Everyone has different needs and preferences when it comes to homeowners insurance coverage, so identifying what would be considered "too much" or "too little" is difficult to really nail down. Since it's different for everyone, you will want to consider the following questions before deciding how much insurance coverage you need for your home.
How much would it cost to replace my home?
Most insurance agents would recommend getting enough insurance to cover the cost of replacing your home in case of an accident. Determining the cost of replacing your home is not quite as easy to figure out as it seems. The figure won't be the same as what you paid for the house or the price you could sell it for, since factors such as location and land contribute to the cost. Call some contractors in your area to get a good idea about how much it would cost to replace your home and adjust your coverage accordingly. Be sure to add in any upgrades you have made to your house in the mean time.
How much would it cost to replace my belongings?
Often, your belongings inside the house can add up to at least half of the cost of the home itself. Consider the cost of your furniture, electronic equipment, works of art, wardrobe, jewelry, appliances, and other expensive items in your home. Because these items can add up to approximately half of the cost of your home, you will want to make sure that the insurance coverage for your belongings is approximately 50% of the coverage on your home.
What would you do if your home was no longer inhabitable?
If a serious disaster damaged your entire home and you were forced to rebuild, how would you cover the cost of living in a new home and paying for necessities such as food, electricity, transportation, and other living expenses? These expenses should also be covered in your insurance plan and should be factored according to the time span necessary to rebuild your home.
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