When To Review Your Homeowners Insurance
How often do I REALLY need to review my homeowners insurance?
I get it. Reviewing your homeowner’s insurance is about as exciting as watching paint dry. To be honest, I get a headache just thinking about reviewing my homeowners insurance. But then I think about the bigger headache I’ll have written a big check that I could have avoided if I had reviewed my homeowner’s insurance.
WHY REVIEW YOUR INSURANCE?
Insurance exists to protect your family’s financial security from what I call “life events with price tags.” Without adequate insurance, you are one busted pipe away from having to either wipe out your savings or take on debt. Worse, without a review, you may find out after the incident that you’re not covered.
HOW OFTEN SHOULD YOU REVIEW YOUR INSURANCE?
At a minimum, review your homeowner’s insurance at least once a year. As you do your insurance review, I suggest doing a “fire drill.” This is walking through “what-ifs” questions with your insurance provider. The what-if questions will help you know if the coverage you think you have, covers what you think it does. The last thing you find out is that the insurance you have doesn't cover what you need it to when you need to use it.
QUESTIONS TO ASK YOUR INSURANCE PROVIDER AS YOU REVIEW YOUR INSURANCE?
First, get an inventory of what you own in your home. Once you have your inventory use it as a guide to asking your provider the following questions:
If the stuff in your home is lost, stolen, or destroyed, what determines the amount your insurer pays you?
Will they pay you the amount the items are worth now (Actual Cash Value), accounting for wear and tear? Or will your insurer pay you the amount you will need to rebuy your stuff (Replacement Costs)? Most insurance agents’ rule of thumb is to consider replacement costs.
Now that you know how your insurer determines the amount they pay, you to ask your insurer the maximum amount you'll get paid if your things are lost, stolen, or damaged.
Is this amount enough to cover your things? If the answer is no, ask how much to increase coverage. Increasing coverage is typically cheaper than you think.
How much will you get to rebuild your home?
Is the amount you get enough to replace your home? In most cases, insurers pay you based on Replacement Costs or Actual Cash Value.
Are you covered if a natural disaster destroyed your home?
Your homeowner insurance typically covers a limited amount of natural disasters like lightning or thunderstorms. Your home is probably not covered unless you specifically have coverage for a natural disaster, like earthquakes and tornados.
What's your deductible?
If your deductible will wipe out your bank account or force you to take on debt if you have to pay it, consider decreasing your deductible to an amount you can afford to pay.
Do you qualify for discounts?
Don't leave money on the table! You may qualify for upgrades like a security system or new windows.
WHAT TO DO AFTER YOU'VE REVIEWED YOUR INSURANCE?
Now that you've reviewed your insurance, take note of any gaps. For instance, you may find the need to add insurance to cover things like known natural disasters or add extra coverage.
After you've reviewed your insurance, consider shopping around for coverage. If your auto insurance is with a different carrier, call and ask about the cost of bundling your auto and home insurance. The Consumer Financial Protection Bureau (CFPB) has great tools to help you shop for homeowners insurance.
WHAT CHANGES MAY REQUIRE YOU TO REVIEW YOUR INSURANCE TO POSSIBLY UPDATE?
You should update your homeowners' insurance as your family, finances, and home change. Below are a few examples of when to contact your insurer to possibly update your coverage:
Child in college.
Ask your insurer how your child’s things are covered if they’re in a dorm or an apartment.
Significant home improvements.
Contact your insurance company to make sure your insurer adequately covers your upgrades. I mentioned it before but ask about discounts for home improvements like a security system and shutters.
New pet.
Many insurance policies have dog bite liability coverage. But, you have to let your homeowner’s insurance company know about the pet BEFORE you need to file a claim. You also want to check to see if your policy has a pet restriction, like a “restricted breed list.”
New housemate.
This could be a new spouse, parent, or adult child. Contact your insurance company about your additional housemate to ensure your insurer adequately covers everyone’s possessions.
Special consideration for an elderly housemate.
Inform your insurance carrier if you are renovating your home for an elderly parent. Your insurer may not cover additions you didn't disclose. If you have paid for home care for your parents, you may need to contact your insurance carrier about additional liability and, in some cases, worker’s compensation.
Expensive item purchase.
If you buy a new TV or computer, contact your insurance company to update them about your new purchases.
The purchase can hurt someone.
This could be as simple as a trampoline, swimming pool, obstacle course for your “American Ninja” in the making, or even a firearm.
NEXT STEPS
Review your homeowners' insurance with your insurance carrier using this blog as a guide.
Put a reminder on your electronic calendar a year from the date you finished your review to do another review of your homeowner’s insurance.
Bookmark this blog and use it as a reference next year to review your homeowner’s insurance.
