What Home Insurance Limits Should You Get?

As with any insurance coverage, home insurance policies have multiple options that you can choose from to match your financial situation. You want to make sure you have adequate limits to fully cover anything you can't.

Coverage for Your Home

You usually don't get to choose the limits for repairing or replacing your home. Your insurance company sets those based on their appraisal of your home. Yet, there are still a few things you should keep in mind.

• Changing construction costs: Construction costs usually rise with inflation. So, it's important to understand if your policy accounts for that or is instead a relatively fixed value that won't increase as fast as inflation. Don't wait for a new appraisal when you renew your policy. A sudden spike in costs could leave you under-insured.
•  Dated features: If your home has construction techniques that are no longer in use, your insurance company may only cover repairs using what's standard today. That's fine if you'd want to modernize, but if you want to keep the charm of an old home, you’ll want to make sure your policy is sufficient to replace its original appearance.
•  Deductibles: You can decrease your premiums by opting for a larger deductible. However, that would mean you'd need to pay more out-of-pocket if something happened.

Personal Property

Your personal property coverage usually has set limits that you want to match to the value of your belongings. If you file a claim, you'll need to provide receipts or other proof of the value of your possessions. So, you don't want to overestimate this coverage and pay more for nothing. You also don't want to be under insured.

Keep in mind that certain items — such as cash, jewelry, and electronics — might have separate limits or be excluded from your general property coverage. You'd need separate or additional coverage for those items.

Liability

Your liability coverage protects you from losing your home or other assets in a lawsuit. Therefore, you may want your total liability coverage to equal at least your current net worth.

You can achieve this through a mix of umbrella insurance and the liability protection included in your home insurance policy.

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View Also: Condo Insurance, Renters Insurance