Is Your Home Underinsured? 4 Signs You May Need More Coverage

Imagine losing your home (or a significant part of its structure or contents) in a natural disaster. Finding out your house is underinsured would just add insult to injury. This is why it’s important not just to have a homeowners insurance policy, but to make sure the coverage level matches the current value of your home and its contents.

Do you know the ins and outs of your insurance policy? It may be time to adjust your limits, or shop home insurance quotes to find a new policy altogether. Here are four signs you may need more coverage to truly protect your property—if any of them apply to you, compare your options as soon as possible.

Your policy hasn’t been updated in awhile

If your home burns to the ground, your insurance policy will pay to replace it, right? It’s not so simple. First, you must consider whether you have an actual cash value (ACV) or replacement cost policy. The former costs less, but includes depreciation. The latter costs more, but excludes depreciation.

However, if it’s been years since you’ve updated your policy, you may be vulnerable—even if you have a replacement cost policy. Why? As CNBC writes, “The cost of materials and labor change over time, usually for the worse, based on market forces and inflation.” Keeping your coverage current is the best way to account for inflation and market fluctuations over time.

You’ve made renovations to your existing structure
You’ve probably added or updated something about your home since you moved in, but your policy may not reflect this change in value. The founder of Angie’s List puts it this way: “Your insurance agent doesn’t know what you’ve done to your house. They don’t know if you added a deck or bought an expensive piece of jewelry.” It’s up to you to keep them in the loop, or to take out a new policy that reflects the current state of your dwelling.

You’ve added possessions/tech to your home

The same principle applies to any technology, art, furniture, antiques and high-value items you’ve amassed since enrolling. It’s worth noting many policies, even if they cover the structure of a home under replacement cost, only cover personal possessions for actual cash value. The Insurance Information Institute recommends acquiring replacement cost insurance for the contents of your home. You can do this by tacking on a rider or finding a more robust policy.

Your living situation recently changed

Marriage, divorce, the birth or adoption of children, acquiring a pet, a child leaving for college and many other common changes in living situation warrant reassessing your coverage. You want everyone under your roof to be protected in case they’re found liable for injury or damage to a non-resident, plus sufficient liability coverage for all visitors to your home.

It’s better to be safe than sorry. Unless you just bought or updated your homeowners insurance policy, you may be underinsured. Get started with free home insurance quotes through CoverHound today!