How Much Dwelling Coverage Do I Need?

When insuring your home, it is important to make sure that you have purchased adequate coverage to protect you in the event of a loss. Just how much coverage you may need will depend on the value of your property and your ability to absorb a financial loss. The process of buying enough dwelling insurance should require a little of your time to get good quotes from companies and good advice from various agents.

Keep your deductibles low enough that you can live with them.

Insurance is no good if it does not let you emerge from a loss with your financial well-being still intact. If you buy a policy with extremely high deductibles, you may save some money on premiums, but you will regret it if you are hit with a large loss. Most people should keep the deductible on their dwelling insurance at $1,000 or less. At this level, most homeowners can afford to fix the damage sustained by their house.

Buy enough insurance to replace your home if it is a total loss.

Many insurance companies today will not sell you a policy that has a value less than the cost to replace your dwelling. However, if you shop around enough, you may find one that will. Buying a $100,000 policy on a $200,000 house can be a short trip to financial ruin. With co-insurance, the insurer will reduce your claim by the amount of the deductible. You property will be assessed at the value before the disaster. Whatever percent of that value that you have insured the home for will be multiplied times the value of your policy, and that will be what you receive. So, if you insure your $200,000 home for $100,000, since you have bought 50 percent of the value of your home, you will receive $50,000 less the $500 deductible.

You need enough liability insurance to prevent the loss of your home and personal financial assets if you are sued.

The reason that liability limits seem so high is that the insurance company is covering the value of your home plus your other personal holdings. If someone falls on your property, they may sue. You need to have enough insurance to protect you from being wiped out financially. This may take a million or more dollars to be safe.

Insure your contents for enough money to buy your stuff back if it is damaged or stolen.

Many people seriously underestimate the value of their home's contents. Add up the current value of all of your large appliances. Compute the price of every piece of furniture. Figure out how much it will take to buy back all of your clothes and shoes. Now, look at all of your electronic equipment and small appliances. Do not overlook the kids' toys and other personal valuables. The number can become staggering. Try not to think that the agent is just pushing for a bigger commission. The agent has seen other clients lose money and is probably trying to be helpful.