Homeowners need insurance policies to protect their homes, especially in areas that are prone to natural disasters, theft, acts of vandalism, or other causes of property damage. However, one of the first considerations homeowners make in reducing their financial liability is, “Exactly how much homeowners’ insurance do I need?”
Factors That Can Impact Home Rebuilding Costs
The market value of your home could be more than or less than the cost to rebuild your house. It is a good idea to know how much it would cost in your area to rebuild so that you can make sure that you have adequate homeowners insurance coverage.
There are two main figures that will influence the total sum of your home rebuilding costs; the structure’s square footage and local construction costs. One fast way to estimate how much insurance you need involves multiplying local, per-square-foot building costs by the total square footage of your property. You may need to contact a construction association or a local real estate agent to learn the average building costs in your neighborhood.
Many other details can influence rebuilding costs. These include:
- The type of material used for your home’s exterior (e.g. brick, veneer, etc.)
- The number of rooms and bathrooms
- Special features such as skylights and fireplaces
- Renovation and remodeling projects, including any room additions
- The existence of structures such as sheds
Establish The Amount Of Insurance Needed For Possessions
According to the Insurance Information Institute, many homeowners insurance policies offer coverage for your personal possessions at approximately 50 to 70% of the insurance on your residence. Nevertheless, you may find that level of coverage to be insufficient for what you own.
Here are two crucial steps to take to determine whether or not you have enough coverage.
Take Inventory Of Your Personal Possessions
A home inventory can be a highly accurate way to determine the value of all your belongings. Having a detailed record of everything you own can also prove useful in the event that any of your possessions are stolen or destroyed in a disaster such as a fire, flood, hailstorm, or hurricane. The process of filing a claim will be more straightforward if you have a home inventory. You should also make sure to take stock and estimate the value of precious items such as jewelry, furs, and collectible objects.
Determine How Much Liability Insurance You Need
A liability insurance plan or policy protects you against lawsuits related to either bodily injury or any property damage that you or your relatives or pets may inflict upon other individuals (including court costs). Per the Insurance Information Institute, most homeowners’ insurance policies provide at least $100,000 worth of liability insurance. However, prices for many valuable items in the United States have risen in recent years, so you may be advised to purchase a policy with a higher level of coverage (e.g., $300,000 worth) if possible.
An excess liability or umbrella policy can also be beneficial because it offers coverage above your standard liability policy caps. The cost of the latter type of policy may vary depending on the degree of risk you represent.
There are other precautions you can take that can ultimately prove to help you significantly in the process of assessing precisely how much homeowners’ insurance you need. You can confirm whether your home is up to code, whether it is older with features that are difficult to replace (e.g., carvings, ceiling moldings), and factoring in the potential rise in the cost of building materials. An inflation guard clause can be added to your policy to protect you against an increase in these types of costs.
According to IBISWorld, the homeowners’ insurance industry in the U.S. grew at an average rate of 1.5% from 2015 to 2020. Be sure to protect yourself against any disasters that may come your way (or penalties you could potentially face for non-compliance).
Contact The Homeowners Insurance Professionals
The experts at Merchant Family Agency will happily answer any questions about the benefits of acquiring homeowners’ insurance and how much protection you need. Since 1995, we have been dedicated to providing customers in Georgia and Florida with versatile home insurance policies. Our products include condo insurance, flood insurance, umbrella insurance, and liability insurance. Our agents will be happy to assist you and ensure that all of your assets are adequately protected. Contact Merchant Family Agency today for more information about our solutions.