There are always restrictions to a homeowner's policy. The reason for the damage is usually the top reason that payments are reduced or rejected. But even when everything else is fine and the terms of the policy are met by the situation then the amount of payout can still be less than the value of the home.

One of the biggest reasons this occurs is the lack of coverage. Many homeowners simply renew insurance policies each year without reviewing coverage amounts. A home that was bought 10 or 20 years ago will have increased in value. If the policy is not changed to match that increase then the home is not covered adequately.

The best way to avoid this situation is to meet with your insurance agent each year to go over your homeowner's policy. Talk about improvements made in or on the home and any other factors that might need to be reflected in the policy.

You should also talk about replacement cost verses extended replacement costs. Regular replacement will cover the replacement of your property (up to the limit in the policy). Extended replacement offers a cushion for costs that may have risen - like building materials.

Getting the coverage that you need will require that you take some time to review your homeowner's policy on a regular basis. At the anniversary of the policy, after a renovation on the home or after a major addition are all appropriate times for review.