The cost of homeowners’ insurance is dependent on a number of factors, which include the area you live in and the condition of your home. Although there is only so much you can control with the cost of the premium, you can control how much coverage you plan to take out on the policy. To calculate your homeowners insurance, take into consideration the various aspects that go into deciding how much coverage you need: the cost of the structure, its contents, temporary housing during repairs and liability.
Determine how much it would cost to rebuild your home at the current rates. Compare this amount with your mortgage and make sure that you are covered for the higher of the two. Some banks require you to have enough coverage in your policy to cover the mortgage, so if this is less than it would cost to rebuild your home, take the coverage amount the covers the rebuilding. This is in the event that a disaster happens and your home needs to be completely rebuilt; the cost may be more or less than the current value of your home. Find out the square footage of your home and use the local building costs per square foot to come up with the calculation.
Consider the cost of additional living expenses. If your home is destroyed, you will need a temporary place to live during repairs. The cost of additional living expenses is typically covered for an amount equal to 20 percent of the coverage you have on your home.
Make an inventory of all the items in your home. This determines the amount of coverage you need for personal property. When making your list, be detailed with each item and include the dollar figure to replace each item in the event of loss or damage. You may need to ask for higher limits on your personal belongings; personal possessions usually amount to 50 to 70 percent of the coverage you have on your home structure.
Determine how much liability protection you need to purchase. The minimum is usually $100,000 for most policies, but between $300,000 and $500,000 worth of coverage is often recommended. This liability protection covers lawsuits that may arise due to damage that you, your family or pets cause to other people and their property.
Inquire on discounts available and make the best of them. Raise your deductible to $1,000; this saves up to 25 percent off your premium. Transfer your car insurance over to the same carrier to obtain a discount for having more than one policy. Install alarm systems and make sure your systems are upgraded to provide the best security possible; companies view this as low risk and award discounts when applicable.
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