How Much Homeowners Insurance Do You Need?

July 10, 2017

When it comes to purchasing homeowners insurance, it can be difficult to narrow down the right amount of coverage. You want to make sure you have enough for your needs, but you also don’t want to end up paying more than you should. Here are a few tips for getting it right.

What you should cover:

  • The structure of your home. It may seem like you should cover the full appraised cost of your property, but that also includes the land your home is on. Rather than covering the land, make sure you’re covering what it would cost to rebuild your home at today’s prices.
  • Your belongings and valuables. In addition to covering the cost of rebuilding your home, you should make sure to cover the cost of your family’s possessions and valuables.

What you shouldn’t cover:

  • The cost of your property including the land. Insuring the cost of the land isn’t necessary since, in the event of a total loss of the structure, the land will still be there to rebuild on.
  • The balance of the mortgage. If you only cover the cost of the mortgage, your home could be underinsured, especially if you’ve paid the mortgage down significantly.

What you should keep in mind:

  • Spend some time researching how much it would cost to rebuild your home. You’ll have a better idea of how much coverage you need for the replacement of your home.
  • Don’t assume you have flood insurance. Most homeowners insurance plans do not include coverage for flooding. You can learn more about what level of coverage you might need by visiting www.FloodSmart.gov.
  • Consider whether you need extra liability or umbrella coverage. You may want to make sure you have extra coverage for situations beyond your regular homeowners insurance. For example, if you have woods, a swimming pool, a water feature or another possible hazard on your property, you want to make sure you’re covered.

The best thing you can do is speak to your insurance representative at least once each year. They can help you decide what changes you need to make to your coverage based on what changes have happened in your life and to your property.