How much homeowner’s insurance coverage do I really need?

Free Insurance Quote Comparison

 Secured with SHA-256 Encryption

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Full Bio →

Written by

UPDATED: Jul 17, 2012

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

Insurance Question from Missouri City, TX

Asked on 07/17/2012

How much homeowner’s insurance coverage do I really need? I understand the requirement to cover the loan amount, or any other lender requirement. My question centers around full replacement value. Some companies are telling us that we should insure for a number close to the full appraisal value. Others are saying the full appraisal value includes the cost of the land, so 80% or so of the appraisal value, or loan amount (whichever is higher) is sufficient to cover the replacement of the house itself. I can understand that logic, but it differs from what I've been told and have done in the past. Advice?

Answer given on August 08, 2012

Homeonwer insurance companies all want you to carry the full replacement value of your home. How this amount is determined varies widely.Some insurance companies hire a firm to inspect the home and determine its replacement cost. Others have their own program that the agent uses to determine the replacement cost. These figures don’t always take into consideration of the wide range of building costs throughout the country, but it is an acceptable way to come up with a figure.Appraisals from real estate appraisers can also be used, but they are often lower than the figure that insurance companies determine in their own process. A real estate appraisal has a figure for the market value of the home, which includes the property but they also have a section that they determine to be the replacement cost of the home itself. They usually include a depreciation in this value, which insurance companies do not use.Talk to your insurance company and see what they determine as the replacmeent cost. You can use a higher value, but the comany will not let you go below their determination of the replacement cost.


IMPORTANT NOTICE: These answers are for general information purposes only and are provided by the person answering and FreeAdvice.com AS IS. It has not necessarily been reviewed by the management staff of FreeAdvice.com nor is it binding any insurance agent, broker, or other insurance professional or any attorney or insurance company. Insurance laws, regulations and practices vary from state to state and insurance policies and practices differ from company to company, by type of policy, by state and locality and by type of insurance. Tiny variations in the facts, policy language or a detail not set forth in a question often can change the outcome or a professional's conclusion. Although FreeAdvice.com has confirmed that the answer(s) was/were provided for the account of an experienced insurance professional, that professional may not be licensed in the state referred to in the question, and may not be experienced or up to date in the subject area. Unlike the answers provided here, upon which you should NOT rely, for personal advice you can rely upon we suggest you consult a licensed insurance professional in your area or retain a licensed attorney listed on AttorneyPages.com to represent you.

Free Insurance Quote Comparison

Enter your ZIP code below to compare cheap insurance rates.

 Secured with SHA-256 Encryption