How to Adjust Your Homeowners Insurance Coverage for Retirement and Empty Nesting

Article overview

• Household and home changes can affect your homeowners insurance needs. Here's what you'll learn in this article:
  
  
• When to review: After major life events such as children moving out, relatives moving in, renovations, adding structures or bringing high-value items into the home.

• What to update: Dwelling coverage, personal property limits, endorsements for valuables, liability considerations and any discounts tied to home improvements like security systems or roofing upgrades.

• What to do next: Review your current policy details, gather information about recent home or household changes, and speak with your AAA Insurance agent to confirm your coverage reflects your home today.

Your homeowners insurance policy is a snapshot of your life at the time you set it up. But when your life or home changes, that snapshot can become outdated, potentially affecting your coverage and premium.

Many people only review their policy at renewal, which means you could go a year without updating coverage after significant life events like your kids moving out, a parent moving in or a renovation.

All these changes can shift what you're covered for, sometimes in ways you may not realize until after a claim. Here's how to adjust your homeowners insurance coverage when life changes.

When should you update your homeowners insurance?

Life changes, and your homeowners policy should evolve with it to help avoid surprises. Certain events may change your home’s value or change what needs to be included in your coverage.

For example, receiving an heirloom like jewelry from a relative may mean adjusting your policy to cover the new valuables.

Other common triggers include:

• A child moves out and takes furniture, electronics or other belongings.
• A parent or other relative moves in and brings their own valuables.
• You complete a major renovation or add square footage.
• You build a garage, add a deck or put in a pool.
• You make a significant upgrade, like new roofing or a security system.
• Starting a home-based business may change your property and liability insurance needs beyond what homeowners insurance covers.

If you’re planning to make any of these changes, you want your coverage to reflect these new assets, improvements or risks. Otherwise, if a claim comes in and an insurer learns about an unreported change to the property or household, it can affect how much is paid or what’s covered. 

What changes when your household does?

Some of the most common household changes that affect coverage are people moving in and out of your home, and each impacts your coverage differently.

If your child moves out and takes furniture, electronics or other belongings, the personal property value in your home could change. You may be paying to insure more personal property than you have at home.

While college students are covered under most homeowners policies for belongings kept in a dorm, that coverage may be capped at a percentage of your personal property limit. If they move out of dorms to an apartment, consider renters insurance.

For an elderly parent moving in, most standard policies extend coverage to relatives living in the home as insured residents. Their belongings are generally included.

However, there are a few things worth reviewing before any moves:

• High-value items like jewelry or collectibles may need a separate endorsement since standard policies can put limits on certain categories.

• Accessibility modifications such as stair lifts, grab bars or widened doorways may increase your home’s replacement value, and that could need to be reflected in your coverage.

• If you plan to charge rent, some insurers reclassify a family member paying rent as a tenant, which could change how the policy responds to a claim.

How do home improvements affect your coverage?

Finishing a basement, adding a garage, or expanding your living space can increase your home’s replacement cost, which is what it would cost to rebuild. If your dwelling coverage hasn’t kept pace with those changes, you may be carrying less protection than you think.

Most homeowners carry dwelling coverage that falls short of their home’s actual replacement costs, leaving them underinsured. Since 2020, according to the U.S. Bureau of Labor Statistics, the cost of materials and building supplies has risen 45%. Any renovation that adds meaningful square footage can widen the replacement cost gap without anyone noticing until a claim comes in.

Some upgrades may work in your favor to reduce insurance costs. Because these improvements can reduce the risk of an expensive loss, many insurers offer lower premiums when you add them. However, these don’t always get applied automatically. Some upgrades that may lower premiums if reported include:

• Impact-resistant roofing, especially in storm-prone areas
• Monitored security or alarm systems
• Updated electrical or plumbing systems
• Smoke detectors and water leak sensors

How to update your coverage

For most changes, a quick call or email to your insurance agent is all it takes. Describe what changed, and they can confirm whether your coverage needs adjusting and what that means for your premium.

Before you call, try to have a rough sense of what has changed (or what's planned to change) to give a more accurate picture. Details like square footage added, high-value items coming into the home, or the specifics of a recent renovation help.

Coverage for your new reality

Your home and the people in it may change over the years. But a quick check-in can make a real difference when you need your coverage.