Don’t wait until after a disaster has struck to discover your homeowners insurance doesn’t completely cover you. If it has been a few years since you last examined your coverage, your policy could probably use some updating. There are typically four events that should trigger you to review and update your insurance policy:
- When your policy comes up for renewal
- When you have made improvements to your home or made major purchases
- When you have had a major lifestyle change
- When you have added safety features to your home
When your policy comes up for renewal, don’t just automatically send the premium check to your insurance company. Review your coverage and talk to your agent to verify that your coverage amounts are still realistic. Do you need to raise the amount of coverage for liability, structure, or personal possessions? Make sure you are taking advantage of all the available discounts. Also, think about raising your deductible to save money. Raising your deductible from $250 to $1,000 could reduce your premiums significantly. If your premium has increased since the last renewal, think about comparison shopping for a better rate with another established and highly rated insurance company.
If you live in a flood or earthquake zone, have you considered a flood or earthquake policy? Earthquakes and floods are not covered in most policies. For flood insurance you can contact the National Flood Insurance Program. In California, you can get earthquake insurance through the California Earthquake Authority.
If you have made any major purchases such as expensive artwork, jewelry, or a plasma television, talk to your agent about purchasing a rider for these items or think about increasing the amount of insurance you have for your personal property. A rider provides you with broader coverage for these items. Make sure your policy pays the full replacement cost, not actual cash value. If something is damaged or stolen, actual cash value only covers the depreciated value. In other words, it only covers what your personal property was worth when it was lost. Replacement coverage pays for a new equivalent or the exact item.
Chances are you have made some improvements to your home over the years such as adding a new room, expanding your kitchen, or replacing your kitchen or bathroom counters with granite. Remodeling can quickly increase a home’s value, but many homeowners forget to increase their insurance coverage to match. You risk being uninsured if you don’t report the increase in square footage to your insurance company. Keep receipts and records in case you need to forward copies to your company.
Marriage, divorce, or adult children who move back into your home can affect your coverage. When people move in or move out they (usually) take their belongings with them. You may need additional coverage if there is a sizeable increase in the value of the belongings in your home. Also, starting a home-based business could trigger a change in your optimum coverage. You will need to obtain additional coverage for business liability and equipment. If this business is your primary source of income, you may need a Business-owners Package Policy.
If you have upgraded your heating, plumbing, or electrical system or if you have installed a state of the art burglar or fire system with 24- hour monitoring, you may qualify for a discount. Make sure your agent knows about these improvements.
Lastly, check to see if your policy offers inflation guard and loss-of use coverage. The inflation guard endorsement increases the limit of coverage to keep up with inflation. This automatically adjusts the dwelling limit to reflect current construction costs in your area when you renew your policy. If you do not have inflation guard, make sure to get your home valued every year to ensure full coverage. Remember, the market value of your home also includes the value of the land, which is not covered by homeowners insurance.
Loss-of-use coverage pays additional living expenses up to certain limits if your home is damaged or destroyed. If you live in an area that frequently burns, quakes, or floods, you probably need more coverage than you think.
It is important to periodically review and update your insurance policies. This process should be part of your personal financial planning and is a regular part of the work we do for our clients. Please contact us if we can be of support in assessing your insurance policy needs.