Homeowners rarely review their home insurance policies unless they experience a loss. As a homeowner, it is important to sit down and review your home insurance New York policy at least once every year. You should not review your policy after a loss occurs. When you review your insurance policy on an annual basis, you can avoid suffering a loss with inadequate coverage limits. As your home ages, the amount of insurance you carry does not necessarily decrease as it would for a vehicle. Understand how to review your home coverage and make sure your policy provides adequate limits of protection.

Dwelling Coverage

When you purchased your home, chances are you built your home insurance policy based on the requirements of your lender. Some homeowners set their dwelling limit based on the amount they financed rather than the amount the home costs to rebuild. There are major setbacks in insuring your home based on how much you are financing. First off, the value of the property figures in the value of the land it sits on. Because land does not burn down, land cannot be insured. Second, if you put a sizable down payment on your home the amount financed may actually be lower than the value of the home. If you do not consider how much your property costs to rebuild you could be in a bind if you experience a total loss.

How to Calculate Sufficient Coverage

Rather than using the loan amount to determine how much to insure your home for, you should calculate the estimated cost to rebuild your home. Calculating this amount involves determining the cost per square foot to rebuild homes in your area. You can contact a local contractor who can give you a ballpark figure on how much it costs to build a home similar to your. The contractor will include materials and labor in their estimate. Once you are given a more accurate figure, you can review your home insurance New York policy to verify you have enough coverage.

Additional Coverage’s to Consider

Most insurance companies automatically raise your dwelling coverage each renewal period to keep up with the cost of inflation. This is a safeguard practice that has been followed since home insurance was created. Ask your insurance agent if your policy includes Extended Replacement Cost. This coverage will provide you with an additional 10 to 25 percent of dwelling covered in the event you do not have enough coverage to rebuild your home at the time of a loss.

If you fail to review your home insurance New York policy each renewal you may regret it if you experience a loss. Review your dwelling coverage limit every year to ensure you are adequately protected.

Jason Fleming of Keller Williams Realty and Group 46:10 talks to home insurance agent Sam Rames with American Family Insurance about how insurance companies determine the price of a home insurance policy.

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