How Much Homeowners Insurance Do You Need?

How much homeowners insurance you need depends on what your home and its content is worth. The amount is different for everyone, but there are some general guidelines you can follow to come up with a good estimate.

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Replacement Cost Or Cash Value Policy?

There are two popular types of homeowners plans to choose from, replacement cost and cash value.  

• Replacement cost. If you needed to cash in your replacement cost policy, no depreciation would be deducted. So regardless of the age or current value of your home, you’d get the sum of your policy. If rebuilding your home from the ground up costs $200,000, that's how much insurance you should get.
• Cash value. A cash value homeowners policy is cheaper than a replacement cost policy. You only receive whatever your home and belongings are worth at the time of your loss. So you get the cost of your home, minus depreciation for age and wear and tear. You pay less, but you may not be able to entirely replace your damaged property with your settlement if you have a loss.

How Much Should My Homeowners Policy Cover?

You need enough insurance to cover the following:

• The structure of our home. One way to save money is to cover just 80% of your home’s value. But remember, if your house is totally destroyed, you’d only get 80% of the cost to replace your home. Recent events like Hurricane Katrina prove that while the chances are slim, it’s possible to completely lose your home. If this is a concern for you, you may want to insure 100% of your home’s replacement value.
• Your personal possessions. Figuring out exactly what your belongings are worth might seem like a big chore. But you’ll be glad you did it if you ever need to file a claim.  To decide how much coverage you need for your possessions, do an inventory. List everything you own and estimate the value at current prices.
• Your living expenses. The cost of additional living expenses if your home is damaged and you have to live elsewhere during repairs.
• Your potential liability. Homeowners policies usually include between $100,000 and $300,000 in liability coverage. But if you’re worth more than that you’ll want to tack on some extra coverage.

Not sure how much homeowners coverage you need? An agent can point you in the right direction. If you want to find an agent now, use our free matching service. Just fill out one quick form and you’ll get free quotes from agents in your area. They’ll give you quotes, and help you decide how much coverage is best for your home.