With the significant increase in property values in many areas of the U.S., if you own a home, now may be a good time to review your homeowner’s insurance policy. Why? Well first off, one in twenty insured homes has a claim each year, according to the Insurance Information Institute. It’s important to be sure you have the right coverage in place.
Secondly, when there are significant changes in property values, your insurance policy may not keep pace. Let’s say you purchased your home eight years ago for $300,000. Your home was insured for $360,000, or 20% more than the value at that time. Today, let’s say your home is worth $500,000, with a replacement cost of $600,000. If your homeowner’s insurance policy had a fixed coverage amount, and there was a tragic loss of your home, you could be as much as $240,000 short of the cost to re-build, and likely $140,000 short if you were to purchase a comparable home.
Simply reviewing your homeowner’s policy on a regular basis can help to identify any needed adjustments to coverage. Given that the increase to your premium for expanded coverage will likely be minimal, this is a no-brainer that can pay off should tragedy strike.
Finally, while you’re reviewing your coverage, if you have not considered an umbrella insurance policy of $1 million or more, it may be worth consideration. An umbrella policy provides coverage over and above any limits with your home and auto insurance. For example, should you or your family member cause a serious auto accident, the standard $300,000 - $500,000 of liability coverage may not be sufficient. An umbrella policy can help cover these more serious events by protecting your largest asset, your home, from situations that result in injuries, property damage, certain lawsuits, and personal liability situations. The annual cost to add this coverage is generally less than $300, so it may be worth a look.
This article is intended to assist in educating you about insurance generally and not to provide personal service. For information about specific insurance needs or situations, contact your insurance agent.