Home insurance, in the society in which we live, has become an absolute necessity to protect the largest investment we will make in our lives. On the other side of buying a home; Lenders, who provided the financing to purchase the home, will always require you to maintain adequate homeowners insurance. Even if you are one of the few people who owns your home, insurance will still be an important issue for homeownership. Now the main question that we all ask ourselves is how much do we need?

For general home insurance coverage guidelines, your policy should cover the following 4 important categories:

1. 100% of the replacement fair market cost of your home. Most insurance industry professionals will recommend that 100% of the home’s replacement cost be the absolute minimum amount of coverage. The calculation to determine the replacement cost must include the construction materials plus labor less the value of the land. It is important to remember that the replacement value does not correlate with the value of the home in the real estate market. Another coverage option, which can save money on premiums, would be to purchase a policy that only covers 80% of replacement costs; however, you will have much more out-of-pocket costs if there is an event that results in damage or destruction of your home. You’ll want to periodically monitor your home’s replacement costs and update your policy accordingly. A good insurance professional should provide this service annually.

2. Within the personal property section of your policy, the ideal level of coverage should be 100% of the contents within your home. Standard items within this section should include furniture, personal items, jewelry, art, electronics, and sometimes even clothing, depending on value. Your insurance professional should help you and provide you with an itemized list of exactly what items are and are not covered by your policy. Most insurance providers will assess your total personal property at around 50% of the insured value of your home. Again, it would be wise to check your personal property items regularly and update your policy if necessary.

3. If a loss event occurs, what will be the cost of temporary housing; You will most likely need to live away from your home during the time it is being repaired or rebuilt. Most home insurance policies will automatically provide this level of coverage and pay for expenses such as hotels, food, and necessities of daily living.

4. Liability coverage may end up being the least discussed section of your policy, but many consider it to be one of the most important. This section of coverage within your home insurance will provide coverage in the event someone else is injured inside your home or on your property, or if something (example: a tree) on your property causes damage to neighboring property, and also legal expenses if necessary.