One of the worst mistakes you can make is to base your home's insurance value on its market value. The numbers are completely different. You need just enough insurance to rebuild your home if it is ruined, which can be a lot less than its current market value. You can not reduce your insurance coverage just because you think your home's market value has gone down, either.

"Construction costs and labor rates have not gone down," said Arthur Slade of the D.C. Department of Insurance, Securities and Banking.

Insurers used to dole out whatever it would cost to rebuild your house, but now most will limit coverage to 120 to 130 percent of the value. When you take out a home owner insurance policy, insurers will definitely ask a bunch of questions, or possible send an agent or appraiser to your house to determine the coverage amount. But it's then up to you to adjust your limits if you make some major home improvements down the road.

It can cost a little less than $50 a year to beef up your coverage by many thousands of dollars, if you it turns out you need it. You can get a detailed report with your house's replacement cost estimate for around $7.95 which uses the similar building-cost database that insurers use.

Fill coverage gaps

Most home owners insurance policy exclude a few key risks that could end up costing thousands of dollars in expenses if you decide to file a claim. Most insurers will no longer stand behind sewage backups in their policies, which can be a common and extremely expensive claim. But you can add $10,000 to $20,000 in sewage backup coverage for around $50 a year, which will pay for the damage and cleanup in the event a sewage line should back up or a sump pump quites working and water comes pouring into your home.

Getting building ordinance coverage is also valuable for the older homes. A home owners insurance policy will generally pay to replace your house as it is but doesn't necessarily cover the additional costs to make the home comply with any new building codes, unless of course you have this coverage.

Make sure your home owners insurance policy provides "replacement coverage" for your furnishings and other things rather than "actual cash value" coverage, which only pays for the depreciated, thrift-shop cost of the old stuff.

Most insurance policies also limit coverage for items such as jewelry, antiques, silver, artwork and collections ,but you can usually add additional coverage for about $10 per $1,000 in coverage for jewelry and $1.50 per $1,000 for other valuables, said John Sanderson, an independent agent home owners insurance policy agent.

Consider flood coverage

Customary homeowners policies will typically cover the damage that comes from the top down -- such as wind and rain damage -- but do not include damage from flooding. This became a big issue after Hurricane Isabel in 2003, when many claims were denied as flood damage.

You can buy always flood insurance through the National Flood Insurance Program. This is a good time to take action; there's a 30-day waiting period before flood coverage takes effect.