Property insurance is crucial in safeguarding and protecting your most valuable assets. Whether it's your home or personal belongings, having the right amount of coverage can provide you with peace of mind and financial security.
But how much homeowners insurance do you actually need? How can you tell whether your quote offers too much coverage or not enough?
Aside from working with Kin (We tailor your coverage to fit your home – not too much or too little), this guide can help you figure out how much homeowners insurance you may need. We’ll look at each part of the policy: dwelling, other structures, personal property, loss of use, liability, and medical payments. And if you’re rusty on what those are, we’ll refresh your memory on that, too.
Let’s do this.
Choosing your coverage limits
| Dwelling |
Home's full replacement cost |
| Other structures |
10% of dwelling amount |
| Personal property |
50% of dwelling amount |
| Loss of use |
20% of dwelling amount |
| Personal liability |
$300,000 minimum |
| Medical payments |
$1,000 minimum |
How much homeowners insurance do I need for my dwelling?
Look at the Coverage A limit on your quote or your policy’s declarations page. This is the amount you’ll have to rebuild or repair your home after a covered event. Your home should be insured up to its full replacement cost – that is, what it would cost to rebuild your home from the ground up after a total loss using materials of a similar kind and quality.
Anything less than 100% replacement cost coverage means you aren’t fully insured to rebuild your home after a total loss.
We calculate your home’s replacement based on its square footage, the quality of the construction materials, local construction costs, and other factors, like:
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Exterior wall construction (frame, veneer, or masonry).
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Architectural style.
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Number of rooms.
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Number of bathrooms.
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Roof type.
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Special features, like fireplaces or arched windows.
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Foundation shape.
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Improvements you made.
For example, the national average cost to build a new home is $150 per square foot, so a 2,000 square foot home may cost about $300,000 to rebuild. But that’s the national average – your local building and labor costs may be higher or lower.
Remember, not all policies are created equal. Dwelling coverage can be offered on an actual cash value or replacement cost basis, and it makes a big difference in your claims payout. Actual cash value policies are often cheaper, but they subtract for your home’s depreciation, deterioration, or obsolescence. It’s often not enough coverage to fully rebuild after a major loss.
Replacement cost policies, like the ones offered by Kin, pay for what it costs to rebuild your home at the current rate, minus your deductible. They may cost more, but they help you recover quicker.
Building code upgrades
If you have to rebuild your home to comply with new (and more expensive) building codes that have gone into effect since your home was constructed, your policy’s ordinance or law coverage may be handy. For example, say you rebuild your $300,000 home after a covered loss, but you need an extra $10,000 to update its electrical panel to comply with a new code. Ordinance of law coverage can pay for that.
This is usually set at 10% of your dwelling coverage. So if your home is insured for $300,000, that would be $30,000 in ordinance or law coverage.
If you have an older home, increasing your ordinance or law coverage to 25% or even 50% in case your systems don’t meet current building codes may make sense.
How much homeowners insurance do I need for other structures?
Coverage B, or other structures insurance, pays for damage to other structures on your property, like fences, detached garages, sheds, gazebos, and carports. You usually want to insure other structures at a minimum of 10% of your dwelling coverage.
But if you have elaborate other structures on your property, like a guest studio with a kitchen and bathroom, it might make sense to increase this coverage. Ask us about it, and we will help you find the right fit.
How much personal property insurance do I need?
Coverage C, or personal property insurance, covers all the belongings in your home—usually, whatever you would put on a moving truck, such as furniture, electronics, decor, clothing, and more.
At a minimum, coverage C should be 50% of your dwelling coverage. So, if your home is insured for $300,000, you should have at least $150,000 for your personal property. The more valuable your stuff is, the more property coverage you need.
What’s your stuff worth? Make a home inventory to find out
The best way to know what your stuff is worth is to inventory what you have fully. As a bonus, this inventory is handy when you need to claim to replace your lost belongings.
Go room by room, take pictures, and document what’s there and what it costs. List the major items and include receipts for big purchases like furniture or electronics. Our home inventory guide walks you through the process.
Once you have the total value of your personal belongings, you’ll know the exact amount of coverage you need.
How much loss of use insurance do I need?
Coverage D, loss of use coverage, steps in when a claim forces you to live away from your home while repairs are underway, or coverage for loss of rent if you lease out your home. It offers an allowance for extra living expenses during this time, like transportation, takeout, laundry, hotel stays, and more. It also provides coverage if a civil authority stops you from using your home due to direct damage to neighboring premises.
Loss of use coverage should be 20% of your home’s dwelling coverage. Again, for a $300,000 home, that would be $60,000 in loss of use protection. That’s $5,000 per month to cover additional living expenses after a loss.
How much personal liability insurance do I need?
Coverage E, personal liability coverage, is intended to protect you if you’re ever sued over someone’s bodily injuries or property damage. So if your tree falls on a neighbor's roof or your kid hits a home run through someone’s window, this typically helps pay for those expenses.
Every homeowner should have at least $300,000 in personal liability coverage,enough to cover common claims. If you have a swimming pool or have a high net worth and could be a target for frivolous lawsuits, it may make sense to increase your liability coverage.
How much coverage do I need for medical payments?
Not every injury that happens on your property results in a lawsuit. There are “friendly” claims where someone you invite over may trip and fall or otherwise get hurt. Medical payments coverage, called Coverage F in your policy, helps to pay for visitors’ immediate medical expenses.
You might be thinking, “Isn’t that a job for my guest’s health insurance?” Yes, but if their company knows the incident happened on your property, it may require you to pay a small portion, typically $1,000, before they cover the rest of the bill.
Your policy includes $1,000 in medical payments coverage for this reason, but you can purchase additional coverage.
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