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How much home insurance coverage do I need?

Most home insurance companies will help you calculate how much insurance coverage you need based on information you provide in your application.

Here’s a quick look at the typical homeowners insurance coverage amounts based on the different sections of your policy.

Coverage type

Typical coverage limits

How to calculate needs

Basic Dwelling Coverages can range from$100,000 to $1 million

Multiply the square footage of your home by the average cost per square foot to build in your area.

Other Structures is 10% of your dwelling limit:

Multiply the square footage of the other structures on your property by the average cost per square foot to build in your area.

Personal Property Coverage is 50% to 70% of your dwelling limit. It is highly recommended you make a home inventory of all of your personal belongings.

Personal Liability coverage is up to $500,000

Add up all of your assets — including your home, belongings, cars, investments, retirement funds and savings.

Medical payments to others recommended to start at $5,000 — though possible to increase up to $25,000. Increase limits if you own a pool, dog, or trampoline that put your guests at greater risk of injury.

Additional living expense is 20% of your dwelling limit

Add up how much you spend on living expenses like food, rent, and gas in a typical month.

How much dwelling coverage do I need?

Dwelling coverage is the part of your home owners policy or HO3 that reimburses you when the structure of your home is damaged. You should have enough dwelling coverage to fully rebuild your home from the ground up if it’s completely destroyed in a disaster.

Your dwelling coverage limits should not be based on your home’s market value which is how much buyers are willing to pay for it on the real estate market. Instead, how much dwelling coverage you need should be determined by the rebuild cost of your home — also known as the replacement cost.

Let’s take a look at an example.

Say you just went through a bidding war to purchase your first home. While the rebuild cost of the home is only $400,000, you paid over $500,000 for it due to the competitive real estate market.

You’d only need $400,000 in dwelling coverage — even though you paid over $100,000 more when you purchased the home.

How to calculate your home’s rebuild cost

To get a rough idea of how much your home’s rebuild value is, there’s a simple way to do it: Multiply the square footage of the home by the average cost per square foot to build in your area.

You can also use this same method to calculate the rebuild cost of other structures on your property, which we’ll get into more next.

9 factors that affect the rebuild cost of your home

There are many factors that affect a home’s rebuild cost, including:

  • Local construction costs

  • Age of your home

  • Your home's square footage

  • Number of bathrooms and other rooms

  • Style of your home — colonial, ranch, farmhouse, craftsman, etc…

  • Type, materials, and age of your roof

  • Special features of your home — fireplaces, crown molding, arched windows, etc…

  • Whether your home was custom built

  • Recent renovations

The Urbanik Group take the time with each and every customer to discuss all your insurance coverages.

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