What will your homeowners insurance cover if disaster strikes? Understanding the extent of your coverage is vital, especially with an increase in severe weather events.

With incidents like Hurricane Laura and various wildfires making headlines, reviewing your homeowners insurance policy is more important than ever. If you haven't checked your coverage recently, it's time to ensure you're sufficiently protected. Here are five key areas to examine:

1. Do you have both home and hazard insurance?

Home insurance is the foundation of your protection. It safeguards your belongings, covering personal items like furniture and clothing, and offers liability support in case someone gets injured on your property.

Hazard insurance, also known as dwelling coverage, protects the structure of your home itself, covering repairs or rebuilding due to covered events.

Having both types ensures comprehensive coverage, but additional protection might be necessary for items not included in typical homeowners policies.

2. What will your reimbursement look like?

It's essential to understand how much your hazard insurance will pay you in case of a loss. There are three reimbursement options, ranked from least to most expensive:

  • Actual Cash Value compensates you based on your home's worth minus depreciation. This means if you have to replace damaged items, you might need to cover the difference out of pocket.
  • Replacement Cost Value reimburses you for the current costs of repairs or rebuilding, offering better coverage than Actual Cash Value but at a higher premium.
  • Guaranteed Replacement Cost and Extended Replacement Cost provides coverage that exceeds standard limits, accommodating increased costs in times of high demand for materials and labor.

3. Are natural disasters covered?

Damage from natural calamities can vary significantly in terms of coverage. Review your policy to see what perils are included, and consider additional policies for threats specific to your area, such as earthquakes or floods.

Check your flood risk using FEMA's flood map, and explore resources on flood insurance to understand your options better.

4. Does your coverage reflect your current home value?

Have you made updates to your home like renovating your kitchen or adding new flooring since you purchased your policy? Make sure these changes are accounted for in your coverage.

It's advisable to ask your insurance agent for a new policy estimate every couple of years. This will help ensure your coverage aligns with current construction costs and your home's value.

5. Can you document your belongings?

To receive compensation for your losses, you need to prove what was damaged. Keeping a detailed inventory of your possessions is crucial. A simple method is to record a video walkthrough of your home, showcasing all your belongings.

Don't overlook valuable items like jewelry, artwork, or collectibles, as standard policies may not fully cover these. Consider adding riders to your policy for specialized coverage.

Regularly review your policy limits and the value of your possessions to ensure you're adequately insured for both new purchases and any items you've sold.