Most homeowners automatically assume that home insurance is a common requirement. While this is true, the requirement doesn’t come from state or federal laws. The only time you may be required to carry home insurance is from a lender if you have a mortgage on your home. Requirements and insurance needs vary, however.

How Much Home Insurance Do I Need?

Aside from mortgage requirements, you should carefully consider different aspects of your home before choosing the amount of home insurance to purchase. Every home is different, and your home insurance needs may be different than your neighbor’s. In general, it is recommended that you insure your home to cover its total replacement cost value.

The total replacement cost value of your home is how much it would cost to completely rebuild the structure, along with material and building costs. This is not the same amount as its market value or the amount you paid for it. You can calculate your home’s total replacement cost value with the help of online calculators and using the value per square foot, along with the value of its permanent fixtures.

Be aware of the 80% rule when searching for a home insurance policy, as well.

What Does 80% Mean in Home Insurance?

In home insurance, the 80% rule means that you should insure your home for at least 80% of its total replacement cost value. If you insure your home for less, you could have gaps in your coverage that leave you open to unexpected expenses when it comes time to file a claim.

How Much Personal Belongings Coverage Do I Need?

The amount of personal belongings coverage you need on your home insurance policy depends on the type of policy you want and the total value of your belongings. There are two types of personal belongings policies: actual cash value and replacement cost value. An actual cash value policy will compensate you for damaged or lost items after accounting for depreciation. This means that as the value of your items goes down, so does the amount of compensation you can receive for them. A replacement cost value policy provides compensation for your items without accounting for depreciation. This type of policy is usually more expensive but may more likely allow you to completely replace your belongings.

Every home is different, and you should have coverage geared for your needs and your budget. Speak with an insurance agent about insuring your home for what it is worth.

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