How much insurance is enough?

It’s proven that if you want to protect the investment you made on your home and on its contents against all natural and man-made calamities, purchasing home insurance is very necessary. However, there is no such formula to determine as how much home insurance you should buy. It changes with your location, home value, size, content and many other things. How much you need chiefly depends on the equity of your home and how far you want to extend the coverage. According to Crissinda Ponder of Bankrate.com, the monthly premiums you pay towards your home insurance buy six types of coverage. These follow:

1. Dwelling: Pays for any damage occurred to the home itself and any connected structures, such as an attached garage.

2. Other structures: Home insurance covers for damages to fences, an isolated garage, and any other structures not attached to the house.

3. Personal possessions: Home insurance pays for lost or stolen stuffs of your - even if the incidents take place outside the house.

4. Loss of use: Compensates for your living costs when your home becomes temporarily uninhabitable due to fixtures.

5. Medical payments: Compensates for the medical bills of anyone if injured while in your property.

6. Personal liability: Offers protection if you are sued and held responsible for injuries or damages made to others.

Among all these six components, the two main factors that determine the cost of your insurance premiums are the dwelling itself and your personal possessions. The amount of coverage you purchase should always equal the full replacement cost of your home. So what should be the figure? As a homeowner, you should have enough insurance to cover:

1. The primary structure of your home 2. Your personal contents/possessions 3. Living expenses in case you move out of your house during home repairs/maintenance 4. Liabilities if someone gets injured while on your property

In order to know how much you should spend on coverage:

1. First, determine the highest deductible you can afford 2. Secondly, see if you reside in a disaster-prone area, such as coastal area 3. Third, check with your insurance agent if you need additional protection like flood or earthquake insurance

How much do you need for personal possessions?

If you are unable to come up with a proper figure, it’s good to fix it at 50%-75% of the home coverage amount. From very trivial objects, every household has expensive items, such as electronics, jewelry, and furniture, which can quickly add up. So if you are insuring your dwelling for a million, you should insure your personal belongings for at least half a million.

What is liability coverage and how much should you have?

If your dog bites your mail carrier or someone gets injured while getting down the staircase, you’d be liable to pay for all the medical expenses. You’d be on the hook without the right liability coverage. As per the Insurance Information Institute, liability coverage is a home insurance policy typically ranges from $100,000 to $300,000. However, if your assets’ net worth is huge, you may consider purchasing additional liability protection for your assets.

How much deductible would you have to pay?

Deductible is an important part of insurance and you should not forget including it while doing your maths. Deductible is the amount that you’d need to pay each time you file a claim and your claim gets accepted. The match of deductible is pretty simple. The higher your deductible is, the lower your premiums will be. If your luck is not that bad, getting a higher deductible would be favorable for your pocket.