How much Homeowner’s Insurance do you need?

The loss of a home can be devastating for the family and can seriously affect every member’s life and future. Homeowners depend on insurance to help them recover from damage or loss of a home. However, according to Consumer Reports, three out of every five Americans have underinsured their homes, often by up to 20%.

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That leaves them in dire straits when they file their insurance claims and find that they do not have the coverage they need to rebuild their homes and their lives. There are four main factors to keep in mind when calculating your home insurance coverage:

v  The cost of rebuilding your home

v  The cost of replacing personal property

v  Liability coverage

v  Coverage to take care of your living costs till you can return home

Rebuilding your home

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The cost of rebuilding your home will not be the same as the original amount you paid. Increases in material and labor costs, changes in building codes and the value of improvements and renovations you have made over time are a few of the factors that impact on the cost of rebuilding.

Replacing personal property

Assessing the true value of all the belongings you have collected over the years is rather difficult. Some items you think have little value may be worth far more than you may imagine, and vice versa. The only way to know how much coverage you need is to take a complete inventory of everything in your home, and check on the current prices of each.

Then remove those items that you need no longer. What remain would be what you will have to replace; their cost would be the amount of personal property coverage you need, which has limits; expensive items like jewelry, high-end electronics, etc. may require you to take out additional coverage.

Liability coverage

You could be liable for any injury that occurs on your property. Even your best friend could sue you if he faces huge medical bills because of a fall in your home. Most homeowner’s insurance policies cover liability, but often the amount is not enough. In general, you should have at least $300,000 coverage; one of $500,000 would be better.

Living costs

How long will you be away from your home – from the day you move out to the day you return? What would be the additional expenses you will incur during that period – temporary accommodation, food, transport and so on? That is the amount of coverage you need for living costs; if your policy does not cover this aspect, ask the insurance company how you can get this coverage.

Expert advice is essential

Each of the factors listed above does affect the amount of coverage you should have. It is indeed complex and getting right the amounts is never easy; leaving something out or underestimating costs can have serious consequences. At the same time, you do not want to pay for your insurance more than what you really need to.

The points listed above give you an idea of the issues involved. It would be better to contact an experienced insurance professional who will be able to guide you on the right coverage, by providing options you may not be aware of.