You may not think much about your homeowners insurance coverage until you have a claim, but this is a good way to leave yourself underinsured or under the impression that you have protection when you don't. While major changes to your coverage are rare, your company may make slight adjustments at each renewal. Carefully examine all the documents your company sends with the annual renewal to ensure the coverage is acceptable.
Changing Insured Amounts
Your homeowners insurance company can change the amount of your coverage, and it generally will do so each year. The reason for this is to account for the increases in prices to rebuild your property if it is damaged or destroyed. Often, the increase in coverage is automatic and is based on the average increase in building and construction costs for your area, not on an actual cost increase to rebuild your home.
Your homeowners insurance company can add amendments or declarations to your policy, which can substantially alter the coverage. Examples are companies adding restrictions for fungus coverage, often to limit payments for mold damage. Claims for this type of damage are often substantial, and insurance companies look to limit their exposure by modifying the coverage on existing policies.
While a company won't often change your deductible without your agreement, it may increase the price of the policy significantly, putting a note in with your renewal notice that you can save money by increasing your deductible. An increase is especially likely if you have filed a claim in the past year. Deductibles can also change to a percentage deductible. For example, your insurance company may change your deductible to 10 percent of the value of the home for wind damage, at your request. This amount is often substantially higher than the dollar-amount deductibles that most people carry and reduces the insurance company's exposure with a catastrophic loss due to a storm.
Reassessing Insurance Needs
Periodically reassessing your homeowners insurance needs is a way to get the most coverage for your value. At the time of yearly renewal is the best time to do this. Get an estimate on what it would actually cost to rebuild your home, either from a contractor or from a service that specializes in providing these estimates. You should also examine your liability coverage and be certain that it meets your needs and protects your assets sufficiently. Also, make certain you have coverage in place for any special items you own, such as jewelry, art or guns, which can be limited in coverage by your policy without a special declaration.
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