How Do I Know if I Have Enough Homeowners Insurance Coverage?

When signing on the dotted line for your homeowners insurance policy, the last thing that is on your mind is whether or not you have enough coverage for your needs. Most of us simply assume that the insurance agent has done his or her homework and has provided you with the best policy you need. However, this can be a devastating assumption if you are faced with the prospect of repairing or replacing your home after a disaster.

How do you know if you have enough coverage to take care of these things? Here’s what you need to know in order to find out.

The structure

Point blank. You need to have enough coverage to completely rebuild your home from the ground up. It won’t include the cost of land and it won’t be based on what you paid for your home when you bought it. It will need to cover the amount that your home is worth today. Get your home appraised and then talk to a home builder in order to find out what this number will look like. Remember, you are going to want to err on the side of caution, so always round or estimate up.

It is also important to ensure that your coverage extends across all perils, not just the usual ones. Do yourself a favor and add flood and earthquake coverage to your standard policy so that you are covered no matter what.

In order to ensure that you have adequate coverage, you need to ensure that your policy is a replacement cost policy and not a cash value policy. A replacement value policy will not take into account depreciation on your home while cash value policies do. Older homes may not qualify, so it is important to boost the structure coverage on your policy to compensate for that.

Your personal possessions

The second most important aspect of your homeowners policy is to provide replacement coverage for your personal belongings. Most policies estimate that the replacement cost of these items will be in the neighborhood of 50%-70% of the replacement value of your home. However, the only way to determine whether or not this is enough is to conduct a home inventory. Document all of your belongings with a video camera and then begin “shopping” for the replacement costs of these items. It’s a tedious process, but the only way to know for sure if you are covered and will provide evidence to support your claim in the event that you ever have to file one.

Once again, go for a replacement value rather than a cash value so that you won’t leave yourself short due to depreciation deductions.

Additional living expenses after a disaster

This coverage provides reimbursement for your expenses if you have to live in a hotel or rental home while your home is being repaired or replaced. Talk to a construction professional to determine how long it would take to rebuild your home and then multiply your monthly living costs by that number to ensure that you have adequate coverage here.

If you still have questions about your homeowners insurance Chico CA coverage limits, it’s time to get real with a home insurance Chico CA. Schedule an appointment today to discuss your coverage.

Short Agencies is the leading homeowners insurance Chico CA provider. If you have home insurance Chico CA questions, contact the Short Agencies today.


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