A home is probably the largest investment a person will make throughout their lifetime. Therefore, you want to to be adequately insured. This is true even though home insurance is not mandatory, such as with auto insurance.

Unfortunately, because it is not required, many Canadians fail to obtain insurance for their home. In fact, two out of every three Canadian homes are underinsured. In an attempt to keep this from occurring to you, keep reading to learn five ways that you can ensure your home is adequately covered and can be rebuilt in the event of a disaster. 

1. Avoid Being a Cheapskate—While the lowest premium is going to be tempting, it isn't the best option. In fact, you may find that if you need to file a claim and rebuild your home that you won't be able to afford to build the same quality of home that you had to begin with. This is because your opted for a lower coverage. However, make sure that you can afford the premium that you choose to go with.

2. Consider Additional Disaster Coverage—If an earthquake or flood decides to come through and damage your home, your homeowners insurance policy isn't going to cover the damage. Therefore, you may want to consider additional disaster coverage to ensure your home is properly and adequately insured during such a time. Otherwise, you may find that you'll be paying for your own repairs instead of the insurance company. 

3. Inspect Your "Loss of Use" Clause—Found on the declarations page, the "Loss of Use" clause pertains specifically to your place of living while your home is being rebuilt. This will include rent, hotel costs, and other related living expenses. In most cases, it is better to opt for a higher limit to limit the amount of out-of-pocket expenses that you have to incur after disaster strikes. 

4. Avoid "Actual Cash Value" and Opt for "Replacement Cost"—Replacement cost will help you replace your household items that are on your insurance policy at the price it costs to replace rather than its value when the items were destroyed.

In other words, if you have a TV that you bought three years ago for $500. It wont be worth as much now and your insurance company will only provide you with maybe half of that price if you choose "actual cash value" on your insurance. However, if you chose "replacement cost," you are going to be provided with enough money to replace that TV at what it costs today, which is likely to be higher than what you paid initially. 

5. Report All Remodels and Renovations—When you decide to remodel your kitchen or add on a bathroom, you need to make sure to have your home re-assessed after the renovation is complete. You also want to report the alterations to your home to your insurance company. If you fail to do so, those additions or remodels won't be considered in the claim that you file. 

Is your home underinsured? If you aren't sure or want to discuss your homeowners insurance policy, you need to consult with a local home insurance company as soon as possible. 

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