When You Should Review or Update Your Homeowners Policy

Why reviewing your homeowners insurance matters

Having a look at your homeowners insurance policy periodically is one of the best ways to ensure you have the right coverage before an emergency occurs. Here are a few of the reasons such a review is important: 

• Home values change: If construction costs rise or your home's value changes, you may need to adjust your current coverage to ensure you can afford to rebuild. 
• You may not have enough liability insurance: Over time, you may build more assets. As a result, higher liability insurance coverage limits may be needed to adequately protect those assets from, for example, a lawsuit from a person who is injured on your property. (Alternatively, you could increase your protection by buying a personal liability umbrella policy.)
• Your deductible may no longer be ideal: The deductible you chose when you first purchased your coverage may not be a good fit now. You may have established a larger emergency fund, for example, so you can now afford a higher deductible – which should lower your premium. 
• You may want replacement cost insurance: This coverage reimburses you based on the current cost to replace items. Actual cash value (ACV) reimbursement, by contrast, pays out based on the depreciated value of the property you’ve lost. To be sure you can replace your property with new versions of the items, consider upgrading your policy by adding replacement cost insurance.

Events to trigger a policy review

While it's a good idea to review your policy and coverage limits at least once per year, it's also wise to review your coverage whenever major changes to your life and property occur. 

Renovations and other property changes  

Over time, you may modify, remodel or expand your property. Noticeable changes to your home's structure or features may demand added coverage. 

Examples of such changes include:

• Adding a bathroom or replacing outdated kitchen appliances and countertops. These changes can affect the value of your home, so you may need to adjust your coverage limits accordingly. 
• Replacing your roof. Not only will your home be better protected, but you may qualify for a new roof insurance discount. 
• You update or install a home security system. Such a system can reduce theft risk. Some insurance companies offer discounts for installing them and other upgrades like smart smoke or water detectors. 

Lifestyle and personal changes 

Home insurance doesn't just protect your home; it protects you, your household and the things that matter most to you. Changes that might affect your home insurance include: 

• You inherited your grandmother's engagement ring or purchased an antique painting. These items may exceed the per-item personal property policy limits of your policy, and you may need an insurance endorsement to cover their full cost. 
• Your mother-in-law moved in, you had a child or you divorced. When the number of people living within your home changes, you may need to update your household information with your insurance company. While who lives in the home doesn't affect your rates, it's important to update your policy so all of your family members are covered. 
• You started a business from your home. A standard policy won't cover your business property or liability. You may need to add a home business endorsement or purchase a separate business insurance policy.

Other reasons to review your policy

Even if your life feels relatively calm, it's smart to review your home insurance policy as it nears its annual renewal date. It's the perfect time to assess your coverage and make any necessary modifications. 

Also, if a major weather event affects your area, check your coverage. For example, if your neighbor's home flooded, but yours barely escaped, review your flood risk and check the cost of policies, under both the federal program and from private insurers. If it seems wise, purchase a flood insurance policy so you're better prepared for the future. 

How to evaluate your current policy

When it's time to review your policy, contact your insurer. This representative is a go-to source for explaining your policy's coverages, exclusions and insurance-industry jargon.

You can contact a representative through chat or a phone call, or set up an appointment to meet in person. 

During the meeting, discuss your current coverage, any areas of particular concern; for example, that you installed a new swimming pool or hot tub and are worried about liability coverage. Go over any life changes, and get the representative’s advice to help you adjust your coverage, identify new insurance endorsements you may need, and weigh the pros and cons of changing your deductible. 

If you have several types of insurance with the same insurance company — for example, if you have life insurance, auto insurance and homeowners insurance — you may qualify for multipolicy or bundle discounts, too. 

Being proactive about reviewing your policy can help you save money, protect your family and property, and give you one less thing to worry about if a disaster occurs.