Should You Make Changes to Your Homeowners Insurance?

Should You Make Changes to Your Homeowners Insurance?
  • Opening Intro -

    We buy our homeowners insurance coverage, stuff our policies away and usually forget about them unless we need to file a claim.

    As our renewal notices come, we may take note of the increases, reluctantly writing out a check for yet another year of protection.


Automatically assuming that your insurance coverage is sufficient year after year may be a given, but it can also cost you in ways that you might not have considered. Read on and we’ll look at some reasons why just might want to pull out your homeowners policy today for a fresh review.

Home Values

After several years of sharp retreats, home values are on the rise again. For many homeowners, the strong home values of years past may take many more years to reach again, but if you bought your home within the past year, you may be in for a pleasant surprise or even a rude awakening.

That rude awakening can hit you if you were to file a claim following a total loss. For example, when you purchased your insurance, you paid $185,000 for your home, a steal in your neighborhood. To replace your home today, you would pay more than $225,000, a difference of $40,000. Your home may not have been properly valued in the first place and with the sharp increases in your area, it may be worth a lot more than you think.

Market Value, Replacement Costs

Market values change, therefore it can be difficult for homeowners to know what their residences are worth from month to month. Basing your insurance coverage on market value is not the best option, rather you want insurance that is based on its replacement cost.

Replacement cost is preferred because it allows you to rebuild a home at its current location with comparable construction materials that were used in the home that you lost. You aren’t at the mercy of ever-changing home values. Instead, your home is replaced whether home values advance or decline.

The Inflation Guard Option

You have another option when it comes to home insurance: asking your agent to automatically include an inflation guard that automatically adjusts your coverage to reflect changes in the cost of construction.

An inflation guard can be especially helpful if your home needs to be rebuilt and the building codes have been upgraded. Normally, you would have to pay extra to upgrade your home, but with an inflation guard in place so-called “ordinance” or “law” coverage would help close that gap.

Your Agent

If you are not sure that your coverage is adequate for your needs, contact your insurance agent to discuss your situation. You may also want to shop around for insurance elsewhere, giving you the opportunity to compare prices and coverage options with competing insurers.

See AlsoShould You Purchase Flood Insurance?


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Categories: Insurance

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Matt's Musings", his personal blog. Matt covers campus, consumer, business and financial topics on various websites and blogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".