When you have an automobile accident, the repair shop is required to restore your vehicle to original condition. That means using Original Equipment Manufacturer (OEM) parts, not after market or junkyard parts. It means straightening the frame to the original dimensions, down to the millimeter. It also means refinishing the vehicle with the same paint and layers of clear-coat finish used by the manufacturer. Your wrecked car is supposed to be "as good as new." Could the same be said for your house, should it be destroyed? Would your homeowners insurance pay to rebuild it exactly as it stands today?

Probably not, reports Marshall & Swift/Boeckh, a company that provides the insurance industry with data about home values. According to the company's annual study, nearly 60 percent of single-family homes are not insured for their actual replacement value. On average, these homes are insured for 20 percent less than the replacement cost. That means owners of a home that would cost $300,000 to rebuild might receive as little as $240,000 toward construction costs. With a $60,000 shortfall, the home cannot be restored to original condition. The home will have to be built smaller or the contractors would have to use cheaper materials.

There are several reasons for the insurance shortfall. To avoid higher premiums, many homeowners do not increase their insurance amounts to adjust for inflation. The longer a person owns a home, the further away from actual replacement costs their insurance becomes. Sometimes the building codes for an area change, requiring costly upgrades in design and materials when a home is rebuilt. The home improvement craze has also widened the insurance gap. Many homeowners add a room, upgrade a kitchen or bath, retrofit doors and windows, install new heating and cooling, or even purchase solar energy systems without factoring in the replacement costs for insurance purposes.

Some upgrades are covered by the "extended replacement cost" that some insurance companies offer their customers. The extended replacement cost provides as much as 20 percent more money for rebuilding than the amount stated in the homeowners insurance policy. The Marshall & Swift/Boeckh study includes this coverage in its under insurance estimates.

Homeowners who have been in their homes for three years or more should revisit their home owner's insurance policies. They should check to see if they have extended replacement cost coverage. If they have made upgrades, they should inform their insurance agents. They also should ask for an analysis of their homes' actual replacement costs. Many insurance companies offer this service for free. Replacement cost calculators are available on the Internet for a small fee. Adjusting insurance upward will cost more in the short run, but it would be well worth it should your home be "totaled" by a natural disaster, fire, or other catastrophe.