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How Much Insurance Do You Really Need?

There's a lot to take in when learning about homeowner's insurance. Here are some basics to get you started.

When you're buying a home, it's easy to focus on shopping for fun things, like furniture and decor for your new space. However, another item to add to your shopping list is a homeowner's insurance policy. Homeowner's insurance is a type of insurance that protects your home and its contents, so it's important to know how it works and what exactly you're getting. Here's what you need to know about homeowner's insurance, including guidelines to help you select the correct level of coverage.

The Ins and Outs of Homeowner's Insurance

If your home is damaged or entirely destroyed due to a natural disaster, theft, or other incident covered by your policy, your homeowner's insurance will help you pay for the repairs. Homeowner's insurance typically covers your home, any structures on your property (like a storage shed or garage), and your possessions.

Note that some events may be excluded from your insurance policy. Some of the most common excluded events include damage from floods and earthquakes. To ensure your home is protected from these excluded events, you'll need to purchase a separate insurance policy specifically intended for these incidents.

When you make a claim on your homeowner's insurance, you must pay your deductible. The amount of your deductible will decrease the amount of money you receive. For example, assume a storm causes $10,000 in damage to your home. If you have a $2,000 deductible, you'll receive $8,000 for the incident.

While a higher deductible will lower the cost of your homeowner's insurance policy, make sure that it's an amount that you're comfortable paying in an emergency.

How to Calculate the Coverage Levels for Your Insurance Policy

It's imperative to purchase the correct amount of homeowner's insurance to make sure you're properly protected. Your insurance company will not pay more than your selected coverage level, even if your costs wind up exceeding this amount. When selecting your coverage levels, you'll want to consider how much it would actually cost to rebuild your home in the event of a major disaster.

This figure may be significantly more than the actual value of your home, especially if your home has high-end features or details that required special skills to build or create them. Consult with your insurance agent for guidance regarding the replacement costs for homes in your area. The costs for building materials and construction labor tend to increase over time, so make sure you periodically revisit your coverage levels.

Survey the contents of your home, and check that the coverage for your belongings will replace them if they're lost or stolen. If you own expensive items (like jewelry, rare collectibles, or musical instruments), you may need to purchase additional coverage to cover the replacement costs of these pricier possessions.

Other Details to Keep in Mind

When buying your policy, there are other policy coverage limits that you'll need to select. In addition to coverage for your home and belongings, your homeowner's insurance policy provides liability coverage if someone is injured on your property. You should check that your liability coverage is enough to protect your assets in case of a lawsuit. If you have extensive financial assets, you may want to consider an umbrella insurance policy in addition to homeowner's insurance to make sure you're properly protected.

Worried that your insurance coverage is too low? Contact your insurance agent today to review the details of your policy!

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How Much Insurance Do You Really Need?

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