How to Review Your Insurance Policy Before You Need It

Most homeowners renew their policy on autopilot. The renewal notice arrives, the premium goes up a few dollars, and the policy continues unchanged. This is how people end up underinsured, surprised by exclusions, and fighting with adjusters over coverage they assumed they had. An annual policy review takes one hour. It can save you from financial catastrophe.

Why Annual Reviews Matter

Three things change every year: the cost to rebuild your home, the value of your belongings, and the terms of your policy. Construction costs in California have risen 40 to 60 percent since 2020. Your insurer may have added exclusions, raised your deductible, or reduced sublimits at renewal — sometimes without obvious notification. The inflation guard endorsement that increases your dwelling limit by 3 to 5 percent annually does not keep pace with actual construction cost increases in most California markets.

Start With Your Declarations Page

Pull out your current declarations page. This is your roadmap. Look at each coverage limit and ask: is this still adequate?

• Coverage A (Dwelling): Does this reflect the current cost to rebuild your home from the ground up? Not the market value — the reconstruction cost. Get a rebuild estimate from a licensed contractor if you are unsure.
• Coverage B (Other Structures): Do you have a detached garage, pool house, fence, or ADU? Is the standard 10 percent of Coverage A enough?
• Coverage C (Personal Property): Have you made major purchases this year? New furniture, electronics, jewelry, art? Is the contents limit still adequate?
• Coverage D (Loss of Use): If you had to rent a comparable home in your area for 12 to 24 months while yours is rebuilt, would this limit cover it? Check rental prices in your neighborhood.

Check for Replacement Cost vs. Actual Cash Value

Your policy should pay replacement cost — the cost to repair or replace with new, like-kind materials — not actual cash value (which deducts depreciation). Check both your dwelling coverage and your contents coverage. Some policies pay replacement cost on the structure but only actual cash value on contents. That means your 8-year-old refrigerator gets valued at what an 8-year-old refrigerator is worth on the used market, not what it costs to buy a new one. For a full explanation, see our guide on replacement cost vs. guaranteed replacement cost.

Look for Percentage Deductibles

A percentage deductible is expressed as a percentage of your dwelling limit rather than a flat dollar amount. A 2 percent deductible on a $700,000 dwelling limit means you pay the first $14,000 out of pocket. These are increasingly common in California, particularly for wildfire, wind, and earthquake coverage. If your deductible changed from a flat amount to a percentage at your last renewal, the financial impact may be much larger than you realize.

Review Your Endorsements

Endorsements modify your base policy — they add coverage, remove coverage, or change terms. Your dec page lists the endorsement form numbers. Read each one. Common endorsements to look for (or ask about if you do not have them):

• Extended or guaranteed replacement cost: Pays above your dwelling limit if rebuild costs exceed it. Essential in the current market.
• Water backup/sump overflow: Standard policies exclude sewer and drain backup. This endorsement adds it back.
• Scheduled personal property: Provides full coverage for high-value items (jewelry, art, musical instruments) that exceed standard sublimits.
• Ordinance or law: Pays for code upgrades required during reconstruction. Without it, you pay for code compliance out of pocket.
• Equipment breakdown: Covers mechanical and electrical failure of HVAC, water heaters, and appliances — perils often excluded by the base policy.

Identify Sublimits

A sublimit is a lower cap within your overall coverage for specific categories. Your policy might have $375,000 in contents coverage but only $2,500 for jewelry, $2,000 for firearms, $1,500 for cash, and $5,000 for business property. These sublimits are often buried in the policy form, not the dec page. Review them. If you own items that exceed these sublimits, schedule them separately or purchase additional coverage.

Questions to Ask Your Agent

At your annual review, ask these questions directly:

1. What is the current estimated rebuild cost for my home, and does my dwelling limit match it?
2. Has anything in my policy changed from last year — deductibles, sublimits, endorsements, exclusions?
3. Do I have replacement cost on both my dwelling and my contents?
4. Do I have extended or guaranteed replacement cost? If not, what would it cost to add?
5. What is my deductible for each covered peril? Are any of them percentage-based?
6. Do I have ordinance or law coverage? What is the limit?
7. Are there any exclusions specific to my property or my location?
8. Is my insurer still financially stable? What is their AM Best rating?

When to Shop for a New Policy

Shopping is not just about price. Consider switching if: your current insurer has a poor claims-handling reputation, your coverage options are limited, your premium has increased dramatically without corresponding coverage improvement, or your insurer is no longer writing policies in your area (a sign they may not renew you next year). Get quotes from at least three carriers. Compare coverage terms, not just premiums.

What "Adequate" Coverage Actually Means

Adequate coverage means your policy will make you whole after a total loss without you paying significant money out of pocket beyond your deductible. That means:

• Your dwelling limit covers a complete rebuild at current construction costs
• Your contents limit reflects what you actually own
• Your ALE limit covers 18 to 24 months of temporary housing at market rates
• You have ordinance or law coverage for code upgrades
• Your deductible is an amount you can afford to pay on short notice
• High-value items are scheduled or otherwise fully covered

The Replacement Cost Estimation Problem

Insurers use software tools to estimate rebuild costs. These tools — Marshall & Swift, CoreLogic, 360Value — often underestimate actual construction costs, particularly for older homes with custom features, homes in high-cost areas, and homes that would require significant code upgrades if rebuilt. Do not accept the insurer's estimate as gospel. Get your own estimate from a licensed general contractor familiar with construction in your area.

For more on why homes are underinsured and what you can do about it, see what your homeowner policy actually covers.

The Annual Review Checklist

Do this once a year, 60 days before your renewal date:

1. Pull your current dec page and compare it to last year's
2. Research current construction costs per square foot in your area
3. Update your home inventory (video walkthrough, receipts for major purchases)
4. Check rental prices for comparable homes to validate your ALE limit
5. Review all endorsements — confirm nothing was removed
6. Calculate the dollar impact of any percentage deductibles
7. Call your agent with your questions list
8. Get competing quotes if your coverage is inadequate or overpriced

One hour a year. That is all it takes. The alternative — discovering a coverage gap after a loss — costs infinitely more.

This article is for informational purposes only and does not constitute legal advice. Insurance policies and applicable law vary by state and by policy form. Consult with a licensed professional regarding your specific situation.