Most people first start looking for insurance when they buy something big like a house or car. Once they get their policy, they often forget about it and only think about it again when it’s time to pay premiums or make a claim. Usually, they just stick with the same policy year after year without really thinking about it. This can lead to overspending on insurance or having coverage that doesn’t fully protect them. Unfortunately, they usually realize this only when something bad happens.
Let’s look at three reasons why you should check your insurance once or even twice a year to avoid any nasty surprises or unexpected costs.
1. Value Replacement vs. Current Value:
It’s really important to know how the value of what you’re protecting matches up with your coverage. There are two main types of coverage: Replacement Cost Value (RCV) and Actual Cash Value (ACV). RCV covers the cost to replace your lost or damaged items with new ones at today’s prices, while ACV factors in depreciation and only pays what the item is worth now, not what it would cost to replace it.
For example, if you insured your outdoor kitchen when you installed it and it’s destroyed in a fire five years later, RCV would cover the cost to replace it with a similar new one. ACV, on the other hand, would only pay out after considering how much the kitchen has depreciated in those five years. With rising costs of materials and labor, the depreciated value might end up being much less than the cost to replace it. RCV provides full replacement but costs more, while ACV is cheaper but less comprehensive.
2. Neglected Items:
Many homeowners assume all their belongings are covered by their insurance, but that’s often not the case. High-value items like laptops, luxury watches, or iPhones may not be included in a standard home insurance policy. Typical policies often exclude items like fine art, antiques, gold coins, musical instruments, firearms, and some electronics. Special assets such as vintage sports cars might also need separate coverage.
Talk to your insurance agent about covering your valuable items to make sure everything important to you is protected. Be prepared that covering more items might mean your policy will cost more.
3. Uncovered Hazards:
Understanding the liabilities that come with home ownership is crucial. For example, if a diseased tree falls on your house, you might not get any coverage. If that tree branch falls onto your neighbor’s property, you could be liable for the damages. This might violate your policy’s terms about maintaining your property.
Not knowing what your policy covers can leave you vulnerable when unexpected disasters strike. Failing to follow policy rules like maintaining your home properly or owning certain dog breeds can also lead to your insurance company canceling your coverage. Similarly, if your home is in a flood-prone area or has old electrical wiring, you might not be covered for related damages.
Conclusion – Conduct Annual Insurance Check-in:
Make it a habit to review your coverage every year. Talk to your agent or broker about possible ways to save money and improve your coverage, like choosing higher deductibles. Don’t assume all your valuable items are covered unless it’s explicitly mentioned in your policy. Always take insurance updates seriously and review them thoroughly to make sure you’re not left underinsured.