Insurance is one of those things you pay for with the hope you never have to use it, but in the aftermath of the April 27 tornado outbreak that destroyed or damaged more than 400 homes here in Bartow County, some residents are now discovering that not all of their losses will be covered by their homeowners’ insurance policies.

The purpose of property and casualty insurance, whether it’s home, auto or business, is to make the policyholder “whole” if he or she suffers a loss. Basically, a large group of people each pays a little every year to provide the financial resources to take care of the few in the group who might actually suffer a loss. However, for many people insurance is an afterthought. Most won’t take the time to research automobile or homeowner policies before purchasing and few know the types and limits of coverage they actually have.

It’s very common, particularly with automobile insurance, for the client to tell the agent to just write the cheapest policy with the lowest coverage limits available. It’s not until they are involved in a wreck or have their home damaged from fire or storms that they start to pay attention. Many times policyholders are shocked to discover they aren’t covered for what many would consider common things or have losses that exceed the coverage limits for a particular item.

First, you have to understand that insurance companies can be very different in how they structure their homeowner policies. Things that are automatically covered by one company may require a special rider to be covered at another. Let’s take a look at a few surprises some people will receive as they file claims for fire, burglary or storm damage at their home.

We’ll start by looking at your home’s contents. Most insurance policies will set limits on how much will be paid for certain items such as furs, jewelry, guns, coins, silverware, musical instruments and certain collectables. These limits are usually quite low. A woman may have a wedding ring set that cost several thousand dollars only to discover that her ring plus all of her other jewelry added together has a maximum insurance reimbursement of $1,500 total. You can argue until you’re blue in the face, but unless you purchased a special rider to increase that limit then $1,500 is all you’re getting.

A few years ago a friend’s home was burglarized and the crooks grabbed all of his guns. He purchased a gun guide to establish the value of his collection and found it would cost about $12,000 to replace them all. His insurance policy had a $1,000 limit on guns and that was all he received. Had he increased the insured limits on his gun collection, he would have received full reimbursement.

Over the years my wife and I have purchased several paintings including original oils and limited edition signed and numbered prints. While none individually are extremely valuable, together they may be worth several thousand dollars and I really need to check my own policy to see if they’re adequately insured.

With the rise in the number of people working from or even running small businesses from their homes, it’s also important to check for the limits on personal business property that may not be covered by your homeowner policy.

The next issue to come up is replacement cost coverage. Almost everyone thinks that is the type of coverage they have for their contents and structure, but quite a few don’t actually have it. Or in the case of the home structure itself, they probably have a modified type of replacement cost.

Replacement cost coverage in its most basic form means the insurance company will reimburse you the entire amount needed to buy an exact replacement of the item you owned at the time it was destroyed or stolen. Let’s use a sofa as an example. Even if the sofa was a few years old and had some obvious wear and tear, the insurance company will reimburse you the funds to buy a brand new identical (or similar) sofa. However, if you don’t have replacement cost coverage, then the value of the sofa at the time it was purchased will be established and then discounted to reflect age, wear and tear. A sofa you paid $1,000 for five years ago and that would cost you $1,300 to replace today might be depreciated to the point that you only receive $300 to $400 for it.

Probably the biggest place where homeowners get tripped up is in not being able to prove they owned what they say they owned. Insurance adjusters usually have a guide that shows the average family will have a certain amount of clothing, food, furniture, tools, books, etc. If you can’t provide receipts or video evidence then they’ll base your reimbursement off of these statistical averages. Perhaps clothing, shoes and handbags are your thing and you have a fabulous wardrobe worth many thousands of dollars. Unless you have documentation, you won’t get reimbursed but a fraction of that because it exceeds what the average family would have owned in clothing.

That brings us to the most important thing about your contents. Establish proof of what you own and then file it away in a safety deposit box or another secure place other than your own home. Probably the easiest way is to walk through your home room by room a video recorder and actually talk about the items as you film them. Open closets, drawers and cabinets and slowly record and note everything including even the smallest and least costly items.

Once you’ve finished recording, watch your video and add up what it would roughly cost to replace everything. Next, check that total amount against the overall maximum amount your policy lists for contents coverage. Most policies establish contents coverage as a percentage of the value you have your home structure insured for, yet for many this is not enough and you may need to pay an additional premium to raise your contents maximum.

There’s not enough room for me to cover all the nuances of handling a structural loss. Let me just say that you need to take an honest look at what it would cost to rebuild your home, making note of any special features like expensive custom cabinetry or other premium upgrades. As with your contents, videotape both the inside and outside. Also, if you add additional square footage to your home though an addition or perhaps by finishing your basement, then you need to notify the insurance company and raise your coverage amount. Be sure to check your policy and see exactly how replacement cost is handled for the structure itself.

Most policies will only pay for tree removal if the tree hits and damages your home, automobile, a fence, or other insured structure in your property. I know of people who individually lost hundreds of trees to the recent tornadoes and even though they had topnotch insurance coverage, they will be responsible for clearing and removal of most of their trees. Some reimbursement may be available through FEMA, and the USDA also has a reforestation program that might help. Don’t forget you can also claim some catastrophic losses on your income tax return.

Many of you have seen television public service announcements encouraging homeowners to purchase flood insurance. Flood damage is not covered by your homeowner’s policy. If your home is located in a place where there is the slightest possibility of flooding, even if it’s not shown to be in a flood plain, please get flood coverage.

Also, even though we don’t think of damaging earthquakes occurring in Georgia, there is a fault line not far away in Walker County capable of producing a 7.0 magnitude temblor. Earthquake damage is not covered by the typical home policy, but an earthquake rider can be added for a very small premium.

Finally, take a look at the amount of your deductible. Insurance is there to cover you for what you can’t pay for yourself. If you could come up with the money in the event of a loss, then raise your deductible to $2,000 or more. This will result in a huge drop in your insurance premium. Additionally, insurance companies are likely to discontinue your coverage or jack up your rates if you file multiple claims over a period of time, so having a large deductible means you’ll be less likely to file small claims for trivial things like your son breaking a $200 window pane with his baseball.

I know there are a lot of things in life more fun than spending a few hours reviewing your insurance policies and documenting what you own, but as we’ve seen in recent weeks, your circumstances can be changed in the blink of an eye.

Follow me on Twitter @chuckshiflett and also check out my statewide columns at: The Backroom Report.