A 5-Step Guide To Choosing Home Insurance Coverage Amounts

Insurance Blog

Do you know how much home insurance you need? Most homeowners know that they need homeowner's insurance, but they aren't sure how much coverage they should buy. Having coverage amounts too low results in being underinsured in the event of an emergency, while limits that are too high wastes money. How can you figure out the right amounts? Here's a short guide to home insurance.

1. Start With the Dwelling. The central part of most homeowners insurance plans is the dwelling itself. Not only is this one of the largest parts of the coverage, but it can also serve as a basis for other elements of coverage. The dwelling should be insured not just for its value on the real estate market, but at what it would cost to replace it entirely, from scratch.

2. Add Overage for Structures. Most properties have at least a few outside structures beyond the home. This may include fencing, a shed, a detached garage, a barn, patio and entertainment structures, and carports. Consider the replacement cost of these for additional structures coverage. However, an easy rule of thumb is to estimate at least 10% of the dwelling coverage. 

3. Use a Percentage for Personal Property. Your household goods — the detached items in your home and car — are covered separately from the dwelling. These are hard to value precisely and individually, so a percentage of the dwelling coverage is also typically used. Most homeowners need at least an additional 50% of the dwelling coverage limit. But as you analyze what you own, you may find that you need up to 70% instead.

4. Choose High Liability Limits. Don't skimp on coverage for liability for injuries and accidents on your property. While you may not see a scenario where you might need $1,000,000 coverage for an injury in your home, medical costs and property losses add up quickly. And you don't want to be on the wrong end of a costly lawsuit because you carried only the minimum.

5. Assess Special Situations. Once you've covered the primary coverages, think about what special items or situations you may have that should be addressed. Do you have one item of particularly large value? Add a rider to increase its targeted coverage. Run a home business? Find out whether you need commercial coverage. Face possible flooding? Add flood coverage in a separate policy.

Using these simple guidelines and recommendations, you can estimate your insurance needs no matter whether you have a large home or a small one. Want to know more about suggested coverage amounts or special considerations you may have? Start by consulting with an experienced home insurance agent in your state today. 

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21 July 2021

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About a year ago, I started thinking more seriously about choosing different insurance. I was focusing on all of the different aspects of insurance, and it was really interesting to me to see how much I could save by switching services. It was a lot to process, but before I knew it, I was able to completely overhaul my insurance coverage, and it made a tremendous amount of difference for me. This blog is here to help other people to know what to look for in insurance coverage so that they can enjoy a happier tomorrow. Check out this blog for more information.