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You know you need homeowners insurance to protect your home – but the options can seem overwhelming. In addition to determining what type of homeowners coverage you’ll need, it’s also crucial to figure out how much home insurance coverage you’ll need to adequately protect your property. Also, it’s essential to set realistic policy limits based on your specific home, property, and belongings. 

Here are some things to consider to help estimate how much home insurance is right for you.

1. The cost to rebuild your home

Insurance is designed to help you plan for the worst. For example, in the unfortunate event that your home has to be completely rebuilt due to a covered accident, a home insurance policy would ideally cover the entire cost (minus your deductible). However, rather than simply insuring your home for how much you paid for it, you should consider the cost of rebuilding, market fluctuations in your area, and your home’s age when estimating the rebuild cost. It’s also important to factor in the value of any new features or remodeling you’ve completed while living in your home. Discover three tools you can use to estimate the value of your home

Dwelling coverage explained

Dwelling coverage protects the structure of your home. That means your walls, windows, doors – anything you’d consider a part of the building you live in. So if your home is damaged by things like a fire, high winds, or a break-in, your dwelling insurance will cover the costs. While you may only need enough coverage to repair small sections of your home at a time, it’s advised that every homeowner have enough dwelling insurance to rebuild the whole home [1].

2. The value of your personal belongings

One of the essential benefits of home insurance is that it can protect your belongings in the event of a fire, wind damage, or other covered accidents. To ensure that your policy limits can cover everything in your house, create a home inventory, room by room. Beyond approximating the cost of valuables such as electronics and art, you should also remember to include furniture, clothing, appliances, and home goods in your estimate.

Personal property insurance explained

Personal property insurance helps cover your possessions, such as furniture, clothing, and valuables.  This coverage is applied in two ways: actual cash value (ACV) and replacement cash value (RCV). In the event of a loss, ACV coverage results in payment for the used value of your property by evaluating its cost minus depreciation from wear and tear. In contrast, RCV results in payment for the full reasonable cost you incur to replace the damaged property without calculating depreciation [2].

3. The cost to live elsewhere temporarily in the event your home must be rebuilt or repaired

If you and your family cannot live in your home after a covered accident, how much would it cost to live in a hotel or other temporary housing? Beyond the cost per night, there are additional day-to-day costs that you would incur if you were temporarily displaced, such as increased transportation costs, food costs, and more. Most insurance carriers automatically include some level of coverage for these types of expenses.  However, coverage limits vary by insurer, so be sure to read and understand your policy to ensure those limits meet your needs.   

4. How much someone could sue you for in a personal liability dispute

Home insurance does more than protect your home and your belongings. The right policy can also protect you from paying out-of-pocket if you are found responsible for a guest’s bodily injuries. If the costs associated with their injuries exceed your policy limit, they could take legal action against you. Although choosing a personal liability limit isn’t as cut and dry as estimating other costs.  It would be best to consider your long-term finances and net worth when estimating how much personal liability protection you will need. 

Personal liability insurance explained

If someone comes into your home and gets injured or suffers some type of property damage, you may be liable. Personal liability insurance covers you in the event you’re responsible for your guest’s medical, legal, or other bills resulting from damages. Every homeowner should have enough personal liability insurance to equal the net worth of all their financial assets. This is a precautionary move because the maximum the plaintiff could pursue in court is your total financial worth [3]. 

In addition, you may want to look into umbrella insurance. Personal umbrella insurance is extra liability insurance designed to help protect you from claims and lawsuits beyond your standard policy limits. 

Do you need homeowners insurance?

The law doesn’t require you to have homeowners insurance. However, having a home insurance policy is a crucial way to protect yourself and your home from the unexpected. In addition, your mortgage lender may require that you obtain a homeowners insurance policy and a certain level of coverage.

Get a free home insurance quote

Choosing how much homeowners insurance coverage you need is a big decision. Get a free homeowners insurance quote online or by calling 1-888-869-5727. Our policies are customizable to meet your unique needs.

[1] “What Is Dwelling Coverage and How Much Do You Need to Protect Your Home?” Margaret Wack, (Accessed August 13, 2022).

[2] “What Is Personal Property Insurance?” Mandy Sleight, (Accessed August 13, 2022).

[3] “What is personal liability insurance?” Pat Howard and Kara McGinley, (Accessed August 13, 2022).

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