You might think the headline of this article portends good news -- we might think that we'd enjoy paying less than we really should to insure our home. We'd feel like we're getting away with something. But if your house burns down, you'll be feeling something else: sick to your stomach, as you learn that you were not only undercharged for your homeowner's insurance, but also underprotected. Let me back up a bit and explain.

In a nutshell, many Americans are not carrying enough insurance on their homes to cover rebuilding them. It's not enough to base your home's replacement value on what you paid for it, or what the market price for it is. Consider, for example, an old house. If you buy it, you may not need to make a lot of changes to it. But if you have to rebuild it, you may need to invest a lot of money updating it and bringing it up to code.

Other contributing factors to this growing problem include insurance agents who may not always do a good job of determining how much insurance you need. (Did your agent quote you your price over the phone, without having asked you lots of questions?) And then there's the rapidly rising cost of building materials. (See "Construction Costs Soaring.")

As MarketWatch's Ray Martin has explained: "Most homeowner policies sold today are called 'extended replacement coverage' or 'specified additional amount of insurance,' which only provide coverage up to the dwelling limits specified in the policy plus an additional amount of up to 20% -- and not a penny more. And if you have an existing policy with 'guaranteed replacement coverage,' expect a notice from insurance company upon the policy anniversary that your current coverage will be replaced with this more limited form of coverage. This development places more responsibility on homeowners to ensure that they have adequate coverage."

If you haven't examined how much your home is insured for lately, do so. And perhaps do a little research on the side, too. One helpful tool might be a property value report from a website such as For free, it offers a replacement cost report and a competitive insurance quote. For a few dollars, it offers an estimated replacement cost report for your home, based on the property's characteristics and local pricing levels.

Learn more about homebuying and homeowning issues by visiting our Home Center, which features lots of money-saving tips and even some special mortgage rates. Then learn more about the not so exciting but still critical topic of insurance by going to our Insurance Center.

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And if you're in the market for insurance, another way to inform yourself about options is to spend some time at the websites of some insurance companies. According to SNL Financial, the 10 largest insurance companies (as of 9/30/05) are:

  • American International Group (NYSE:AIG)
  • Berkshire Hathaway (NYSE:BRKa) (NYSE:BRKb)
  • UnitedHealth Group (NYSE:UNH)
  • WellPoint (NYSE:WLP)
  • MetLife (NYSE:MET)
  • Allstate (NYSE:ALL)
  • Prudential Financial
  • St. Paul Travel ers
  • Aetna
  • Hartford Financial Services

UnitedHealth Group is a Motley Fool Stock Advisor recommendation. Want to see what else Tom and David Gardner are recommending? Check out Stock Advisor for free, with a no-risk trial subscription.

Longtime Fool contributor Selena Maranjian owns shares of Berkshire Hathaway. The Motley Fool has a disclosure policy.