Most of us set up a homeowners insurance policy when we buy our home and then forget about it. But that can leave you with inadequate protection.
Inflation, remodeling, big-ticket purchases and other changes should lead you to revisit your policy. You don’t want to discover after a burglary, fire or other mishap that your losses aren’t fully covered.
“We really highly, highly, highly recommend you check your insurance at least once a year, when you get the renewal,” says Jeanne Salvatore, a spokeswoman for the Insurance Information Institute, an industry group. “But then any major change in your life should also trigger a call to your insurance professional.”
Here are seven changes that should put you in touch with your insurer.
1. You remodel your home
Making your home bigger or nicer means it would cost more to rebuild. So you’ll need to raise your homeowners coverage limits. More space also will probably mean more stuff to insure (more on that in a minute).
On the flip side, a renovation might entail updating old wiring and plumbing. That could lower your insurance bill, because you’ve made your home safer.
In addition to leaving you with inadequate coverage, failing to tell your insurer about a remodel or addition may also violate the terms of your policy. State Farm, for instance, wants to know within 90 days about any change that increases a home’s value by at least $5,000.
2. Construction costs go up
Even if you never expand or remodel your home, inflation will raise the cost to rebuild. In some markets, high housing demand is driving up construction costs particularly quickly.
Some homeowners insurance policies automatically raise coverage to match inflation, or offer this as an option. State Farm, for instance, says it “provides coverage that automatically adjusts each year in an effort to compensate for increases in construction costs in your area.” You should check if your policy includes inflation protection and, if not, ensure your coverage remains adequate.
3. You get more stuff
With or without added space in our homes, we all tend to accumulate stuff over the years. That’s important to your homeowners insurance, which covers the value of your possessions, not just the cost to repair damage.
You had to decide how much coverage for possessions you needed when you first got your policy. Your annual insurance checkup should include a review of whether this is still adequate. Check in with your insurer right away after a big-ticket purchase.
4. You get a dog
Dogs can increase liability risk, because they might attack someone. Some insurance companies will charge more or deny liability coverage altogether for certain kinds of dogs. Others consider a specific dog’s history.
5. You start a home-based business
A homeowners policy typically will cover just $2,500 worth of business equipment in your home and $250 worth off the premises, according to the Insurance Information Institute. Homeowners policies generally don’t protect against liability if, for instance, a business-related visitor slips on your stoop or a client sues you over a dispute involving your services.
A survey commissioned by the Independent Insurance Agents & Brokers of America found that nearly 60% of home-based businesses didn’t have business coverage. To be properly covered, you'll need a home-business rider on your homeowners coverage, a separate home-business policy or even a standard business policy.
“You want to know what the insurance costs are,” Salvatore says.
6. You start renting out a room, or your entire home
Your homeowners policy might cover an occasional short-term rental, but once you’re regularly renting out a room or your home, you’ll need hotel or bed and breakfast coverage, the Insurance Information Institute advises. If you rent out your home for longer periods, like six months or more, you’re looking at a landlord or rental home policy, the institute adds. Standard homeowners insurance is for owner-occupied homes.
7. Weather hazards get more extreme
Due to climate change, the Insurance Information Institute warns: “Property losses of all kinds are most likely to increase.”
A report published by the Bulletin of the American Meteorological Society in December 2015 found climate change contributed to extreme heat waves, droughts, heavy rains, cyclones and winter storms in 2014, and has raised the probability of wildfires in the West.
Last October, the National Oceanic and Atmospheric Administration warned that one of the strongest El Nino weather patterns on record would lead to an unusually wet winter across the southern United States and up both coasts. The Federal Emergency Management Agency advised residents to consider flood insurance, even if they live outside of high-risk flood zones.
In short, changes to your home, how you use it, what you put in it and the world around you can impact your coverage needs. When it doubt, contact your insurer. A wasted call is better than learning too late that you don’t have the right protection.