When shopping for homeowners insurance, one of the first questions you will have is how to calculate how much homeowners insurance I need. This is important to ensure that you get enough protection while also making sure you don’t pay for more coverage than you need. There are several components of a home insurance policy, so you will want to consider how much coverage is necessary for each.
Calculating Homeowners Insurance: Dwelling Coverage
The first item to consider, and the item that will make up the majority of your policy, is how much dwelling coverage you need. To determine this, you need to know how much it would cost to rebuild your home if it were completely destroyed. This is not the value that you paid for the home, as that number also included the value of the land, which does not need to be insured. To understand this number, take advantage of online resources that provide estimates for this amount based upon the size, age, address and upgrade status of your home.
Calculating Homeowners Insurance: Home Contents
Another element of your coverage is protection for the contents of your home. This will vary greatly depending on what you would like to cover and its value. It is recommended that you compile a personal inventory of all your belongings that includes photos, a description and an estimated value. Determining the amount of coverage to include on your policy is simply a matter of adding up the replacement value of each item. Of course, over time, as you add items to your home that have significant value, you can revise your personal inventory and increase the amount of coverage accordingly.
Calculating Homeowners Insurance: Liability Coverage
Liability coverage can sometimes slip through the cracks. Most homeowners insurance companies will automatically attach a standard amount of liability coverage based upon the location your home. Liability coverage is to protect you from lawsuit in case someone is hurt or their property is damaged while on your property. A normal amount of coverage will generally be around $250,000, but will depend greatly on where you live and your personal preference. Liability coverage should be increased, and in some cases may be made mandatory by your lender, if you have certain items such as a pool, a trampoline and certain breeds of dogs.
Calculating Homeowners Insurance: Other Structures
You don’t always need coverage for other structures on your property, but it is a good addition to your policy if you have a garage, storage shed or any other structure in addition to your home that is on the property. Again, the amount of coverage you will need here will be based upon the replacement value of the additional structures. The contents of those structures can be included either on the home inventory portion of the policy or added into the coverage for other structures. This will usually depend upon the specific homeowners insurance company’s terms and conditions.
Calculating Homeowners Insurance: Getting Quotes
Your budget is a major consideration when it comes to getting the right amount of coverage. A tight budget may mean cutting back a bit on the overall coverage, such as going with lower estimates on the value of your home, contents and other structures. To help determine just how much coverage you can afford, take advantage of online rate quotes. In only a few minutes, you can get multiple quotes from the best companies in your area. You can change the variables for each component of a prospective policy to find the best balance between homeowners insurance coverage and insurance cost.