10 Reasons to review your homeowners insurance policy
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Maintaining your home is an ongoing process for all homeowners. Having homeowners insurance is a crucial part of that maintenance, because it provides financial protection in the event of a natural disaster, accident or other incident resulting in damage to your home.
However, just as you continue to update and improve your home, you also should update your homeowners insurance to make sure you have the coverage you need. In fact, conducting a home insurance review every year should always be on your “to do” list.
What does it mean to review a home insurance policy?
Conducting a home insurance review means sitting down and going over your home insurance policy to see what is and is not covered in the event of damage or an incident, as well as how much financial protection you have. It’s important to make sure you have the right amount of coverage to repair or rebuild your home, replace your personal belongings and protect you in the event someone files a liability claim against you for injuries or damage to their personal property.
“Periodically reviewing your home insurance policy is critical to avoid being over- or under-insured as a homeowner,” says insurance and finance expert Laura Adams. “If your home gets destroyed by a fire or other natural disaster and you don’t have enough dwelling coverage, you’d have to pay the difference to rebuild it.”
Pros and cons of reviewing home insurance policy
A home insurance review contains a lot of benefits and very few drawbacks.
|Ensures you have proper coverage||Requires time to thoroughly review|
|Save money by not paying for coverage you don’t need|
|Add items you didn’t have before to account for coverage gaps|
|Protects your financial assets|
|New discounts may be available|
Reasons to review your homeowners insurance policy
There are many reasons why your homeowners insurance policy may need to be updated. Things such as changes in home or personal property valuations, new additions to the cosmetics or home features can affect your rates significantly.
1. Increase in property value
During the time you own your home, it typically will increase in market value. For instance, if you bought your home for $250,000, five years later it may be worth $325,000. Because of this, you will need to increase your homeowners insurance coverage to reflect this new value. Otherwise, if your home burns down and you still have coverage for a $250,000 home, you will have to pay the difference when rebuilding your house.
2. Increase in personal contents
At the time you purchased your homeowners insurance, you also determined the cost it would take to replace your personal contents in the event of damage or loss. Since then, you have likely added to these contents, or replaced certain pieces with higher value furnishings.
“Also, consider the value of your personal belongings,” Adams says. “If you purchased or were gifted expensive items–such as jewelry, electronics, artwork, or firearms–your home insurance coverage limits may not be high enough to replace them. You may need to schedule some of your valuables as an endorsement to your policy.”
3. Home improvements
If you decide to renovate your kitchen, finish the basement or add an extra bedroom, this will increase the replacement cost of your home. It’s important to adjust this coverage in your homeowners policy accordingly.
4. Start a home business
If you decide to start working from home, you need to speak to your homeowners insurance company or agent to find out if you need additional insurance to protect your business operations. This could be anything from computer and office equipment, to art studio supplies, to cameras and lights. In fact, it’s possible you may need to take out a separate commercial insurance policy to insure your business equipment and assets. Speak with your agent about what business coverages you may need.
5. Swimming pools, hot tubs and trampolines
Swimming pools, hot tubs and trampolines are a great way to bring enjoyment to your backyard, but they also bring a new level of risk as well. Therefore, it’s important to make sure you have the right liability coverage to protect you in the event someone gets hurt while playing in, on or around these additions.
6. Protect your personal assets
During the time you live in your home, your personal assets may grow as you continue to earn more income, increase your savings and save for retirement. As these assets increase in value, it’s possible they could be in danger if someone files a liability suit against you and you don’t have enough liability coverage in your homeowners insurance to cover the claim. “The liability coverage that comes with home insurance may also need to be adjusted depending on your finances,” Adams says. “As your net worth and income increases, you have more at risk if you get involved in a lawsuit.”
7. Safety prevention
Alarm and home surveillance systems continue to be very popular with homeowners as they provide additional security measures in protecting your home. If you add these components after you get your homeowners insurance policy, talk with your agent or company to see if you qualify for discounts on your policy.
Adding a new pet to your home can be exciting. However, it’s important to speak with your homeowners insurance company or agent and let them know you have a new pet. For some pets, you may not require additional coverage or see a change in your rates, but that’s not always the case. Some insurers may assign a higher risk to certain animals or breeds based on historical data, which could lead to higher premiums for you.
9. Renting out your home
If you choose to rent your home out to someone else, it’s important to speak with your homeowners insurance company or agent to find out if your policy still applies to damage or loss incurred during the rental period. This applies to rooms you may rent on airbnb, through a vacation home swap or to long-term renters while you live elsewhere.
10. Check for new discounts
Insurance companies continually change the discounts they offer, so ask your agent for a full list of current discounts to see if there are some you can take advantage of to reduce your premiums. “As your life changes, you may qualify for new discounts or opportunities to cut your premiums,” Adams says.
“For instance, getting married, changing careers, retiring, quitting smoking and increasing your credit typically affect your rates. And don’t forget that making home improvements–such as getting a new roof, installing a security system, or updating electrical or plumbing systems–may also reduce what you must pay for home insurance.”
- A home insurance review could lead to additional savings on premiums.
- Increased home values and home improvements require additional coverage.
- A home insurance review determines if you are lacking coverage or paying for more coverage than you need.
A regular home insurance review ensures you always have the right amount of coverage so you don’t come up short if you have to file a claim. Conduct an annual home insurance review to evaluate your assets, current liability risk and whether or not you qualify for additional savings through discounts.