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Alot of policyholders set and forget their home insurance over the years especially if the escrow pays it each year.  Why is it important to stop and review your policy each year?   

1.     Dwelling value -    To avoid being underinsured, it is important to review the coverages and coverage limits to be sure your policy is current.
a. Inflation Guard - Some polices do not have an inflation guard so your dwelling value does not increase annually.   This could leave you underinsured as time goes by.   This means if you purchase a home insurance policy without inflation guard your insurance coverage for the dwelling does not increase so as the cost to rebuild goes up, your dwelling value does not so you would be underinsured if you have to rebuild your home.  This happened to my elderly neighbor when her home burned down and she could not rebuild her home because she did not have enough coverage so she only received actual cash value for her total loss, a large shock to her.   She was definitely underinsured because of it.

Even if you have inflation guard coverage ask your agent to perform a replacement cost calculation for you.   Construction materials can go up more than the 4% typically used for the inflation guard protection.  For example, Marshall, Swift and Boeckh reported that in 2012, copper pipe cost increases 3.8%, Drywall 13.9%, Insulation 3.8% and shingles 12.3%.

b. Upgrades or remodeling -   Did you finish out the basement or attic?  Guess what that's an increase in living area which affects how much you should be insured for?    Did you upgrade your kitchen or bathroom with new flooring, expensive appliances, countertops or cabinets?  These upgrades need to be insured for.   If not you could be underinsured.

2,    Valuables acquired over time - Certain types of property coverage on your policy have sublimits.  Jewelry, furs, collectibles, guns, fine arts can have sublimits on the base policy as low as 500 for each type of property.   When you first get your policy you may not remember your policy states this sublimit but acquire gifts or property for birthdays, holidays or anniversaries.    You must contact your agent to add on the additional items to your policy.   If you do not,  those items are uninsured.

3.    Liability coverage -  Life happens but your agent doesn't know until you pick up the phone or send your agent an email.  Anyone who gets a new dog, puts in a new pool, gets a trampoline, has teenagers driving should add on additional liability coverage and even get an umbrella policy that add liability coverage up to $5M.    These are additional risks that if you were to get into a lawsuit could result in a lawsuit greater than the base level of coverage on your homeowners.

4.   Deductibles - Alot of times new homeowners choose higher wind deductibles when they purchase newer construction because they feel their risk is limited with no trees or landscaping, new roof, and a builders warranty.   Over time when the roof becomes older, lowering the wind deductible may be a consideration.    If your carrier tells you, they only offer a higher wind deductible, shop around. 

5.   Policy forms  - As the home ages,  it would be a wise choice to find a HOB broad form policy which covers the plumbing underneath the slab, the constant seepage coverage and mold coverage.   As your plumbing ages, small leaks throughout the house are common.

Doing an annual review of your insurance every year only takes a few minutes and keeps your insurance in line with what you need.  

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