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Are You Really Insured?

The financial pain of an accident can sometimes be soothed by the knowledge that you have insurance. At least until you file a claim. Then you might suffer the additional frustration of finding out your loss won't be completely covered, even though you've been paying insurance premiums for years.

How can this happen? Here are a few of the reasons:

1. You don't have enough coverage.
Inflation, depreciation, and regular acquisitions can make your current insurance obsolete. Has your current homeowner's insurance policy kept up with the appreciated value of your home? And will it cover the various valuables -- family heirlooms, jewelry, football card collection -- that you have accumulated over the years? Now is the time to find out, not as you sift through the ashes for your prized Lee Roy Selmon rookie card.

2. You don't keep adequate records.
To prove a loss, you have to first prove ownership. A great way to document your possessions is by photographing or videotaping them (but make sure you keep the pictures or tape somewhere other than your house so they don't get destroyed). Also consider saving the receipts for all your major purchases. If you own a business, you absolutely must keep accurate records of your inventory and proof of purchase. Finally, photograph or videotape the damage, using rulers or other markers to record the extent of the loss.

3. You don't follow directions.
Insurance companies have specific ways of dealing with claims. If you don't follow the rules, they might deny your claim. Make sure you do what's required and document as much as possible. Generally, file a claim as soon as possible and don't make any repairs until directed to do so by the insurer.

4. The insurance company is lowballing you.
Despite all the warm and fuzzy slogans about being in "good hands," insurance companies will try to pay as little as possible on a claim. Business is business. Protect yourself by getting outside estimates of the repair costs. You might even consider hiring a public insurance adjuster, who can serve as your advocate and help navigate the claims process. Whatever you do, be persistent.

If you're having significant problems with your insurer, contact your state insurance department. And if worse comes to worst, you can hire an attorney who specializes in putting the screws to insurance companies.

For more on the wacky, wild world of insurance, visit the Fool's Insurance Center.

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