5 free ways to prep your home for disaster

An unusually dry winter in California could mean a fierce wildfire season, and in other regions across the country, tornadoes and hurricanes are known to peak during the warmer months. This means now is a prudent time to review your homeowners insurance coverage and assess if it will meet your needs should disaster strike.

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In California, state officials are warning residents to be prepared, and so is the Insurance Information Network of California (IINC), which suggests five cost-free steps to protect your home.

"In today's economy, everyone has to make some tough cuts," said Candysse Miller, IINC executive director, in a statement. "But you don't have to spend a fortune -- or in some cases, anything -- to help guard your household against loss."

The IINC notes that the advice is important for homeowners and renters across the country, and is especially relevant for those in natural disaster danger zones. Hurricane season hits the Gulf of Mexico and Eastern Seaboard states beginning in June, and tornadoes are always a threat to much of America's heartland, especially during the spring and summer.

The IINC recommends these "freebie fixes":

1. Create a home inventory. This will let you identify and account for items covered by your insurance policy. To help, the IINC provides free home inventory software for a computer and a free smartphone app. If you'd rather do it the old-fashioned way, try the pencil- and-paper version.
2. Organize financial documents. Put all important papers in a "grab-n-go" box in case of evacuation. If possible, keep copies in a safe-deposit box or with a family member living elsewhere.
3. Create an insurer emergency contact list. Having policy details accessible in the early days of a disaster can smooth the claims process. Entering insurance contacts and policy information into your smartphone or creating a wallet-size hard copy using IINC's Insurance 411 can help.
4. Plan and practice evacuation. Identify who is responsible for gathering various items, including financial documents, clothes, prescription drugs and irreplaceable valuables. Practice your plan periodically and revise it if necessary.
5. Evaluate and update your homeowners insurance policy. Although changes in a homeowners insurance policy may come with costs, it's free to sit down with an agent and review coverage.

Recent disasters underscore the need to review homeowners insurance

There have been several natural catastrophes recently, leaving broad swaths of destruction. Hurricane Irene, which tore through the East Coast in August, is caused between $2 billion and $4.5 billion in insured losses in the U.S, according to catastrophe risk modeler Risk Modeler Solutions.

And the figures from the deadly tornadoes that killed 116 and destroyed almost one-third of Joplin, Mo., in May are telling. According to the Missouri Department of Insurance (MDI), claim payouts for residential, auto and commercial damage have exceeded $1 billion and continue to grow. John M. Huff, MDI's director, says the amount could reach $2 billion (including those for home and commercial property, by far the greatest damage segments) once every claim is processed.

With that in mind, it may be a good time to review what homeowners insurance firms offer in home replacement coverage. The information comes from the Insurance Information Institute (III) and Lisa Lobo, a vice president for product management at The Hartford.

• Replacement cost coverage: This covers the reconstruction cost amount stated in the policy.. But there can be a big difference between that figure and the final amount it costs to actually rebuild your home. For example, your policy may cover $100,000 for reconstruction, but the actual costs could come to $150,000. Lobo and the III caution that you might not have enough money to rebuild if you try to save on premiums by buying a basic replacement cost policy without more complete replacement coverage.
• Extended replacement cost coverage: Typically, this is the option offered to homeowners who want to protect against inflation, increased building costs or any other unforeseen charges. Lobo says that extended replacement usually pays 25 percent above the cost stated in the policy.
• Guaranteed replacement cost coverage: This policy would pay to rebuild your home regardless of cost, without any percentage ceiling. However, insurers are increasingly dropping this option and instead offering extended replacement cost coverage as the added protection option, according to the III. In most cases, guaranteed replacement, as with extended, could increase your yearly premium by anywhere from 2 percent to 5 percent, says the III.