When you buy your home, you will probably have to buy homeowners insurance at the same time. However, the good thing about home insurance is that it is able change with you as your lifestyle changes.
How you use your home, who lives there, the contents inside and your property value will all likely change over time. With these changes come varying risks and liabilities that need to have the right benefits of home insurance to counteract them. Therefore, there are times when you will need to increase or adjust your coverage.
Why should I increase my homeowners insurance coverage?
Homeowners insurance protects you against numerous hazards that might strike your property. It might pay for the losses resulting from:
- Damage to your dwelling from hazards like fire, severe weather or vandalism.
- Damage to or theft of your personal belongings.
- Liability lawsuits brought by someone harmed as a result of your mistakes or negligence.
- Additional living expenses you accumulate if you have to temporarily move out of your home after damage occurs.
Within these benefits, there will be limits to what your policy will pay. When you first buy your coverage, your agent will work with you to establish your initial level of benefits. You will likely have to set certain limits as required by your mortgage lender. However, you also have much leeway to increase your coverage to your satisfaction too.
However, the coverage you have on day one might not be the coverage you need ten years down the road. Therefore, if the value you have invested in your property increases over the years, then you will also have a need to increase your benefits. There are several ways you might need to do so.
Adjust Your Dwelling Insurance
Your dwelling coverage is the portion of your policy that will pay for damage to your home’s structure. Generally, these policies pay for repairs to your home based on its replacement cost value. This is the value needed to repair your home based on construction, labor and materials costs at today’s prices. It will pay to replace most of the structure, though exclusions might exist for certain fixtures.
If you make renovations or build an addition onto the home, your dwelling’s value will increase. This increase can also happen when repair and labor costs rise in your area. In either case, you might need to increase your dwelling coverage. Periodically review your dwelling coverage with your agent to research expanded benefits options.
Consider Replacement Cost Possessions Coverage
When you buy possessions insurance, most policies pay for damaged items based on their cash value. An item’s cash value is its used value at the time a claim occurs. Therefore, you likely won’t receive 100% of an item’s cost back from the insurance company.
To receive more of a benefit, ask your agent if you can upgrade your coverage to replacement cost value insurance. The settlement you receive will more closely match the cumulative value loss of all your possessions.
Ask About Scheduled Items Riders
Some portions of your possessions coverage will include exclusions or strict dollar limits for special items like musical instruments, collectible items, jewelry, art or other valuables. To get appropriate coverage, you might be able to insure them using a scheduled item rider. This is a policy endorsement that will offer specific coverage for this item at its replacement cost value. When you buy one of these items, call your insurer to ask if you have the option to buy one of these endorsements.
Adjust Your Deductibles
Most possessions and dwelling claims will include a deductible. The deductible is your responsibility to pay for your own damage. Therefore, the insurer will subtract your deductible from your final settlement. So, if you have a $500 possessions deductible, and $2,000 worth of possessions damage, you pay the first $500 and your insurance pays the remaining $1,500.
Claims below the deductible value will have no coverage. If you increase your deductible, you will agree to pay for more of a claim on your own. Therefore, you should only choose a deductible you can afford to pay. If this means taking a lower deductible, then that is likely a better decision.
Buy Umbrella Liability Insurance
Liability coverage compensates third parties, like neighbors, when you negligently cause them harm. However, if the claim value exceeds your policy limits, then you could face a cost you have to pay on your own. By investing in expanded personal umbrella coverage, you can receive additional liability benefits on top of those already provided by your homeowners policy.
Ask About Expanded Perils Coverage
Most homeowners policies will exclude certain perils from coverage. However, to get this expanded coverage, you can often buy specific policy endorsements. For example, you might be able to get endorsements for sewer backups, identity theft, equipment breakdowns, earthquakes or personal injury liabilities. Keep in mind that some coverage, like flood insurance, you will have to buy from a separate policy.
Periodically, make a point to review your homeowners insurance with your agent. They can help you determine whether your present coverage levels still protect you. It might be best to increase the coverage offered by your policy based on your agent's findings.
Also Read: What Will Your Homeowners Insurance Pay for Structural Damage?
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