Tips And Works

Americans should make sure their homes are covered for when disasters strike. Here's how you can be prepared.

NEW YORK (CNNMoney.com) -- If the wildfires in Florida have you thinking about whether you have enough insurance for your home, here are some top tips on how you can protect your home when disaster strikes.

The National Association of Insurance Commissioners (NAIC) found that nearly half of people - 48% - said they did not have an inventory of their possessions. And almost 60% of people didn't have receipts that showed the cost of their items.

About 28% did not know which type of coverage they purchased, whether it was an actual cash value or replacement cost. The NAIC said 69% of folks didn't have earthquake insurance, and 65% did not have flood insurance.

There is a world of difference between actual cash value and replacement cost. Remember, actual cash value is the amount it would take to repair or replace damage to a home and its contents AFTER depreciation. So if you bought a flat screen TV at $3,000 five years ago, you may get a check for what it's worth today and that could be as low as $500 if you have actual cash value insurance.

Replacement cost is the amount it would take to replace or rebuild a home or repair damages. An actual cash value payout could be thousands of dollars lower than a benefit calculated at the replacement cost according to the NAIC.

In this case, wildfires are a covered peril in most homeowner's insurance policies. But make sure you get the details. Insurance companies have been avoiding risk and cutting back on their insurance coverage for years.

Flood insurance and earthquake insurance must be purchased separately from your homeowners policy. Standard policies also don't cover damage from sewage and water backups.

And keep in mind, homeowners policies typically cover only $1,000 to $2,000 for theft of jewelry, furs or other precious items. So, if you have expensive items, you may consider buying extra insurance.

Inflation doesn't just hit your groceries. The materials needed to rebuild your home are also vulnerable to inflation. Your homeowner's policy may not account for this.

To protect yourself, ask for an inflation guard with your policy. This lets the insurance company to automatically increase the policy limits to keep pace with inflation. Now, you will have a higher premium, but if you have to rebuild your home, you'll be glad you have this protection.