When it comes to insurance coverage you have to make sure you have enough of it in order to cover the expenses of rebuilding your home from scratch according to the current construction prices. But don't put the cost of the land into the equation. And don't fall to the temptation of taking the construction costs you paid for in the first place as the base of your calculations. In most cases the cost of rebuilding your house will be near the price you would sell it for at the current moment.

In certain cases you will be required to purchase homeowners insurance by the bank you're getting the mortgage from. And if the mortgage defines the limit of your insurance coverage, always make sure to have enough of it for covering the cost of rebuilding the house. (In case the mortgage is already settled, don't choose to drop your homeowners insurance policy as it's a good tool for protecting you initial investments.)

To get an approximate amount of insurance coverage your home will need, simply multiply the square footage of your house by current local construction costs per square foot. If you don't know the current construction costs, you can always contact a local construction company, real estate seller or insurance representative.

Things that will influence the cost of your home being rebuilt:

• Current building costs in your area
• Your home's square footage
• Exterior wall construction type
• House style
• The total number of rooms
• Materials used and type of roof
• Other building on your property
• Special features (like fireplaces or large windows)
• Custom design of certain parts of the house (bathroom, kitchen)
• Modifications after the construction was finished (adding more rooms or changing the overall square footage)

When you buy standard homeowners insurance policy your house will be covered in cases of fire, storm, lightning, hail, theft or explosion but it won't pay for damage caused by wear and tear, earthquake or flood. If you want to cover the latter, you will have to buy additional coverage.

The largest part of all homeowners policies will pay the cost of replacing the damaged part of the building. Such a policy will cover the cost of replacing or repairing the damaged elements with the use of the same or identical materials. Depreciation is not taken into account.

If choose to buy a flood coverage policy, the amount of coverage is also likely to be based on the replacement costs.

In case your home is damaged by a major hurricane or other natural disaster then the material and construction costs are very likely to rise in your area, because the demand will be increased. In many cases such a situation can leave your policy limits well behind the amount of money you will actually need. In order to get covered properly in such situations think of an insurance policy that is able to go beyond your initial coverage limits.

This type of homeowners insurance is called extended replacement cost policy and it usually leaves room of about 20 percent beyond your policy limits when needed. Another similar type is called guaranteed replacement cost policy and it will cover the damages in full no matter how much the costs have changed since the disaster.

Building codes are the subject of periodical innovations and changes, and it is very likely that the current building codes differ significantly from those that were in force when you've built your house. And if your home gets serious damage you will most likely be required to rebuild it in accordance to the new building codes. Typically, homeowners policies of any type won't cover the extra costs associated with the need to meet the current building codes. However, most companies provide such coverage in the form of an endorsement, which is bought in addition to your current policy.

It is recommended to include this clause when signing the policy. It will reflect the current building costs in your neighborhood according to the dwelling limit.

In case you want to insure and older structure you may find it difficult to get a replacement cost insurance policy. Instead, it would make sense to purchase modified replacement cost insurance policy. Such a policy will cover the costs of repairing or rebuilding your house but with the use of modern materials, and not the ones that were used decades ago.

When it comes to insuring older structures there are big differences between insurance companies. Some companies will get you covered as long as the structure is in an acceptable condition, while other companies will simply refuse providing you with replacement cost coverage, unwilling to recreate old features in case the structure gets damaged.

In case you can't afford to get a replacement cost policy for your home or simply don't want it, always make sure that your policy has high enough limits for building a new house that is comparable to the size and quality of the old building that gets damaged.

Other important assets:

1. Your property
2. Your personal belongings
3. Expenses due to your home being damaged
4. Personal liability towards other parties