How Much Home Insurance Do You Need? | The Policy Center Inc.

Your home's structure or dwelling is the biggest component of your home insurance coverage. Ideally, your home insurance limit should be enough to rebuild your home in case of total damage. Thus, you should know the property's rebuilding cost home and use the cost as the basis for your home insurance coverage.

Note that your home's value and rebuilding cost are not the same. A property's value includes some things, such as the land's value, that are not part of the rebuilding cost. To determine the rebuilding cost, consider things like:

• The construction materials
• The local construction labor costs
• The architectural style of the structure
• The home's square footage

Note that construction costs change with time. Thus, you should allow room for appreciation in your rebuilding estimate.

In addition to protecting your dwelling, your home insurance also protects your home contents or personal belongings. Personal belongings include things like:

• Clothes
• Appliances
•  Electronics
• Furniture
• Jewelry

Your personal belongings coverage should be just enough to replace your valuables. For example, you don't need much coverage for your personal belongings if you have a fairly big house, but most of the rooms are empty.

Many people buy things bit by bit, so they might not be aware of the value of their personal belongings. Your personal belongings might be more valuable than you think if you have lived on your own for a long time. Take an inventory of your personal belongings and adjust your insurance limit accordingly.

Your home insurance coverage should be proportional to the risks your property faces. Since location affects the risks your home faces, it directly determines your coverage limits too.

Your home's location is critical because:

• It determines the likelihood of theft. For example, you are more likely to lose your valuables to criminals in a high-crime neighborhood than in a low-crime neighborhood.
• It determines the type and frequency of natural disasters your home faces. For example, some areas experience more wildfires than other areas.
• It determines how home insurance companies have classified your risks. For example, insurance companies classify neighborhoods that experience numerous claims are as high risk.

Evaluate other risks in your area and adjust your insurance to cover them.

Home insurance also includes liability coverage, which comes to your rescue if someone blames you for their injuries or property damage. For example, the coverage may cover legal and compensation costs in case your dog bites someone.

Evaluate your liability exposure to determine how much liability coverage you need. For example, you should increase your liability coverage if:

• You have pets that might harm others
• You frequently entertain visitors since they might suffer injuries on your property  
• You have valuable assets you might lose in a liability claim

An insurance agent can help you evaluate your exposure to liability claims.

Lastly, you should know that home insurance doesn't cover everything. For example, standard coverage typically excludes flood coverage. You should also know that home insurance have sub-limits for high-value items, such as jewelry. Use endorsements or riders to cover such exclusions or to raise the coverage sub-limits.

The above are some of the basic factors to include in your coverage assessment. However, your exact coverage will depend on your circumstances and needs. The Policy Center Inc. can help you evaluate and buy the coverage you need. Contact us