Before you start requesting insurance quotes, it’s important to consider how much coverage you need. Most standard policies put dollar-amount limits on dwelling, personal property, and liability coverage. Adding additional coverage beyond a standard policy can help you avoid hefty out-of-pocket costs if you have to file a claim.
To determine the right level of coverage for you, consider the actual cash value of your home and belongings compared to your policy’s payout limits. Consider more coverage if your home is in a high-risk location that will make it more likely to rely on your insurance — such as an area with high rates of home break-ins.
Dwelling coverage is the foundation of a good homeowners insurance policy and should be robust enough to cover property damage repairs or even rebuild your home. Without enough homeowners insurance, property owners can end up in a financial hole trying to cover damage costs. As a rule of thumb, you should have enough dwelling coverage to cover a complete rebuild of your home. In other words, your dwelling coverage limit should be approximately the actual cash value of your home.
You may want to involve a contractor to determine an estimate based on the square footage of your house. Use those numbers to determine how high your coverage limits should be to repair or replace your home. Dwelling coverage typically covers attached structures to a home, so you may need to add an endorsement if you’d like to insure a detached garage or guest house.
There are two types of personal property coverage: cash value and replacement cost. Imagine you need to file a claim after a storm damages your refrigerator. Due to years of depreciation, the fridge was only worth $500 before it was damaged, but the actual replacement value of a new refrigerator is closer to $1,000. With a cash value policy, you will have to cover the difference out-of-pocket. A replacement cost coverage policy will cover the entire amount, up to your policy limit.
To make sure you have enough coverage for personal property, start by taking a home inventory of all your essential and valuable items. Get an estimate of what each item is worth and what it costs for a replacement.
A standard homeowners insurance policy with liability coverage will make payouts if someone is hurt on your property or if you cause damage to someone else’s property. Liability coverage generally pays for medical expenses up to a certain amount. Under a basic policy, liability insurance may include a $100,000 coverage limit. While this amount may seem like a lot, medical expenses can rise quickly.
To decide if you need more protection, consider the potential risks at your home. Items such as pools and trampolines increase the risk of injury. Liability coverage often applies when your covered pet hurts someone.
In conclusion, before you start requesting insurance quotes, take the time to assess how much coverage you need for your home, personal property, and liability. By ensuring you have adequate coverage, you can protect yourself from financial burdens in the event of a claim. Consider consulting with an insurance agent to help you determine the right level of coverage for your specific needs.