San Francisco ? If home is where the heart is — not to mention a major portion of your investment portfolio — you should be actively protecting that vital organ.

Instead, most homeowners put a review of their home-insurance policy about as high on the to-do list as reading credit-card agreement policies.

The recent rise in home values, inflation and even new building codes can leave the biggest purchase of a lifetime insufficiently protected in the event of a fire, flood or other disaster.

“It’s a financial asset and they need to pay attention to their homeowners insurance just as they would any other financial asset,” said P.J. Crowley, vice president of the Insurance Information Institute, an industry-funded research association.

“You have to make sure that as the value of your home rises and the cost of construction rises with it, the insurance coverage keeps pace. People think ‘I’m covered.’ Yes, you are, up until the policy limits you have purchased,” he said.

It’s not only market forces that affect how much insurance coverage you need. Any home improvements or new possessions, such as jewelry or collectibles, could mean you need a higher policy limit to cover your replacement costs.

‘Replacement’ misperceptions

Insufficient coverage is often the result of a common misperception: Homeowners, seeing the words “replacement cost” in their policy, think their house will be replaced no matter what.

However, unless you buy added protection, you only will be reimbursed for replacement costs up to the limits of your policy — and if you have not upped the coverage recently, that could leave you footing some of the bill yourself.

“They hear that their policy provides replacement cost coverage, and many standard policies do provide it, but it’s replacement cost within the policy limits,” said Michelle Kenney, a senior director at Fireman’s Fund Insurance Co.

Ideally, “you want to have replacement costs beyond the policy limits,” she said. While some insurers have stopped offering guaranteed replacement-cost coverage, which pays for the rebuilding of a house no matter what it costs, most still offer “extended” replacement cost coverage, which goes beyond the policy limits but up to a cap, usually about 120 percent of the limits.

“If you had it insured for $100,000 and the house burns to the ground and it costs $115,000” you are covered, said Mike McCartin, a partner with Joseph W. McCartin Insurance in College Park, Md. “But if it took $200,000 to replace it, you’ve got a problem.”

“I think a lot of the people that have these caps would be surprised how much they’re underinsured,” McCartin said. The solution, with a 120 percent extended-coverage policy, is to ascertain what the replacement cost of your house would be, and to make sure you are covered to at least 80 percent of your home’s replacement cost.

Items to consider

The following are additional questions to consider when reviewing your policy.

Has your insurance agent accurately assessed the replacement cost of your home? Homeowners’ policies are based on the replacement-cost value of your home, not the market value. Your insurance agent can assess your home’s replacement cost with the aid of a computer program. However, some people might want to consider hiring an appraiser.

“Estimating the value of your home is not an exact science. Most of the appraisal systems that are used are at best ballpark figures,” said Bill Wilson, a director with the Independent Insurance Agents and Brokers of America. “If you’ve got a home worth $150,000 to $200,000, it’s worth several hundred bucks to get an appraisal.”

Does your policy offer automatic inflation protection? Inflation protection is not a given in homeowners insurance policies, so consumers should confirm they have this added protection.

“That’ll keep your home automatically up-to-date with increased construction costs,” Wilson said.

Does your older home need building-code coverage? If the state or local codes have changed since your house was built, you will have to incorporate those changes into new construction.

“In many instances, you can’t put the house back to the way it was,” Kenney said, noting, for example, that California requires sprinklers in new houses. “There’s a specific coverage that you can have. It’s usually called building-code or law-and-ordinance coverage.”

Do you need additional disaster or personal-liability coverage? Most homeowners’ policies do not cover floods, earthquakes or other natural disasters, so homeowners might want to consider purchasing additional protection. Homeowners interested in upping their personal-liability coverage on both home and car should consider an umbrella policy, which offers a lot of insurance bang for the buck. Generally, umbrella policies cost $150 to $200 annually, for usually $2 million in additional coverage. McCartin particularly recommends it to households with teenage drivers.