Buying a home is the biggest purchase many people will make in their lifetime, and in spite of the cost, there are so many benefits to homeownership. Not only does a home provide safety and security, but it can also be an opportunity to invest back in your community and build generational wealth.
That being said, it comes with a responsibility — protecting your investment. Homeowner’s insurance is a vital tool in safeguarding your home, belongings and financial security, but it’s not a one-and-done deal. Reevaluating your homeowner’s insurance every year is essential to ensure you have the right coverage for your changing needs and circumstances. Below, we’ll outline some of the most common changes you’ll notice year-to-year in homeowner’s insurance policies and why it’s important to review them.
1. Changes in Home Value
The value of your home can change from year to year due to factors like market trends, home improvements or inflation. If the value of your home increases, you may need to adjust your coverage to ensure it adequately protects your investment.
2. Home Renovations and Improvements
Homeowners often make improvements or renovations to enhance the space. These changes can significantly increase your home’s value, but in turn, can also increase the cost of rebuilding in the event of damage. Updating your policy ensures that the swimming pool, new addition or upgraded deck you added is properly covered.
3. New Belongings
Over time, you accumulate more belongings, from furniture to electronics to jewelry. It’s crucial to review your personal property coverage regularly to make sure your policy still adequately covers your assets.
4. Liability Coverage
If someone is injured on your property, liability coverage in your homeowner’s insurance is what protects you. Your financial situation may have changed since you first obtained the policy, so review your liability coverage to make sure it aligns with your current financial status and lifestyle.
5. Discounts and Savings
Insurance providers frequently update their policies and may offer new discounts or coverage options. By reevaluating your policy annually, you can take advantage of potential savings and ensure you’re getting the best coverage for your budget.
6. Your Deductible
The deductible is the amount you must pay out of pocket before your insurance coverage kicks in. Can you reevaluate your deductible amount to ensure it aligns with your financial capabilities and goals, but keep in mind that changing your deductible can affect your premiums.
7. Natural Disaster Risk
Environmental factors can change over time, including the risk of natural disasters in your area. Climate change, flood risk or other factors may necessitate additional coverage.
8. Reviewing Exclusions
Lastly, homeowner’s insurance policies often come with exclusions and limitations. By reviewing these exclusions, you’ll better understand what is and isn’t covered by your policy, and be able to adjust your coverage accordingly. For example, if you live in a region prone to earthquakes, you may need to add earthquake coverage.
In a world where change is constant, annual policy reviews can give you peace of mind knowing that you’ve taken the necessary steps to protect your home and investments. Don’t wait until a disaster strikes to find out you’re underinsured — take proactive steps today to secure your home and your future.