Advertising Disclaimer

How Much Homeowners Insurance Should I Carry?

Read Time: 5 mins

Our team is devoted to helping homeowners make the right coverage choices. We adhere to strict editorial guidelines to maintain the accuracy and relevance of our content. This article may feature our affiliate partners who provide us with compensation; however, our reviews remain independently formed. For further details, please refer to our editorial policy.

House in Palm Springs, CA from @codypboard/Unsplash

Homeowners insurance is insurance coverage that offers you financial protection in the event that your home and (to a certain extent) your personal property within are damaged or lost. 

There are several components to understanding if a homeowners insurance policy is meeting your coverage needs, including knowing what your policy does cover versus what it needs to cover. Once you know those details, you can determine if you need to shop for a new plan and/or explore the other types of home insurance that exist.

Compare home insurance quotes
Find cheap rates from the best providers in your area

What Does Homeowners Insurance Cover?

Homeowners insurance covers the cost of replacing or repairing damage and/or loss of your home, up to the monetary limit set in each specific policy. Often, standard policies will cover your home’s replacement in the event of damage or loss from fire, lightning, hail or explosions.

Floods and earthquakes often require their own specific policies in order for your home’s value to be protected.

Homeowners insurance policies also have liability coverage, which comes into play if someone is hurt while on your property during an accident. This prevents you from having to pay out of pocket for resulting medical bills and even lawsuits.

Homeowners insurance also includes personal property coverage, which protects the monetary value of everyday belongings, such as furniture, clothing, technology, and more, up to a certain monetary limit set in the policy.

How Much Coverage Do You Need?

The simple answer to how much coverage should you have is enough to cover the cost of rebuilding your home in the event that it is entirely destroyed. This can be similar to the purchase price of your home, but you need to know the actual replacement cost to figure out your potential insurance premium.

In order to find out this value, you need to know certain things about your home, including:

  • Your home’s square footage
  • Your home’s specific construction costs (which you can request help from an insurance agent about or research online)
  • Your home’s number of rooms

You can use this information to develop three rough estimates in the following ways:

  1. Multiply the construction costs you found with your home’s square footage.
  2. Provide the information to an insurance agent to calculate for you.
  3. Use an online calculator for home replacement costs.

These estimates can help you when comparing different policies that will potentially provide adequate financial protection for your home. Once you’ve gathered more information, you should then find someone to provide you with a professional estimate to use when making your final decisions.

How To Know If You’re Covered?

Your replacement costs can be impacted by a number of factors in your home, so it’s important that you make sure to regularly reassess the current value.

Many different changes over the years in your home will have a significant effect on new estimates’ results. Common factors include:

  • Updated building codes where you live
  • Recently remodeled kitchen in your home
  • New rooms or other structural changes in your home
  • Increasing overall costs of construction, caused by:
    • Rising wages in the industry
    • Inflation of material costs
    • Outdated parts and features in your home that will be hard to source

What Other Kinds of Coverage Should You Have?

As previously discussed, there are limits to what damage and loss homeowners insurance will cover. That also applies to your liability and personal property coverage, so there are multiple kinds of additional insurance that you should consider based on your individual needs.

Standard homeowners insurance policies will cover at least $100,000 worth of liability coverage, but it is often recommended that you have three to five times that amount of coverage to be adequately protected from the financial costs of having an accident occur on your property. This amount of coverage can be gotten from an umbrella policy.

This kind of policy is something dog owners should look into because insurance companies will sometimes have specific dog breeds they will not cover. Umbrella insurance would keep you from being exposed to financial loss if someone is hurt by your dog.

If you have expensive items like fine jewelry, high-fashion items, or costly technological equipment or musical instruments, you should catalog what you have and how much its worth. From there, an insurance agent can help you determine if valuable items insurance coverage is a  good option for you.

Another common type of insurance that homeowners can get is an Additional Living Expenses (ALE) policy. Although your standard homeowners insurance will cover the cost of rebuilding your home, it won’t cover the financial burden you’ll have from not having a suitable place to live. 

ALE will allow you to have money to pay the cost of finding a place to stay and meals you eat while your homeowners policy’s coverage goes towards the rebuilding process.

This type of policy is definitely one to consider as you shop around and compare what home insurance policies you should get to protect you and your family. For each type of policy, make sure to compare what’s offered from as many insurers in your area as you can.

Get Cheap Home Insurance
Compare quotes from the top insurance companies in your area to find the cheapest plan
Notice an error or discrepancy?
Despite our rigorous fact-checking process, we recognize that errors can sometimes occur, as we are only human. If you discover any inaccuracies, oversights, or outdated information within this post, please bring it to our attention. Your input is highly appreciated and instrumental in maintaining the accuracy of our content. Contact us here.

Leave a Comment

Thank You for Visiting HOIC