You need home insurance coverage to protect both your home and your personal property. But home insurance can be expensive, and you don’t want to purchase more coverage than you need. So how much home insurance coverage do you really need?
Protect Your Property
A typical homeowners insurance policy covers your home and your personal property against loss or damage by fire, theft, vandalism, and other causes. It includes:
* Your home, other structures on your property (such as a shed), and outdoor items such as trees, lawn furniture, and sprinkler systems.
* Personal property, such as clothing, furniture, electronics, and appliances.
For your home, you need enough insurance to cover the cost of rebuilding your it at current construction costs.
To estimate this cost, multiply the square footage of your home by the building cost per square foot in your community. Then add in the cost of replacing any special features in your home, such as custom windows, arched doors, granite countertops, and crown molding. Do not include the cost of your land as you figure out your coverage limit.
To decide how much coverage you need for personal property, you need to do a home inventory, listing everything you own and how much it would cost to replace these items. Most policies automatically set coverage for personal property at 50% to 70% of your home insurance amount, but you can increase it if necessary.
Some types of personal property are only covered up to a specified amount. For example, jewelry may only be covered up to $1,000. Ask your insurance professional what types of personal property have specific limits so you can buy more coverage for these items if you need it.
Your homeowners policy also includes liability coverage, which protects you if someone is injured while on your property. Most homeowners insurance policies provide $100,000 worth of liability insurance, but you can buy more. You should buy enough liability insurance to protect your assets.