Special Report: Home Owners Insurance

Unfortunately, it often takes a disaster before most homeowners find out they are under-insured. That happens when the cost of rebuilding a damaged or destroyed home exceeds the value of the homeowner's insurance policy.

Then, the homeowner has to somehow come up with cash to be able to rebuild their home to the way it was before.

And who's responsible for this? The homeowner.

It is the homeowner's responsibility to have enough insurance coverage. That's why a regular conversation with your insurance agent or company is so important.

Jeanne Salvatore, Insurance Information Institute
"The three most important questions to ask your insurance agent or company representative are, if my home is destroyed do I have enough insurance to rebuild it, do I have enough insurance to replace my possessions, and do I have enough insurance to protect my assets if I am sued?"

Some people find themselves under-insured because of major home improvements.

Candysse Miller, Insurance Information Network
"Many people have done expensive renovations to their homes but failed to increase their insurance to cover that. Now after a disaster, the demand for supply and labor tends to go up driving up construction costs. So if they haven't made the adequate changes to their insurance policies they may go from natural disaster to financial disaster. "

One way to determine the building costs of your home is to call an independent appraiser, then review your policy to make sure it reflects current construction costs.

If it does not, you need to purchase additional coverage. You may also want to consider buying what's called an "inflation guard endorsement" which will help your coverage keep pace with rising costs.

That's what homeowner Tom Stobbs did...which meant when his home was destroyed, he only had to deal with a natural, not a financial disaster.

Tom Stobbs, Homeowner
"Fact is I ended up I think with $150 out of pocket for the whole house, the landscaping, the whole thing. And that was probably for an extra steak or two when I celebrated."