Should I Add More Coverage Before I Renew?

When your homeowners insurance policy is up for renewal, this is often an opportunity to add more coverage if you need it. Although you can change your coverage during the middle of the policy with some companies, many homeowners prefer to make adjustments at the time of renewal. Whether you need to add more coverage depends on the amount of changes that take place in your household--generally, if everything is the same, you can leave your policy as is. Another factor that can influence the amount of coverage you add is your ability to afford more insurance on your home.

Changes in the Home

Homeowners insurance is based on the amount of coverage you would need if your house were to become a total loss during a disaster. Fires and severe storms can all be causes of complete destruction. Many house owners also have additional flood coverage in order to protect their homes from significant water damage. Not only is the actual dwelling at stake, but you can also risk losing all of your belongings within the home as well.

When you initially sign up for homeowners insurance, you need to get an estimate as to how much it would cost to rebuild your house from scratch. This seems difficult to accomplish at first, given the fact that construction costs can fluctuate overtime. Generally, it is best to overestimate than to underestimate the cost of rebuilding your home, so that you are not out any funds if such a disaster were to occur.

The frequency of a policy renewal can vary depending on the provider, but many insurance companies renew the contracts of their policyholders every 12 months. At this time, you have the option of either decreasing or adding more coverage. Decreasing the amount of homeowners insurance is usually not necessary, and it is not a very sound plan if the initial coverage you had was just right.

You can certainly increase your coverage amounts upon renewal, but you first want to justify the amount. Common reasons why homeowners need more insurance are to cover home additions, or to cover an increased amount of valuables within the dwelling. If you find that you did not initially take out a sufficient amount of liability coverage, then this can also be changed at the time of renewal.

While it is acceptable to slightly overestimate the costs of rebuilding your home, you should take care not to choose too much coverage. Not only would you be paying for unnecessary coverage, but the insurance company could potentially reject your request based on the estimates. Keep in mind that when you need to file a claim, you will receive the amount of money that it costs to rebuild or repair your home, and not the total value of your policy.

Consider Your Budget

It is important to consider how much you can afford when it comes to possibly adding coverage to your homeowners insurance policy. In such cases, you should preferably ask for a quote before automatically increasing your coverage. You will pay higher premiums for whatever additional coverage you have, so it is important that you can budget the extra costs out in advance.

Although you might desire extra coverage, you should really only take out the exact amount of house insurance that you need in order to reasonably protect your property. If you take out more coverage than you can afford, you possibly risk losing your policy due to skipped or missed payments. It is important to reevaluate your coverage needs every year, but only add when necessary.

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