How Much Homeowners Insurance Do I Need? 

by COUNTRY Financial

When you bought your home and signed your mortgage, you likely made one of the most significant financial investments of your life. Naturally, you want to make sure you have the right amount of home insurance to protect your investment. 

But did you know that home insurance isn't just about protecting your home itself? It also includes your personal belongings, liability insurance and other structures on your property.

So, how do you determine how much home insurance you need? Here are key factors to consider.  

What would it cost to rebuild your home?  

Your home value is the main factor in determining the amount of home insurance coverage you need. Home value doesn't mean what you probably think it does; it's the cost to rebuild your home if it were destroyed.

Of course, in order to know what it'll cost to rebuild, you have to determine how much its materials and design are worth now. Here's what to consider:

• Overall style: You should know your home's main design style—Victorian, Modern, Adobe etc.
• Design and features: Consider whether you home has any unique or special features, antique or vintage accents and the like.
• Changes you've made: Replaced that old carpet with hardwood? Installed granite countertops? These things add value, and should be factored in to your valuation.
• Building materials: This is probably the most important aspect to consider. If you don't already know, find out what your home's bones are made of, what materials clad the interior and what type of roof you have. Then, look at the cost of those of these items. 

Also, because these building costs can change, be sure to schedule an annual insurance review with your insurance agent. Discuss your settlement options, actual cash value vs replacement cost coverage, to be sure you know how your home insurance would work if you had a claim. Keeping your home insurance coverage current will help make sure you have the coverage you need if you have a home insurance claim.  

Where do you live? 

Some areas are more prone to natural disasters such as floods and earthquakes, which can cause significant damage to your home. While wind, storms and other weather and disaster-related events are usually covered by standard home insurance, you may need to buy more insurance coverage to protect your home against floods and earthquakes.  

Talk to your insurance agent about adding earthquake protection or buying a separate flood insurance policy for your home.  

What would it cost to replace your belongings? 

If every item in your home were destroyed, what would it cost to replace them? That's where personal property coverage comes in. It helps reimburse the cost of personal belongings that are damaged or destroyed by a covered event.

Personal property includes items like furniture, clothing, electronics and more, and the their value can really add up. Make sure your personal property coverage limits align with the full value of your belongings.

Complete a home inventory of your possessions to help decide how much home insurance coverage you need. Keep that inventory up to date so, if something happens to your home, you can have a record of what was in your home. 

If you have high-value items like jewelry, antiques or collections, you may need more personal property coverage than what’s available in your standard home insurance policy. Work with your insurance agent to identify those high-value items for added protection, known as scheduled personal property. While home insurance may not be able to replace all heirlooms or collectables, having the added protection can ensure you’re financially compensated to acquire items of equal value.  

How much liability insurance do I need?  

If someone is injured on your property or you cause an injury, you need liability insurance protection. You could be responsible for their medical expenses and other damages, and they could file a lawsuit against you.  

Without liability insurance, those medical and legal costs could come from your personal assets including your home, retirement accounts and even your kids’ college funds.  

Talk with your insurance agent to figure out what level of liability coverage you need to protect your finances. You may even need the added liability protection of an Umbrella insurance policy.  

Do I need other structures coverage?

Other structures coverage, also called auxiliary private structures coverage, provides insurance protection for additional structures on your property that are physically separate from your main home. Examples of other structures include detached garages, sheds, barns or stables and even children's play structures.

Standard home insurance policies only include limited protection for these other structures, so if you have them on your property, you should look into other structures coverage.

Note that this coverage is imperative if you live in an area prone to extreme weather. Without it, you could be fully-responsible for damages caused by, say, a tornado.

Do I need additional living expenses coverage?

If your home is uninhabitable after some disaster—natural or otherwise—you may need to stay somewhere else while it's repaired. In this case, additional living expenses coverage can help pay for your essential necesseties while you do.

This coverage is something to consider if you live in disaster-prone area. The amount of coverage you'll receive is calculated from a certain percentage of your dwelling coverage.

What other insurance do I need if I own a home? 

When you sign your mortgage, you take on a significant financial responsibility. You may want to add life insurance to the agenda when you meet with your insurance agent. If something were to happen to you or your spouse/partner, would you be able to make your mortgage payments?  

With life insurance, you can reduce the financial pressures on your family if the unthinkable happens. Start with our life insurance calculator to figure out how much life insurance you may need, and then talk with your agent to find the right mix of types of life insurance to meet your needs and your budget.  

Get the right amount of home insurance protection 

With the right amount of home insurance protection, you can have peace of mind knowing you're adequately protected if your home and possessions are damaged or destroyed by a covered loss.  

Meet with your insurance agent regularly to review the amount of home insurance coverage you have to make sure your coverage keeps pace with building cost and inflation.  

Updated 12-13-24