How to determine how much home insurance coverage you need?

If you’re like most people out there, you probably don’t have enough home insurance coverage. According to statistics, over 60% of all properties in the United States are underinsured. In case of an accident or natural disaster, most people find themselves having to take a lot of money out of their own pockets to pay for damage and restore their homes.

So how much home insurance coverage do you need in 2020? This depends on a wide variety of factors, such as the size/age of your home, the propensity of natural disasters occurring in your region, and the total value of your home or valuables inside it.

Many homeowners incorrectly believe that their standard policy insures them against floods, winds, storms, or fires. However, standard policies do not cover everything. Floods, earthquakes, sewer backup, fires, or maintenance damage are just some categories of threats that you need a separate coverage against.

Now, in case you have a mortgage, your lender will probably require you to get minimum insurance coverage, to protect their investment. If the home you live in is yours, the rule of thumb is to have enough coverage in order to:

• Rebuild your home after a disaster
• Replace all your belongings
• Cover damages and injuries as a result of the calamity
• Get enough money to live in another place while your property is fixed

First of all, you should consider getting dwelling coverage. This is that part of your insurance policy that helps to completely pay for rebuilding your property and any associated parts: garages, front porches, or decks. With this coverage, you can sleep soundly knowing that your insurer will replace any structural items affected.

This policy takes into account the cost of rebuilding, not the actual cost of your home. You can either estimate the costs or ask your insurance agent to do that for you.

The next policy you want to consider is personal property coverage. With it, you can easily replace all of your belongings affected or destroyed. This includes clothes, appliances, sports equipment, toys, furniture, electronics, and even the food inside your fridge.

If you choose this type of coverage, you need to be mindful at all times of the items you own. You should take photos of more valuable items and keep a list of your belongings, including the price you paid for each of them. Note that expensive items, such as watches, jewelry, musical instruments, or fine art, require additional coverage.

Another type of coverage you want to choose is water backup insurance, earthquake coverage, flood insurance, or any other specific insurance that you need in your area.

Lastly, you want to consider getting liability coverage. If someone gets hurt on your property, this type of coverage protects you from expensive claims. For example, if a worker has an accident or a guest gets bit by your dog, they may sue you and ask for tens of thousands of dollars in damage. A comprehensive liability coverage policy will protect you from any trouble.