by Cheryl Abney

Created on: May 12, 2009   Last Updated: August 10, 2009

The risks of hurricanes, tornadoes, floods and other disasters make your home one of the biggest investments you need to protect. You don't want to wait until after disaster strikes to learn you haven't enough home owner's insurance coverage to rebuild your home to its current condition on the present property. It's not enough to purchase an amount equal to the balance of your home loan. Even if you would be happier in a smaller priced home, you would lose your valuable real estate investment.

The home insurance you need may be more than your home's present market value in today's economy. Do not confuse real-estate values with what it would cost to rebuild your home. Your policy insures the building structure and possessions, not the land. Another caution is not to take your home insurance for granted just because you pay with an escrow account. You should review your home insurance policy annually to make sure you have enough coverage. This is particularly true if you have done any of the following:

1. Added rooms.

2. Finished your basement.

3. Upgraded kitchens or bathrooms.

4. Added unique features such as custom molding, flooring or windows.

When deciding the amount of home owner's insurance needed to protect your home investment, you should have a recent replacement-cost appraisal or a building contractor's estimate. Another option would be to talk with a building contractor or your real estate agent to determine the average per square footage cost for your neighborhood.

There are additional items you will want your standard home owner's insurance policy to cover. Discuss the following with your insurance agent to determine the appropriate coverage.

(1) Personal possessions at actual cost value or replacement cost. You may need to purchase an endorsement if your insurance limits are too low to cover expensive items such as jewelry and artwork. It's a good idea to do a home inventory. Photograph or videotape the contents of your home and store a copy in a safe deposit box or at a family member's home.

(2) Additional living expenses while your home is repaired.

(3) Liability to others. This covers you against lawsuits for bodily injury or property damage. The minimum amount is generally $100,000.

(4) Inflation guard. This clause will automatically renew your policy to show current construction costs in your locality. You should check that this figure is actually enough to cover your home.

Your home insurance policy should reflect your personal needs. Having done your homework, it is important to review your findings and concerns with your insurance agent. Their knowledge and expertise can provide you with a reliable home owner's insurance quote. If you have addressed each of the items presented above, you should have confidence in the amount of your home owner's insurance. A few minutes of preparation now will give you a feeling of accomplishment and security, and may save you a lot of grief later.

Learn more about this author, Cheryl Abney.
Click here to send this author comments or questions.