Insured Value vs. Replacement Value

CoreLogic estimates that three out of five homes in the U.S. are underinsured by an average of 20 percent. Being underinsured means that you don’t have enough home insurance coverage to protect you if your home is damaged or destroyed by fire, water, storm, or any other type of disaster.

Not having enough insurance coverage can result in you paying a large part of the repair costs out of your own pocket. For example, if your $400,000 home burns down and you’re underinsured by 20 percent, you’ll be paying $80,000 out-of-pocket for the rebuild.

That’s why it’s important that you check in with your insurance agent every year to review your policy. If you’ve made significant upgrades to your home, such as finishing a basement or replacing windows, let them know so your policy can be adjusted accordingly. It’s a good idea to also make sure you have the adequate replacement value for your home’s contents. There is structural insurance and content insurance.

Structural vs. Contents Insurance

These are separate policies. You should have both!

Structural Insurance

If you tipped your house upside down, whatever doesn’t fall out is considered structural. Assuming your house is structurally sound, this includes your foundation, roof, windows, flooring, ceiling, and more.

Contents Insurance

Everything that fell out of your house when you tipped it upside down is considered contents. This could include furniture, electronics, appliances, and even clothing. It’s a good idea to keep inventory of these belongings and document their value. Many insurance programs provide downloadable home inventory apps that make the process easier and headache free. However, if you keep track of this on paper, make sure that paper goes into a fire-proof safe or lock box.

Personal possessions that are worth a lot, such as jewelry, art, antiques, guns, or collector’s items are usually limited to $2,500 worth of coverage. If your items exceed this amount, it’s wise to purchase extra coverage, called a rider or endorsement, up to the limit on these types of items. You’ll need to provide receipts and appraisals to document the replacement costs.

Assess Your Endorsements and Exclusions

You should also review your exclusions and endorsements, the parts of your policy that give or take away coverage. Endorsements can ensure you are fully protected and are typically very affordable. Reviewing your exclusions will help you determine how to protect your home from severe weather and if you need to buy more liability insurance.


You can get an endorsement for expensive personal possessions, as explained above, but there other important ones you should know about.

Sewer and sump-pump backup: Adding sewer and drain backup coverage to your homeowners policy is wise. It is one of the most common homeowner claims, averaging $10,000-$20,000 in expenses, and it is almost always excluded from a basic policy.

Special personal property coverage: Damage to your electronics from what insurers call a “named peril,” or lightning, fire, or water damage that’s not from flooding, is covered under a standard policy. But if your electronic devices are zapped by a power surge, damaged is not cover. However, you can get a special property endorsement for such situations.

Home-based business: If you have a simple home office, you can typically get a home-based business endorsement to cover your office equipment and related property. But if you run a daycare, dog grooming service, or other type of full-fledged operation, you will need a separate commercial business property policy to ensure full coverage.


Dog breeds: Typically, a home insurance policy’s liability coverage has included dogs. But a growing number of home insurers now exclude “dangerous” breeds from liability coverage due to the increasing amount and cost of dog bite claims. Others require dog owners to sign liability waivers for dog bites. If you have a dog, be sure to check your policy to see if it is excluded from liability coverage or not.

Some insurers, including Liberty Mutual, Nationwide and Amica, don’t discriminate based on breed and evaluate your dog based on its history and behavior. Also, some states, such as Maryland, Pennsylvania and Michigan, don’t allow insurance companies to deny coverage to owners based on a specific breed of dog. However, that doesn’t prevent insurance companies from charging higher premiums, so some dog owners may still have difficulty getting coverage.

Wind and hail: Damage from wind and hail is covered under standard policies in some states, but in some others, it is not. Insurers in states where hurricanes and tornadoes are common sometimes put wind and hail exclusions in home policies. That means damage isn’t covered unless you buy separate wind and hail coverage. There are also exclusions for cosmetic roof hail damage, which means if the roof is structurally damaged, you can file a claim, but if it is dinged up, you can’t. Be sure to check your policy for wind and hail exclusions to be sure you’re sufficiently covered.

Avoid Home Insurance Coverage Minimums

The minimum liability protection many policies provide is usually $100,000, but experts recommend at least $300,000!

The Bottom Line

  • Review your homeowner policy every single year.
  • Update your insurer if you make any improvements or additions to your home (including exterior features like pools, decks, fences.)
  • You may need extra insurance coverage for your household items, especially if you have highly valuable items. It’s well worth the minor amount you’ll pay every month if something tragic were to ever happen to your home.
  • Check your endorsements & exclusions.