How much homeowners insurance do I need?

Homeowners Insurance

You may think the biggest threat to your home is a fire, storm or flood. All of those can be devastating to your family, but there’s one hidden danger that can wreck your family’s finances and quality of life for years — not buying enough homeowners insurance.

When a disaster happens, you count on your homeowners insurance to jump in and foot the bill to make it all right again. But if you don’t have enough homeowners insurance, you may find yourself paying out of pocket for repairs, a rental home while your home is being repaired, and more. It’s estimated that one in three Americans is underinsured. So how much homeowners insurance do you really need?

Consider the replacement cost of your home

If a fire burns your home to the ground, you’ll need to replace your home from the ground up. You want to make sure your home is covered for the replacement cost, not the value. Insuring for the replacement cost means your insurance will completely cover the cost of building an exact replica of your home, minus your deductible.

How do you figure out the replacement cost of your home? 

This part is tricky. With the cost of building materials skyrocketing at the moment, as well as the increased cost of labor as Covid-19 has caused a labor shortage, building costs are higher than ever. But that is likely to not always be the case. Figuring out the replacement cost of your home is not a “one and done” deal. It’s something you should refigure every few years, so you’re covered even if the market goes up or down.

It can be difficult to do this math, but one quick way to get an estimate is from your homeowners insurance agent. Insurance agents have access to up-to-date averages of building costs, such as materials and labor, and will be able to give you a good estimate of how much it would cost to replace your home.

A home isn’t a home without what’s inside 

Now that you’ve got the structure of your home covered, it’s time to consider what’s inside. After all, it’s the stuff inside that makes a house a home. This will be covered in a portion of your homeowners insurance called “personal property coverage.”

People tend to vastly underestimate the cost to replace all the items in their homes, probably because we buy things a little at a time, never really adding it all up. To figure out how much personal property coverage you need, go through your home and write down the value of clothes, shoes, electronics, furniture, decor and any other items of value. While you’re at it, take pictures, too. If you ever need to file a claim, these pictures can be helpful to getting the proper reimbursement from your insurance company.

Even in a small home, you’re probably going to be looking at tens of thousands of dollars to replace everything inside. In the case of a disaster, that’s not a bill you want to be footing all on your own.

Liability coverage 

If someone is injured in your home, your homeowners liability coverage will cover their medical bills as well as any court costs you incur. Most homeowners insurance policies come with $100,000 liability coverage automatically, but we typically suggest that homeowners raise that amount to at least $300,000 or more. This extra coverage doesn’t add much to the cost of premiums, but it can save you a load of hassle should someone be injured in your home.

Got questions about your homeowners insurance? 

The insurance experts at Edwards Insurance Agency have helped thousands of South Carolina homeowners get affordable yet comprehensive insurance that protects their biggest investment. Give us a call today.