An annual home insurance review is a wise move for any homeowner. But anytime you make changes to your home, it’s important to discuss what you’ve done with your insurance agency to ensure your homeowners insurance keeps up with your home improvements. Here’s some guidance on when to update your home insurance.

• Renovations like kitchen or bathroom remodeling
• Additions like decks, carports, and patios
• Updating plumbing or electrical systems
• Adding security alarm systems
• New expensive assets like jewelry, artwork, or antiques
• Starting a new home business
• Life events like marriage, retirement, or divorce

Replacement Value Is Not Market Value

Consider improvements and additions you recently made to your home. If you’ve made significant improvements, like finishing a basement or expanding the square footage of your home, you’ve probably increased the value of your home, which is great! You’ll want to protect that investment you’ve made in your property, and these types of changes might require an increase to your coverage limits for proper protection. Think about other structures on your property—if you added a shed, pool, or detached garage.

Renovations and upgrades increase your home’s market value. But the current market value is different from its replacement value, which is what your insurance covers. In other words: Don’t rely on Zillow’s estimate of your house’s value to determine the amount of coverage you need. Also, you shouldn’t simply add the cost of a renovation to your home’s value and assume it’s the amount you should insure for.

Homeowners insurance covers the cost of replacing or repairing your house where it sits, not buying a new house somewhere else. If your house burned down, the land would still be there, so that’s why market values are less relevant than you might think. The critical factor is determining how much it would cost to replace or rebuild your house right where it is based on current local construction costs. There are a lot of online calculators and articles that can help you understand the current price of home construction.

Probably the best way to determine a safe replacement value for your house is simply to ask your insurance agent. Agents see both home market values and replacement values all the time. They see the costs involved when homeowners lose their homes and have to rebuild. Your agent could be your best resource.

Stuff is Valuable

Don’t forget about your valuables like jewelry, expensive art, antiques, and collections. Selling valuable items affects your home insurance too. You’ll want to be sure your homeowners insurance can cover the cost of any new furnishings or appliances when you make upgrades or decrease if you offload valuables. Your insurance agent can guide you on whether or not you should have items appraised or if you should have a separate list of valuables called a schedule added to your home insurance.

Emergency Coverage

You should also review your understanding of risks that could damage or destroy your house. Nightmare events like floods and tornadoes can wipe out your home and everything in it.

Flood coverage is especially critical. 90 percent of weather disasters involve some aspect of flooding. Don’t just rely on your mortgage lender to determine if you need flood insurance. You can get a better idea of what flooding actually is here.

Insurance Changes With Your Life

All kinds of life events have an effect on your insurance. Many of them can even save you money. You might get married or divorced. You might have a child. Children or roommates might move in or out. You might start a home-based business or retire.

Events like retirement can save you money because it typically means you’re at home more frequently. It lowers the risk of a house being burglarized or damaged due to an unexpected event like a burst water pipe. When there are significant changes to your life or who comes and goes from your home, give your agent a shout to see if it affects your insurance coverage.