Home Insurance  

Owning a home is a significant milestone, but protecting that investment is equally crucial. Homeowners insurance can be a financial safeguard against unexpected disasters and liabilities. Let this guide help you determine the right amount of coverage for your home.  

How Much Homeowners Insurance Coverage Do I Need? 

The general rule of thumb for homeowners insurance is to purchase coverage that equals the replacement cost of your home. This cost is not necessarily the market value but rather the amount required to rebuild your property if destroyed.  

It’s important to note that the replacement cost should include the structure and any associated costs, considering local building codes, which might have changed since the home was initially constructed. Beyond this, liability coverage is also advisable to protect against lawsuits for damage or injuries that occur on your property. 

How Do I Calculate How Much Property Insurance I Need? 

A typical home insurance policy covers the structure of your home and personal belongings, with added personal liability coverage. To determine the amount of insurance you need, start by factoring in your home’s location, square footage, features and building materials. Take an inventory of your belongings and estimate their replacement value. These can include the following: 

• Furniture
• Electronics
• Appliances
• Clothes Valuables (e.g., artwork or jewelry) 
•  

Depending on your location and other circumstances, you may need extra coverage such as flood insurance, earthquake insurance or coverage for specific hazards prevalent in your area. This is particularly critical as standard homeowners policies typically do not cover flood or earthquake damage, highlighting the importance of these additional policies for those in risk-prone areas. Consult with an insurance agent to receive personalized guidance.  

What Is the 80-20 Rule in Homeowners Insurance?  

Most home insurance carriers follow the 80-20 rule, which dictates that they may only reimburse the homeowner for damages to a house or property if the insurance coverage purchased equals at least 80% of the property’s total replacement cost. If this threshold is not met, the insurance company may pay only a portion of the claim based on the percentage of the home’s insured value.  

Keep in mind that some insurance providers might mandate higher percentages or incorporate features within their policies to accommodate rising replacement costs caused by inflation. To avoid being underinsured, regularly reassess your coverage alongside an insurance professional.  

How Much Should You Spend on Homeowners Insurance? 

While you may be inclined to find the cheapest home insurance available, it’s crucial to prioritize adequate protection over low premiums. Consider bundling your homeowners insurance with other policies such as auto or umbrella insurance for potential discounts. Review your policy annually to compare rates and ensure you’re getting the best value for your coverage needs. 

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Esplanade Insurance Agency can help you get home insurance while maximizing savings. Contact us today to get started.