Many homeowners may have a problem and may not even be aware of it. Many don't know what their homeowners insurance policy covers. There are reasons for this, some of which are understandable.

Many people buy their initial homeowners' insurance policy when they purchase their home. They may not have had a peek at it since. Many also include insurance payments along with their property taxes in their mortgage payments. They may not even know how much they are paying for their homeowners insurance. So now there's the additional problem of not only not knowing what coverage is available, but also not knowing whether you are paying a fair price.

First Things First

The first step is to find out how much your homeowners insurance is costing annually. This may take a bit of research but it can pay off. After all, how can you know if you are overpaying if you don't even know what you are paying? Once you know what you are paying, the next step is to find out what you are paying for.

What Coverage Do You Have and What Exclusions Are There?

There are at least three critical areas to look at in a homeowners' insurance policy.

• What perils are you covered for?
• What are the policy limits?
• What exclusions exist?

If you get a handle on these areas you will be in a much better position to know what you have and what coverage lacks. You will also be in a much better position to compare rates and coverage.

Most policies, for example, will cover the home's main structure and outbuildings for damage due to storms, fire and other natural disasters. There may be exclusions for high winds, and weather-related flooding almost never has coverage. You might need separate coverage for these losses.

There will be total limits for coverage on your property. Make sure these limits are sufficient to cover the home's value. Do the same for the limits for personal belongings and collectibles.

If your home has increased in value significantly, then this is an area worth revisiting. This is also a good time to make sure all information on your policy is accurate. Have you acquired a dog or put in a pool or made other significant improvements? Those might merit amendments to the policy.

It's Time to Compare

Now that you know how much you pay and what perils have coverage, you are in a better position to compare policies. It is important to note that if you find better coverage at a better rate, it is your decision to switch insurance companies. It is your right and your privilege. Your agent is able to be your advocate in this regard.