Make sure you have enough homeowners insurance

Overhead view of house

When you're buying a home, you might find yourself rushed to get all the i’s dotted and t’s crossed.

In racing to the finish line, however, you could short-change yourself, particularly when it comes to homeowners insurance.

Homeowners insurance is a necessary evil.

You must have it. But unless you ever need its benefits, you rarely think about it.

After hearing the almost-daily news concerning this spring's flooding, wildfires and tornadoes, it's worth a reminder to check that you have the right amount of coverage. It's almost certain many of those who lost everything don't have adequate coverage to cover rebuilding costs.

In fact, a 2008 study by the research firm Marshall & Swift found that while 96% of homeowners have insurance, 64% of homes didn't have enough coverage based on their home's value.

For as much as you pay for insurance coverage, it makes sense to know exactly what you are paying for and to ensure you are not paying for what you don’t need. Review your policy regularly.

The National Association of Insurance Commissioners recommends regular reviews of coverage to insure it doesn't drop below your home's replacement cost -- that is, how much it would cost to rebuild or repair your home "using materials of similar kind and quality."

The replacement cost can change over time based on the price of materials and labor. Your policy might not reflect these changes.

"If (coverage) drops below 80% of the full replacement cost of your home, your insurance company may reduce the amount that it will pay on a claim," according to the association's "Consumer's Guide to Home Insurance," which you can find at

Depending on where you live, there may be special insurance coverage requirements you need outside of what's covered in standard policies.

If you live in an area prone to flooding, you may need to buy special protection, because most standard policies do not cover flood damage.

Before signing off on your insurance binder, ask questions. Do your homework and know what you are paying for.

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