By sheer coincidence, we’d already scheduled a replacement for our AC and furnace that’s taking place right now.

I’m writing this not just to express amazement at our incredible luck—our contractor laughed when I told him, saying “you got every last dime out of your old system, didn’t you!”—but to talk about the importance of having some green saved up to handle the inevitable big repairs that come with owning a home.

Because if it’s not the air conditioning or the heating, it’s the roof—or the sewer line, or the pipes, or the electrical system. Something big will inevitably go wrong during the time you own your house, and often it’s several Big Somethings right in a row.

For around $400, a qualified home inspector can scrutinize your casa and give you an idea of what repairs are in your future. The inspector may help you estimate the costs, or you can get a membership to Angie’s List (which is where we found our contractor, by the way) to see what others paid for similar repairs.

Or you can simply start plugging money into a targeted savings account for your home. Eric Tyson, author of “Personal Finance for Dummies,” recommends setting aside 1% of the value of your home each year for this stuff. In most years, you won’t spend that much, he says—but inevitably a year will come along when you need every dime.

This is for a policy that has a $5,000-per-person deductible ($10,000 family). Eight years ago, when we first secured coverage, the premium was less than $250 a month.

We’re not alone. Our insurer, Anthem, is jacking rates on thousands of its policyholders, as this Los Angeles Times article attests. California’s insurance commissioner says he’s “very concerned.” I’ll bet.

Anthem is blaming this on rising health care costs. Insurance agents are saying Anthem’s trying to rid itself of less profitable policies.

Anthem does offer policies with even less coverage that might save us some money on monthly premiums, but we’d have to go through underwriting again—and our insurance agent doubts we’d pass.

Why is that, you might ask? Do we have cancer, diabetes, heart disease?

No. Neither of us is overweight. We don’t drink or smoke, we exercise regularly and we’re in excellent health.

But I’m over 40, and my husband is over 50, and we each take a prescription medication. Mine’s for an underactive thyroid. My husband’s cholesterol is a little high.

That’s it. But that’s enough to prevent us from getting new insurance.

There is nothing about this situation that isn’t insane.

I don’t believe insurance should cover every sniffle and check-up. I was fine with paying most of our family’s health care costs out of pocket, as long as we had protection against catastrophic expenses. But I also expect insurance companies to hold up their end. When they cherry-pick their customers, drop those who are sick and jam through eye-popping rate increases, they aren’t providing insurance in any real sense of the word. They’re not pooling risk; they’re evading it.

The good news is that we can afford this increase, and probably a few more to come. Others can’t. One of my friends got a notice that her premium is going up to $500, and she can’t pay it. She, like many of Anthem’s other customers, will be going bare.

Kathy Kristof writes in this thoughtful column that the reason health care reform is dead is that Congress doesn’t understand what insurance should really do.

So instead of getting what we needed—coverage that’s available, affordable and there when you need it—we got squat.

UPDATE: The Los Angeles Times is reporting that the Obama Administration has called on Anthem to justify these huge price increases. Health and Human Services Secretary Kathleen Sebelius, who used to head the National Association of Insurance Commissions, wrote that Sebelius said that Anthem’s “strong financial position” made the increases “even more difficult to understand”:

These extraordinary increases are up to 15 times faster than inflation and threaten to make healthcare unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy.

photo credit: rutlo

Face it–you have a lot of stuff. So much that if you tried to list everything you own from memory, you’d probably forget most of what you have. (Do you know how many pieces of clothing are in your closets and drawers? Can you list everything in the medicine chest? How about all those holiday decorations in the attic?)

But trying to remember a houseful of stuff is exactly what people face when they file an insurance claim after their home has been destroyed in a fire or natural disaster. Without a household inventory, it’s all but impossible to remember everything or even most things.

United Policyholders, a non-profit group that educates consumers about insurance issues and their rights, offers a lot of good tips and resources to help you get started on your inventory:

• Create a room-by-room inventory in Excel. UP provides an Excel sheet that lists items found in the typical home so you don’t have to start from scratch.
• Fill out a sample home inventory from a total loss insurance claim.
• Build your inventory with a flash drive that’s preloaded with the inventory spreadsheet. This was created with help from disaster victims who struggled to remember the contents of their home after it was damaged. (UP does request a $10 donation for the flash drive)
• Walk around your home with a video camera, talking about the items as you film. (Store the clip/chip/tape outside your home in a secure location, preferably in another area or state.)
• Pay an inventory specialist to do the work for you. Inventory specialists charge either by the hour or for the project. Some will store the data for you. Others will give you the disk or inventory list to store yourself. Visit the FIND HELP section on UP’s Web site by CLICKING HERE.

To access UP’s links to the Excel spreadsheets and other inventory tips, CLICK HERE.

Also, make sure you’ve got your disaster/home insurance in order. Not sure? Check out some of my previous columns:

• Do you need disaster insurance?
• 10 things your insurance may not cover
• Is your home underinsured? 8 key points

Answer: Do you have the cash on hand to rebuild your properties if they’re destroyed in an earthquake? If not, would you be comfortable walking away from the properties, including any equity you have in them and any mortgages you owe on them?

