By Richard A. McGrath, CIC, LIA
Are you a homeowner or soon-to-be homeowner? Or maybe you have an expensive wine collection, jewelry collection or art collection? Homeowners and collectors have a significant amount to lose. As a homeowner, there are a few emerging risks that could greatly impact you and your financial security.
Risk #1: The Internet of Things
With over 6 billion devices currently connected around the world, the Internet of things (IoT) presents a huge threat to homeowners. By 2020, analysts at Gartner estimate that there will be over 20 billion connected devices. These devices range from smartphones and wearables to self-monitoring appliances such as washing machines, refrigerators, smoke alarms and thermostats, even wireless personal assistants that report on the weather or manage shopping lists. A lot of these devices can be beneficial to monitoring a secondary or seasonal home.
However, as more devices become connected to the Internet, homeowners need to ensure that they are properly protected from unwanted guests. The IoT opens up the door to hackers who are looking for access to private information, such as personal and financial data. That’s why it’s important for you to safeguard all of your devices against a breach. This includes creating strong passwords and not using the same password across different devices and accounts.
It’s also a good idea to change your passwords when any household workers are let go, such as your WiFi password. Additionally, it’s important to remember that if hackers gain access to your connected devices they can better understand your daily living patterns, including when you are or aren’t at home.
Risk #2: Ransomware Attacks
Another emerging risk for homeowners is ransomware. According to the 2016 Internet Security Threat Report, crypto-style ransomware attacks grew 35 percent in 2015 for a total of 362,000 attacks. Hackers use phishing tactics to get individuals to click on a corrupted link in an email that looks authentic. After clicking on the link, all of the user’s files become locked and encrypted. The user is then notified that they have a set amount of time, usually 48 hours, to pay the ransom in order to unlock their system. This ransom is usually paid via a form of digital currency called bitcoins, which is independent of banks and keeps the user’s identity anonymous.
In order to avoid becoming a victim of ransomware attacks, it’s important to remember not to click on attachments, emails or links that look suspicious or too good to be true. It’s also a good rule of thumb to not open any emails that you’re not expecting or don’t remember signing up for. Also, be sure to back up your files in the cloud.
Risk #3: Underinsured Homes
Most homes are insured to their market value rather than their replacement cost value, which is the cost to rebuild the home after a total loss. This can result in high out-of-pocket costs for the insured in the event of a claim. It’s critical to speak with an independent agent to ensure that your home is adequately protected for its replacement cost value, and that your policy includes extended coverage, which will cover your home for present day rebuilding costs.
And since floods can happen everywhere, it’s also a good idea to secure homeowners insurance that includes unlimited backup for sewer and drain, seepage into basements and excess flood solutions as deemed necessary. It’s also important to disclose whether any valuable collections are in storage somewhere other than your property, such as a bank vault.
Risk #4: Delaying Appraisals
Rather than investing in bond portfolios and the stock market, homeowners are spending more of their money on building up their collections, such as fine art, jewelry, antique cars, wine, etc. The Knight Frank Luxury Investment Index found that art investments alone have grown 226 percent in the past 10 years. Yet, many people are leaving their valuables unprotected from theft and damage by neglecting to update their appraisals. It’s best practice to have your valuables reappraised every few years as a lot of pieces increase in value over the years.
In the event you experience a claim and your insurance policy doesn’t reflect the higher appraisal value, then you could be faced with a significant financial loss. For example, the price of diamonds and gemstones is constantly changing. The value of a diamond is based on its clarity, color, cut and carat weight, which is all determined by a certified professional, but its value could also depend on whether it has any historical significance. Currently, the value of high-quality sapphires has increased by 20 percent and the value of rubies in rare colors has increased by 52 percent. Make sure to appraise jewelry every three years, especially pieces that have larger gemstones.
Additional concerns include securing protection for homes that may be abroad, directors and officers (D&O) insurance for those serving on nonprofit boards, and protecting individuals who embrace the sharing economy, for example, renting out your home on Airbnb.
If you’re a homeowner, it’s important for you to speak with a trusted independent agent about your unique insurance needs. Securing the right coverage not only protects your financial security, but also provides you with Freedom from Worry®.
Richard A. McGrath, CIC, LIA is President of the McGrath Insurance Agency, a division of Starkweather & Shepley Insurance, located in Sturbridge and Spencer, Mass. He can be reached at 508-347-6850 or at firstname.lastname@example.org.
This article is written for informational purposes only and should not be construed as providing legal advice.