Shopping for a new homeowners’ insurance policy can be difficult and confusing, causing many homeowners to stay with their current policy, even if it hasn’t been updated in years. Though insurance companies often reward homeowners for their loyalty with premium discounts, keeping the same policy for many years can lead to potentially costly coverage gaps, especially if the family’s financial situation has changed.
In This Blog:
This article goes over the signs that homeowners should watch for that signal a necessary change in their homeowners’ insurance policy. Along with these events, we review the insurance steps that homeowners should take to make sure their policy aligns with their current needs.
Why Do I Need Homeowners Insurance?
Homeowners insurance is not required by law, but when buying or building a home, mortgage lenders nearly always require a minimum amount of liability coverage. These policies protect the structure, the owner’s assets, and more from common types of damage. Examples of coverage that most homeowners should consider include:
- Repair or rebuilding costs after a covered event, such as a storm or fire.
- Reimbursement or replacement costs after a theft of personal property or damage from a covered event.
- Coverage for medical expenses and legal costs for covered liabilities, such as a houseguest slipping and falling.
- Coverage for additional living expenses, like rent and transportation, while the home is being repaired.
- Repair or replacement costs for additional structures like sheds, pools, garages, fences, and walkways, provided the policy has the necessary riders.
Note: While homeowners’ insurance plans cover many types of losses, standard policies often exclude coverage for specific types of losses. For example, flood and earthquake damage are not usually covered in general liability policies.
When to Update Homeowners Insurance
Even homeowners’ insurance policies that are customized to the needs of the home can become outdated. Here are eight signs that homeowners should watch for to determine when it’s time to re-evaluate their homeowners’ insurance and potentially switch policies:
In Response to Frequent Premium Increases
Monthly premium increases can result from both internal and external changes. The insurance company may change its policy calculations, or the homeowner’s claim frequency may have changed their risk assessment. Market changes may also impact premiums.
Next Step: Homeowners should request a policy assessment from other carriers to determine whether their recent increases are due to market changes or their current provider’s policies.
Before the Policy Renews
As policies near their renewal date, homeowners should take the opportunity to reassess their coverage. After reviewing their current protections, homeowners may choose to update their current policy or switch to a new carrier.
Note: When the insurance company sends the notice for a policy renewal, homeowners typically have 1-2 months to review their coverage before their final renewal date.
Following Major Home Upgrades, Additions, or Renovations
Home upgrades that add square footage or significantly change the value of the home warrant a reassessment of current policy protections. If an old policy’s liability limits fail to compensate for changes to the home, homeowners could be vulnerable to costly claim denials.
Next Step: Check your policy to make sure you have enough liability coverage based on your home’s current status, including any additional riders for structures added or upgraded in the renovation.
To Compensate for Rising Home Value
As home values rise, insurance policy protections should be updated to cover the new cost of repairing or rebuilding the home in the event of a disaster. Home insurance policies must keep pace with market values to avoid underinsurance.
Next Step: Use current market valuation data to determine the liability limit your policy should set. Accurate reimbursement depends on preparing your policy with accurate repair and replacement costs based on current market conditions, including estimated labor and material costs.
To Protect New Possessions
Just as a change in home value warrants a policy reassessment, acquiring valuable possessions could warrant new or updated personal property coverage. This could involve reassessing the coverage limit on the same policy or adding another rider to cover specific items.
Next Step: Itemize possessions acquired since the last policy update to determine if they warrant a property coverage update. Rather than update the entire policy, a single expensive item such as an instrument or piece of art may warrant an individual valuation or policy rider.
To Accommodate New Residents
Homeowners insurance policies include injury liability coverage for guests and residents. Adding residents, especially those with disabilities, may increase the amount of liability that homeowners should prepare for.
Next Step: Ask your insurance policy provider whether a new resident changes the liability limit you should have on your policy.
After Reviewing Your Deductible
A high deductible usually means lower monthly premiums, while a low deductible costs more since the insurance company shoulders more of the risk. If your risk tolerance or financial situation has changed since opening your policy, you may want to shop for a new one.
Next Step: Review your historical claims data to determine if a higher or lower deductible would be to your advantage.
Following a Poor Customer Service or Claim Experience
A bad customer service experience can cause homeowners to lose faith in their insurance company’s ability to protect their best interests. The same applies to a claim experience (denial or approval) that the homeowner views as difficult or unfair.
Next Step: A bad service experience is a good time to find a local provider who can offer a more consistent claims process that gives you more confidence in your protection.
Re-evaluate Your Homeowners Insurance with the Help of a Trusted Professional
At Pro Insurance Group, our local team of agents helps homeowners recognize the signs that they should change their homeowners’ insurance policy to avoid costly coverage gaps. Our goal is to personalize insurance coverage to make sure the policy matches the homeowner’s individual needs while providing long-term support to review and renew policies when conditions change.
Contact our team today to schedule a consultation with one of our experienced insurance agents. We can review your current policy, including exclusions and riders, to customize your homeowners insurance to match your current needs.