As home value increases, the need for adequate insurance coverage also increases. Review your coverage with your insurance agent each year to make sure you are covered “just in case.” Your real estate agent can help you determine the property value of your home, which is a good guide to proper homeowners insurance. It is also sometimes known as fire insurance or hazard insurance. It’s better to have it and not need it, than to need it and not have it, right?

What is not covered

You pay your annual homeowners insurance premium, so you’re protected against any property damage, right? Not always! Homeowners may not realize that their policies may not cover damage caused by:

• tremors
• floods
• Mold
• Pets (dogs, cats, etc.)
• Pests (termites, birds, rodents, bats, etc.)
• Cracks or sedimentation
• Water or ice (especially on fences, patios, pavement, and swimming pools)
• “Preventable” damage
• War
• Nuclear explotion

If you live in an area prone to earthquakes or a flood zone, you can purchase additional insurance specifically to cover this type of damage.

For added protection, many homeowners add supplemental insurance; for example, general personal liability insurance. General coverage is highly recommended for homeowners with multiple assets. Check with your insurance agent or broker.

How much to insure?

When you insure your home, you must insure the full amount it would cost to rebuild your home if it were destroyed. If you don’t have enough coverage, your insurance may only cover part of the cost. The ways to ensure are:

1. replacement cost -insurance that pays the cost of replacing the damaged property without deduction for depreciation, but limited to a max. dollar amount.

2. Guaranteed replacement cost – insurance that pays the full cost of replacing damaged property, with no deduction for depreciation and no dollar limit. This gives you protection against rising construction costs.

3. Present Effective Value – insurance that pays the replacement value of the damaged property less a depreciation allowance, up to the actual cash value.

If your house burned down, how much would it cost to rebuild it? Measure the square footage of your home and multiply it by the building costs in your area.

For example, California’s central coast costs about $175 per square foot to build. For an average of 1,500 m2. foot home, this is over $250,000. So if your insurance is only $100,000 and the entire house is destroyed, you could suffer a loss of $150,000 due to underinsurance.

Factors that determine the cost of rebuilding your home:

• Local construction costs
• Square meters of structure
• # of bathrooms, other rooms
• Exterior wall construction (framing, brick/stone, veneer)
• House style (ranch, colonial)
• roof type
• Attached garages, fireplaces, exterior trim and other special features

Read your policies carefully or talk to your insurance agent about full coverage of your assets.