You should expect the unexpected and be ready for natural calamities such as earth quake, Hurricane ,fire, mudslide etc. The idea is that you must be ready for any unpleasant happenings which may happen.

When it happens to your house is a total thrashing that necessitates your house to be completely re-erected. And you know you do not have that must insurance coverage for a complete reconstruction of your house. Got a shock. Yes and the reason is normally the insurance policies generally insures up to the book value of your house. It ignores the inflation and appreciation effect on the value of your house which means if you had built your house in 1999 for the cost of $200,000 but the at present in 2008 if you build the same house the cost would be $350,000. The difference of $150,000   would actually kill you as you would get only $200,000 from the insurance company. There is not protection against the inflation and the rising cost of construction.

 To avoid the situation what you need is Guaranteed Replacement Coverage. This coverage insures that you would get the coverage for the cost of rebuilding your house in the event of any miss happenings. In simple terms you get the replacement cost for your house. Its important that while taking the insurance you must make sure that the coverage is full as some of the policies restrict the coverage to 20to 30 per cent which means in the case of claim you may only get $220,000 or $230,000.

 Do not forget, as the coverage increases you insurance premium would also increase. But its always better to have full coverage.