Home Insurance Articles
The Correct Amount Of Home Insurance Coverage To Buy
2009-11-20
Purchasing the right amount of home insurance is a surprisingly involved endeavor. There are two basic types of home insurance coverage. The first type covers the entire replacement value of your home at today's cost. The second type is a "cash value" policy and is offered by virtually all home insurance agencies. Cash value polices pay you the amount your house is worth at the time of disaster minus deprecation. Cash value polices are generally cheaper than full replacement polices.
If you are going with a full replacement policy, you should research the cost of completely rebuilding your home at today's costs. A simple method for figuring this cost is to contact local home builders and ask them their building price per square foot. You should be sure to give them a list of the materials contained within your home, including any special materials like exotic marbles and international hardwoods. You will also want to take into consideration the current building codes & zoning laws in your area. These may influence the cost of rebuilding your home. Most home insurance policies will not cover these costs, so you will need a rider to cover this and any other unexpected expenses incurred in rebuilding your home.
In determining your home insurance policy, you will want to make sure it offers full replacement value on all of your possessions. A general rule you can use is to insure your possessions for approximately 65 percent of the value of your home. If the cost of replacing your possessions is higher than the standard replacement amount listed on your policy, you may need to purchase extra coverage through a property rider. Possession coverage is similar to structural coverage in that there are two different types. You can choose between full replacement and cash value. Your possessions tend to depreciate much quicker than your structures do, so full replacement coverage is the type of policy you need when considering possession coverage. Discussing your particular situation with an agent is the best way to learn what type of policy you need.
The final thing you need to research when purchasing a home insurance policy is liability coverage. Every policy comes with a standard amount of liability coverage ranging from $100,000 to $300,000. If your net worth is higher than your standard coverage, you might want to look into purchasing an umbrella liability policy. Juries lean towards large awards for accident victims when you are determined to be at fault, and an umbrella liability policy can be an important part of your asset protection strategy.
In all realms of home insurance coverage, your best route to obtaining the proper amount is to meet with a qualified agent.