How much insurance coverage do you need for your home?
It’s essential that you have sufficient insurance coverage for your home. While serious home damage occurs only rarely, it’s better to play it safe. Should the worst-case scenario come to pass, you won’t be faced with heavy financial losses. Therefore, you need to determine how much insurance protection you require for your home’s structure and its contents in the event that your home needs to be entirely rebuilt and your belongings replaced.
How much insurance coverage do you need for your home’s structure?
There are a number of factors you’ll need to take into account when determining how much it would cost to rebuild your home. Start by figuring out rebuilding costs by multiplying the square footage of your home by local per-square-foot building costs (which you can usually obtain from a local real estate agent, builders association or insurance agent).
This amount will equate roughly to the replacement value of your home. However, to get a more exact figure, you should factor in value-adding features and additional structures on your property.
Loan amount vs. insured amount
Your home’s replacement value may not be equal to your loan amount (the figure that borrowers agree to repay lenders). Your mortgage loan could cost significantly more than the market vluae of your home. When this is the case, you may consider types of insurance coverage that protect the full loan amount.
How much insurance do you need for your belongings?
This is a much simpler calculation, which involves making an exhaustive list of your belongings and their values. This takes time, but it’s worth doing. Not only does this allow you to calculate how much insurance you require for your possessions, it also gives you a convenient record of everything you own, making it much easier for you to file a claim in the event that items are stolen or become damaged.