Homes often mirror changes in homeowners’ lives. As families grow or careers takes new paths, homeowners adapt their spaces to accommodate such life events. When they need more space, they make additions or finish basements. And when homeowners found home-based businesses, their homes double as offices.
When navigating life’s twists and turns, it’s important to remember that as our homes change, our homeowners insurance policies likely should, too. When we modify our homes’ sizes, living areas, uses, and even contents or amenities, we may need to modify policies so our homes in their current states are fully covered.
Some changes that may prompt a homeowners insurance policy change include:
- Doing a home addition or major remodel — Home improvements like additions or major remodels can increase value, which often requires more insurance coverage. Why? A home that is worth more should be insured for a higher replacement cost. To prepare in case disaster strikes and a home requires a complete rebuild, the insurance policy should reflect the value of the home after the add-on investment or remodel.
- Making certain lifestyle changes — It may seem odd, but there are personal lifestyle changes that can affect homeowners insurance, including retiring and giving up smoking. Smokers are riskier to cover because of the link between cigarettes and house fires, so their homeowners insurance premiums are often higher. Retirees typically spend more time at home, which can mean less risk of unattended hazards causing house fires, less risk of burglary, and more time to maintain the property. According to the Insurance Information Institute, those who are 55 or older and retired may qualify for a 10% discount with some insurance companies.
- Starting an at-home business — Running a business out of your home may require significant technology or equipment investments. Don’t assume these items are covered under your homeowners insurance just because of where they’re housed. Also, if your business involves people coming to your home, are you protected if a client or customer sustains an injury? For example, if a client slips and falls on the steps while leaving your home office, will your homeowners insurance automatically cover any liability? Make appropriate adjustments to ensure protection of your business assets and all related activities.
- Acquiring high-value items — If you’ve acquired certain high-priced valuables like art, antiques, or jewelry since your last homeowners insurance policy review, you should review anew and make necessary modifications so they’re covered in the event of theft. If you don’t have these items listed on your policy, they are likely not protected.
- Purchasing high-risk items for the home — Some home additions like swimming pools or outdoor trampolines can increase the risk of injury at home. This means liability insurance must be adequate to safeguard homeowners if an accident — and potential lawsuit — occurs.
If this discussion has prompted you to review your homeowners policy, you may be thinking, “But when … and how?” Simply reviewing a policy doesn’t mean your policy will change — but a thorough review may uncover some areas that are lacking in coverage and could sneak up on you later. Always review your homeowners policy in conjunction with making a major life or home change. If no obvious changes occur, experts recommend reviewing your policy annually around the same time each year. Consider a few guidelines as you sift through your policy.
- Know your home’s current replacement value. Don’t use the appraised value of your home since appraised values also factor in the value of the land homes sit on. Calculate using replacement costs per square foot in your area, which you can obtain from your area homebuilder’s association.
- Consider the risks associated with your geographical area. If you live in an area prone to certain natural disasters like hurricanes or wildfires, don’t assume your home is protected. Flooding and fire insurance are most often supplemental policies. Too often, homeowners don’t realize they aren’t protected from fire and flood until they file claims for such damage. Know in advance what inherent risks your home faces — and get the necessary coverage specific to those risks.
- Review your deductible and compare it to previous years. A year-to-year review of your deductible may reveal that you’re suddenly not comparing apples to apples. Some insurers change deductibles from set dollar amounts to percentages of insured home values. These changes can be dramatic and may prompt you to change your policy. Ideally, you want the highest deductible you can afford to lower your premiums, but you certainly don’t want the sticker shock of a high-priced deductible you weren’t expecting. So, review your deductible and make sure you fully understand how your insurer calculates it and what your options are.
Perhaps the best advice to navigating your homeowners insurance coverage is to have an expert on your side who can guide you through the review process. A knowledgeable insurance agent who understands the intricacies of the business — pitfalls to avoid, industry trends to watch, opportunities for discounts, and more — can make the difference between a homeowners policy full of valuable protection and one full of costly holes.