If you own a home and have a mortgage, you’ll likely be required to have homeowners insurance. Your home is where your family grows and plays together, so protecting it is a top priority.
Understanding homeowners insurance can be difficult, as there are many elements to it and different types of coverage to be aware of. One of your burning questions might be “how much home insurance do I need?” It’s a common concern. Beyond that, many people wonder if homeowners insurance is enough or if there are other options for added coverage. We’ll try to answer these questions and clear up any confusion you may have.
How Much Homeowners Insurance Do I Need?
This is a complicated question, but it’s important to ask it if you’re shopping for home insurance. It’s critical for a few reasons. First, how much coverage you have will determine how much you pay for your policy. Second, it’ll dictate how big of a financial headache you’ll have if disaster strikes. The time to find out how much homeowners insurance you need is before a major incident, not after.
Just how much homeowners insurance coverage do you need? The answer is, it depends. When you’re thinking about how much dwelling coverage you’ll need, start by figuring out how much it will cost to rebuild your home. This will help you determine the coverage and limits you need. Keep in mind that this number will likely be different from the original purchase price, or even the current market value. A lot of factors go into determining how much coverage you’ll need. Here are a few of them:
- The style of your home. Is it ranch or colonial, for example?
- Your home’s exterior. Is it brick, stucco, stone, or veneer?
- The number of rooms. More rooms likely equals a higher premium.
- The roof type. Do you have wooden shingles?
- Additional structures including garages, sheds, and decks. You’ll want to insure more than just your actual home.
- Improvements and renovations. These could add to the amount of coverage you may need.
- Belongings and personal property. Start thinking about more than just the roof over your head.
What Does Homeowners Insurance Cover?
Homeowners insurance coverage covers about five different areas, with more nuanced coverages also available. Dwelling, personal property, and liability are usually the most standard coverages included in a policy. The others can be added if you want the most comprehensive coverage. The typical coverages you’ll see are the following:
- Dwelling Coverage (or Hazard Coverage)
- Other Structures Coverage
- Personal Property Coverage
- Liability Coverage
- Additional Living Expense Coverage (or Loss of Use Coverage)
Could You Explain Each Type of Coverage?
There are a lot of different elements to a comprehensive homeowners insurance policy. Let’s break the different coverages down so they’re easier to understand.
Dwelling Coverage (or Hazard Coverage)
Dwelling coverage is used to rebuild your house should it be damaged by things like a fire, windstorm, or vandalism. Generally, dwelling coverage covers your home and also anything attached to it (like a garage or deck). You may be wondering “how much dwelling coverage do I need?” It depends on the price of rebuilding your home.
Other Structures Coverage
Other structures coverage is for other structures that are on your property but separated from your home. A shed or a detached garage might fall into this category.
Personal Property Coverage
This type of coverage helps you if your personal belongings are damaged or destroyed by a covered loss. In order to make filing a claim easier, it’s important to take a look at what you own and keep track of how much you paid for it. Take an inventory using pictures, and be sure to note how much each item costs.
Personal property coverage could be handled in one of two ways. You can either have an actual cash value policy where the insurance company pays the cost to repair the item minus depreciation. Or, you could have a replacement cost policy. This type covers the dollar amount it would take to replace the item at the time of the claim. Keep in mind that there are limits to the coverage, so if you have expensive items like jewelry or collectibles, you might need to look into a plan with higher limits.
This coverage can help pay for repairs if you damage someone else’s property. It can help pay medical bills for someone who is injured in your home. Even if you are responsible for another’s injuries at a different location, it can sometimes help. For instance, if your dog runs into the neighbor’s yard and bites or injures them, your liability coverage might pay for your neighbor’s medical bills.
Additional Living Expense Coverage (or Loss of Use Coverage)
This helps pay for the cost of rent, hotel, food or other living expenses. It’s a type of coverage that’s helpful if your home is so damaged that you cannot live in it for a time.
What Does Homeowners Insurance Not Cover?
Homeowners insurance does not cover damage from things like floods and earthquakes. Generally, it’s also not helpful in the event of sewer backups or broken down appliances within your home. You’ll need separate insurance for earthquakes or floods, and you might need a home warranty if you want coverage on your appliances.
How Much Does Home Insurance Cost?
The cost of home insurance varies by insurance company, state, and even city. Zillow says that a ballpark number is around $35 a month for every $100,000 of your home’s value. While that’s a rough estimate, keep in mind that it can fluctuate dramatically from there. It’s best to talk to an insurance agent to get the most accurate information for your specific home.
What Should I Consider When Buying Home Insurance?
There are a number of considerations when buying a home insurance policy. The main things you’ll want to think about are your coverage limits, deductibles, and premium.
- Your coverage limit is the maximum amount your homeowners insurance will pay toward a covered loss. Be sure you have sufficient coverage to cover the cost to rebuild your home.
- Your deductible is how much you’ll pay out of pocket before the insurance kicks in and pays the rest. Make sure you can afford your deductible.
- The premium is the amount you pay for an insurance policy. The higher your premium, the lower your deductible, and vice versa.
Above all, remember that no two policies are exactly alike. As such, you should work closely with an insurance to craft the best policy for your specific home and needs.
How Can I Get More Protection Beyond a Home Insurance Policy?
Not everything is covered with a homeowners insurance. For instance, if your dishwasher or water heater breaks down, you can’t rely on your typical home insurance policy to help there. This is where a home warranty comes in. A home warranty covers many of the systems and appliances in your home and acts as additional coverage.
We recommend adding a home warranty plan to your homeowners insurance policy to get the most comprehensive coverage. There’s no dollar sign on peace of mind, so a little extra investment is a great idea. Request a home warranty quote today!