Protecting the Roof over Your Head: How Much Home Insurance Coverage Do You Need?

By admin / February 25, 2019

In 2017, one property crime in the United States occurred every 4.1 seconds. Burglary cases alone averaged one per 22.6 seconds. That’s almost three burglarized properties in one minute!

What’s more, these crimes alone led to property losses totaling $3.4 billion that year. On average, each victim suffered a loss of $2,416.

Luckily, home insurance coverage helped mitigate the losses of burglarized homeowners. Theft, after all, is among the most common reasons people file an insurance claim. Back in 2016, 97.1% of claims were for property damage, theft included.

Now the big question is, does your home have this kind of insurance in the first place? Even if it does, how sure are you that your coverage is enough to cover potential losses?

That’s what we’ll help you uncover in this post, so be sure to keep reading!

Standard Home Insurance Coverage Inclusions

There are eight different types of homeowner’s insurance, from HO-1 to HO-8. Of these, the most common among homeowners is HO-3, with its expansive coverage. It’s an “exclusion” policy, so it covers everything except specifically-listed perils.

Standard home policies provide coverage for dwelling, contents, and personal liability. But only to a certain limit, which you’ll find listed on your policy.

HO-2 is also quite common, but very limited (coverage only includes named perils). HO-4 is insurance for renters, but protects only the contents of a rental house.

Dwelling Coverage and How Much of It You Should Get

This part of your policy protects your home’s structure itself. That includes protection for walls, floors, ceilings, and built-in appliances. Attached structures, like a tool shed, garage, pool, or gazebo are also often covered.

Most home insurance policies cover perils like theft, vandalism, fire, and hail. But again, only up to your policy’s limit, which can be much less than what you need to rebuild your home.

To answer your question, “how much homeowners insurance do I need,” check your policy limit. The dwelling coverage should be equal to the cost you’ll rack up if you were to replace your home. “Replace” here means building a replica of your home before the damage occurred.

Factor in your home’s square footage, local construction costs, and inflation. This’ll give you an idea of how much you should have on your home insurance dwelling coverage.

What About Your Personal Stuff?

Contents coverage or personal property coverage protects the contents of your home. It covers your furniture, electronics, appliances, and clothing. It depends on the insurer, but it may even cover your sports equipment and the goodies you’ve got in your fridge.

This part of your homeowners’ policy will kick in if your personal stuff gets stolen or destroyed. But for you to get coverage, the cause of the damage should not be part of the listed exclusions.

That said, you’re now thinking “How much home insurance do I need then for my stuff?” Enough to replace everything or at least the most expensive and valuable ones. You may not be one to count everything you own, but so you know, an average U.S. household contains about 300,000 items.

To figure out how much contents coverage you need, make an inventory of all your belongings. The keyword here is “all”, so go through each room in your house and list all stuff of value in each of them. So long as it’s worth something, it’s best to include it in your inventory.

While you’re at it, take photos of everything, especially big-ticket items. Be prepared, as taking inventory may take an entire day. But that’s nothing compared to all the hours at work it took to buy everything you own now.

Remember: Your home and all its contents are part of your investments. Insuring these means protecting and securing your family’s financial well-being.

Still unsure how much contents coverage to get? You can learn more here to be certain you have adequate personal property coverage.

Personal Liability Protection

Personal liability coverage protects you in case someone gets hurt in your property. Take falls, for instance, which led to 9.2 million people seeking ER treatment in 2016. If this happens to a guest in your home, your policy’s liability coverage will pay for the medical bill.

Personal liability also protects homeowners in some cases of dog bites. Aside from the medical bills, your liability coverage may also protect you from a lawsuit.

How much of this insurance should you get then? If you buy a standard policy, it may already include a $100,000 liability coverage. But that’s not enough if you factor in medical costs and lawyer fees if you get served, say for negligence.

It’s best to get at least $300,000 in liability protection, so you can protect your assets. This won’t increase your premiums that much, but it’ll give you much more peace of mind.

Pay Attention to the Exclusions

Now, let’s talk about what a standard home insurance policy doesn’t cover. An HO-3 policy won’t cover you for earthquakes, flooding, sinkholes, and mudslides. It also doesn’t protect you from terrorism, acts of war, and nuclear accidents.

These are only some of the common exclusions, so make sure you check your policy. Your insurer may have a long list of coverage exceptions, so you want to know what they are. Because if any of these listed exclusions cause damage to your home, you won’t have coverage.

Also, flood insurance may be a legal requirement in your area. These places are those at high risk of flooding. If you live in one, make sure you get a separate flood insurance policy.

Taking Out an Umbrella Policy

An umbrella policy kicks in if you used up your policy’s liability limits. It provides extra dollar coverage on top of your standard policy’s liability coverage. This includes coverage for injuries, property damage, lawsuits, and other specific personal liabilities.

It’s advisable to get an umbrella policy if you own assets worth more than what the average person does.

Don’t Let Your Home Remain Underinsured

Now that you know how much home insurance coverage you need, make sure your current policy is enough! This applies to when you’re still shopping for your first home insurance policy too.

Inadequate home insurance can render you homeless, so read everything in your policy. Pay careful attention to its inclusions and exclusions. This’ll help you find out what coverage to get for the exclusions and how much more of a certain coverage to get.

Want more insider tips to help you secure your family’s finances and well being? Then keep checking in on our blog’s Family section! We regularly update that with family and lifestyle tips.

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