Tips for Buying Homeowners Insurance (Part 2)

Once you’ve chosen an agent and a reputable insurance company, you need to make sure you have the right insurance coverage. 

A homeowners insurance policy will typically be a package of coverages including dwelling, personal property, liability, guest medical and possibly separate structure.  Most of the aspects within a policy have limits that are derivatives of the dwelling coverage.  When you’re deciding how much coverage you need for your home consider that you’ll need enough coverage to rebuild of your home if it’s destroyed in a disaster.  Keep in mind, insurance companies don’t insure the land your house sits on; it’s not going anywhere.  The market price is not relevant when figuring this cost.  Remember, although the value of a home on the market has decreased in recent years the cost to replace that same home has increased.  This can be attributed to the increased cost of fuel, wood and other materials.  A good calculation you can use is to divide the dwelling coverage you want by the amount of square feet in a home (i.e.  $500,000 / 3500 sq ft = $142.86 price per square foot). Your price per square foot should be around $120 to $160 per square foot depending on the grade of materials needed to rebuild the home.    Once your coverage is established, plan to review it at least once a year with your agent.