Many people think they have enough insurance coverage to replace a home when, in fact, they don't. A big problem can occur in neighborhoods that are being rediscovered or gentrified. Often the beautiful construction of these homes is expensive to replace. An owner may discover his insurance won't cover the loss.
To avoid this trap, the owner should ask his insurance agent to estimate how much it would cost to replace the home. This should be available for free and should be done annually. If the home is in a rising real estate market, or if the area is subject to natural disasters, get an estimate twice a year. A way to keep up with housing-cost increases is through inflation-guard coverage that automatically increases annually the amount for which your home is insured.