Horrible disasters not only wipe out property, but lives. Particularly at times when so many homeowners are significantly leveraged with mortgage and credit card debt, the amount and quality of home insurance can make the difference between normalcy and financial ruin.

What Should Home Insurance Cover Be?

If you own, you need to insure:

• The replacement value of the physical structure of the home, not including the value of the land.
• The replacement value of your personal possessions (including significant quantities of jewelry, technology, art, or other objects that may require additional insurance on their own).
• The cost of living expenses off-site if your home is too damaged to live in.
• Your liability to others.
• Most leading insurers assign values to these coverages, and, for the most part, they meet local standards. But your agent needs to know about renovations and additions to the property as they’re added so you can truly replace what you have.

In the wake of Katrina, some insurers were starting to curtail hurricane coverage, so it’s important to know what individual insurers are offering in your area and whether they’re referring coverage to other insurers. Obviously, when fewer companies are competing for customers, premiums go up.

What is Replacement Value?

Insurance with the correct replacement value would cover the amount it would take to rebuild your home thoroughly right on the same piece of land. Beware of any home insurance policies that base coverage on “fair market” or “cash value”. That means the company will cut their payment based on the wear and tear they believe the item had, and on top of that, you’ll be forced to substantiate the value of the item when it was lost or destroyed.

Replacement value replaces what was lost. Period. However, there are certain stipulations. Some insurers will pay only if you replace items within a certain time period; if you are out of your home for six weeks and your policy stipulates replacement of covered items in four, you have a problem. Also, if you choose not to replace a covered Hem for any reason, how will you be reimbursed for the covered loss?

To be safe, designate a weekend to photograph the interior and exterior of your home-in sections so it can be clearly seen. Take tight shots of appliances and other valuable items. If you haven’t bought a digital camera, consider one that not only photographs a wide area, but one that can take tight shots of jewelry and other small items you know you’ll want replaced. Burn these photos onto a CD that you can keep in a safe place, and if you feel the need to show any of these items to an agent for special coverage over and above your existing coverage, bring the CD to his or her office.

The Insurance Information Institute says you can start estimating the replacement value for the structure of your home by multiplying the total square footage of your home by local building costs per square foot. You can find out this information from your local real estate agent, builder’s association or insurance agent.

What Are Endorsements?

People are investing in expensive entertainment centers, computer systems, and other costly possessions that take a lot of money to replace. That’s on top of jewelry, cameras, and other traditional valuables that homeowner’s policies may not cover completely in case of lost or office.

They may need to buy an endorsement for those goods. Endorsements, sometimes called “floaters”; are additional coverage you can purchase for your homeowner’s insurance policy. They cover specific risks that are not included on a standard policy and as such are dependent on your needs and lifestyle. Ask your agent what’s right for you. And make sure you have that equipment photographed as well, including serial numbers and other identifying features.

Insuring Condos, Co-ops, and Apartments

Home insurance isn’t only for freestanding homes. Condo owners and apartment dwellers also need to insure their property and belongings. For condos and co-ops, you need to know what areas are covered by the condominium and co-op and what areas you’ll need to insure. You’ll obviously need to insure your own belongings and certain designated areas of the structure. Check with your association to make sure your policy covers the right elements.

Renters should invest in insurance for their possessions since landlords don’t cover those losses. Some landlords will also require you to carry liability insurance, in case someone is hurt inside your apartment while visiting or working there.

What are Deductibles?

Deductibles are the amount of out-of-pocket cost you pay before the insurance kicks in, and just like auto and health insurance, home insurance gets cheaper when you raise the deductible.

But here’s the point about taking on a higher deductible for your insurance. Make sure you sock money away-or put that difference in your emergency fund-to make sure you have enough money to pay your deductible if you need to.

What If You Have To Move Temporarily?

If you are put out of your home by some natural disaster, fire, or other insured cause that makes your home unlivable, make sure you have coverage to pay your living expenses. This is called loss-of-use coverage. Be very precise about what this will cover-hotel, food, utilities, and transportation.

What’s an Umbrella Policy?

An umbrella policy is critical coverage if you keep your home, auto, and watercraft (if you own a boat) insurance at one carrier. Individual coverage in each of those areas has limits on liability insurance. Umbrella policies are designed to give a person added liability protection above the limits on those individual policies. Depending on the company and your record, you can add an additional $1 to $5 million in liability coverage.

Ways to Save

Carriers who insure both home and auto will sometimes offer a discount for customers who buy their home and auto policies at the same place, so in addition to umbrella coverage, see what that grouping will save you.

Other factors that save or cost money on home insurance:

1. The way your home is constructed. If you live in a wooden home with wooden siding, you’re going to pay more because wood is less resistant to fire.
2. The kind of pets you have. Some insurers are penalizing homeowners for certain breeds of dogs and other animals believed to be more violent than others, thus raising the risk of liability.
3. Your proximity to the fire department. Premiums may be affected by the distance between your home and fire department, the quality of the department’s fire-fighting equipment, level of training, and response history.
4. The crime rate in your neighborhood. High-crime neighborhoods are more expensive to insure.
5. The likelihood of natural disasters. Hurricanes in the Gulf and East Coast, mudslides, wildfires, and earthquakes in the West, tornado alleys in the Midwest. If there’s a pattern of weather or geological behavior where you live, you’re going to pay higher premiums that cover likely damage.
6. The age of your home. Older homes are susceptible to breakage, erosion, and other risks.
7. Your claim history. If you file claims for every little problem, you’ll pay more.
8. Your credit rating. The less attractive your credit rating, the more you’ll pay because high debt and shaky payment behavior suggest that you might let a property deteriorate or delay payments on mortgages or other home-related debts.
9. Your deductible. One of the few things you can directly control. Tf you pay a higher deductible, you’ll get a lower premium. However, you need to make sure you can afford the deductible if a loss happens.