Homeowners Insurance Updates: 10 Reasons to Change

By Allison Bisbey Colter

Property values may be falling, but many people’s homes are still their biggest asset. To protect this investment, homeowners should regularly review their insurance to make sure they have enough coverage to rebuild their home and replace their personal possessions in case of disaster.

Here are some reasons you might need to update your policy.
  1. The cost of rebuilding is going up. It’s important to understand that the market value of your home, which includes the land, and its replacement value, are very different. “The value of real estate is not what you’re replacing,” says State Farm spokesman Dick Leudke. “You don’t want to overinsure.” On the other hand, the cost of rebuilding can only rise -- particularly if a large number of properties are damaged in the same area. It’s a good idea to review your coverage every few years.

  2. You’ve remodeled. “Something as simple as a bathroom remodel can impact your home value and should be discussed with your agent,” says Madelyn H. Flannagan, vice president for education and research at the Independent Insurance Agents and Brokers of America, Inc., a trade association.

  3. You’ve installed a sprinkler system. Many insurers offer credits for alarms, sprinklers and other safety devices; be sure to ask.

  4. You’ve got more stuff. We tend to buy enough stuff to fill all of our available space. If you’ve bought a new dining set or acquired a lot of things you didn’t know you needed for a new baby, make sure you have enough homeowners insurance to replace it. Conversely, if you’ve divorced or your kids have moved out and have their own coverage, you may not need as much coverage. Most homeowners insurance policies provide coverage for your personal possessions for approximately 50 percent to 70 percent of the amount of insurance you have on the structure of your home, according to the Insurance Information Institute, a trade group. So if you have $100,000 worth of coverage on the structure of your home, you would be covered for $50,000 to $70,000 of the contents of your home, depending on the specific policy. The best way to determine if this is enough coverage is to conduct a home inventory.

  5. You’ve got expensive stuff. Your insurance may only pay a certain amount for individual items, such as jewelry or works of art. If you have an extensive collection, you may need additional coverage for these items.

  6. You work from home. If you run a business from your home, you may have limited or no coverage under your homeowners policy.

  7. You live in a flood or earthquake zone. Standard homeowners insurance provides coverage for disasters such as fire, lightning and hurricanes. It does not include coverage for flood (including flooding from a hurricane) and earthquake. Flood insurance is available through the federal government, but can also be purchased from the same agent or company representative who provides your homeowners or renters insurance. Earthquake coverage is available in the form of an endorsement from private insurance companies. In California, supplemental coverage is also available from the California Earthquake Authority.

  8. You’re changing carriers. You can often save money by combining your home, auto and other coverage with the same carrier.

  9. You want to protect your assets. Homeowners insurance does not just protect the structure and contents of your home, it also covers you against lawsuits for bodily injury or property damage if someone gets injured at your home. Most standard home and renters insurance policies will generally provide at least $100,000 of liability coverage. But additional protection is available and everyone should consider getting enough insurance to protect their assets.

  10. You live in an old home. Standard homeowners polices won’t cover you for damage from sewer or drain back-up or other mishaps that you might experience in an older home, but most insurers offer it as an add-on. Check with your insurer about what other types of insurance coverage you might need if you live in an older home.

Allison Bisbey Colter is a freelance writer in New Jersey whose work has appeared in The Wall Street Journal and American Banker. She is a former editor at TheStreet.com and a former reporter for Dow Jones Newswires.

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