#11 Reviewing Your Policy
#11 How often should I review my homeowner’s insurance policy? What should I look for?
You should review your policy yearly. Consider both your coverages and deductibles, in light of your current circumstances (financial, risk tolerance, etc). This is especially important if your coverages don’t increase automatically for inflation.
More Details: You should review your policy yearly. As wildfire risk is becoming a bigger issue in our area, and new consumer protection laws are enacted in the state, the insurer may change your policy. In Colorado, the insurer is obligated to tell you about these changes at renewal, and you should review these changes carefully. United Policyholders has a list of questions to ask your agent or insurer when buying or updating coverage.
Many people who lose their homes find they are underinsured. In the Marshall fire, 74% of homeowners who lost their homes were underinsured and 36% were severely underinsured i.e., their insurance paid for less than 75% of the cost to rebuild). See FAQ #12 on whether your protection is adequate. United Policyholders recommends an in-person meeting with your agent or broker to be sure that you have a policy appropriate for your situation (there are a variety of homeowners insurance policies). The agent can explain the policy’s terms/vocabulary as it can be arcane to a layperson; walk through what happens in the event of a claim; provide an understanding of what is covered and not covered; and the time process for resolving a claim. You should be confident that your agent will be your advocate.
If you lose your home, do you want to rebuild on the same site? If the neighborhood is burned, do you want to rebuild? Has that choice changed with time? Reconsider this annually. Not all policies offer this cash-out option, in which case you have no choice but to rebuild. Check with your insurer and be prepared to shop for a new policy if you want to have a cash-out option. United Policyholders has more information on this.
Most insurance policies do not cover the loss in value of the building lot after a wildfire.