Ask the experts
Supplement figures generated by your insurer for the replacement cost of your home by getting a second opinion from a local contractor. Ask for an estimate of the real-world cost of rebuilding your home, including the expense of demolishing the structure, says public adjuster Robert Freitag, president of AmeriClaims Inc. in Indian Trail, N.C.
"The agents plug in square footage and construction materials, and (the computer) spits out a figure," Freitag says. "Sometimes it's on, and a lot of times it's off."
Natural disasters can also drive up replacements costs, says Ed Charlebois, vice president of personal insurance for Travelers.
"With building costs, you can't anticipate everything that could happen," Charlebois says. "If you think about the tornadoes in Missouri and Alabama, I'm sure there were surges in pricing that were higher than you would have thought possible."
Check your contents coverage
Replacement cost policies usually don't include the same level of coverage for contents -- instead, the reimbursement amount for furniture, clothing and other possessions is typically based on a percentage of the replacement value for the entire house.
For those who determine their contents are underinsured, it's "pennies on the dollar" to buy additional coverage, Freitag says.
If you live in a condominium, be sure to read the fine print of the association bylaws to determine which portion of the building is covered by the association policy and which part you must insure yourself.
"Typically, the association will cover everything in a unit, except improvements and betterments made," Freitag says. "The association will never cover contents."
New kitchen, more coverage?
Additions and interior renovations, such as a new kitchen, remodeled bathroom or finished basement, could push your home past its current insured value.
Some improvements may also come with unexpected insurance costs, according to Kevin M. Lynch, an assistant professor of insurance at the American College in Bryn Mawr, Pa., and a former insurance agency owner.
"If you put in a pool, you may need to upgrade your homeowners (insurance), but you also may need umbrella liability insurance," Lynch says.