Everything You Need to Know About Insurance

By Josh Garskof

Insurance is as confusing as it is necessary. Here, unbiased experts provide answers to six of your thorniest insurance questions.

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Photo by Martin Barraud/Getty Images

Question #1

I just received the renewal for my homeowner's policy and noticed that the value listed for my home is much less than it's worth -- even with the recent decline in real-estate prices. Am I underinsured?

Probably not. Real estate is all about location: The lot itself may account for up to half the property's total worth. So even if your home burned to the ground, the land would retain its value. Besides, explains Bob Hunter, director of insurance for the Consumer Federation of America, "Most homeowner's policies pay replacement cost -- that is, the price of building essentially the same house from scratch. That's generally lower than market value."

For around $250 to $500 you can hire a real-estate -appraiser (to find one log on to appraisal-institute.org) to do a replacement-value appraisal. Or if you have a good working relationship with a general contractor, ask him or her to give you typical per-square-foot construction costs for your area. "Keep in mind that most policies will pay out up to 120 percent of the replacement value stated on your policy," says Hunter, "so you have some wiggle room."

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