How Much Homeowners Insurance Do You Need?

Talk over these factors with your agent to be sure your policy suits your needs.

If you think buying homeowners insurance is a one-time deal, you may want to give that a second thought. You’ll likely take a close look at your homeowners coverage when you buy a new house. Remodeling or a room full of new furniture are also good reasons to revisit your policy.  Think about extra coverage to protect those great investments, too.

Whether you’re buying a new home or reassessing where you are now, making sure you have adequate coverage is key. Here are some things to think about—and, even more important, to talk over with your agent.

According to the Insurance Information Institute, there are four key things you need enough insurance to cover.

  1. The physical structure of your home. Your insurance should cover the cost of rebuilding your home at current construction costs. This is not the same as the purchase price of your home. Ask your insurance or real estate agent to help you calculate the cost for replacement based on square footage. Also consider the cost of replacing anything you’ve added, such as a custom kitchen, new windows and other improvements.
  2. Your personal possessions. To know whether you have enough coverage for your possessions, conduct a home inventory. List and document everything you own and what it would cost to replace it. If you have very valuable items such as jewelry or artwork, ask your agent about a rider or floater to cover them.
  3. Additional living expenses. If your home is damaged, you’ll need somewhere else to live while it’s being repaired, so you’ll need coverage for the cost of rent or hotel bills, restaurant meals and other living expenses. Many policies include this coverage as a standard amount, but if you need more coverage, you may be able to buy an additional policy.
  4. Liability.  Homeowners policies may provide coverage in the event you, your pet or anyone in your family causes injury or property damage to someone else. The coverage may help reimburse you for court costs and may pay damages if there’s a lawsuit. You can buy basic coverage or add to it with umbrella or excess liability coverage.

Exactly how much coverage you need for each of these things depends on many factors. Provide as much detailed information as possible to your agent, and together you can determine what policy is right for you.

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