Updating Homeowner’s Insurance Coverage

Introduction

Is your homeowner’s insurance coverage complete and up-to-date? You might think, “My insurance coverage is fine.” Tragically, a 2023 tornado destroyed homes on the Indiana and Illinois sides of the Wabash River and exposed some families’ insurance gaps the hard way. If you haven’t reviewed your insurance coverage lately, you might find yourself out in the cold without enough to replace your home after a fire or storm. This article explains the need for updating homeowner’s insurance coverage and issues you might have overlooked.

What is Homeowner’s Insurance?

As we explained in Why Should You Buy Insurance?, homeowner’s insurance is like a safety net for your home. If something bad happens, like a tree falls on your house or a burst pipe floods your living room, homeowner’s insurance helps pay for the repairs. It’s there to help you rebuild and repair without breaking the bank.

Why Update Your Homeowner’s Insurance Coverage?

Over time, things change. Your home might get upgrades, prices to rebuild homes might go up, or you might add a cool new shed in the backyard. All these changes can affect how much money you would need to fix or rebuild your home if something happens. That’s why it’s crucial to make sure your homeowner’s insurance coverage keeps up with the current replacement value of your home and other structures.

Understanding Replacement Value

Replacement value is how much it would cost to rebuild your home from scratch at today’s prices. It’s not the same as what you paid for your home or its current market value. It’s all about the cost of materials and labor to build a similar home right now.

How to Update Your Homeowner’s Insurance Coverage

Review Annually: Make it a habit to check your homeowner’s insurance coverage every year. Things change, and you want to be up-to-date.

Check Home Improvements: If you’ve made any big upgrades or added new structures, let your insurance company know. These changes can increase the replacement value of your home.

Understand Local Costs: Building costs can vary a lot depending on where you live. Make sure your coverage reflects the current costs in your area.

Use an Insurance Calculator: Many insurance companies have tools to help estimate the replacement value of your home. These can be a great starting point.

Ask for a Professional Appraisal: Sometimes, it’s good to get an expert’s opinion. A professional can provide a detailed estimate of your home’s replacement value.

Naming a Trust as an Added Insured Party

If a trust owns your property, it’s smart to name the trust as an “added insured” on your policy. Why? Because if something happens to your home, the trust is involved since it owns the property. By naming the trust, you make sure that the homeowner’s insurance covers the trust’s interest in the home. Just chat with your insurance agent about adding this to your policy.

Discuss Homeowner’s Insurance Coverage with Your Estate Planning Lawyer

Talking to an estate planning lawyer can also be a big help. They can guide you on how your insurance fits into your overall estate plan. For example, if you’ve set up a trust to manage your assets, your lawyer can help ensure that your insurance policy supports this plan.

Conclusion

Keeping your homeowner’s insurance updated might seem like just another task on your long to-do list, but it’s a crucial one. It’s all about protecting your home, your family, and your peace of mind. So, take a little time each year to review your coverage, make updates as needed, and chat with your insurance agent and estate planning lawyer. That way, you can rest easy knowing that if life throws you a curveball, your home is protected.

Remember, your home is one of your most significant investments. Treat it with care and make sure your homeowner’s insurance coverage is always in line with its replacement value. Your future self will thank you!