How Much Home Insurance Do You Need?
The most common mistake homeowners make is insuring their home for its market value instead of its rebuild cost. These two numbers are often very different — and only one of them matters for insurance purposes.
Dwelling Coverage
Your dwelling coverage should equal the cost to rebuild your home from the ground up — not what you paid for it or what it's worth on the market. Rebuild costs depend on local labor rates, materials, and your home's size and construction quality. A good rule of thumb: multiply your home's square footage by local construction costs per square foot.
Personal Property Coverage
Standard policies cover your belongings at 50–70% of your dwelling coverage. Do a home inventory to estimate the real value of your furniture, electronics, appliances, clothing, and other possessions. High-value items like jewelry, art, or collectibles may need separate riders.
Liability Coverage
If someone is injured on your property and sues you, liability coverage pays for legal costs and settlements. Most experts recommend at least $300,000 in liability coverage — and an umbrella policy if your net worth exceeds that.