February 2008
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Cost: $16,000 to $194,000
Even with the recent retreat in home prices, if you've lived in the same house for 10 years, it's likely to be worth 54 to 104 percent more than you paid for it, depending on where you live. But if you haven't updated your homeowners insurance and disaster strikes, you could lose those gains.
All told, 55 percent of residential property in the U.S. is undervalued for insurance purposes, according to Castle Inspection Service, which conducts valuations for insurance companies. The average shortfall: 28 percent.
Using metropolitan area home prices as tracked by the National Association of Realtors, we picked a $71,700, median-priced home in Elmira, N.Y., and an $865,000 one in the San Jose, Calif., area. We subtracted the value of the land, which is theoretically indestructible, and multiplied the remainder by that 28 percent shortfall.
What you can do. Ask your insurer to reassess your home's replacement cost and adjust coverage accordingly. Buy an inflation-guard endorsement. Make sure your policy would pay to rebuild to the current housing code where you live.
