If you have purchased a new home, then you are going to need homeowners insurance. Homeowners insurance helps protect your house financially from theft and damage. It can help pay for the repair or replacement of property and personal belongings.
The amount of homeowners insurance coverage can be different for everyone. You could be paying too much for coverage that you don’t really need. Or you are lacking coverage for a particular incident you might want covered.
We have to take a few steps in determining what you should be paying for homeowners insurance.
- Dwelling Coverage – How much it would cost to rebuild your home
- Personal Property Coverage – Cost of replacing your personal belongings
- Loss of Use Coverage – If you have to live in a different home while you are unable to use your home due to a loss
- Liability Coverage – The cost of any injuries that might have occurred in your home
When looking at dwelling coverage, you don’t want to just look at the price of your home or what it was purchased at to decide on the coverage amount. Dwelling coverage is calculated on the estimate of what it would cost to rebuild your house during a loss. Easiest way to calculate the amount is by taking what the current cost of construction per square foot would be in your area and multiplying it by your square footage.
For example an average home in California or New York costs about $243 to $253 per sq ft. If your home is 1,000 sq ft, then it would costs $243,000 (1,000 x $243) for building a new home. This should be a good estimate to start with for minimum coverage. Now each home can be different, and you could have more done to your home which can increase the amount you would want coverage for.
Personal Property Coverage
Personal property coverage will cover the costs to your personal belongings, if they are stolen or damaged in a loss. Items like TV, couch clothing and anything else you have in your house.
Items like jewelry is covered as well, but you have to be careful that it will not be covered at full value. This applies to a lot of high end expensive items. You might be only covered between $1,500 to $2,000. You can still have the items covered but it will require you to do an addendum, which will add extra coverage for your expensive belongings.
You also want to make sure that when choosing a policy you go with replacement value and not depreciated value. With depreciated value or actual cash value, the older your item gets the less value it has. $150,000 worth of items can be worth $80,000 in 2 years and in a loss that is all you would be paid out for. You want to make sure you choose replacement so that you are reimbursed the full amount.
Loss of Use Coverage
Loss of use coverage is used when you are forced to move out of your house during a loss. You might be forced to rent another home while your home is being built. It is normally 10 to 20% of dwelling coverage you want to calculate.
Liability coverage will cover injuries that might occur on your property. In a situation where you have someone at your home and they slip on your driveway or hurt themselves in any other way, this will cover for medical costs. The individual might not have medical coverage or decides to sue you. This is where your coverage will handle the costs. It’s good to consider a coverage of around $300,000 to $500,000.
When it comes to injuries caused by animals, talk to your insurance provider to make sure if there are any particular breeds they don’t insure for. Even dogs with prior bite history might not be covered under your plan.
There are other coverages that you might also want to consider when getting homeowners insurance. While some coverage is available with standard insurance like hurricane coverage, flood coverage is not. So if you are in an area with high risk flooding, you are going to need coverage.
Earthquake coverage also does not come with your standard insurance plan. If you live in an area where there is a high risk of earthquakes, you might want to consider getting coverage.