How much homeowners insurance do I need? You need enough insurance to cover the following:

• The structure of your home.
• Your personal possessions.
• The cost of additional living expenses if your home is damaged and you have to live elsewhere during repairs.
• Your liability to others.

You need enough insurance to cover the cost of rebuilding your home at current construction costs. Don't include the cost of the land and don't base your rebuilding costs on the price you paid for your home. The cost of rebuilding could be more or less than the price you paid or could sell it for today.

Some banks require you to buy homeowners insurance to cover the amount of your mortgage. If the limit of your insurance policy is based on your mortgage, make sure it's enough to cover the cost of rebuilding.

For a quick estimate of the amount of insurance you need, multiply the total square footage of your home by local building costs per square foot. To find out construction costs in your community, call your local real estate agent, builders association or insurance agent.

Your personal possessions

Most homeowners insurance policies provide coverage for your personal possessions for approximately 50% to 70% of the amount of insurance you have on the structure or "dwelling" of your home. The limits of the policy typically appear on the Declarations Page.

To determine if this is enough coverage, you need to conduct a home inventory. This is a detailed list of everything you own and information related to the cost to replace these items if they were stolen or destroyed by a disaster such as a fire. If you think you need more coverage, contact your agent or insurance company representative and ask for higher limits for your personal possessions.

Additional living expenses after a disaster

This is a very important feature of a standard homeowners insurance policy. This pays the additional costs of temporarily living away from your home if you can't live in it due to a fire, severe storm or other insured disaster.

Coverage for additional living expenses differs from company to company.

Liability to others

This part of your policy is designed to help cover you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also helps pay for damage caused by pets. It may pay for the cost of defending you in court and for any damages a court rules you must pay if the act is based on negligence (with some exceptions). 

Umbrella or Excess Liability.

You should buy enough liability insurance to protect your assets. If you own property and or have investments and savings that are worth more than the liability limits in your policy, you may consider purchasing an excess liability or umbrella policy. Additional premium may be required. 

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