How Much Homeowners Insurance Do I Need?

It seems that buying enough homeowners insurance should be a fairly straightforward matter. You simply pick an amount large enough to rebuild your house and replace the contents it held in case of total loss. But, the question of how much is enough is not an easy one to answer.

When considering how much homeowners insurance you should buy you do need to factor in the cost of the structure of your house and your possessions inside the home. But, you also need to consider the cost of additional living expenses if you need to live somewhere else while your home is repaired as well as your liability to others in case an accident happens in your home.

As far as the home structure is concerned this doesn’t include the land your home is on, only the home itself. Also, you need to be sure your are insured for current construction costs to rebuild your home and not just the price you paid for your house or even what you could sell it for today. These amounts can vary by large degrees and so you want to make sure you have enough for the construction costs. Factors that can determine the cost of rebuilding your home include the following:

• Local construction costs
   
• The square footage of the structure
   
• The type of exterior wall construction–frame, masonry (brick or stone) or veneer
   
• The style of the house (ranch, colonial)
   
• The number of bathrooms and other rooms
   
• The type of roof and materials used
   
• Other structures on the premises such as garages, sheds
   
• Fireplaces, exterior trim and other special features like arched windows
   
• Whether the house, or parts of it like the kitchen, was custom built
   
• Improvement to your home–adding a second bathroom, enlarging the kitchen or other additions that have added value to your home

To figure out a relatively good estimate of the amount of insurance you would need to cover your home’s structure you should multiply the square footage of your home by local building costs per square foot. If you are unsure of the construction costs in your community try to contact a local real estate agent, builders association or insurance agent in your area for the answer.

As for your personal possessions, most homeowners insurance policies provide coverage for approximately 50% - 70% of the amount of insurance you have on the structure of your home. To find out if this coverage is enough you’ll have to perform a home inventory where you make a list of everything you own and the cost of replacing the items if they were lost to theft or disaster. If you think you need more coverage, you can contact your agent or insurance company representative and ask for higher limits for your personal possessions.


Finally, you have part of your policy that protects you from lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by pets. It pays for both the cost of defending you in court and for any damages a court rules you must pay. Generally, most homeowners insurance policies provide a minimum of $100,000 worth of liability insurance, but higher amounts are available if you feel you need them.

Considering these three major expenses should help you figure out how much homeowners insurance coverage you will need in your policy. But, if you have any questions talk to your agent to make sure you have the appropriate coverage.