Before a storm like Hurricane Sandy, not afterwards, is the time to ask the 
question, “Is my Gulf Shores home properly insured?”
Just as there are different home styles, insurers offer a menu of different policies. For the majority of single-family Gulf Shores homeowners, the most appropriate policy is the HO-3, sometimes called the special policy. It insures all major perils, except flood, earthquake, war, and nuclear accident.
For flood damage like that suffered by many homeowners at the hand of Hurricane Sandy, special flood coverage is needed. Floods aren’t covered by ordinary homeowners insurance. Flood insurance is available through the Federal Emergency Management Agency. You may need earthquake coverage; check with your insurer.
You’ll need deep coverage, up to and including 100% of your Gulf Shores home replacement cost. By insuring at, say, 90%, you’re making the reasonable bet that your home won’t ever be a complete loss. That may be a reasonable bet, but if you want to play it safe, insure at 100%.
Insure your Gulf Shores home for its replacement cost — that is, the amount it would cost to rebuild it if it were totally destroyed. That means determining the average local building cost in your region, and applying it to your home’s size, style, and quality of construction.
Your best resource for this is a builder. For a flat fee, you may be able to have a local contractor go through your Gulf Shores home and provide an estimate. Try to find someone who builds individual, custom homes that doesn’t benefit from the economies of scale that tract homes offer.
Traditional guaranteed replacement cost coverage promises to pay whatever it takes to rebuild your home, even if it costs more than the original limits you purchased. That’s crucial in the event that labor and building costs balloon after a major disaster like Sandy. In many states, large insurers now cap the guarantee at 120% to 125% of purchased limits.
Your safest bet is to seek a company with no cap. However, if you’ve properly valued your home’s replacement cost, the caps shouldn’t scare you. It’s unlikely that building and labor costs will go up to more than 120% of your home’s insured value.
You’ll be most satisfied with your settlement if you know in advance what’s covered. That means eyeballing your policy now. Pay particular attention to the exclusions section, which as the name implies, outlines what’s not covered.
Check out the declarations page, which outlines the limits of your coverage. Coverage D of the homeowners policy, for instance, outlines how much an insurer will cover if you have to relocate temporarily. Does your insurer pay up to 10% of your home’s insured value, or offer to pay “reasonable” expenses over 12 to 24 months?
Finally, update your policies regularly. Inform your insurer of improvements and additions to your Gulf Shores home — including redecoration — of $5,000 or more.
We hope you never have to file a homeowner’s insurance claim, but hopefully this article will help you prepare yourself ahead of the next storm.