How Much Home Insurance Should I Carry?

Homeowners insurance must cover the most severe disasters.

Home Insurance Should Cover Rebuilding Costs

Home insurance should cover the costs of materials and labor to completely rebuild a severely damaged house. Estimating the amount of coverage involves multiplying the home's square footage by the average cost per square foot of construction in the area. Insurance agencies and real estate offices carry this type of local information, according to CompuQuotes.

Personal Possessions Cost Money as Well

The cost of rebuilding an actual dwelling won't cover all losses if a fire, flood or other disaster occurs. Belongings inside the house should add at least 50 percent over rebuilding costs to the home insurance policy, states Salhaney Insurance Agency.

Bottom Line

The amount of home insurance required by lenders won't always cover the costs to completely rebuild a house and replace the belongings inside. Instead of buying the bare minimum, homeowners should multiply their home's square footage by the area's average square foot construction cost and add 50 percent more for personal belonging coverage.

References

• CompuQuotes: How Much Homeowners Insurance Should You Carry?
• Salhaney Insurance Agency: PERSONAL INSURANCE