The Pitfalls of Failing to Review Your Homeowner’s Insurance

Damaged HomeWhen was the last time you looked at the details of your home insurance policy? For most of us, we’re lucky to have read through the fine print back when we first secured the protection we’ve been renewing every year. Only about a third of the respondents to a recent Angie’s List nationwide survey said they’d reviewed their homeowners’ policy in the past two years.

“At a minimum, every year when it’s time for renewal, you should review your policy,” said Lynn Hudson of The Turner Agency Inc. in Greenville, S.C. “A lot of changes can affect the policy. There are things that, when they come up throughout the year, would benefit (the homeowner) to tell us as soon as they do them.”

Skipping this review can really cost you if you’ve made improvements and failed to cover them. But don’t just stop at home improvement. Think about expensive purchases or gifts — jewelry, electronics, antiques or artwork. Most of us have something of value that’s sitting unprotected somewhere.? Even adding a pet or plaything like a trampoline could impact — even void — your policy.

Another issue could be a misunderstanding about what kind of coverage you have. Most homeownersshould have a guaranteed cost replacement clause in their policy, so if the home is damaged beyond repair, the policy would cover the cost it would take to rebuild the home. But some homeowners have policies that only offer the original value of the home.

Because the cost of reconstruction has increased in recent years, homeowners without replacement cost might not have enough coverage to replace their homes to their current state.?

Suzanne Brown of Suzanne Brown Insurance Agency in Houston suggests homeowners consider inflation guard protection, which raises the dwelling coverage 4 percent every year. ?

“In a year like this year, it would definitely be worth it to check with your agent to be sure you have the current cost of appraisal built into (your coverage),” she said.

Brown speaks from personal experience. Her 91-year-old neighbor had a 60-year-old home and hadn’t updated her policy in years. When a fire leveled the home, Brown’s neighbor found out her policy only covered the original value of the home.

“She didn’t review it and left everything up to her agent,” said Brown, who was not the agent who insured her neighbor. “When they looked at the policy after the fire, they realized she did not have a policy that tracked with inflation, so she got only a fourth or a third of what she needed. All those years, she basically thought she had a policy that would rebuild her home, but because the value of that policy did not track to what she needed based on current construction costs, it paid her much less.”

If establishing that you have the coverage you need isn’t enough to get you to talk to your agent, consider this: Sometimes a short chat can result in a rate reduction. Many insurers give discounts for alarm, home automation and sprinkler systems. Even nonsmokers and retirees can qualify for special deals through some carriers. Anytime you have a significant life change, be it having a new child, getting divorced or bringing in a roommate, you should talk to your agent.

Homeowners concerned about whether they have too much or too little coverage should ask their agent to run a replacement cost estimator, which can provide them with accurate information on current values.

“You don’t want to find out after you have a loss or claim,” Brown said. “By then, it’s too late.”

If you’re shopping for a new policy, don’t just look at rates. Find an agent who is well-versed on the varying coverages and isn’t interested in just making the sale. Talk to prospective agents, and find one who will act as your consultant during the purchasing process. Insurance agents must be licensed by each state in which they do business. Your agent should work on your behalf. Be sure to find someone with whom you are comfortable.

Hudson has another tidbit to offer.? “The home insurance market is getting tough right now,” Hudson said. “The losses have been bad the last three to four years. Homeowner insurance carriers are tightening up. When you have a loss, talk to your agent and weigh it out with them whether or not it’s something you need to turn in. It’s not a good idea these days to turn just anything in. Always talk to your agent first. That’s what they’re there for.”

Angie Hicks is the founder of Angie’s List, the nation’s most trusted resource for local consumer reviews on everything from home repair to health care. To find out more about Angie Hicks and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate webpage at www.creators.com.

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