For all that you pay to protect your home, are you sure that you have the right coverage that’s sufficient for every contingency? More than that, do you have the right amount of coverage so if something catastrophic happens, you can recoup without decimating your finances?

The fact is that three of every five homes in the U.S. are underinsured by an average of 20% below the full value of your assets. If you’re among them and also live in an area prone to the rising number of natural disasters like floods, tornados and hurricanes and wildfires, your risk posture increases exponentially.

To evaluate the sufficiency of your homeowner insurance policy, consider what determines the level of protection you need for each category of coverage: Property damage; additional living expenses (only if incurred if home is rendered uninhabitable due to an accident or natural disaster); personal liability; and medical payment coverage.

Each category is required, but the amount of coverage that you need in each is dictated by three factors:

  • The assets that you want to protect, like your possessions, your type of home and your financial cushion. Combined, they influence your premium, deductible, and coverage considerations. A substantial financial cushion, for example, may mean you can lower your premium, since you’ll need less assistance to recoup losses. But it can also make you vulnerable to lawsuits – possibly warranting a boost in liability coverage.
  • How much your mortgage lender requires – which is at least the balance that you owe in the case of a catastrophic loss. But you need to benefit, too, so it’s important to insure to the cost of rebuilding your house. This can be a lot more than you expect after a catastrophic event, so get guidance from your broker on options (especially if you’re in a high-risk area). Two options: Extended replacement coverage pays as much as 125% of your policy limit for rebuilding and guaranteed replacement cost coverage (a very expensive option) covers rebuilding whatever the cost.
  • Requirements of your insurance company in order for you to qualify for general homeowner insurance. Flood insurance, for example, is often required if you live in a flood plain.

That last requirement raises another consideration worth discussing with your broker. You may not live in a flood plain and your insurer may not require flood insurance. But a lot of the U.S. has been underwater recently: Two-thirds of the country dealt with historic flooding in the first half of 2019 alone. Should you get flood insurance? And are you covered for mold and sewage backup (that can accompany all that water)?

Flood insurance is available under a federal program; the cost varies according to your risk of flooding and how much coverage you want. There’s a 30-day waiting period for coverage to kick in after you buy a policy, so timing is important.

You probably have limited or no coverage for mold or sewage backup. Additional coverage for the sewer issue, which often crops up during heavy rains, is fairly inexpensive. Mold protection is difficult to find and then is costly – upwards from $400 a year. But it might be worth it if your home’s in a high-humidity region and built before mold-resistant materials were available.

Be certain you have the coverage you need, and instantly compare multiple home insurance quotes here.