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How much homeowners insurance do I need?

Many people question the amount of homeowners insurance they need to cover their home and possessions in the event of a flood, fire or other disaster.

The amount of homeowners insurance you will need to purchase will cover the cost of the following:

  • The structure of your home
  • Your personal possessions
  • The cost of additional living expenses in the case that your home is damaged and you must live somewhere else while repairs are performed
  • Your liability to others for accidents that may happen at your home

While considering the value of your homes structure for insurance purposes, please keep the following in mind:

Your homes structure does not include the land that your home resides upon. In the event of a fire, flood or other disaster, your homes structure should be insured enough to cover the cost of rebuilding your home at current construction rates. This value is not contingent upon the price you paid for your home, or what you might be able to sell your home for today.

Some banks will require you to purchase enough homeowners insurance to cover the amount of your mortgage. Although in some cases your loan amount might be less than the value of your home, you should still purchase enough homeowners insurance to cover the cost of rebuilding. Homeowners insurance is designed to protect your investment and should not be purchased only to meet bank requirements on your loan.

To estimate the amount of insurance you will need to cover the structure of your home, multiply the square footage of your home by local building costs per square foot. Use our home insurance calculator for accurate calculations.

Home Insurance Coverage Estimator

To find out construction costs in your community, call your local real estate agent, builders association or insurance agent. Remember, factors that will play a role in determining the cost of rebuilding your home include:

  • Local Construction Costs
  • The Square Footage of the structure
  • The type of exterior wall construction

Last Updated: July 15, 2009

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More Frequently Asked Questions About Homeowners Insurance

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