How Much Homeowner’s Insurance Do I Need?
How much homeowner's insurance do you need? As a rule of thumb, it is recommended you purchase as much homeowner’s insurance as you can afford. You never know when you’re going to suffer a loss related to what is likely your biggest investment and most valuable asset. But to properly evaluate your homeowner’s insurance needs, you must look at your unique financial situation and consider both the liability and property damage portions of your policy.
Free Insurance Comparison
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
UPDATED: Jul 19, 2021
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance provider and cannot guarantee quotes from any single provider. Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.
Homeowner’s Insurance Q&A: “How much homeowner’s insurance do I need?”
Most of us know that homeowner’s insurance is mandatory if you have a mortgage, but very few know how much coverage is actually needed?
You don’t want to be “under-covered,” but at the same time, you don’t want to be oversold and wind up paying far too much for coverage you don’t need.
As a rule of thumb, it is recommended you purchase as much homeowner’s insurance as you can afford. Period. You never know when you’re going suffer a loss related to what is likely your biggest investment and most valuable asset.
But to properly evaluate your homeowner’s insurance needs, you must look at your unique financial situation and consider both the liability and property damage portions of your policy.
Let’s start with the liability portion of the policy:
Very few assets:
If you don’t have a lot of assets to protect in the event someone is severely injured or killed on your property, or if you damage another’s property, you may be able to get away with the lowest liability coverage offered, which is typically $100,000 for a homeowner’s policy.
Remember, if anyone is hurt on your property, you are considered at fault. There are almost no questions asked here. Those “silly” stories regarding individuals breaking into a home, hurting themselves and suing the owner…and winning…are true in some cases.
Some assets (IRA, 401(k) / Business owners:
The most commonly sold liability limit for a homeowner’s policy is $300,000. It is recommended you purchase at least this amount of liability insurance to properly protect your assets.
High net worth individuals:
You have a lot to lose. And you need to protect it. A $500,000 liability limit would likely be your minimum option. After all, the more money you have, the more susceptible you are to high dollar settlements if you’re sued and lose.
It is also highly recommended that you purchase a personal umbrella policy in addition to your existing home and auto insurance policies to make sure you are as protected as possible.
Now let’s look at property coverage:
It’s important to know how to read a homeowner’s insurance policy to make a really informed decision about what level of property coverage you need. Just like everything else insurance related, homeowner’s policies offer a wide spectrum of coverage.
There are those who want the minimum coverage at the lowest price and those who are willing to pay a little extra to make sure they don’t have a care in the world when it comes to having their property covered…and of course everything in between.
Tip: There are insurance companies out there that offer the highest level of coverage available at a price that can be lower than what some pay for the least coverage.
So the more informed you are, and the more shopping you do, the more money you will save.
It is recommended you work with an independent insurance agent to obtain the most comprehensive homeowner’s insurance coverage available at the lowest cost.
Captive agents can only offer you a single policy at one premium. They often have to reduce coverage to get you a lower premium, whereas an independent agent makes insurance companies compete for your business.
Your insurance company or agent can also assist you if you’re not exactly sure what you need.