House Guess

I look forward to reviewing my homeowner's insurance the way I do to cleaning the gutters on the roof. Preventive care is a pain. It's amazing, though, how much trouble can turn up. Did you know, for example, that coverage guaranteeing you'll have enough money to rebuild your house is disappearing? That's what my Allstate agent told me a few weeks ago, and I was floored. Isn't the main point of homeowner's insurance to ensure that you can replace your house should it burn down?

Yes, and it still does that--but not automatically. To reach the right amount, you're going to have to do more homework than in the past.

I didn't give much thought to insurance amid the hubbub of buying my house in 1996. I ended up with a cash-value policy good for a specific amount. That was fine then. I knew what I was paying for the house. But since then I've made improvements and enjoyed appreciation in a hot housing market. I'm no longer sure what my house is worth, so I wanted to switch to a policy guaranteeing full replacement value no matter how mistaken I might be.

But Allstate, the second largest underwriter of homeowner policies in the U.S., stopped offering such coverage a couple years ago. Industry leader State Farm Group is eliminating the coverage state by state. Third-ranked Farmer's Insurance has stopped the coverage as well. Of the 15 largest underwriters, only Chubb continues to offer guaranteed replacement value, says the Insurance Information Institute. And even Chubb has stopped offering it in harsh-weather zones.

The upshot: insurers have quietly shifted the risk of knowing what it would take to rebuild your house from them to you. Because of that, you're at greater risk of buying too much or too little insurance. Too much is better, but it's a crime that insurers are bleeding homeowners for unneeded coverage just so they can achieve peace of mind.

The insurers don't see it that way, of course. They say they have absorbed losses for years because homeowners tend to understate the value of their homes when buying guaranteed replacement-value policies. That way homeowners get the guarantee of being able to rebuild while saving on premiums, which run about $5 per $1,000 of coverage. Not fair.

Bottom line: if you've had guaranteed replacement coverage in the past, it's probably been converted to an extended-limit policy, in which you are protected only to the amount you pay for, plus a 25% buffer. That means if you pay for $100,000 of insurance, you're covered up to $125,000. The buffer is there to compensate for miscalculations.

But if you're like me, that buffer isn't enough. Estimated rebuilding costs vary widely, especially on an older home. My agent helped me come up with a figure. But if he's wrong and my house burns, I pay. Likewise, I'm responsible for getting the square footage right and valuing special things like the marble counter we put in. I raised my coverage by $71,000 to be safe. The good news is that I was able to offset the added premiums by raising deductibles. Do I really need this extra insurance? Do I want to sleep at night?

E-mail Dan at kadlec@time.com; see him on CNNfn Tuesdays, 12:20 p.m. (E.T.)