Catastrophes Happen

I want to take a minute to apologize for the recent silence. On Saturday 2/02/2019; I had a water pipe break in my house and I have spent a few days dealing with the repercussions of vacuuming 50 gallons of water out of a finished basement. What this has taught me is something I have inherently always known; Good things happen to good people; Bad things happen to good people; Good things happen to bad people; bad tings happen to bad people. In essence, life happens; how prepared are you to handle it physically, mentally, and financially?

The old phrase of “insurance will cover it” is not always applicable. Insurance does not cover everything, or you may receive remuneration based on an a skewed value. But more importantly; and this is why housing issues can cause financial ruin despite having insurance; all home insurance falls under the policies of indemnity.

You may be unfamiliar with indemnity plans because they are almost unheard of in car and health insurance and homeowners insurance does not refer to their policies as indemnity specifically since it is generally the only possible insurance you can buy. So how can this lead to financial ruin? It’s for the same reason very few people have indemnity health insurance.

Under the concept of indemnity; after the loss occurs; you are responsible for getting things back into order. After all accommodations, repairs, and rebuilds have been performed; the insurance company will issue a claim check in the amount of what they perceive the value of the loss to be. So, if your house goes up in flames and you have a rebuild and replace policy, which most people have, you are responsible for paying the architects, the permits, the construction crews, and the project managers to rebuild the house. After everything is said and done and the insurance company confirms the work was completed; they issue a claim check to reimburse you; which may or may not cover the total cost.

What is the moral of the story? Be prepared for the worst and hope for the best. I discovered today that I will need to replace two bookshelves, carpeting in two rooms; new pipes and a new wall. Many would freak when they discover they need to front these costs and hope to be reimbursed later. I am personally not too concerned.

We have a $1,000 deductible; what this means is if the adjuster determines the total cost of repairs and replacement to be $3,000; after everything is fixed; the insurance company will issue a claim check for $2,000. When I first bought the property; I put $1,000 in a separate account just in case this day ever arrived; and now it has; so this whole ordeal is nothing more than a minor inconvenience; it is not a major loss.

Are you prepared for such a loss? Are you prepared financially? Are you prepared mentally? What happens when you walk into your house one day and turn on the sink to find the hot water is not functioning. You then pay visit to your hot water heater to check if it is working and find the 50 gallon contents all over the floor. Are you ready for this? If not; you better get yourself financially and mentally ready because I can guarantee you that these events will happen at some point.

Check in with your home insurance and car insurance every once in a while. Understand your deductibles and coverages. You need to know if catastrophe strikes; what will be covered under your policy and what will or will not be covered.

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