How to Estimate Home Owners Insurance Coverage

Estimate the value of everything outside and inside your home.

Estimating how much homeowners insurance coverage you need can be a bit challenging. Simply getting coverage that equals your mortgage balance, as required by your lender, is seldom, if ever, sufficient. You need to consider a number of questions, features and variables about your home.

Things You'll Need

• List of all personal property
• Calculator

Instructions

Estimate Homeowners Insurance Coverage

1. Calculate the cost to rebuild your home in the event of a total loss. Some property and casualty (P&C) insurance companies have built-in estimators of costs to rebuild. Do not totally depend on their calculated figure. Perform your own rough calculation (or get some help from an expert) of the real projected cost to rebuild.

2. List and assign a value to replace ALL the contents of your home. Many people underestimate this important factor. Don't be one of them. Consider everything, including all family clothing, furniture, electronics (PCs, TVs, other audio/visual components, and alarm systems), lamps, art work, jewelry, rugs, curtains, and all other personal property.

3. Add the cost to rebuild your home and the value of all the contents of your home. The total is the minimum coverage you'll need for your homeowners insurance.

4. Choose a deductible amount that is "comfortable." Saving money on homeowners insurance premiums by having a large deductible may make sense. However, you should set aside the amount of your deductible in savings, allocated specifically for insurance. The emotional stress after a casualty loss only increases if you don't have the funds needed to meet your deductible.

5. Assess whether you need need flood insurance coverage. Most homeowners insurance policies do NOT cover pure flood losses. Buying a home with a mortgage will help you in this area; the lender will obtain a flood certificate, which determines the probability of your home suffering a flood-related loss. Federal flood insurance is available at reasonable cost. If you are in a classified flood area, your lender will mandate that you purchase this coverage.

6. Write down special items that you may need extra coverage for, such as a pool, storage shed or other structure on your property, or more expensive items, such as jewelry, unique antiques or collections (stamps, baseball cards, campaign buttons, coins). Ask your insurance company for a low-cost "rider" (addendum) to your policy that will specifically cover the loss of these items.

7. Calculate the amount of homeowners insurance coverage based on the values and special situations you've figured out.

8. Compare your conclusion with an online calculator from an insurance company website. Many insurance companies offer calculators that prompt you for answers, so they can estimate the coverage you should purchase, which will give you numbers to compare.

Tips & Warnings

• Consider the materials in your home when estimating rebuilding cost. For example, you'll want to replace expensive tile counter tops with similar material, not linoleum. If you have a storage shed, put a value on the contents, not just the structure.

• Don't forget to estimate the value of items in your attic or basement. You might have valuable contents that you could overlook. Don't select homeowners insurance coverage on price alone. Choose a company that has a reputation for making the claims process easy with fast payment. Don't use the tax valuation for your property as a valid value indicator. Tax values are different from home appraisals or other value estimators.

References

• How to Estimate Home Value
• Federal Flood Insurance Program
• How Much Homeowners Insurance Should You Have