You May Have Homeowners Insurance, But Are You Covered?

An estimated two-thirds of homeowners across the nation are underinsured. When was the last time you reviewed your policy? Now, if a problem arises down the road, for example, a fire or theft - the coverage you currently have may not be sufficient to replace these items or rebuild your property.

April 30, 2008

Most people only think about homeowner's insurance when they are buying a new home, and then forget about it. Unfortunately, if you don't review your homeowner's policy from time to time, it can come back to haunt you later. Believe it or not, the policy you started out with only a few years ago could very well be obsolete.

In fact, a large number of policies established as recently as the past two years no longer provide sufficient coverage, and the policyholders don't even realize it. An estimated two-thirds of homeowners across the nation are underinsured.

I already have homeowner's insurance. Why do I need to update my policy?

One reason is that property values have risen dramatically in recent years and will most likely continue to increase. Beyond that, you may have spent the past few years completing costly renovations, also increasing the value of your property. And, chances are, since your original policy was written, you've probably acquired additional possessions and valuables — perhaps a new sound system, digital equipment, jewelry, art or antiques.

Now, if a problem arises down the road, for example, a fire or theft — the coverage you currently have may not be sufficient to replace these items or rebuild your property. This could be a grave and costly oversight and, the truth is, with a few moments of time and some sound advice, it is a catastrophe that can easily be avoided.

When is a good time to review my homeowner's insurance policy?

It would be ideal if we remembered to update our homeowner's insurance every time we completed a major home improvement or whenever we invest in new valuables. But that's simply not realistic. Therefore, plan to reevaluate your policy every year, upon renewal, and if you refinance. With interest rates hovering in record-low territories, there's a good chance you've recently refinanced or are considering doing so soon. If that's the case, your home will be re-appraised. Make a point to review your homeowner's policy to be sure it covers the current value of your home and all of your new possessions.

Specifically, you should review your coverage when:

Your policy comes up for renewal.
Use this time as a chance to assess your policy from top to bottom.
You're renovating or expanding your home.
Any change in square footage should be reported to your insurance company, including new rooms and even outside features such as a pool or shed. Be sure to talk to your insurance agent before you begin construction so that the additional value of your home can be accounted for if disaster strikes before the project is completed.
You've recently been given or bought expensive items.
Have you recently purchased any antiques, artwork, electronics or jewelry? Your personal possessions are covered under homeowners insurance, but you may want to purchase additional coverage for valuable items.
You have improved your home's security.
Installing a security system, smoke detector, fire extinguisher or other safety measures can earn you a discount from your insurance company.
The number of people living in your home changes.
Whether you get married or divorced, have a baby or send your child off to college, as people move in and out of your home, the amount of personal property within it changes and your coverage should reflect that. This is particularly true if the number of people living in your home increases.
You start a home business.
You may need extra coverage for your business equipment or even an additional business-owner policy if that home business is your primary source of income.