If you use some setup program (MSI, for example) you need add custom actions on Update, Unistall or Re-install events that deletes the database.
Other solution is to add it to the main code:
if (IsVersionChanged()) {
if (Database.Exists(...)) { Database.Drop(...); }
}
But it does not address the Re-Install case (you may try to detect this case by analyzing a file timestamp that should be always overwritten on installation/re-installation but it is only worth doing if you don't have a setup program).
There're several ways how you can implement the IsVersionChanged. For example, you can keep the version in the database itself or keep the last version in the windows registry.