How Much Homeowners Insurance Coverage do You Need?
Figuring out how much homeowners insurance coverage you need is probably the trickiest part of buying homeowners insurance. You may know what basic insurance covers, but you may be a little confused about how large of a policy to take out on your home. Well, you’re not alone. Lots of people are either under or over insured on their homes, which is not a good place to be. If you’re under insured, you won’t have enough money to rebuild your home in case of a fire or something similar, but if you’re over insured, you’re going to be paying way too much money for your insurance premiums.Home Insurance
Your Home’s Replacement Value
Obviously, homeowners insurance is there to pay to rebuild your home if it should be tossed to pieces by a tornado or gutted by a fire, and you want to be sure you have the ability to pay to recreate your home. However, over or under estimating what this costs is common, so take these tips into consideration:
1.Land. When you bought your home, you also paid for the land it’s on. That land isn’t going anywhere, so be sure you aren’t including that in your estimate.
2.Location. If you live in a nice neighborhood, you also paid for that privilege, which inflated the cost of your home. When you’re looking at replacement value, know that it won’t cost you any more to rebuild your home in Beverly Hills than it would in an old, overcrowded neighborhood.
3.Inflation. While you can subtract what land and location added to the cost of your home, you’ll have to account for inflation, which could add up to 3% to construction costs with every passing year.
The best way to accurately account for your homes replacement value is to carefully count the cost of reconstructing it. Each time you remodel, especially if you’re adding expensive updates like nice appliances and such, add this into your estimated costs. Review your insurance policy every time you do a major remodel or every few years to be sure that you could afford to rebuild your house just like it is in the event of a disaster.
Your Personal Belongings
Most insurance companies estimate that your personal belongings are around 50% of your home insurance policy, so if you’re insuring your $150,000 for $200,000, the insurance company will assume that $100,000 of that is for personal belongings. This estimate may be really high or really low for you, depending on how much expensive stuff you have. To get a good idea, take an inventory of everything in your home � especially furniture, electronics, and jeweler � and figure out about how many your things are worth. Then base part of your overall insurance estimate on that.
Cost of Living
If something happens to your home, some insurance policies will pay for your rental or hotel fees while it’s being rebuilt. This is a good thing to write into your insurance policy, as renting a new apartment or a long-term hotel room for three months while your house is being rebuilt could really break your budget. However, be sure that you know whether or not your insurance policy will cover this and how much money it will give you for it.
Liability Coverage
You may not be aware of it, but homeowner’s insurance coverage also includes at least some liability coverage. If someone is injured on your property or if your property damages your neighbor’s property, for example, your homeowners insurance will pay for damages and legal expenses if you are dragged to court. However, be aware that this insurance may not be enough to cover expenses if you get into a drawn-out legal battle; for these purposes, it may be a good idea for your to have umbrella coverage, which will act as all-around liability insurance and will cover much higher amount than typical homeowners insurance.Home Insurance
Now, how much homeowners insurance you need depends on these basic things, but you may need to add extras to your policy to protect against flood, to insure very valuable belongings like collector’s items, or to cover your outbuildings. This, though, should give you a basic idea of what sort of homeowners insurance coverage you need right now.
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