Homeowners Insurance Review Checklist

Review the exclusions. No homeowner policy covers all perils, so take note of the exclusions and look for other coverage options if necessary. For example, depending on where you live, you may need an earthquake endorsement. And even if your home isn’t located in a high flood-risk region, you may need flood insurance, which is relatively inexpensive. According to the National Flood Insurance Program, 90% of all natural disasters in the U.S. involve floods, and about 25% of flood insurance claims come from low-risk areas.

Basic homeowners policies aren’t designed to provide coverage for business or professional activities either. So if you operate a business out of your home, you probably need a separate business owners policy. And if you employ household workers such as childcare givers or house cleaners, you may need to buy a standard workers compensation policy to cover workers for medical treatment and recovery of lost wages in case they’re injured while working for you, regardless of fault.

Get the broadest protection available. The most comprehensive type of coverage available for your home itself is a Homeowners Special Form Policy (HO OO 03). These "open perils" policies cover all perils except those specifically excluded. To protect the contents of your home, the best coverage available is a Homeowners Special Personal Property Endorsement (Form HO 00 15), which also provides open peril coverage on your personal property. Paired together, these two coverages can provide the most comprehensive coverage available on both your home and its contents.

Make sure your home is adequately valued. You should insure your home for its replacement cost, which is the amount it would cost to rebuild, not the price you paid for it, or the price you could sell it for today. Replacement cost covers the cost of rebuilding your home or repairing damages, with materials of a similar kind and quality at current prices, without deducting for depreciation. Many insurers require that you insure your home for at least 80% of its replacement cost. If you fail to insure for at least this amount, the insurer will apply a penalty to partial losses.

Add a guaranteed replacement cost endorsement. If it’s available for your home, add a guaranteed replacement cost endorsement. With this endorsement, in the event of total loss, you’ll be covered for the full cost or a specified percentage of rebuilding your home, even if that cost exceeds your policy limit. To qualify for guaranteed replacement cost, you have to insure your home for 100% of its replacement cost, as well as agree to increase your policy limits regularly to keep up with inflation.

If your home isn’t eligible for this endorsement, you may be able to buy a policy that will pay above the value of your policy limit, but only up to a specified percentage. Likewise, if you have an older home, you may only be able to buy a modified replacement cost policy. This type of policy will pay for repairs using modern building materials and construction techniques, rather than those that were used in older homes, such as wooden floors and plaster walls.

Keep your insurer up to date. To ensure that your home remains adequately valued, notify your insurer of any home improvements you make, such as a remodeled kitchen, second bathroom, or new deck. And review your coverage annually to adjust your policy limits for inflation and increases in construction costs. Or add an inflation guard endorsement that will automatically increase your policy by a specified percentage.

Make sure your personal property is adequately insured. Add a Personal Property Replacement Cost Endorsement to your homeowners policy so the contents of your home will be repaired or replaced without deductions for depreciation. Also check how much your policy would pay, and under what circumstances, for valuable items such as jewelry, expensive antiques, or computers. For instance, a basic homeowners basic policy only covers jewelry up to a specified limit, typically $1000 per loss for all your jewelry in total. If necessary, step up coverage with personal property endorsements or separate personal article floater policies.

Evaluate your medical payments coverage. Referred to as "goodwill coverage" because it can help avoid litigation, medical payments to others coverage pays necessary medical expenses for anyone accidentally injured by you or a member of your family or by your pets, on your property, even when you’re not legally obligated. The basic limit is $1000 per person, with higher limits available. Note that this coverage excludes you and any other insureds covered under your policy.

Evaluate your liability coverage. Personal liability coverage protects you against a claim or lawsuit resulting from non-auto and non-business bodily injury or property damage caused by you, or family members who live with you. Liability policies typically provide $100,000 in coverage, which you can usually raise to $200,000 or $300,000 for a small premium increase. If you're sued and the judgment against you exceeds these limits however, you'll have to pay the difference.

To get increased and broader liability protection against catastrophic lawsuits, buy a personal umbrella liability policy that picks up where your existing coverage leaves off. In addition to the loss exposures covered by your basic homeowners policy, umbrella policies cover a wide range of risks including false arrest, wrongful eviction, libel, slander, defamation of character, and invasion of privacy. Umbrella policy liability limits commonly range from $1 to $5 million, and because coverage doesn't kick in until your homeowners insurance liability limits are exhausted, policies are relatively inexpensive.