What Is an Appropriate Amount of Home Insurance Coverage?

Determining what is an appropriate amount of home insurance coverage completely depends on the individual and what your unique circumstances are. For instance if you own a 500,000 home you will need higher limits on coverage’s than someone who owns a home valued at 250,000. The appropriate amount of your insurance coverage’s should cover to rebuild or repair your home to pre loss condition and cover your personal belongings for replacement or repair as well.You will also need to determine where you want your coverage’s applied. For instance, your dwelling coverage is separate from your personal belongings coverage which is separate from your outside buildings coverage and so on. When you are talking about limits you will need to look at each different types of coverage that you have on any one given insurance policy.

As a general rule your personal belongings coverage is usually 30 percent of your dwelling coverage. So if your dwelling coverage is 100,000 dollars then your personal belongings coverage should be at least 30,000 dollars. This method only works though if you have very average items. I feel it is better to do a complete inventory of your home and garage to estimate what it would cost you to replace all of it if it were destroyed in a loss of some kind. And don’t forget to consider cost of items that should be covered on your home insurance policy like an RV, Boat, or ATV.In order to determine how much is appropriate for your home insurance coverage It is very important to sit down with your insurance agent and go over all of these items in detail. The worst time to find out that you are underinsured is right after you have experienced a loss of some kind.When you are trying to figure out how much coverage you should have on your policies you need to remember to consider not only what it will cost to replace your belongings but how much it will cost to demo, remove and possibly discard of your damaged items. This can cost several thousands of dollars depending on the extent of damages.You also need to consider your Additional Living Expenses or ALE coverage. If your home is unlivable for any period of time your insurance policy has an ALE provision that can cover you for several months of rent and other expenses incurred for a rental or hotel room so that you have a place to live while your home is being repaired.

Another thing to consider is whether you will need any riders or scheduled items put on your insurance policy. A rider is necessary if you have a high valued item that you have an appraisal on and need additional coverage for. If you have a high value item you may not have proper limits on your standard home owners insurance coverage if you do not have an additional rider on that item. It is very important to talk with your insurance company or agent about these kinds of items. When you have a rider or scheduled item you can be sure that you have the right amount of coverage for high value belongings.Each household will have different coverage needs based upon their belongings and home value. So the appropriate amount of home insurance coverage is not a standard equation.