Make sure you have the coverage you need in light of market changes and any home improvements you’ve done.

When was the last time you reviewed your homeowners insurance? In light of rising home values and construction materials, now is a good time to ensure your policy provides the coverage you need.

What rising home values mean for your policy

An increase in home values doesn’t necessarily mean you are underinsured. If your policy includes replacement cost coverage, it fully covers the cost of repairs and replacing covered belongings. It’s good idea to document your home’s construction materials and create a home inventory in case you need to make a claim.

However, if your coverage is for actual cash value, your property is only covered for the cost of repairs or replacement minus depreciation. Actual cash value usually doesn’t apply to the house itself but to belongings such as furniture, appliances, electronics and clothing. Depreciation on things that are several years old can bring their value down to a fraction of the cost for new replacements.

Make sure your insurer knows about home improvements

During the pandemic, the number of home improvement projects soared. Remodeled kitchens and bathrooms, new additions, stand-alone structures, pools and basement remodels can all increase the value of your home and therefore the amount of insurance you need to be fully covered. Let your insurer know about substantial changes to your home.

Why you might see your premium go up

Even if you haven’t made home improvements or increased your policy limits, you could still see your homeowners insurance premium rise. One key reason is because insurers are passing along the growing costs of construction materials. If you have a second home in a place like Florida that’s suffered from several major storms as well as construction fraud in recent years, premiums are skyrocketing across the board.

Review your coverage and deductibles

You don’t want to wait until you have a claim to learn about your homeowners insurance. Review your policy today. If you don’t understand what’s covered or are unsure whether you have the right coverage amounts, talk to your insurance agent.

If your premium is going up, consider shopping around. Sometimes the difference between insurers can be hundreds of dollars. Also, consider your deductible. Raising deductibles is an effective strategy for helping lower premiums. However, you should try to have enough cash on-hand in a savings account or money market account to cover a deductible if needed.

Consumers helps more than 2,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.