If the answer to these questions is no, then buying earthquake insurance is a prudent move. The deductibles are substantial, but the point is to protect you from the catastrophic expense of rebuilding.

You can probably get somewhat lower deductibles, by the way, if you’re willing to pay higher premiums. The CEA has a 10% deductible, as do a few private insurers that offer coverage.

Either way, you should try to keep a cash reserve equal to the deductible, or at least have access to an adequate line of credit established in advance. Once the Big One hits, you won’t be able to get a home equity line on your rubble.

photo credit: captg

Home values have dropped across the nation. But that doesn’t mean you should reduce the coverage under your home insurance policy.

Why? The real estate value of your home is very different from the rebuilding cost. You could wind up seriously underinsured, says the Insurance Information Institute, a nonprofit group supported by the insurance industry. It suggests asking these key questions about your policy:

1. Do I have enough insurance to rebuild my home?
Your policy needs to cover the cost of rebuilding your home at current construction costs. The cost to rebuild your home is not based on the price you paid for your home, the real estate value in today’s market or even the cost of new construction, the III says. Rebuilding costs are often higher than new construction costs because of demolition and debris removal fees.

Extra coverage you should check on:

• Water back-up (damage from sewer or drain backup)
• Disaster coverage (floods and earthquake aren’t covered on the typical policy, and wind damage may or may not be)
• Building code upgrade, also known as ordinance or law coverage (pays for additional expense of rebuilding your home to comply with building codes that didn’t exist when the home was originally built).

2. Do I have enough insurance to replace all of my possessions?
Most homeowner policies provide coverage for your personal possessions of about 50 percent to 70 percent of the amount of insurance you have on the structure of your home. For example, if you have $100,000 worth of coverage on the structure, you would be covered for $50,000 to $70,000 worth of the contents of your home. You may need  more, particularly if you own antiques, guns, furs, expensive jewelry and artwork or business equipment–all of which may require separate “riders” to ensure adequate coverage.

You can insure your possessions in two ways: Actual cash value or their replacement cost. Actual cash value is the amount it would take to repair or replace your belongings  — minus depreciation. That $1,000 sofa may be only worth $50 today, which is all you’d get under an actual cash value system. A better bet: Replacement cost, which gives you the amount it would take to replace your belongings with items of comparable value and quality without deducting for depreciation.

3. Do I have enough insurance to protect my assets?
Home insurance also provides liability protection, which covers you against lawsuits for bodily injury or property damage that you or your family members cause to other people. The coverage pays for the cost of going to court (your defense) and court awards – up to the limit of your policy.

Most standard home and renter’s insurance policies provide at least $100,000 of liability coverage, but additional protection is available. You want to make sure you have enough insurance to protect your assets and finances should someone sue you. A good rule of thumb is to have liability insurance at least equal to your net worth. Even better: Get enough to cover twice your net worth. Extra liability coverage is not that expensive, and if you max out the available coverage on your policy you can get an “umbrella” policy that gives you $1 million or more for $200 to $300 a year.

Want to know more? Check out my columns for more tips:

• Is your home underinsured? 8 key points
• 3 costly myths about insurance
• Homeowners, demand your (insurance) rights

photo credit: Night Owl City

One of the biggest mistakes people make when they decide to store their extra stuff in a storage unit: They assume that their belongings are insured by the facility.

Nope. The storage facility has nothing to do with insurance, according to the Insurance Information Institute. It simply provides a place to stow your belongings.

Here are few things to consider if you’re going to stash your belongings in one of these units:

Do you really need to do this? You’re essentially paying rent on belongings you aren’t using. And if you aren’t using them, perhaps it’s time to get rid of them. Storing stuff temporarily while you’re moving is one thing. But long term? Maybe it’s time to “release” some of your items via a yard sale or charitable donation so that someone else can get some use out of them.

Check with your insurance company. If you own a home, your homeowner’s policy might cover items that are being stored, but then again, it might not. If you are a renter and have renters insurance, the same applies. Call your insurance company and ask if your items that are being stored are covered in your policy.

What some policies cover – and don’t. Most policies that include protection for storage provide coverage from theft and damage from fires, tornadoes and a few other disasters listed in the policy, says the Insurance Information Institute, a nonprofit group supported by the insurance industry. Most policies will not cover damage from flooding, earthquakes, mold and mildew, vermin (rats, termites, etc.) or poor maintenance. Some insurers may limit the amount of coverage to 10 percent of the amount of insurance you have on your overall personal possessions for items stolen or damaged away from home. Other insurers may offer higher limits.

Consider the type of insurance you need. Personal possessions can be covered on either an actual cash value or a replacement cost basis. An actual cash value policy pays only the depreciated value of an item.  A replacement cost policy would pay to replace the item at what it would cost to purchase it at the time of loss. Clearly, replacement cost is the way to go, especially since these policies generally run only about 10 percent more than actual cash value policies.

