“That’s a lose-lose situation,” she says. “You need the Goldilocks policy: not too much and not too little.”
To make sure you’re adequately covered, here are a few questions to ask to help you figure out how much home insurance you need…
1. How Much Will it Cost to Rebuild Your Home?
When determining how much home insurance you need, understanding the cost of rebuilding your home is crucial.
Below is a list of some factors that will decide the cost of rebuilding your home, notes the III:
- Local construction costs
- The square footage of the structure
- The type of exterior wall construction – frame, masonry (brick or stone) or veneer
- The style of the house (ranch, colonial)
- The number of bathrooms and other rooms
- The type of roof and materials used
- Other structures on the premises such as garages, sheds
2. How Much are the Items in Your Home Worth?
It can be hard to know how much insurance to buy if you don’t know what all of your assets are worth, says Pant. “Many people underestimate the value of their assets because they don’t conceptualize them as being worth cash,” she adds.
However, Pant says it’s important to have a good handle of the monetary value of your possessions as it will put you in a better position to recoup your costs should disaster strike.
To do this, Pant recommends having photographic evidence of your possessions.
“Walk around your house with the video camera, even if it’s just the camera on your phone, gathering video evidence of what the interior of your home looks like. Couple that with any receipts or invoices from contractors that you’ve saved.”
The III offers similar advice, noting that homeowners should take an inventory of their personal possessions: “You need to conduct a home inventory. This is a detailed list of everything you own and information related to the cost to replace these items if they were stolen or destroyed by a disaster such as a fire.”
3. What’s Your Likelihood of Getting Sued?
Do you have a dog? Swimming pool? Trampoline?
“There are three good steps to good risk management,” advises Weiss. “You want to identify the risks that concern you, estimate the likelihood of their coming to pass, and determine the cost you’d incur should that thing occur.”
“These umbrella policies are generally cheap – less than $100 a year can provide coverage for up to $1 million or more dollars for lawsuits and liabilities. If someone slips on ice in your front yard and sues you, it’s good to have the peace of mind that you have additional protection.”
4. Are Earthquakes and Floods Common in Your Area?
In fact, the III says that floods, earthquakes, maintenance damage (like mold, for example), and sewer backup, are a few disasters that are not covered in a standard insurance policy.
Luckily, you do have coverage options available.
“Ground water flooding is not covered by most (if not all) homeowner’s insurance policies. You’ll need flood insurance for that, which the government makes available,” says Weiss.
He also suggests looking at wind-damage insurance limitations.
“These are used to describe an issue that’s common to beachfront – or near beach – properties. Insurance companies set high deductibles for that, which leaves the homeowner to cover the difference,” Weiss explains.
So, if you live in an area that’s known to experience natural disasters or just bad weather in general, you’ll want to add any coverage necessary to ensure you’re protected.
5. How Much Would it Cost to Live Elsewhere if Your Home is Damaged?
You obviously don’t want to think about your home being damaged to the point where it’s uninhabitable, but it’s an important thing to consider when you’re talking insurance.