Property insurance policies are normally renewed automatically after one calendar year from when the policy went into effect. Around sixty to thirty days prior to your renewal date, you should expect to receive a notification from your insurance carrier regarding your upcoming renewal. A conditional renewal notice will always outline a reduction in coverage, different limits, an increased deductible, new exclusions, or a premium increase in excess of the percentage set by each state statute. It’s also important to go through your policy to make sure it’s up to date and fits your current needs, as this could change from year to year.
1. Replacement cost
One of the most, if not the most important aspect of any property insurance policy is to make sure you have insured it to full replacement cost. It’s important to make sure that the replacement cost you have outlined in your insurance policy is up to date and that the coverage limits align with the current value of your property and any improvements you may have made. Considering there has been a significant inflation and increase in building costs, it is highly likely that your replacement cost will have risen since you last signed or renewed your insurance policy, and this should be reflected in your renewed policy.
2. Did you make any significant upgrades or renovations to your property?
If you made any big upgrades to the infrastructure of the property, then make sure you update your insurance carrier ahead of the renewal. In addition to replacement costs as we discussed above, this could mean you need additional coverage, and in some cases, it could even have a positive impact on your premium rates.
- New structures: If you added a pool or built a detached garage on the property, the value of the property will most likely have increased which should be reflected in the replacement costs. A swimming pool could also impact your liability coverage needs. It may lead to a small impact on your total premium rate, but if something was to happen to the property or if there is an incident where you are held reliable as a result of these new additions, you absolutely want to make sure this is covered in your insurance policy
- Major renovations: If you replaced the entire roof or upgraded an old wiring system like knob and tube, this is something that could possibly have a positive impact on your premium rates as it may lower the risk for damage from certain perils such as wind and hail or electrical fire damage. A new metal roof probably needs to have a higher replacement cost than an old shingles roof, so this is a very important property detail. In any case, the insurance carrier should be informed so that the renewed policy can take this into consideration.
3. Did the way you use the property change?
Was the property originally your primary residence, but you’ve since moved and started renting the insured property out? This is vital information for any insurance carrier. A property that is being rented out is best covered with a customized landlord insurance policy, while a primary residence should be insured with a standard homeowners insurance policy. The risk assessment is different for a rental property versus a primary residence. The same goes for short-term rentals or secondary homes, so make sure your policy is customized to the way you use your property.
4. The deductibles and exclusions
If your financial situation changed, you might want to consider changing your deductibles. Higher deductibles generally result in lower premiums, while lower deductibles typically mean higher premiums. Compare the potential savings in premiums against the increased out-of-pocket expense in the event of a claim to see if it makes financial sense for you.
There is a chance your insurer may decide to increase or decrease your deductibles upon renewal. It is usually a result of your claims history or other changes in your circumstances or in the overall risk landscape.
As for exclusions, insurance carriers may opt to add exclusions to the policy as a result of new underwriting guidelines or general risk assessment. This will, of course, be outlined in the conditional renewal notice , and you can always ask your carrier for more information if you need more information about the practical implications of any potential new exclusions.
Why are my rates going up when the property is in the same condition as last year?
Home insurance premium rates are expected to go up by 9% on average in 2023. While this applies specifically to privately owned homes, the trend has been similar with other types of property insurance as well. There are several reasons why this happens. The global pandemic and the ongoing war in Ukraine have also led to an abnormally high inflation rate, supply chain issues, and higher building material costs. Additionally, climate change has caused an increased risk for damages due to extreme weather, leading insurance carriers to take particular precautions in states that are more prone to weather hazards. Florida is the state that has been most affected by this, with property insurance rates projected to rise by as much as 40%.
Overall, insurance premium rates are expected to continue to go up, but if you think your insurance premium rate have gone up by too much recently, it's better to check with your insurer to understand the reasoning behind it.
The yearly renewal is the perfect time to shop around
Even if you are perfectly content with your current premium rates and coverage, by the time your insurance policy is up for renewal it’s a good idea to shop around to see what other insurance carriers can offer. You might be surprised to see that you can get the same coverage for a significantly lower amount, or perhaps even better coverage for the same price. It’s wrong to assume all insurance carriers are the same. Additionally, if your insurance carrier opt to not renew your policy, don't lose hope and check with other carriers.
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