If your home is damaged or destroyed you want to make sure that you are carrying enough insurance to rebuild your home, replace all of your possessions and be able to afford to live somewhere else while your house is being fixed.
Homeowners insurance will help with all of these costs but you need to make sure you have the proper amount of coverage in place. Determining the correct amount of insurance for your particular situation can be tricky so we have put together a few guidelines below to help you calculate just how much insurance you need.
How Much Dwelling Coverage do You Need?
When it comes to homeowners insurance you want to carry enough coverage to rebuild your home in today’s market. The cost to rebuild your home is not the same as what you paid for it or its current market value. The current market value of your home includes the land that it sits on, an expense that your insurance policy doesn’t need to cover.
Your insurance agent will provide a recommendation when it comes to coverage levels but it is a good idea to understand how they came up with their number as well as verify that you feel it provides enough coverage.
Here are the various factors you should consider when calculating the amount of homeowners insurance you need:
Factors that Impact Rebuilding Costs
These are some of the major factors that should be considered:
- Construction costs in your local market
- Square footage of your home
- The type of exterior walls your home has: frame, masonry or veneer
- Style of the home: ranch or two story
- The number of bedrooms and bathrooms
- Roofing materials
- Additional buildings on the property
- Special or custom features
If you are looking for a quick calculation of the amount of insurance you need, simply multiple the total square footage of your home by local building costs.
You can determine local building costs by contacting a local homebuilder, appraiser, local builders association or insurance agent who should be able to give you a fairly accurate per square foot estimate of building costs. There are also numerous websites that can help you determine your local building costs.
While multiplying your local building costs by square footage will give you a pretty good estimate, if your home was custom built or features expensive add-ons, these will all have to be factored into your rebuilding costs. Recent improvements, upgrades or additions will also have to be calculated.