When was the Last Time Your Reviewed Your Insurance Policy?

If you’re like most homeowners, you carefully selected a homeowner’s insurance policy when you purchased your home. You made sure that you had adequate coverage based on the value of your home, its contents, and your financial needs at the time. However, if you’ve been in your home for a number of years, it’s highly likely that your situation has changed – for better or for worse. For example:

Your home may be over- or under-insured.

The cost of rebuilding in your community may be much higher now than it was at the time of purchase.

You may have valuable personal property that is not fully covered.

You may have higher.

You may be paying too much.

You may have liabilities that aren’t adequately covered such as a potentially vicious dog or a swimming pool.

Whether you are hoping to save money by finding a better insurance policy or increasing your deductible in exchange for lower premiums or want to ensure that you have the right amount of insurance for your situation, now is an excellent time to review your insurance policy.

Dwelling Coverage

The first step is to examine your current policy and compare your existing coverage with your current insurance needs. Have you added on to your home either through a remodel or by adding a pool or outbuildings? Chances are, your lender would have insisted that you increase your insurance at the time but this may have been overlooked if you self-financed the addition.

In addition to considering the additions to your home, consider the cost to rebuild should your home be completely destroyed. Your home may have increased or decreased in value since you purchased it but the home’s market value is not what you are insuring. You are insuring the cost to rebuild it from the ground up and these costs are not related to how much the home is worth but rather they are related to how much local building costs and materials are at the time you need to rebuild your home. Check with your local building association, real estate agent, or insurance agent to find out how much local rebuilding costs are per square foot and then multiply that number times the square footage of your home to determine an approximate rebuilding cost. Make sure that your home is insured for at least this much, more so if your home is extensively upgraded.

Personal Property Coverage

Next, take a look at your personal property coverage. Have you accumulated a lot of possessions since you moved in? Are all of these items covered? Probably not, especially if your policy limits artwork, jewelry, furs, coin collections, and electronics. Pay close attention to the details of the policy and consider purchasing endorsements for valuable items currently limited by your policy. In addition, make sure that your policy offers “replacement cost” coverage rather than “actual cash value.”

Liability Coverage

Your homeowner’s insurance policy provides liability to others, up to policy limits. If you or a family member causes bodily harm to others, even off your property, this liability coverage provides protection, up to policy limits, against lawsuits. It also covers damage caused by your pets; however, some breeds of dogs may be excluded so pay attention to the policy’s terms and consider increasing your liability coverage’s if you feel the amounts are not adequate. In addition, you may want to consider an umbrella policy depending on your financial circumstances and net worth.

Living Expenses

If your home were to be completely destroyed, where would you live while you rebuild? Does your policy provide for living expenses such as rent during rebuilding? Does it provide temporary benefits such as paying for hotels and meals during an evacuation?

Additional Considerations

Many insurance companies offer guaranteed building cost, building code coverage’s, and inflation guard options that provide you with additional peace of mind that you will not quickly outgrow your coverage.

Raising your deductible can reduce your homeowner’s insurance premiums.

Shopping around can yield better coverage’s at a lower price.

You may qualify for discounts for items like security systems and automatic fire sprinklers.

You may qualify for discounts if you insure your cars and homeowner’s insurance with the same company.