Many homeowners may learn about their insurance policy’s small details only after experiencing a disaster such as a hurricane, tornado or wildfire. Knowing your policy thoroughly is the key to making sure you are properly covered for these situations.

Avoid these top ten mistakes when buying homeowners insurance.

 Mistake #1:     Assuming That You're Adequately Insured

It is realistic to assume that your home is underinsured in even the best of circumstances. In order to purchase adequate coverage for your home and personal property, be prepared to ask your agent very specific questions about homeowners’ insurance.

 Mistake #2:     Not Reading the Policy

Homeowners’ insurance policies typically contain a large amount of fine print, legalese, and insurance company terminology. Read through the policy carefully and in full.

Keep a pad of paper nearby to jot down questions for a follow-up meeting with your agent. Insist that your agent specifically define any legalese and insurance industry terms that you don't understand.

 Mistake #3:     Relying on a Computerized Estimator

Most insurance companies arrive at homeowner insurance policy coverage amounts via replacement cost estimation tools, such as AccuCoverage (at http://www.accucoverage.com) or ISO HomeValue software. These tools are mostly computer-generated mathematical formulas where only the most basic physical information about your home is entered, such as your home's square footage and current building material and labor costs within your zip code.

Relying on these formulas in lieu of an on-site visual inspection by an insurance company representative can be a mistake. A visual inspection could catch property specifics and improvements that could be overlooked by an estimation program.

 Mistake #4:     Lack of Flood Insurance 

Many insurance company policies do not cover flooding. Flood insurance can be purchased as a separate policy, in participating communities, via the U.S. government's National Flood Insurance Program. If you live in a flood zone, this type of flood insurance is a necessity.

The insurance industry term "anti-concurrent causation"  means that if you are covered for one type of disaster (wind damage) and not covered for another type of disaster (flood damage) and both types of disasters occur at the same time, the insurer won't cover you for either type of damage. Again, make sure you read and understand your policy to avoid this worst-case scenario.  

 Mistake #5:     Underestimating the Time Needed to Rebuild Your Home

When purchasing homeowners insurance, make sure that your additional living expenses (ALE) will cover at least a two year period starting from the day of the disaster.

Note that most homeowner insurance policies include only one year as standard coverage. When meeting with your insurance agent, ask him or her to specify what ALE will cover. ALE should include immediate post-disaster needs, such as clothing replacement and temporary housing, as well as  ongoing post-disaster needs, such as monthly rent and additional gas mileage allowances. If you can get additional coverage for your mortgage payments during the rebuild period, do so.

 Mistake #6:     Underestimating Your Personal Property Coverage

Coverage of personal property is divided into a list of categories such as furniture, electronics, and collectibles. When buying insurance, be sure that you ask your agent to list these specific personal property categories and detail specific replacement dollar limits per category. In particular, find out which policy coverage limits you can raise and which you cannot.

Note that many of the larger insurance companies may not cover specific items with a certain added intangible value. Such collectibles may include stamps, coins, comic books or sports memorabilia.

 Mistake #7:     Not Keeping Additional Personal Property Documentation

After a disaster, you will be dealing with an insurance company adjuster. Understand that a key part of an adjuster's job function is to keep reimbursement payments down to what they might deem to be a reasonable maximum. Despite having specific personal property items listed in your policy, you may still have to offer additional proof of ownership when making a case for replacement of these items. Videotaping or photographing specific valuables and home improvements and keeping them in a safety deposit box at your bank is recommended.

Mistake #8:    Not Understanding the Difference between Full Replacement Value and Actual Cash Value

Ask your agent whether your personal property items are covered for their actual cash value or their full replacement value. For example, a brand new car might lose as much as 10% of its actual cash value as soon as it's driven off the lot. While choosing the full replacement coverage option will make your policy more expensive, depreciation won't play a factor in replacing the items that you've lost in a disaster. 

 Mistake #9:     Not Keeping Your Policy Updated

When making major home improvements, such as adding a pool, a garage or remodeling a kitchen, you'll need to continuously contact your agent with every significant improvement in order to make sure that your policy keeps up with the increase in your property's value. Again, make sure that full replacement value is covered.

 Mistake #10:    Having a Deductible That's Too Large 

Every homeowner insurance policy has a deductible amount. This is the out-of-pocket amount that you must pay before the insurance company will start a post-disaster claim. While some deductibles are minimal, typically $500, other policy deductibles may be as high as one percent of your home's insured value. For example, if your home is worth $400,000, you may have to pay a deductible of $4,000. Ask your agent what your deductible is for your policy. The amount of the deductible will affect your insurance premium.

Additional Resources:

• CARe (Community Assisting Recovery, Inc.) a nonprofit devoted to helping homeowners after a disaster:

http://www.carehelp.org/about_care/aboutcare.htm

• National Flood Insurance Program:

http://www.fema.gov/business/nfip

• Insurance Information Institute’s Homeowners Insurance Information:

http://www.iii.org/individuals/homei/hbasics/arethere/