Homeowners insurance will protect you if your house or its contents get damaged, but you don’t want to pay more than you have to. Review your policy on a regular basis to find out if it still fits your needs. You might discover that you’re over-insured and wasting money for coverage you don’t need.
Make Sure You Have the Right Amount of Dwelling Coverage
The dwelling coverage portion of your homeowners insurance policy will pay to have the house rebuilt if it gets destroyed by a covered peril. The amount of coverage you need is determined based on average costs for materials and labor in your area.
Homeowners often assume that they should have a level of coverage equal to their house’s purchase price or its current market value. That can cause people to have too much or too little insurance.
When figuring out how much coverage you need, focus only on how much it would cost to rebuild your house. Don’t factor in the cost of the land that the house sits on. If you chose a coverage amount that was based on your home’s purchase price or current market value, you might be over insured and paying more than you should in premiums. Talk to your agent and adjust your coverage if necessary.
See How Inflation Adjustments Have Affected Your Coverage
If you file a homeowners insurance claim and costs for building materials and labor have increased since you took out your policy, but you didn’t adjust your coverage, you can find yourself without enough money to rebuild your house. Some insurers automatically adjust coverage amounts each year to account for inflation and prevent that sort of problem.
If your homeowners insurance company does that, after several years, the amount your house is insured for may no longer be in line with the amount it would cost to rebuild it. If that’s the case, you can adjust your coverage to avoid paying unnecessary premiums.
Review Your Personal Property Coverage
Make sure that the amount of coverage you have for personal belongings reflects their value. Many homeowners have no idea how much their possessions are worth and simply choose a level of coverage that they think will be enough.
If you take an inventory of all your belongings, you might discover that your current level of coverage is higher than it needs to be. An inventory can also be helpful if your personal property gets damaged or destroyed and you have to file a claim.
Don’t Pay for Coverage You Don’t Need
Being underinsured can leave you vulnerable if you have to file a claim, but having too much insurance can also be a problem. There is no reason to pay for coverage that isn’t necessary. Review your homeowners insurance policy on a regular basis and contact your company or agent if you have a question or want to make a change.
