Your home insurance should be an accurate reflection of your needs at all times. What most people do not realize, however, is that your needs can change over time. Your insurance needs can change from year to year as you expand or remodel your home, or if it experiences the general wear and tear all homes do. It’s important to reevaluate your homeowner’s insurance policy every year to make sure that your home is fully covered. If you don’t reevaluate your policy once a year, you could find yourself paying more for less home insurance coverage. Here are three reasons why you should update your policy every year.
Reason No. 1: Account for New Property
One of the main reasons to take stock of your homeowner’s policy every year is to see if you can save money. Many valuable items covered under itemized home insurance policies, such as stereo equipment, can depreciate over time. If you reevaluate your policy on an annual basis you can make sure that your new policy reflects the lower monetary value of these items. The savings from individual items can really add up each year. Reevaluating your itemized list of possessions can reduce the overall cost of your home insurance policy due to depreciation. Look at your possessions once a year to see how much you can save.
The same rule applies for the property you purchase. If, since you updated your policy, you’ve purchased a new television, exercise equipment, or any other property of value, then you’ll want to update your policy to make sure you’re covered. This is particularly true if you have replacement cost coverage, which reimburses you for the price you paid for the item without factoring in depreciation. With that in mind, it’s a good idea to hold on to the receipts of all high-value items you purchase so that you can help expedite the reimbursement process if you experience a loss.
Reason No. 2: Account for Home Improvements
The final reason to reevaluate your homeowner policy on an annual basis is to make sure that any changes that you have made to your home have the appropriate coverage. Whenever you expand or remodel your home, you need to make sure that your home insurance policy reflects the increased property value. Major changes like these often cause your property value to shoot through the roof. The home you own is simply worth more after a few simple changes. You need to make sure that your new, more valuable, home is well covered.
You can also often save money on your policy if you add a home security system to your house. These systems reduce the chances of a burglary, often meaning that insurance companies can offer you the same coverage with less risk. Most insurance companies will pass the savings onto you in the form of lower rates. Insurance companies will often only allow you to make major adjustments like this once a year. If you miss your chance to reevaluate your policy limits, you may find yourself paying a premium that does not reflect your circumstances. Don’t let this happen to you.
Reason No. 3: Adjust for Inflation
This could be the most important reason to update your policy every year. The value of your property, and the cost to rebuild it, can increase over time due to inflation. However, that doesn’t mean that the amount of coverage you have will increase with inflation, which could leave you drastically underinsured if you experience a total loss of your home. Fortunately, many insurance policies come with inflation guard coverage, which automatically increases your coverage by a certain percentage every year. Inflation guard coverage is typically available for homeowners who cover 100% of the value of their home. If you cover 80% or less your insurance company may not be obligated to cover all of the cost of rebuilding your home. By revisiting your policy once a year, you can be sure that every inch of your home has appropriate coverage. If you just take a few minutes every year to look around and take note of changes, you can save a lot of money, and ensure you have adequate coverage, in the long run.