One of the most important things to do as a homeowner is to purchase home insurance. It can protect you if disaster strikes and your home and belongings suffer damage. Of course, there is no one-size-fits-all home insurance policy, which means you will have to determine how much you need based on your home itself and how much property you own.
What Does a Home Insurance Policy Typically Include?
In general, there are six types of coverage included in a home insurance policy. They include the following:
- Dwelling: This pays for the home itself as well as any attached structures, such as a garage.
- Other Structures: This covers any damage to other structures built on the property, such as fences, freestanding garages and others that aren’t built directly into the house.
- Personal Possessions: This covers property that is lost or stolen.
- Loss of Use: This will cover the costs if your home is not livable while repairs are being made after damage.
- Personal Liability: This protects you if another person sues you for injuries or damage that occurs on your property.
- Medical Payments: This type of coverage covers medical bills for anyone who is injured while on your property.
What are the Home Insurance Rules of Thumb?
Generally speaking, as a homeowner, you should always purchase enough home insurance to cover the following:
- Your Home’s Structure: You should always aim to get dwelling coverage that is equal to the full replacement cost of your home if the structure is badly damaged and you need to rebuild.
- Your Possessions: Your possessions are also a huge factor because you want to be able to replace them if they are damaged or stolen easily.
- Additional Living Expenses: Your insurance policy should be able to cover any additional living expenses if you have to make large repairs after your home has suffered considerable damage.
- Your Liability to Others Injured on Your Property: It’s important to have enough coverage to protect you if someone visiting your home or who is passing by your property sustains an injury and decides to sue you.
To determine how much you should spend on home insurance coverage, you should do the following:
- Determine the highest deductible amount you can afford.
- Consider whether you live in an area that is more prone to disasters. For example, do you live close to the water?
- Talk with your insurance agent about additional policies like earthquake or flood insurance that can further protect your home.
Consider Liability Coverage
You may also want to consider adding liability coverage to your home insurance policy. It can protect you if your dog bites someone or a person gets injured visiting your home, such as if they slip and fall and break a bone.
In general, a typical home insurance policy that includes liability coverage ranges from around $100,000 to $300,000.
Remember the Deductible
You should also remember that all home insurance policies carry a deductible. This is the amount you are required to pay out of pocket for every claim you submit. The higher your deductible, the lower your insurance premium. The rule of thumb is to get as high a deductible as you can afford.