Does your policy contain a Loss of Use provision that will help pay for hotel, restaurant and other expenses accrued while you're displaced? Chances are your homeowners insurance isn't going to provide you with enough coverage to resume the lifestyle to which you've grown accustomed should a disaster strike.

Homeowners Don't Know They Are Underinsured

Homeowners are spending billions of dollars a year to add onto their homes, but most of them don't update their homeowners insurance coverage which leaves them grossly underinsured.

According to a Marshall & Swift / Boeckh survey, 66% of U.S homes are undervalued for the purpose of insurance by an average of 18%. If you add a new deck to your home, but fail to notify your homeowners insurance provider, you could end up underinsured.

How Much Homeowners Insurance Coverage Do You Need?

Many homeowners might be unaware of how much homeowners insurance coverage they need. You need enough coverage to protect your home and assets in case of a worst case scenario and your home is lost due to a covered disaster. You need to review your policy at least once a year to make sure all your belongings are covered.

Homeowners insurance policies can be broken down into four categories - structures, possessions, living expenses and liability:

Structures

You generally want to have coverage equal to at least the amount of your mortgage. Your policy should cover rebuilding costs. And if you've recently remodeled your home, you need to update your coverage to cover these additional renovations.

Possessions

Your homeowners policy will also cover your possessions. You may choose between replacement coverage (the cost to replace each item) and actual cash value coverage (the item's original value less depreciation). If you have valuable jewelry, an art collection or a state-of the-art home theater system, you should consider purchasing additional coverage to cover these items.

Living Expenses

This often overlooked coverage will provide you with coverage for hotel, restaurant and other miscellaneous expenses you may accrue if your home is rendered uninhabitable by a covered disaster.

Liability

Most policies offer a base amount of liability coverage - typically $100,000. However, if you have a swimming pool or a dog whose breed is aggressive by nature, you may want to consider increasing your limits.

Review Your Policy

The most effective way to know if you have enough insurance is to maintain a home inventory that you update regularly, and check your homeowners insurance policy at least once a year. Keeping your home inventory up-to-date will help you determine how much homeowners insurance coverage you need. After updating your home inventory, you may find you need to increase your coverage.

Even if you need to add more coverage to your homeowners insurance policy, there are still ways to keep your rates low. The best way is to compare multiple homeowners insurance quotes to find the right policy with the best price. Nothing is more costly than having an underinsured home.