How Much Homeowners Insurance to Purchase
A looming question is how much homeowners insurance to purchase. This can be a major roadblock for many first time home buyers. While your lender and prospective homeowners insurance companies will have recommendations, you need to make an informed decision on your own as it can profoundly affect your budget.
Homeowners Insurance Coverage for the Structure of Your Home
The structure of the home is the major part of your homeowners insurance coverage. It is where you and your family live. It is where you store your most precious and expensive personal belongings outside of vehicles. Therefore, the coverage you get should provide adequate financial protection. It also requires you not to go overboard. This means an accurate evaluation of how much it will cost to rebuild your home. A simple calculation in which the square footage of your home is multiplied by the average cost to rebuild, in your area, per square foot. Remember that the value of the land should not be included in this calculation. Also remember to consider inflationary factors. Of course, if the housing market is stagnant or drooping, don’t go to high; you can increase the coverage limits of your home any time you wish.
Homeowners Insurance for the Contents of Your Home
Determining how much coverage you need for the contents of your home is simple but tedious. It will involve an inventory of your personal belongings stored in the home that you want insured. Make a list of each item (include a receipt if possible) with an exact or estimated value. It is also a good idea to take a picture of each item as well. Add up the cost to replace all items and you have the amount of coverage you should purchase. Remember to inform your homeowners insurance company if you add a valuable item to the list.
Homeowners Insurance for Separate Property Structures
As a default, most homeowners insurance policies will contain a certain amount of coverage for other structures on the property such as workshops and unattached garages. In many cases it is necessary to have insurance for these structures and the contents of those structures, but just because you have a building on the property, doesn’t mean that you must insure it. If all you have is a storage shed with a few rather inexpensive items inside, it is probably not worth including on your policy. On the other hand, if you do want to insure these structures, then follow the same steps as you did when estimating the value for your home and the contents inside the home.
Liability Coverage with Homeowners Insurance
Liability coverage is often overlooked by those shopping for homeowners insurance. You will need a certain amount to protect you from legal liability (lawsuits). If someone comes on your property and is hurt or if there property is damaged, you may be held responsible. The liability portion of your homeowners insurance policy will provide coverage for this. Depending upon where you live and other factors, you will want to have anywhere from $100,000 to $500,000 worth of coverage. Things such as a swimming pool, a trampoline or a pit bull may make it worth having the higher amount of coverage.
Using Homeowners Insurance Quotes
Homeowners insurance quotes can help you decide on the level of coverage you can afford. Be careful not to sacrifice the coverage you need for lower premiums; however, once you meet your baseline needs, you can then use the quotes to decide what add-ons or increased monetary limits could be beneficial without breaking your budget. Quotes are a simple way to help you choose your insurance provider. Rates vary greatly, so getting at least 5 quotes will put you in a position to find the cheapest homeowners insurance rate from a reputable insurer.