How Can I Tell if I Have Enough Coverage?

The primary purpose of having homeowners insurance coverage is to have the ability to replace your house in the event that it becomes a total loss or you incur damages from things like unruly pets or adverse weather. Therefore, you will need to have enough coverage associated with your policy to rebuild your home. However, there are other benefits to having insurance for your home that can also determine the amount of overall coverage you purchase. Insuring the personal property within your home is a must, since such contents will likely become a total loss if the structure is destroyed too. Before purchasing coverage, you should have a rough estimate as to what it costs to rebuild your home, as well as the value of your personal belongings.

Home Replacement

If your home gets destroyed, it is unlikely that you are able to cover the rebuilding costs on your own--this is where homeowners insurance kicks in. Not only is it financially smart to have this kind of coverage, but it is also required if you are still paying a mortgage. In either case, it is important that you get the right amount of coverage so that your home is reasonably protected, but without breaking the bank.

The main reason homeowners purchase house insurance is to protect their homes. If a natural disaster or accident were to occur, you need this protection so that you can repair or rebuild the structure. Common types of disasters include fire, hail and winds. Flooding is another concern, but you will need to add a separate rider to your policy because basic homeowners insurance does not cover such disasters.

When determining the amount of coverage that you need to cover your actual structure, you first need to obtain estimates. Ask two to three contractors to evaluate your home, and have them give you an estimated cost as to how much it would cost to replace it in the event of a disaster. This will give you a rough idea as to what amount of homeowners insurance coverage you select. If there is a great discrepancy between the estimates, you might consider choosing a coverage amount that falls somewhere in between.

It is important to focus on these estimates and not base your coverage amounts on the actual market value of your home. The two amounts are often significantly different, and many homeowners make the mistake of basing their coverage off of the retail sale value. This can be disadvantageous to you for two reasons. First, you can accidentally select too much coverage and pay an unnecessarily high amount of premiums. Or you can obtain insufficient insurance and not have the right amount when you need it most.

Personal Property

Another aspect to choosing the right amount of coverage for your house insurance policy is protecting the personal property within your home. Although this might not apply to you if you are renting your home to another person, you should always protect your belongings as long as you are the one who is residing in the structure. If a disaster strikes and destroys your home, your valuables will likely be lost among the rubble too. It can be financially impossible to replace everything you own, and your insurance is able to help you along the way.

Before selecting the home coverage you want for your personal property, you should take an inventory of everything you own. At this stage, you might also consider taking photographs in case you need physical proof for the insurance carrier. You are less likely to have problems with claims down the line if you are thorough in your estimates.

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