What Coverage Do You Need for Homeowners Insurance?

Your home is probably the largest single investment you will make during your lifetime, and having adequate homeowners insurance is a must. If you are in the process of buying a home, you will need to think about the types of homeowners insurance available and what makes sense for your particular situation. If you are already a homeowner, it makes sense to review your homeowners policy to see if you need to make changes. Your lender will also require you to have homeowners insurance.

Replacement Value

You should insure your home based on replacement value or the cost to rebuild your home in the event of loss. Insurers disregard market value, as this fluctuates from year to year. Instead, they look at the material and labor costs to duplicate your home. If your home has special features, such as expensive tiling, these are included in the replacement value as well. Expect your premium to rise to reflect inflation.

Personal Property

You should also insure your personal property, such as furniture and clothing. If your home is consumed by fire, you will need to replace these things as well. Personal property is generally insured for 70 to 75 percent of the value of your home. If you have valuable antiques or artwork, you will pay an additional fee and you will need a recent appraisal of that property.


If someone slips and falls on your property, you need liability insurance to cover that person's medical expenses, legal fees and any settlement in the event of a lawsuit against you. Make sure you have sufficient coverage for all eventualities, such as swimming pool accidents or dog bites.

Living Expenses

If you are forced from your home and have to live someplace else until it is fixed or replaced, you need coverage to pay for living expenses in a motel or rental unit. Insurers differ on what is covered and what is not, so it is important to understand exactly what is included in the policy you choose.

Optional Coverage and Discounts

Most insurers offer optional coverage and discounts for a wide variety of situations. If you have fire alarms and sprinkler systems in your home, you will generally receive a discount on your coverage. You can also usually buy a replacement policy on personal property that protects you from receiving the depreciated value in the event of loss.

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