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Are You a Bigger Insurance Risk Than You Think?

You're a good neighbor. You keep your sidewalks clear, your trees trimmed, your dog on the leash, and your pool gate locked--all steps meant to keep your family and friends safe and your insurance costs down.

But even the most conscientious homeowners may trigger insurance issues and not even know it.

"Consumers need to keep in mind that insurance products were created to replace catastrophic loss," says Jeff McCarthy, an agent with Harrington Insurance Agency in Woburn, Mass. "It's not quite so simple as bumping up your policy here and there to cover a trampoline, for instance. It's not like getting a new car and adding air conditioning or GPS. Your overall insurance risk profile might be elevated, and that comes at a cost."

[See 50 Ways to Improve Your Finances in 2012.]

"It doesn't mean you're uninsurable. There is always a carrier, such as a more-expensive state insurance pool or a specialty insurer that will take on your risk, but you pay for it," McCarthy says.

When your homeowners, condo, or renter's policy comes up for renewal, the insurer typically sends a questionnaire that asks about hazards. Homeowners have a responsibility to report their current status, detailing any changes. Failing to keep policies up to date can risk a rejected claim or a dropped policy. Many consumers go for multipolicy discounts between homeowners and auto insurance, so putting your homeowners' policy in jeopardy could prompt having to change auto insurers.

Although regulation varies by state, some of the biggest culprits behind added insurance costs include:

Swings, gyms, trampolines, and other backyard equipment. They're a staple of childhood and quite common. But they're still often an added insurance liability cost because of the risk that a child could fall or suffer an injury while on your property. The equipment make and model can affect the price of a policy, so do some research to find which equipment is highly rated by the insurance industry.

[See What Type of Life Insurance Do I Need?]

Pool, sauna, hot tub, and fireplaces. Owning a pool, sauna, or hot tub can increase the cost of your home insurance policy due to increased liability as well as greater property value. Appropriate fencing, security features, and other measures not only save lives, but also reduce the cost of insurance. Often homeowners take steps to keep unexpected guests out of the pool, but even carefully patrolled parties carry the risk of an unexpected accident. In general, remember that it costs money to insure these watery additions to the patio and yard, so make sure your budget can handle it. Outdoor fireplaces and fire pits have gained in popularity in recent years; they may also not be covered under a standard homeowners' policy. Research ahead of purchase is important.

Dog breeds. The loyal family dog may simply be a gentle giant, but it likely won't matter to the underwriters if the pooch fits a certain profile. Virtually no regular insurance company will cover you if you have a Doberman pinscher, German shepherd, pit bull, or Rottweiler. The second category encompasses borderline breeds. A certain breed--a husky, for instance--may be okay with one insurance company but not with another. If you have a certificate showing that the dog has gotten obedience training, it may help. Among the borderline breeds are supersized varieties such as the English bullmastiff and Great Dane. According to insurance industry rules, that's because a big dog, although unaggressive, may playfully jump on someone and accidently knock him or her down and cause an injury.

[See Do You Need Liability Insurance?]

There are other not-so-obvious homeowner insurance responsibilities to consider. McCarthy says homeowners often neglect to update policies after major renovations. The square footage increase is the primary reason that a bigger policy is needed. Should a tree fall on the new addition that the insurer doesn't know about, the homeowner may face some problems.

Homeowners should also be careful that any repairman, especially electrical or plumbing contractors, are insured. Spreading the risk to the service provider is important should their work malfunction in some way and harm the home.

Another issue gaining greater attention is the fact that more home-based businesses have sprouted up in recent years. Consultants, for examples, may not be incorporated as a business but if they receive clients with any frequency, they should come clean with their insurance agency. One slip on an icy step and a home-based business could be shuttered by a lawsuit.

Twitter: @USNewsMoney



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