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Yearly Assessment of Your Home Insurance Coverage Is Recommended by State Farm

Neglecting to conduct an annual review of home insurance during home improvements or appliance updates might result in coverage gaps. We've teamed up with State Farm to provide guidance on how to sidestep this prevalent issue.

An annual review of home insurance coverage is recommended by State Farm, as per the statement.
An annual review of home insurance coverage is recommended by State Farm, as per the statement.

In the ever-changing world of homeownership, it's essential to ensure that your homeowners insurance policy keeps pace with your renovations, market conditions, and significant life events. Here's a simple guide to help you manage these updates effectively.

**1. Update Coverage After Renovations**

After making improvements to your home, it's crucial to increase your dwelling coverage to reflect the increased value of your home post-renovation. This adjustment is necessary as home improvements typically raise your home's replacement cost, and your insurer needs this information to adjust the policy limits accordingly.

Additionally, consider adding construction-related coverage, such as builder's risk insurance during the renovation, to protect against risks like theft, vandalism, and weather damage while work is ongoing. Adjust personal property coverage to include new appliances, fixtures, or other belongings added during renovations, and review exclusions and liability limits to ensure coverage includes potential risks related to construction.

When providing your insurer with detailed information about the renovations, remember to include the cost, timeline, contractors involved (including their insurance), and whether the home will be occupied during the work.

**2. Review and Update with Market Conditions**

To keep your policy current, review your policy annually or at least once every 12 months. This review helps you keep pace with inflation, increasing building and rebuilding costs, and changes in local real estate market values. Insurers may require proof like receipts, permits, or contractor documentation to reassess your home’s current replacement cost accurately.

Consider add-ons or endorsements tailored to your property’s new risk profile as market conditions and home values evolve.

**3. Update Policy After Significant Life Events**

Whenever major life changes happen—such as adding household members, purchasing valuable personal property, changing pets, or modifying your lifestyle—you should update your policy promptly to maintain adequate protection. Inform your insurer about events that could affect liability or personal property risks to avoid denied claims later.

**General Recommendations**

Contact your insurance agent before, during, and immediately after renovations or major life changes for guidance and to initiate policy updates. Coordinate with your agent to ensure all new investments (structural, personal property, or liability-related) are properly insured. Keep accurate records and documentation related to improvements, purchases, and life changes to support policy adjustments.

By proactively managing these updates, you ensure comprehensive coverage for your home’s current value and your evolving needs, avoiding potential gaps that could leave you underinsured in the event of loss or damage.

Remember, severe weather can increase the demand for labor and materials, raising costs beyond normal inflation. Notifying a State Farm agent of any significant changes to your home within the required timeframe is important to maintain appropriate coverage. State Farm provides coverage options that automatically adjust each year to compensate for increases in construction costs.

Many homeowners have not reviewed their homeowners insurance policies since the initial purchase. Overlooking an annual home insurance review could lead to a gap in coverage. Your agent can make you aware of extra coverage available for jewelry or additional coverage for business property. State Farm offers homeowners insurance coverage that adjusts to increases in construction costs in your area, and the inflation rate can affect homeowners insurance coverage, so it's important to update the coverage amount each year to keep up with the changing economy.

Lastly, always ask your agent about current coverages, limitations, and exclusions to the homeowners policy to ensure you have a clear understanding of what is and isn't covered.

  1. As you focus on updating your homeowners insurance policy to match changes in homeownership, don't forget to adjust your personal-finance budget to accommodate increases in premiums resulting from policy updates.
  2. When reviewing your personal-finance budget, ensure that you factor in the premiums for any additional coverage, such as builder's risk insurance or extra liability coverage, added to your homeowners insurance policy in response to renovations or significant life events.

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