to PurchaseAs a homeowner, you purchase insurance to cover
your house and your possessions, and help you
protect the value you’ve built.
How do you decide how much homeowners coverage
to purchase though?
Here Are Some Steps to Make Sure You Are Covered:
Homeowners insurance covers the costs to rebuild your home and replace personal items after a covered loss, like a fire or natural disaster. It also provides liability coverage in the event someone accidently gets hurt as a result of your negligence and sues you. You will want to keep these things in mind when selecting coverage.
To have a better idea of how much Homeowners insurance it makes sense to buy, take some time and:
Video: Homeowners Insurance
Estimate the cost to rebuild your home.
Rebuilding your house can be your biggest expense and one of your first priorities after a covered total loss. That’s why estimating rebuilding costs is so essential to consider when selecting your homeowners coverage limits.
Many people want to base the replacement costs on the price they paid for their home, instead of considering what a rebuild would actually cost.
Market values fluctuate and material and labor prices are different across the country. Also, the cost of your home probably included the land it sits on, while the cost to rebuild it doesn’t.
In other words, the cost to rebuild your home might be very different than the price you paid for it.
When estimating rebuilding costs, among other things, take into account:
It may cost more to replace or rebuild upgraded features made with new materials or specialized labor. If you’ve made upgrades to your home, consider its potential increased value.
Age of your home
If your home is older, you may be required to rebuild to modern building code standards, which may add to the cost. A Farmers Homeowners policy generally includes an extra 10% above the reconstruction cost to cover added expenses required by building codes and ordinances.
Local rebuilding costs
Talk to a reputable contractor, check online, or talk to your agent about local building prices. This should give you a good idea of what labor and materials cost in your area.
Take an inventory of your personal property.
Homeowners insurance covers the costs to replace your stuff if it’s stolen, damaged, or ruined (as long as it’s a covered loss). The next step in choosing the amount of homeowners insurance you want is to determine the value of your personal property. The best way to do that is by taking a home inventory:
- Make a list of everything in your home, from the furniture to the appliances. Include as much detail (estimated price, purchase date, make, model, etc.) as you can.
- Take pictures or a video of everything.
- Keep your personal property inventory in a safe place outside your home, like in a safe deposit box, with a friend, or online in digital cloud storage.
- Update your personal property inventory after you acquire new things.
Consider your assets.
If there is an accident, and your negligence is the cause of property damage or bodily injury, your assets might be at risk. A lawsuit could threaten your investments, your home, and your financial future. Thankfully, Homeowners insurance offers liability coverage in the event you’re legally responsible for another’s injuries and damages.
To determine how much liability coverage you want, it’s important to consider your net worth and what liability coverage limits would be enough to protect you.
If you have a high net worth, you may want to consider an Umbrella policy, which provides additional liability limits over and above those provided by your homeowners and auto policies.
This brief summary is not a policy document. Please read the actual policy documents for your state for important details on coverages, exclusions, limits, conditions and terms. If there is any conflict between this summary and the policy documents, the policy documents will control. Not all products and discounts are available in every state.