How Much Homeowner’s Insurance Do I Need?

Home much homeowner's insurance do I need?Homeowner’s insurance is insurance coverage that protects your home, its contents and other assets in the event of fire, theft, vandalism, accident, storm or other disaster. Homeowner’s insurance also covers liabilities if someone is hurt on your property.

Some coverages for your home are not included in a standard policy. For example, floods and earthquakes are usually purchased separately. Some homeowners also insure specific items such as an art collection or jewelry over a certain amount.

If you have a mortgage on your home, your lender will require you to have homeowner’s insurance, but it is not required by law. However, we consider it a “must have” even if your home is paid for.

How much coverage do you need to protect yourself financially if something happens to your home? To answer that, let’s look at some important terms that will influence the amount and cost of coverage.

  • Guaranteed replacement coverage: Your insurer will pay to rebuild your home no matter what it costs. According to the Wall Street Journal, these types of policies are hard to find.
  • Extended replacement coverage: Many insurance companies offer coverage with a cap at 125% of the insured value of your home. This limits their liability.
  • Inflation guarantee or guard: This insurance feature ensures that your home’s insured value is in line with the current marketplace.
  • Actual cash value vs. replacement cost: To insure the items in your home, a replacement cost policy is more advantageous than actual cash value as personal items such as furniture, clothing, electronics and household furnishings depreciate over time.
  • Liability coverage: This is a standard feature of homeowner’s insurance to protect yourself if someone is injured on your property or in your home. Standard policies range between $100,000 and $300,000. How much coverage you opt to get depends on your needs.

The Wall Street Journal recommends that you get an appraisal and then purchase extended replacement coverage and an inflation guarantee to protect yourself. You will also want to ask your insurance agent if flood insurance is required in your region of the country. If so, you’ll want to obtain that coverage. Learn more about flood insurance at

Because each homeowner’s situation is different, it is best to discuss your specific needs with an insurance specialist. If you don’t have an insurance agent, ask your Realtor for a referral to local agents she knows and trusts. They can discuss your situation and make recommendations for your consideration. Good luck!

Marti Reeder, Realtor, Managing Broker