Six times you should review your home insurance policy
If your home insurance policy is like mine, it sits in the filing cabinet waiting patiently for the day the executor of my estate says, “yeah, you can probably shred that.”
But should your home insurance policy be something you set and forget? Probably not. As life goes on and things change, there are times when you’ll want to dust off your home insurance policy and make sure it still meets your needs. Here are six of those times:
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You’re moving or buying a new house
It should go without saying that anytime you move, you should not only review your home insurance policy but contact your provider to keep them in the loop on all the details regarding your changing living situation.
To start, you need to update your policy to your new address, that’s simple. But the reason why you’re moving could mean many more changes.
If you’re renting your first place, whether your landlord insists on it or not, make sure you have a valid renter’s insurance policy.
It does more than protect your stuff. It also covers you against liability claims, such as a delivery person injuring themselves on your icy steps. If your place floods or a fire breaks out, insurance will pay for you to live somewhere else while your apartment is repaired. The best part is you don’t have to scour the internet for cheap tenant insurance because it’s already pretty affordable at roughly $15-$20 per month.
If you’re buying a home, you’ll need home insurance as a condition of your mortgage. Unless your mortgage is paid off, but even then, going without home insurance is risky and leaves you open to expensive risks (e.g. fire, roof collapse, flood) where you’d have to pay tens of thousands out of pocket to repair your home. So, for or around $120 per month (depending on many factors like location, size of the property, and contents) home insurance is a worthwhile investment.
If you’re porting your mortgage to a new home and already have an existing home insurance policy, it’s a great time to review your coverage options since you’ll already have to connect with your insurer to update your policy to cover your new address. When you move, there is no guarantee that your price will remain the same due to a number of factors, such as location and home condition. A new neighbourhood brings a change in risk – more burglary attempts could increase your rate, but closer proximity to emergency services and you’ll save. The general condition of the home is a factor your insurer will consider, from the electrical and plumbing to the exterior siding or mason, they all play a role in your new rate calculation. If you’re living closer to larger bodies of water, you may even consider adding on flood insurance, as your standard policy will not cover these sorts of claims.
If your rate goes up ask your broker about ways to save, such as bundling with your auto insurance, increasing your deductibles, and other carrier specific discounts. One of the best ways to save is to compare insurance quotes online because you’ll see right away which companies will give you the best rate given your newfound situation.
If you find a better rate, don’t cancel your previous insurance policy until after you move out just in case any problems prevent you from leaving your old home.
Someone else is moving in
Whether it’s a romantic partner, a roommate or even an ageing relative, it’s a good idea to take a look at your insurance policy when someone new will be living in your home.
There are two good reasons for this.
- Ensure you have the right kind of coverage. For example, your home insurance policy might not cover you if you’re renting out part of your home – even if the person you’re renting to is a roommate. If you’re renting out a room, your own provider may want them to have their own insurance. When both parties have insurance, there are no disputes on who claims what.
- Get enough insurance coverage for the new person’s belongings. If your significant other is moving in, you might want to consider the replacement cost of all their clothes, electronics, personal items and valuables and make sure your contents coverage is sufficient. Remember your original policy was designed to only cover your stuff, so bringing more stuff into your home should increase the contents portion of your insurance policy.
You’re doing renovations
If you’re a homeowner, you need to talk to your insurance company whenever you do renovations. Small jobs like a fresh coat of paint or a new toilet aren’t likely to make a difference to your insurance, but big jobs can affect the replacement cost of your home.
For example, finishing a basement, redoing a kitchen, or adding an addition adds significant value to your home and you want to be able to rebuild to the updated standard, not what was there before.
Before beginning any work, it’s vital to consult with your insurer. Your insurance agent can help spot any other potential gaps in coverage. If you’ll be away from the home for more than 30 days, you’ll likely need permission from your insurer since the risk changes if a potential thief sees no one at home because the yard is unkept and mail is piling up. Even if the construction crew has their own insurance, it may be prudent to up your third-party liability coverage if something goes wrong during the reno.
