by Barbara Nuzum

Created on: May 08, 2009   Last Updated: May 14, 2009

How much Homeowner's Insurance do you need?

Home is where the Heart is-and it is also your biggest financial investment. You need to protect it adequately against eventualities and unforeseen circumstances. Analyze your assets to determine how much coverage your homeowner's insurance should offer. Several criteria need to be considered.

*Structures

You should only insure the value of any structures on your property, such as the house, barns or any other kind of outbuildings. Do not include the value of the land itself. Should you have to rebuild due to disaster, the land will still be there.

Some banks require that you carry a homeowner's insurance policy for the amount of the mortgage only. Keep in mind that is to protect the bank's assets, not yours. Be sure to buy enough insurance to cover current construction costs. You can quickly estimate how much insurance you need by multiplying the square footage of your home by the cost of local construction cost. Consider the materials used in the construction of your home and the style, such as ranch or 2-story. Then call several insurance agencies to get home owner's insurance quotes. This will give you a good idea of what you need and how much it will cost you. Review your homeowner's insurance policy periodically and update the coverage if there have been improvements made to the house. And to protect against inflation, you may want to add an Inflation Guard to your homeowner's insurance policy.

*Floods and Earthquakes

Most homeowner's insurance policies cover disasters such as fire, lightning, hail and storms, gas explosions and outside forces such as theft and burglary. If you live in an area prone to floods or earthquakes, you should buy additional insurance for theses natural disasters. Flood insurance is available through the government's office of the National Flood Insurance Program, and through the private sector. In most states earthquake insurance is available through private insurance companies.

*Personal Property

Make a list of the items you want insured. Keep purchase receipts of the most expensive items. Consider to insure your personal items for replacement cost rather than actual cash value. This will protect you against depreciation of items such as electronics or appliances.

While you shop around for homeowner's insurance quotes, ask what limits are set on expensive personal items such as jewelry, paintings or silverware. If you need extra coverage, inquire about a personal property floater.

*Living Expenses after Disaster Strikes

Your house has been rendered uninhabitable due to a natural disaster and it might take several months to rebuild a home. Perhaps you had rented out part of your home and now suffer loss of income. Consider including coverage for such eventualities.

*Liability

Liability insurance will protect you against lawsuits for bodily injury that you, a family member or a pet may cause. Standard coverage is usually $100,000.00. Some companies offer higher amounts and you should inquire about this feature when you get homeowner's insurance quotes.

*Umbrella Liability

As the name implies, this is broad coverage to exceed the limits of your standard homeowner's insurance policy. It usually activates once your standard liability insurance has been used. An umbrella policy will offer you a higher dollar amount as well as coverage for libel, slander and invasion of privacy. This coverage must be purchased separately.

To have sufficient homeowner's insurance coverage will not only give you peace of mind, but also protect your financial health. Natural disasters, theft or fire may be beyond your control, but you can prepare against such eventualities.

Learn more about this author, Barbara Nuzum.
Click here to send this author comments or questions.