Are you covered?

So how can you tell if you have enough coverage? Take the following steps:

• Read your policy. Its not exactly summer beach reading, but insurers have generally made their policies more understandable in recent years. You should be able to get a good idea of whats covered and whats not. If you have any questions, call your insurer and ask.
  
  
• Insure the house, not the land -- or the mortgage. The price you paid for your home, the amount its worth now and the mortgage you're carrying are all pretty much irrelevant when it comes to determining how much insurance you should have. What you really need to know is how much it will cost to rebuild your house, and that could be significantly more or less than any of the above figures.
• Use averages only as a starting point. The average cost for building a home nationally ranges from $65 to $150 a square foot, with homes on the coasts and in major metropolitan areas coming in on the high end of that range. Custom-built homes in these high-cost areas often can cost $200 to $400 a square foot. The average homeowner in today's market should start with (rebuilding costs) of $75 to $85 a square foot, and then make adjustments from there.
  
  
• Talk to builders in your area. If your insurer cant help you nail down the cost of rebuilding your home -- and many cant -- your best bet may be to chat with contractors doing work in your neighborhood. Their ballpark estimates are likely to be much more helpful and accurate than a guesstimate from a company or agent who isn't as familiar with the quality and cost of homes in your area. If you're still having trouble coming up with a solid estimate, consider hiring an appraiser to do the job. This can cost you $200 to $300, but in the long run could save you a world of grief.
  
  
• Consider adding upgrade coverage. The older your home, the more it will cost to bring it up to current codes -- and those costs typically aren't covered in the standard replacement policy being sold to most homeowners. Upgrade coverage is a relatively inexpensive addition to your policy that could pay off should you ever face disaster. And the possibility of disaster is, after all, why you have insurance in the first place. Make sure you have enough so that the tragedy of a fire or other disaster isn't compounded by not having enough money to rebuild.

MSN Money Central Report