When Is Changing Homeowners Insurance Important and Why?
Let’s go over the specifics of why it matters when to update, and how to make the change so you can determine if you need to update your homeowner’s insurance.
Why Is Making a Change to Homeowners Insurance Important?
As we previously stated, it’s critical to be prepared to modify your homeowners’ insurance because market values are constantly changing, which can have an impact on not only the worth of your property but also the price of building supplies like roof tiles and floor joists.
Consider this. Let’s say your ideal home cost $500,000 when you purchased it.
Everything about it, from the screened-in porch to the marble countertops you installed yourself, is to your and your family’s liking. You’ve invested a great deal of time, love, and money in this project.
And what’s this? It has a net worth of $1 million as of right now. This is definitely going nicely, I must say! Imagine the unimaginable now, though. What would happen if your beloved home was accidentally destroyed by a kitchen fire overnight? Do you believe your original home insurance will provide you with coverage for a total rebuild?
That is the response, and it is incredibly implausible. Your insurance provider won’t issue a blank check to you or a contractor if they are handling the repairs. You won’t get anything more than what is stated in your policy. Imagine how horrible it would be to learn that the insurance coverage you were counting on to rebuild your house would only give you enough money to erect a shanty where you formerly lived in a mansion! Unexpectedly frequently, it occurs.
The amount of homeowner coverage is determined by the value of the house at the time the policy was written. And regrettably, that worth is subject to change. Because of this, it’s crucial to make sure that your coverage increases or decreases along with the value of your house.
The cost of the materials needed to rebuild your house after a calamity follows the same logic. Even if property values in your neighborhood aren’t skyrocketing, other market shifts may still have an impact on rebuilding prices. In a short period of time, the cost of components like lumber, steel, concrete, and even paint can increase significantly. A sudden tragedy could leave you short on money if your homeowner’s policy is insufficient to cover reconstruction.
When to Change Your Homeowners Insurance
Basically, you should update your homeowner’s insurance if the worth of your home rises or the cost of construction materials rises because you’ll need to rebuild your roof with brand-new materials if a once-in-a-century hailstorm destroys it. Having a policy in place is undoubtedly a good start, but the costs associated with such repairs are too high to simply hope for the best.
Cost
Even if only one of the major factors home value or material costs—is increasing, an unavoidable calamity at your house could leave you in serious financial trouble after you’ve received that meager insurance payout.
A professional who can instruct you on the fundamentals and inform you of the reality of your local home market is always worth consulting. Your local situation will be described by an independent agent, allowing you to decide if you need to increase—or perhaps decrease—your coverage. These are things that our RamseyTrusted agents excel at! They are a part of our Endorsed Local Providers (ELP) network and are focused on giving you the best value for your money without putting you at undue risk.
How to Change Your Homeowners Insurance
Step 1: Don’t allow a gap in coverage.
This would only be relevant if you were looking for a different seller to get a better deal (which our ELPs can help you do). Let’s hope you discover a better offer! Just wait until you’ve locked in that new rate before terminating your current policy or letting it expire.
Step 2: Ask how well your coverage reflects current prices.
Homeowners’ insurance often has a one-year expiration date and an annual renewal option. Most of the time, you can change your coverage when it’s time for renewal. Ask for an estimate of your homeowners’ insurance from the agent or business that sold you the policy, and make sure your coverage level corresponds to recent market values. If not, determine if you require less coverage (which would result in lower premiums) or more (if your policy does not offer sufficient coverage).
Step 3: Check your policy’s terms and conditions.
You can be assessed a cost or penalty if you ultimately decide that you need to cancel a policy because it doesn’t suit your needs. Though fitting it into your budget may influence how you time the cancellation, it’s definitely still worthwhile. (Remember: no gaps in coverage!)
Step 4: Be aware of coverage, limits, and deductibles.
Coverage, restrictions, and deductibles are all clearly stated in every policy. In order to discover the ideal policy for your needs, you’ll need to keep an eye on these aspects while you compare different insurance providers. A trustworthy independent agent is important to discover because they make these comparisons for a living.
Step 5: Let the lender know about any policy changes.
Are you debt-free, including your mortgage? If so, that’s incredible! Congrats! But if you’re still paying off your mortgage, make sure to let the lender know if you make any changes to your homeowners’ insurance. They possibly use an escrow account to pay for some of the products they buy for you. So they will undoubtedly need to be aware of the move.
Working With an Independent Agent Can Help You Big Time
When you’re considering changing your home insurance, working with an independent agent (rather than a single firm) can help you save a lot of money. Captive agents, as they are known in the industry, are only ever going to present you with their own rates and choices. But what about a freelancer? That person will put in the effort to find you the precise coverage and price you need to win.
