After buying your new home, your next step should be to purchase a homeowner's insurance policy. This type of insurance policy can help you recover the cost of repairing or replacing your home after a catastrophic storm, fire or any other type of damage or loss.
You know you need homeowners insurance, but you might not be sure how much coverage you'll actually need. The following explains some of your coverage options and their recommended amounts.
It Depends On Your Home's Value
The amount of coverage you'll need for your homeowner's insurance policy depends on the home's value. Depending on your insurance options, your policy may cover your home for its actual cash value or replacement cost.
With ACV, you'll only recover the market value of your home if it's destroyed. This means if you purchased your home for $125,000 and it's worth $115,000 on the open market, you'll only get $115,000 as compensation for the loss of your home.
With replacement cost coverage, you'll be reimbursed for the cost of rebuilding your home from the ground up after a total loss. If you purchased your home for $125,000 and the cost of rebuilding it is estimated at $175,000, for example, you'll receive the latter amount as compensation for your loss. Most experts recommend ensuring your home for 100 percent of its replacement value, at minimum.
Consider Your Home's Valuables
Most homeowner's insurance policies include coverage for your personal belongings, especially if those belongings happen to be of high value. These include high-value additions to your home such as custom flooring and countertops. If you have antique furniture, expensive jewelry, fine art or a gun collection, you should have these valuable items included in your personal property coverage.
A typical homeowner's insurance policy may cover your personal belongings at 50 percent of your home's insured value, although this can be as high as 70 percent for some standard policies.
Don't Forget About Liability Coverage
If someone is injured on your property, you could be held liable for their medical costs and other expenses. Fortunately, your homeowner's insurance policy includes liability coverage that shields you financially against legal action taken by the injured party.
Your policy's liability coverage should match the value of your home. If your home is worth $200,000, then you should have at least that much in liability coverage. You can always raise that amount for your own peace of mind, especially as legal and medical costs can skyrocket over time. Talk to an agent, like Kuresman Insurance, for more help.