Home insurance offers invaluable coverage for homeowners that helps protect their homes and personal belongings from a variety of common hazards. From fires to theft, homeowners insurance can help cover the damages caused to your property by a covered peril.
But every homeowner’s needs are different, and it can be difficult for homeowners to determine how much home insurance coverage they need. By being able to determine how much coverage you need, you can ensure your entire property and all of your personal belongings are covered without paying excessive premiums.
Here’s what you need to know about determining how much home insurance you need.
What Does Home Insurance Cover?
To determine how much home insurance you need, it’s important to understand what is and is not covered by home insurance.
A standard homeowners insurance policy includes the following coverages:
● Dwelling coverage
● Personal property coverage
● Other structures coverage
● Loss of use coverage
● Personal liability coverage
● Medical payments coverage
These are the standard coverages included in most home insurance policies, and depending on your needs, you can customize your coverage limits to ensure you are protected against covered perils. You may also add optional endorsements, such as water backup coverage, to protect against other risks not included in your home insurance policy.
Home insurance policies cover damages caused by covered perils, which may include:
● Fire and smoke
● Falling objects
● Water damage from within your home
● And more
Perils that are generally not covered include floods, earthquakes, sewer backups, and damage caused by a lack of maintenance.
How Much Home Insurance Do You Need?
If you are financing your home with a mortgage, your lender will typically require you to have a minimum amount of dwelling and liability coverage to protect your home from damages. However, in many cases, the minimum requirements established by your lender may not always be enough to fully cover your home and personal belongings.
To determine how much coverage you need, it’s important to start by finding out how much it would cost to rebuild your home, replace your personal belongings, and cover your living expenses while your home is being rebuilt.
The most crucial coverages in your home insurance policy to consider are dwelling coverage, personal property coverage, liability coverage, and additional living expenses coverage.
Dwelling coverage helps pay to repair or rebuild your home’s structure if it is damaged by a covered peril. Your dwelling coverage should be equal to your home’s replacement cost.
Your home’s replacement cost is not the same as your home’s price — it’s the total cost required to rebuild your home if it is destroyed. This may be higher or lower than your home’s market price. Your insurance provider will provide an estimate for your home’s rebuild cost when you purchase home insurance.
Personal property coverage
Personal property coverage helps protect all of the items inside your home against damage. This includes clothes, electronics, furniture, appliances, gym equipment, and nearly everything else inside your home.
Your personal property coverage limit should be enough to replace all of your personal belongings if they are stolen or destroyed. You should start by taking inventory of everything you own, including pictures of more expensive belongings.
For more expensive items, like jewelry, you may need to purchase additional coverage specifically for these belongings.
You may also consider upgrading your personal property coverage to cover the replacement cost of your belongings rather than their actual cash value (ACV). ACV accounts for depreciation, meaning you may not be able to replace everything with a policy that insures your items for their ACV.
Liability coverage helps pay for damages that arise if someone is hurt while on your property. This can include court costs, lawyer fees, settlements, etc. — all of which add up to hundreds of thousands of dollars in some cases. If you are held liable for such an accident, the injured party may even be able to go after all of your assets.
In most cases, you want at least enough liability coverage to cover all of your assets. Policies typically start at $100,000 in liability coverage and go up to $500,000. Generally speaking, the more liability coverage you can afford, the better. If you need more coverage than your policy offers, you can also purchase personal umbrella insurance for added protection.
Loss of use coverage
Loss of use coverage, or additional living expenses coverage, helps pay for your living expenses if you are temporarily displaced from your home due to a covered peril. This includes lodging expenses, food costs, and other living expenses.
Most home insurance policies provide loss of use coverage equal to 20% of your dwelling coverage limit. If you have a large family or live in an area prone to natural disasters, you may want to bump this up to 30%.
Request a Home Insurance Quote
Home insurance is essential for any homeowner as it protects you, your family, your home, and your belongings from a variety of common disasters. By determining how much home insurance you need to cover your home and personal belongings, you can adequately protect your property without paying excessively high premiums.
Contact FIB Insurance today to get a custom quote and learn more about home insurance in Miami, FL.