Purchasing homeowners insurance is an important way to protect what you love. Your home is one of your biggest assets. As you're looking to buy homeowners insurance and comparing policies to find the best, most affordable coverage, it's important to understand how much coverage you need.
It can sometimes be a challenge to know how much insurance you need. You don't want to be overpaying for insurance and losing money each month, but you also don't want to be underinsured as payments to cover damage and losses can add up fast.
But, don't worry. This guide breaks down how much insurance is right to protect you and your home, and how to find the best coverage.
Homeowners insurance is a basic way to protect your home, which is often one of your biggest assets. It is coverage from any financial losses, property theft, or damage to your home. It also protects you from lawsuits and other liability claims in the event of injury or accidents that take place inside your home.
Homeowners insurance is not required by the state. If you have a mortgage loan, your lender may require you to have homeowners insurance until you pay off the loan. However, homeowners insurance is a good idea for anyone, even if you've paid off your mortgage and own your home completely.
Similar to car insurance, you pay for the deductible, filing fee, and any expenses once your policy's limit has been exceeded. Your home insurance company will pay the rest. Typical homeowner's policies include three types of coverage, plus some coverage you can add. These three parts of homeowners insurance dictate how much coverage you need, so it's good to be familiar with them.
In the event of a disaster to your home or your possessions, homeowners insurance protects you. But how much do you need? Let's break down how much homeowners insurance you need by the three main types of coverage.
Whether you have a standard homeowners policy plan or added coverage for hurricanes or flooding, your insurance policy is enough to completely cover your asset. In other words, your insurance limit needs to be able to cover the cost of rebuilding your home.
It's important to note here that the cost to rebuild may not be equal to what you paid for your home. As the market changes, so does the current market price of your home, so let's review some factors that affect the cost to rebuild your home.
The second aspect of homeowners insurance to consider when calculating the amount of coverage you need is personal property. Most insurance policies will automatically add 50-70% of the coverage from the structure of your home to your personal belonging coverage, but you may want more than this. Here are some guidelines to help you calculate how much coverage you need for your personal property.
Keep a detailed account of your possessions. The best way to learn how much coverage you need for personal property is to keep a detailed account of the items you want to be covered. For example, if you want your electronic devices, artwork, jewelry, furniture, and clothing to be covered in the event of theft or damage, make a list of how much each item is worth.
By knowing how many possessions you have and what they're collectively worth, you can figure out how much coverage you'll need for them!
The last aspect of homeowners insurance that affects how much you need is personal liability. This part covers any liability claims against you in the event that a guest or visitor gets injured on your property or in your home.
The same rule can be applied here. You need enough liability to cover your assets. This means the amount of liability insurance you have should meet or exceed the cost of your home. There is typically a minimum of $100,000 of liability coverage. If you do need to exceed this amount, you can add more.
When deciding how much coverage you need to protect your home, it's also a good idea to note some other factors that may influence how much insurance you need.
Understanding how much homeowners insurance you need to protect yourself and your assets can make all the difference in the event of a disaster or damage to your home. We never know what's going to happen, so it's always best to be prepared.
Count up the cost of rebuilding your home, your possessions and objects you want covered, and how much liability insurance to make sure your assets are covered in the worst-case scenario.
If you're paying too much for homeowners insurance, check out these resources to find out how to lower your payments and save money.
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