There’s also a chance that you can save money on your home insurance policy by making safety upgrades. Adding carbon monoxide detectors and adding a monitored alarm system are small additions that can lower your home insurance rate. If you’re replacing outdated (i.e. knob & tube) wiring, it could lead to a significant reduction in your home insurance premiums (if they haven’t mandated the upgrade already due to fire risks).
Changes are happening in your neighbourhood
Your home insurance premium depends on several different factors, including the emergency services immediately available to your home. These things don’t change often, but you might find that your home insurance cost will go down significantly if there are improvements in your neighbourhood.
A new, closer fire station could lower your insurance costs, as could the installation of a new fire hydrant because it’s much cheaper to repair a house, rather than rebuild it. A closer police station could mean less burglary and therefore a safer environment. For vacation properties, a change from seasonal to year-round road maintenance could also make a difference in how much your insurance costs.
You might also find that your insurance needs change over time with the natural rise and fall of the neighbourhood. Gentrification alone may lower your risk of burglary, but your insurer may not be studying the stats of your neighbourhood.
Your insurance company might not be keeping track of these kinds of changes. So make sure to let them know if something is happening in your neighbourhood that could change your home insurance needs.
Your mortgage is paid off
When your mortgage is paid off, there’s a chance your home insurance needs could change. That’s because your mortgage lender is named on your policy protecting their interests in case of a major loss. When your mortgage is paid off, you can remove their name.
When you have a mortgage, you will have a contractual obligation to the lender to carry home insurance coverage. Once the mortgage is paid off and you’re no longer beholden to the bank or lender, you might decide to change your coverage.
However, just because you can reduce the amount of coverage you carry on your home doesn’t necessarily mean you should. Accidents happen, it’s why we have insurance, for unpredictable events such as a flood or fire. You can continue to make upgrades to reduce your risks such as installing a sewer backup valve to help prevent flooding and a monitored alarm system to deter break-ins which can both lower your rates.
Being mortgage-free typically results in a line item discount, so call your insurer to let them know at the very least and take advantage of the savings.
You’re starting a new job
You might be wondering what on Earth could your job have to do with your home insurance. It all has to do with how your home is used.
For example, if you’re going to be working from home, your insurance company will want to know, even if it’s just part-time. If you’re hosting clients or having meetings at your home, that could also change your insurance needs. If you’ve decided to run a bakery or daycare out of your home, it’s possible you may need a commercial insurance policy, on top of your home insurance, to properly protect yourself.
Furthermore, if your new job has you travelling frequently, you’ll want to make sure your coverage is adequate. Most home insurance policies have a condition that someone will be there to inspect the home regularly. Reviewing your policy will help you avoid any unpleasant surprises resulting from you not meeting your obligations under your contract.
Every year on renewal
Every year when your home insurance policy comes up for renewal, your insurer will send you a package outlining your coverage and premiums for the coming year. Let it serve as a reminder to look over your policy to make sure you still have the coverage you need and aren’t paying for anything you don’t.
It’s also possible that something has come up over the past year that you didn’t think about before. Maybe you’ve purchased a valuable item that needs to be named specifically on your policy (e.g. jewellery, rare art). Or maybe you’ve sold one such item that you can remove. Either way, renewal is the perfect time to think back over the past year and note any changes you might have missed. Take an inventory of your belongings and consider their depreciation and current value, can you lower your contents insurance and uncover savings?
Finally, insurance companies are constantly tweaking the math they use to determine how much you pay for home insurance. Your annual renewal is an opportune time to compare home insurance quotes online to make sure you’re still getting the best value for the coverage you need.
The bottom line
Your home insurance policy shouldn’t stay in the filing cabinet to gather dust. Things are constantly changing – in your life, home and neighbourhood. As things change, so too does your need for home insurance coverage. Whenever something happens that could change your risk for liability, fire or theft, be sure to get in touch with your insurance company. And take some time every year to compare home insurance quotes online to make sure you’re getting the best rate for your current situation.
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