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  • How Much Home Insurance Do I Need

    As a homeowner, you fully understand the significance of home insurance holds, not just in protecting your house but also your family. So, when it’s time to buy a new insurance policy, how does one decide on the amount of home insurance they require?

    The process of estimating just how much insurance your home requires, involves various steps. To begin with, you need to assess the approximate cost of rebuilding your house, followed by estimating the cost of your personal possessions present in the house. Apart from that, you must also consider the cost of your assets present in the house and the cost of liability to others. Another factor to be taken into consideration while assessing the amount of insurance needed is the cost of any alternate / additional living expenses (rent, etc.) which you might have to incur, if your house is rendered uninhabitable due to damage or ongoing repairs.

    Cost of Rebuilding Your House

    With all other things, construction costs have also gone up since the time you built your house. The cost of rebuilding a house could well be equated to the cost at which you would sell it off at. When it comes to rebuilding your house, there are several factors which come into play. Some of them are:

    1. Built-area of the house / structure.
    2. Local construction costs.
    3. Home exterior material – frame, brick/stone or veneer.
    4. Style of the structure i.e. colonial, cottage, French, Tudor, ranch, etc.
    5. Number of rooms / bathrooms in the house.
    6. Materials used for the roof and type of roof.
    7. Any other structures on the land like a garage or sheds.
    8. Any special features inside or outside the house like fireplaces, arched windows, trims on the exterior.
    9. Whether or not any part of the house was custom built like the kitchen, garage, etc.
    10. Any improvements / alterations done to the structure of the house like addition of another bathroom, enlarging the kitchen, or any other additions which have added to the overall value of the house.

    Cost of Personal Possessions & Assets

    The cost of personal possessions / assets is covered by most insurance policies. However, there is a specified limit up to which the insurance company will provide cover for these personal possessions, which is usually anywhere between 50% to 70% of the insurance amount of the house. To evaluate the amount of insurance sufficient to cover the value of the contents of your home, you need to carry out an inventory of your home. Make a detailed list of the contents in your house like electronic appliances, kitchen appliances, furniture, furnishings, valuables, etc. and the cost of replacing them, in case they are damaged, destroyed or stolen. You also have the option of choosing between an insurance policy which either provides Actual Cash Value for your lost or damaged goods or covers you for the Replacement Cost.

    Cost of Alternate Accommodation

    This is one of the most significant features of any home insurance policy which essentially covers you for any cost you might incur towards paying for an alternate or additional accommodation, in case your original accommodation / own house is damaged or destroyed by fire, a storm or any other insured disaster. This part of the insurance policy covers everything from meals, room rent, and any other living expenses which you might incur. This feature is also applicable in cases where a part of your house which has been rented out to a tenant, is damaged due to an insured cause. In this case, the insurance policy will cover the cost of the rent that you may have lost out on, which would have, under normal circumstances, been paid by your tenant.

    Liability To Others

    Your home insurance policy also covers you against any legal liabilities which may arise, if any third party sustains a bodily injury or property damage on your premises or any such damage which has been caused either by you or any of your family members. The policy shall cover you for the cost of any legal liabilities arising in court which you might have to pay. Different policies provide varying amounts of protection when it comes to legal liabilities. However, it is advisable to opt for a slightly higher sum.

    Deductible Amount

    Do consider he deductible amount when you are calculating the amount of insurance you must purchase. The higher the amount of the deductible you pay, the lower your insurance premium will be.

    In order to calculate the amount of insurance you need to purchase, you could also find assistance online. Online tools like Home Building Calculators or the House Content Calculators are of great help for the purposes which they serve. A House Building Calculator essentially helps in calculating the cost of rebuilding your house, based on the current rates. A Home Contents Calculator helps you make an inventory of the contents of your house like electric appliances, kitchen appliances, entertainment systems, personal computers, etc.

    Buying a house insurance policy is a decision which requires a fair amount of research and thought. In order to decide on the most adequate coverage which a policy can provide, you must evaluate the above mentioned factors, before arriving on a figure. Also, it is helpful to consult an agent or insurance expert, who can better guide you through the process and help you with the insurance deal which is best suited for you.

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