Why You Need an Annual Insurance Review
Last updated: April 2022
An annual insurance review is a great opportunity to consider any major life events in the last year. Getting married, having a kid or adding a bedroom are perfect examples of changes that may require adjustments to your protection. You don't even have to wait a year to make updates, either. You can adjust your coverage at any time.
The benefits of an annual insurance review
Many homeowners purchase an insurance policy when they first move in, but they may not understand the importance of periodically reviewing it or reassessing their needs. It's an oversight that can ultimately lead to a gap in their coverage.
For instance, you may have insured your home for $200,000 when you first bought it. A decade later, your home may cost $300,000 to rebuild. That's a $100,000 gap in coverage—which could leave you without the proper resources to rebuild in the event of a loss.
A home renovation or upgrade is another reason you may want an insurance review. It can help ensure that your home and belongings are fully protected, and that your coverage is keeping up with your current needs. Everything from new furniture to a kitchen upgrade can affect the value of your family's home, and may even qualify you for additional discounts on your insurance policy.
One way to evaluate your needs is to conduct a home inventory, a detailed catalogue of all your possessions. Take videos or photos on your smartphone and create a virtual inventory.
Tips for talking with your insurance provider
Despite what you might think, though, an insurance review doesn't have to be an involved, time-consuming endeavor. A single conversation or a visit with your insurance provider can help make sure that you're knowledgeable about your coverage and comfortable that your limits are meeting your current needs.
Here are some ideas on what you might want to discuss:
- "Does my policy provide enough coverage to rebuild my home today?"
Many homeowners are surprised to learn that their policy is outdated and does not provide sufficient coverage to rebuild their existing home. Changes in construction costs (they can vary from year to year), upgrades to a kitchen or bathroom, new kitchen appliances, or updates to a basement can all affect the cost to repair or rebuild your home. For example, new finishes in your kitchen can change your existing kitchen from "standard" to one that's considered "semi-custom" or "custom." Since insurance companies replace lost items with "like kind and quality," it is important to estimate the full cost of replacing finishes, appliances, electrical systems and plumbing systems in determining your coverage.
- "How does a newly finished basement affect my policy?"
A finished basement may not only increase the cost to rebuild your home, but it may also require additional coverage to protect items from water damage. For example, optional water backup coverage will help protect new furniture and carpet in your basement if a sump pump breaks or a drain backs up.
- "Does my policy provide enough coverage for landscaping or outdoor appliances?"
Installing a new sprinkler system, a larger storage shed, a new pool or hot tub, or buying a substantial backyard grill are outdoor changes that may require a homeowner's policy upgrade.
- "Do I need extended coverage for valuables?"
Your existing policy provides standard coverage for your home and belongings, but this coverage may not be sufficient for all your valuables and is frequently overlooked. For instance, you may need additional coverage for wedding rings, valuable golf clubs or other sports equipment, family heirlooms and antiques, musical instruments or artwork in your home.
- "Do I qualify for discounts?"
An annual insurance review can also be an important opportunity to ensure you are receiving all possible discounts on your homeowners policy. For example, you may qualify for a discount if you have installed a security system, a smoke alarm or a hail-resistant roof. Additional discounts may apply if you insure both your car and home through the same provider, if you don't have any claims, or if no one in your household is a smoker.
Like home maintenance, periodically reviewing your coverage is something that can go a long way to protecting what is likely your biggest investment. Your insurance provider can walk you through the details of your policy and suggest updates to your protection based on updates in your life.
So, when was the last time you reviewed or updated your homeowners insurance policy?