Review homeowner’s insurance for coverage

Your home–one of your biggest lifetime investments–must be protected from the dangers of nature and the world.

What if a volcano erupts, a satellite drops, the wind blows, lightning strikes, or fire burns? For those threats, you need insurance, and you need the right amount.

The biggest catastrophe would be not having enough coverage.

Consider these three types of coverage:

1. Standard dwelling coverage.
This is based on the cost to rebuild your house, based on construction and material costs in your area. Your homeowner’s insurance company can give you an estimate and might even update your coverage for you to reflect changing costs of labor and materials.

Note that standard coverage does not cover everything. It almost certainly does not cover floods or earthquakes. Or nuclear war.

2. Extended replacement cost.
Not offered by every company, extended coverage can absorb price increases. If a tornado tears through your town, labor, and materials could be scarce and costs could rise. With standard dwelling coverage, you are insured to the limits of your policy but no more. With extended coverage, even if costs rise, your investment will be protected.

3. Guaranteed replacement cost.
This is the best coverage because it pays to rebuild your house no matter how much costs have gone up. You might need this in a high-value, historical home, for example. You might need it if your home has special features that would be difficult and expensive to replace.