How Much Home Insurance Do I Need?

Most people need sufficient home insurance to cover their home’s replacement costs, but the amount of coverage you need will depend on your property, area risks, and other factors. 

Homeowners insurance should protect what could be one of the biggest investments of your life: your home. Knowing whether you have sufficient coverage is crucial due to coverage limitations and restrictions.

Various types of coverage, from dwelling coverage to personal property, are also to consider. Below, we'll breakdown the types of coverage and when you might need them so you can answer the question, “How much home insurance do I need?” 

How Much Home Insurance You Need Based on the Types of Coverage

A typical home insurance plan covers your dwelling, other structures, and personal property. Here is an overview of the types of homeowners insurance coverage you might need. 

Dwelling Coverage 

Dwelling coverage pays to repair or rebuild your house if a covered peril damages it. This coverage will also repair or rebuild attached structures, like a deck. Common covered perils include loss due to fire, windstorms, hail, lightning, and vandalism.

To determine how much coverage you need, estimate the cost to rebuild your home, not its market value. Your mortgage lender may require certain dwelling coverage options or limits.

A subcategory of dwelling coverage is extended replacement cost and guaranteed replacement cost. Extended replacement covers up to a set percentage over your dwelling limit. Guaranteed replacement will pay to rebuild your home after a covered disaster, whatever the costs. 

For example, if your home costs $300,000 to rebuild, an extended replacement might cover up to 80% over your limit, while a guaranteed replacement will cover the full amount needed. 

Other Structures Coverage 

This coverage pays to repair or replace detached structures on your property, such as sheds, fences, or even detached guesthouses. Like dwelling coverage, this insurance only kicks in when the loss or damage is due to a covered peril.  

While insurers' policies can differ, most policies cover detached structures for about 10% of the amount of insurance you have on the house's structure. For example, if your home is worth $300,000, other structures coverage would typically cover up to $30,000. 

If you have a detached guesthouse, a barn, or other high-value structures, you might want to consider increasing the coverage percentage.

Personal Property Insurance

Personal property insurance will pay to repair or replace your personal belongings, including furniture, clothes, and electronics, if they are stolen or damaged due to a covered peril. You can also consider an all-risk policy, which covers any event the policy doesn't specifically exclude. If you have a policy with named perils, only the events listed in the policy are covered.

You can choose between the actual cash value personal property coverage included in most homeowners insurance policies and the optional replacement cost coverage. Both types are subject to applicable policy limits and deductibles. Most home insurance companies will set your personal property limit between 50% to 70% of your dwelling coverage.

To estimate your personal property coverage needs more accurately, inventory everything you own and assess the value.​​​​​​​​ You can also get additional coverage for valuable items, such as collector or jewelry insurance. 

Personal Liability Coverage

Personal liability insurance covers the costs of accidental injuries and property damage to others. Like other liability insurance, this coverage covers legal fees if you're sued due to an accident. Personal liability coverage can cover everything from someone breaking their leg tripping on a loose step to a branch from your tree falling in your neighbor's yard. 

Many homeowners insurance policies provide a minimum of $100,000 in personal liability coverage. If you have a high-risk property, you could purchase an umbrella or excess liability policy if you need additional liability coverage. 

It's usually a good idea to have enough liability insurance to cover the total value of your at-risk assets, including cars, homes, cash in bank accounts, and investment accounts. 

Additional Living Expenses Coverage

If you have to move out of your home due to extensive damage, additional living expenses coverage will pay for your living expenses while you cannot live there. That can include apartment rental or hotel bills, restaurant meals, or additional transportation costs if your commute to work is longer than usual.

Additional living expense coverage usually has a dollar limit and a time limit. Consider the costs in your local area to rent a comparable property for three months, for example, and then check to see if you have adequate coverage.  

Medical Payments to Others Coverage

Medical payments to others will help pay medical bills for a visitor accidentally hurt while on your property. Policy limits vary, but most policies have at least $1,000 in coverage. If the damages are higher than your coverage limit, you'll be responsible for the difference. 

Additional Homeowners Coverage You Might Need

In addition to the basic coverage, you might need additional policies based on where you live. Here are a few possibilities to consider: 

• Water backup coverage: Covers damage to your property, including mold and water damage caused by a clogged sewer line, failed sump pump, and backed-up drains. You can also consider sewer line insurance. 
• Flood insurance: Related to water backup coverage, flood insurance covers losses directly caused by flooding.
• Earthquake insurance: Covers some losses and damage caused by earthquakes. Typically covers your home, belongings, and other buildings on your property.
• Sinkhole coverage: Covers your house, unattached structures like sheds, fences, barns, or guesthouses, and personal property from damage caused by a sinkhole.
• Home-based business insurance: This is a bundle of insurance coverage for business owners who work from home, which might include general liability insurance, professional liability insurance, business personal property insurance, or business interruption insurance. 
• Identity theft: Covers the costs to recover your identity or associated losses and provides financial protection for victims of identity theft.
• Cyber insurance: Designed to protect individuals and businesses from Internet-based risks, such as cyberattacks.

Compare the Best Home Insurance Providers From Benzinga’s Top Partners

Comparing policies and coverage amounts is essential. You can find various offers from Benzinga's best home insurance partners here:

Do You Have Enough Home Insurance?

Home insurance costs are minimal compared to the cost of replacing your home or the devastation of having to pay for major repairs out of pocket. It protects your property and investment and ensures that your family's comfort and assets are secure, whatever happens. 

When choosing home insurance, get a realistic estimate of your home's replacement cost and account for additional structures, personal property, personal liability, and other possible risks like floods, earthquakes, or water damage. You might also want to include cybersecurity insurance if you have a sophisticated home security system.  

Remember to compare estimates, read policies carefully, and consider add-ons to ensure you get coverage at the best price. You can also check out homeowners insurance vs. renters insurance, so you're covered in all cases. 

Frequently Asked Questions