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How Much Home Insurance Do You Need?

Most homeowners know how important it is to have home insurance to help cover costs in case the unthinkable happens. However, many don't get the right type of coverage for their home and belongings, or worse - they don't get enough coverage. Here are a few tips to help determine how much homeowners insurance you need:

Cost to rebuild

In the event of a fire or natural disaster, it is possible that you could lose your entire home and everything in it. While your belongings might seem to be precious, the cost of rebuilding your home is probably going to be the largest expense. If your home is destroyed, you want to be sure that you have enough coverage to pay for the entire cost of rebuilding. Many homeowners may mistake the rebuilding cost as the same figure as what they paid for the home. However, with market fluctuation, it is possible that the price of rebuilding could exceed the price that you originally paid for the entire property.

To figure out the rebuilding cost and get the proper amount of coverage, it is best to exclude the rest of the property's value and think about square footage, the exterior materials, number of rooms and bathrooms, the kitchen and home appliances. Don't forget about the garage or any outdoor sheds that might be lost as well. Some mortgage lenders might also require homeowners insurance that can cover the entire cost of the home loan and rebuilding. Using a builders association, real estate agent or insurance agent to determine the full cost of rebuilding is the best method for getting adequate homeowners insurance coverage.


Homes that are a higher risk for damage may be in need of more insurance than others. For example, if you live in an area that is prone to flooding, you might want to invest in flood insurance, which is generally not a part of regular home insurance policies. Standard policies will usually cover the cost of a home in the event of damage or loss, coverage for belongings and liability protection. Additional living expenses might be covered under some policies if you need to live away from your home while it is being repaired.

When looking at coverage options, it is important to assess your personal belongings. There are two main ways that insurance companies provide coverage and reimbursement for lost or damaged personal items. One choice is a replacement cost, meaning you will receive enough to replace the item. Another payment option is to receive cash for the amount that the items are assessed at. If prices for some items rise over time, this second option might not be enough to buy new possessions. Be sure not to underestimate the value of the things you own. Many people may think they don't need insurance because they don't own much or have anything very valuable, but once you start looking at all your belongings, the price can add up.

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