Ask about adding a “floater’’ or endorsement to your policy. If you’re storing really valuable property such as artwork, antiques, jewelry, furs etc., there might be dollar restriction on your standard policy. As your insurer about adding a floater or endorsement to your policy to make sure you’re fully covered on these items.

Don’t forget to make an inventory. This is probably one of the easiest things you can do.  Take photos, record purchase prices, serial numbers, appraisal forms and sales receipts. If your property is lost or stolen, an inventory can help you speed the claims process and substantiate your loss. It also helps you figure out how much insurance you really need.  (The Insurance Information Institute offers a free, online software program called “Know Your Stuff” to help you document your items. CLICK HERE to check it out.)

For more tips, check out some of my previous blog entries:

• “Cut your insurance costs, not coverage”
• “Consumer groups warn: Don’t go bare (on insurance coverage)”
• “Basic insurance questions still stump Americans”

Your coverage is there to protect your from catastrophic expenses that might otherwise wipe you out. The smarter approach: look for ways to reduce your premiums by shopping around, paying more small costs out of pocket and keeping your coverage for the big expenses so you’re able to recover from an accident, theft or disaster.

A few tips:

Insure your house – not value of the land. Your property value has probably plummeted but rebuilding your house will still be expensive, according to the Insurance Information Network of California. Make sure your coverage reflects the rebuilding cost and not the real estate value. To save money, consider raising your deductible to $1,000 or higher, and put an equivalent amount in savings to cover smaller expenses. Also, many insurers offer discounts if you buy multiple policies, such as homeowner and auto insurance, with them.

Rethink your auto insurance. If you’re not driving as much these days–you’re carpooling, working from home or unemployed–you might be eligible for a low-mileage discount. Raising your deductible is another way to trim costs, as is dropping comprehensive and collision coverage on older vehicles. One rule of thumb: if your insurance premium equals 10% or more of the value of the car, it may be time to drop collision and comp. Edmunds.com can help you determine your car’s current value.

Don’t put off buying flood insurance. Regular homeowners insurance doesn’t cover floods. Flood insurance from The National Flood Insurance Program generally runs about $500 a year, but those costs could be higher if you buy later under a higher flood risk.

Shop for service as well as price. Yes, price is important. But should you need your coverage, you also want your claims paid without big hassles. Many states have consumer complaint surveys, such as these at the California Department of Insurance, to help you judge an insurer’s customer service.

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1.    Does auto insurance automatically cover a rental car?
2.    Can you own a house without homeowners insurance?
3.    If you need life insurance, in general how much coverage should you buy?

If you answered: No, yes and 5-7 times your annual salary – Bravo!!! You know more about insurance than the majority of 1,000 American adults who answered those questions incorrectly on a 10-question quiz about insurance. On average, Americans flunked the test – receiving only a 40% score.

That shows that consumers know a lot less about insurance than they think, says the National Association of Insurance Commissioners, a group of state insurance regulators that sponsored the poll.

Among the poll’s findings, which covered several areas of insurance:

• Health insurance: Less than half of those surveyed (49%) know that if they leave their job and choose COBRA (Consolidated Budget Reconciliation Act) insurance to continue their health benefits, they must pay the full cost of coverage.
• Life insurance: Only 14% knew that the amount of life insurance typically recommended for individuals is 5 to 7 times your annual salary.
• Home insurance: About 19% understand that the requirement for PMI (private mortgage insurance) depends on the size of the down payment and law.

You can see how well you do on the rest of the quiz by clicking through to www.insureUonline.org and taking the Insurance Quiz. (Look for a small light-blue box on the right-hand side of the page. It’s near the top.)

If you didn’t do so hot or have questions, educate yourself. NAIC’s Web site at www.insureUonline.org is one place to start.

But see my columns for other tips:

• 3 costly myths about insurance

• Refinance your life insurance

• 10 things your insurance may not cover

Usually, your standard homeowners and business insurance policies cover a lot of problems caused by storms, including:

• losses from burst pipes
• ice dams (when water can’t drain properly and seeps into your house)
• wind damage
• a building that collapsed because of the weight of ice/snow
• damage from a tree crashing into your home

Even your car is covered for auto accidents caused by slippery weather under most standard auto policies. If a tree or branch or other falling debris smashes into your car, you’re usually reimbursed if you opted for comprehensive coverage.

What’s typically not covered: long-standing problems that aren’t promptly spotted and fixed. Most insurers, for example, won’t pay for rot or other damage caused by a slow leak.

So make a complete tour of your house after every storm to identify problems and get them fixed promptly.

If you have no clue what your policy covers, find out. You never know when Mother Nature will throw another weather curve ball at us.

Here are some of my columns related to insurance issues:

• 3 costly myths about insurance

• Should you buy pet insurance?

• Close the gap in your car insurance

• A home warranty is no guarantee