Maintaining adequate home insurance coverage is an important responsibility of homeownership. In fact, mortgage lenders routinely require borrowers to agree to maintain home insurance as a requirement of the mortgage lending terms. In addition to the financial risk involved, homeowners who fail to maintain home insurance coverage can be at risk of losing their home to foreclosure.
Homeowners are not, however, required to maintain coverage with the same insurance provider during the term of their mortgage. The renewal period is the perfect time for homeowners to discuss their current policy with their home insurance provider to see if changes or adjustments are needed.
Replacement value of the home
One of the most important things homeowners should discuss with their home insurance provider is whether their coverage is written for replacement or market value of the home. Costs for lumber and other types of construction materials needed for residential housing can fluctuate widely and impact home construction costs.
Homeowners with market value policies may not be able to replace their home after a loss because of the gap between the market value of the home at the time of the loss and the actual cost to rebuild it. Renewal time is the perfect time to verify the type of coverage you have and make any necessary changes to ensure that your family is fully protected.
Type and amount of deductible
Homeowners should also use discuss the type and amount of their deductible with their insurance provider each year before renewing their policy. Some insurance providers have begun to change deductibles from a set dollar amount to a percentage. For example, homeowners who have a $1,000 deductible on a $200,000 home could be forced to pay $2,000 after a loss if their deductible is adjusted to one percent of the coverage amount.
Homeowners may find, however, that some deductible changes can benefit their situation. For example, homeowners who agree to raise their deductible amount may be able to enjoy reductions in monthly, quarterly, or annual insurance premium rates.
Credit for home improvements
Homeowners will also want to make sure that their home insurance provider has current information on the condition of the home and any improvements and upgrades that the homeowner has made over the past year. Insurance providers view some types of repairs or upgrades favorably because they make the home safer and reduce risk of a payable loss. Replacing the roof, HVAC, or other major systems of the home are examples of some upgrades that could result in lower insurance premium costs.
Renewal is a good opportunity for homeowners to discuss their home insurance policies and decide whether they should continue with the same provider or look for a better option. Homeowners who would like to discuss these or other home insurance questions should contact a home insurance provider in their area.