It’s very important for any homeowner to have insurance coverage on their home. Without insurance, you won’t be protected if your home is damage or vandalized, or if your items are stolen. For those who have a mortgage, homeowners insurance coverage is a requirement. Lenders don’t want to loan money on a home that isn’t protected, because it harms their investment and puts them at risk of loss. If you don’t keep insurance on your mortgaged home, your lenders will get insurance for you and charge you for it, and it’s often much more expensive than what you could get on your own. Still, how do you know if the coverage you have is really enough? Here are seven ways you can tell.
1. Do you have coverage for additional perils?
If you live in a place where there are floods, earthquakes, or hurricanes, your standard homeowners insurance policy won’t protect you from those things. You’ll need separate coverage, and your standard policy won’t be enough. You don’t want to get caught unaware and end up with a lot of damage that you could have been protected from financially, so it’s important to make sure you have all the coverage you need for your area, and not just a homeowners policy. Your mortgage lender will insist upon a flood policy if your house is in a flood plain, and hurricane buy-down insurance if you live in an area at high risk for windstorms.
2. How much is your deductible?
When it comes to insuring your new home properly, the deductible for your insurance is one place where you might be able to save some money. If you have a higher deductible, your premiums will be lower. Of course, you’ll also need to pay out more if you have a claim, but that’s something many people can budget for. Be careful if you have a mortgage, though, because your lender may not allow you to have a large deductible on your homeowners insurance. It’s always better to find that out before you make a decision on raising that deductible to save money, since your lender may see that as not having enough coverage.
3. Have you had a review with your agent lately?
If it has been a while since you talked to your insurance agent, now may be the time to pay them a visit. They can take a look at your coverage and determine whether you’re properly covered for your specific needs and the type of property you have. Most agents want to sell insurance, so be vigilant in not agreeing to more than you really need. But do take the insurance agent’s thoughts and information under advisement, so you can make the best financial decision going forward. The goal is to have an adequate level of coverage, but not to pay for more than you need.
4. Did you make big improvements to your home?
Even though you go through getting coverage when you buy a home, you may make changes at a later date. If you’re worried about your homeowners coverage you’re not alone, and it’s important that you make sure you have enough coverage in case you ever need it. When you make improvements to your house, your insurance agent doesn’t know about that. They assume your house is the same as it was when you got the coverage. It’s understandable that you don’t want your premiums to go up, but you also want to be sure that you’re covered for any damage that could occur. Protecting the new things you have in your home is important, and you’ll want to reevaluate how much coverage you have after you’ve made your improvements.
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5. Have you had any claims?
If you’ve had a claim against your homeowners insurance and found that you had to pay out of pocket for things that weren’t covered, that could be a definite sign that you don’t have enough insurance. You want to prevent that from happening again, and the way to do that is to make sure you have a higher level of insurance coverage for the future. That will keep you from needing to pay money out that you weren’t expecting, and help you avoid the need to pay over and above your deductible.
6. Are house values going up in your neighborhood?
There are many ways to check and see if your insurance coverage is enough, and some signs you can look for that can help you decide. One of them is what the other houses in your neighborhood are doing when it comes to value. If homes are worth much more now than they were when you purchased yours, you may not have enough coverage. That’s never a good feeling, but you can fix that by contacting your agent and asking them whether they would advise you raise your coverage to meet a new value.
7. Is your coverage for replacement cost?
Your insurance should be for replacement cost, which is what would be required to rebuild your entire house today. A lender will generally require that level of insurance, but you may want it even if your home is already paid for. It’s the highest level of coverage you can have, and will protect you from any serious financial loss, even if your home is completely destroyed. If you don’t have that, you may not have enough coverage.
