How much insurance is enough for your home? When you buy home insurance, there are two things to keep in mind. One, you should insure your home for the cost of rebuilding it after a disaster, not the amount of money you could get if you sold it. Two, homeowner’s insurance covers the contents of your home as well as the building itself. Therefore, the total home value you use as a guideline for insurance should be the cost of rebuilding your home plus the cost of replacing the contents in it.
Inventory your home's contents. What do you own that you would need your insurance to replace in case of disaster? What is the value of those items? You should make a list of the items and compile proof you may need in case of a claim, such as receipts for purchase and photos of the items. This job can be a big one, so consider using a software program, such as KnowYourStuff.org, to help you manage the process and organize your list (see Resources). Once your inventory is complete, add up the total value for your belongings.
Gather information you need to find the rebuilding costs for your home. Find the square footage of your home by measuring each room. You will also need to know when your home was built and figure in any special features, such as marble counters or a whirlpool. You should be able to describe the structure, including building materials (hardwood floors, stucco and so on). This information, as well as your ZIP code, will help determine the rebuild value for the house.
Use a home valuation calculator. Most home insurance companies have online calculators on their website that you can use to determine the rebuild value. Although these calculators vary slightly in the way they work, generally they will ask you to enter your ZIP code and details about your home size, structure, build date and features. The calculator will determine a rebuild cost for your home based on that information (see Resources).
Add the rebuild cost for your home and the value of your belongings. This number is the total home value you should use when you buy insurance.
If you don’t want to use a home valuation calculator, you can hire a home appraiser to evaluate your home and determine a cost.
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