Most people who own their house know having homeowners insurance is important. If you’ve taken on a mortgage, you’re probably required to have it.
But do you have enough coverage?
A policy isn’t helpful if you’re left with a huge bill when disaster strikes. And, unlike car insurance, there are no state requirements for minimum coverage on your home.
You should have enough insurance to rebuild your home, replace any belongings, pay for living expenses if you’ve been displaced and cover damages caused to others.
How much is that? CNBC Select explains how to adequately protect your property, your possessions and your family.
What we’ll coverÂ
Dwelling coverageÂ
Dwelling coverage is the foundation for homeowners insurance. It pays for rebuilding or repairing your home, including the house’s physical structure, and any permanent fixtures, appliances and attached structures.
Typically, your insurance company will provide an estimate for the cost of rebuilding your home based on its size, location, special features and other factors. Other kinds of coverage — such as for personal property, liability and additional living expenses — are usually a percentage of this base amount.
Nationwide Homeowners Insurance
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Cost
The best way to estimate your costs is to request a quote
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Maximum coverage
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App available
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Policy highlights
Policy covers home and property damages caused by theft, fire and weather damage. It also covers personal liability, loss of use and unauthorized transactions on your credit card
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Does not cover
Water damage, earthquakes, flood insurance, identity theft, high-value items, rebuilding home after loss (these can all be purchased as add-ons for extra coverage)
Hippo is also tops for discounts, with lower premiums available for activating smart home devices, new homeowners, renewing your policy and even being part of a qualifying homeowners association.
Hippo Homeowners Insurance
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Cost
The best way to estimate your costs is to request a quote
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Maximum coverage
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App available
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Policy highlights
Policy covers dwelling and related structures, personal property, personal liability, loss of use, ordinance or law coverage, home office equipment damage, water backup, high-value items, coverage for smart home appliances and more
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Does not cover
Properties outside of the U.S.
Personal property coverage
Even if you don’t have expensive artwork or a wine cellar full of prized vintages, you probably have items that would be costly to replace, like a laptop or jewelry.
This is where personal property coverage comes in — and having enough is key. Â
To see how much you need, tally up the total monetary value of your belongings. A video walkthrough of your home will help give you an idea — and create a record to refer to later if you need to file a claim. Â
You’ll also need to decide between covering the actual cash value or the replacement cost value of your belongings. Premiums for actual cash value policies are lower, but you’ll only get the depreciated value of the lost item. Replacement cost coverage is pricier, but you’re reimbursed for the cost of a brand-new substitute. Given how quickly home appliances and personal electronics depreciate, it can be a worthwhile investment.
Named the best for covering high-value assets by CNBC Select, Chubb offers competitive replacement cost coverage, as well as a complimentary home risk consultation.
Chubb Homeowners Insurance
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Cost
The best way to estimate your costs is to request a quote
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Maximum coverage
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App available
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Policy highlights
Policy covers home and property damages caused by wildfires, extreme weather, crime, vandalism and personal liability, which also covers claims for libel and slander. Also includes replacement cost for contents, extended replacement cost for dwelling and a cash settlement option
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Does not cover
Flood or equipment breakdown (these can be purchased as add-ons to your policy)
The typical home insurance policy has personal property coverage that pays between 50% and 70% of the dwelling coverage. Â So, if you have a homeowner’s policy for $250,000, you’ll receive between $125,000 and $175,000 to repair and replace your belongings.
If that’s not enough, you’ll need to increase coverage accordingly.
In addition, there are limits on coverage for certain individual items — like jewelry, which is typically capped at $1,500. If you have an engagement ring or other pieces worth more, consider a floater policy or even a separate jewelry insurance policy.
Jewelers Mutual offers affordable coverage that not only pays for damage or theft but for regular maintenance and repairs. Â
Jewelers Mutual Jewelry Insurance
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Cost
The best way to estimate your costs is to request a quote
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Maximum coverage
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Policy highlights
Jewelers Mutual policies are a strong option for those wanting more than just insurance coverage. Policies cover normal wear and tear, and can include things like prong retipping, broken or bent prongs, pearl restringing, and stone tightening. Coverage can be optioned to include a deductible.
Liability coverage
Liability coverage provides protection in case you, a household member or pet are held responsible for someone being injured on your property or for damaging someone else’s property.
Lawsuits can be costly, so it’s recommended to have personal liability coverage that’s equivalent to your net worth. Â
Most homeowners insurance policies provide $100,000 in liability coverage, though some go up to $500,000. If your assets are worth more than that, or you’re in a position that exposes you to more risk, consider an additional umbrella policy.
Umbrella policies typically require a minimum of $300,000 of liability coverage, but our top pick, Travelers, has products with up to $10 million in umbrella insurance coverage. Its policies also cover legal fees, damages outside the U.S. and those not covered by a standard liability policy — including libel, slander, defamation of character and invasion of privacy.Â
Additional living expenses coverageÂ
If your family has to relocate while your home is being repaired, additional living expenses (also known as “loss of use”) coverage pays for expenses like hotel rooms, laundry, meals and storage.
The amount of additional living expense coverage is typically 30% of dwelling coverage, according to the International Risk Management Institute. Most insurers will limit policyholders to 12 months of additional living expenses coverage, though some offer up to 24 months.
If you’re concerned you don’t have enough, some carriers will allow you to increase the amount. You may also be able to choose to be reimbursed the “actual loss sustained,” with no cap on coverage.
More coverage options
You should also review whether some other common policy add-ons are needed and whether the standard coverage will serve your needs.
Other structures coverage. If you have additional structures on your property — like a fence, toolshed or detached garage — your policy needs to include other structures coverage, also referred to as Coverage B. Coverage for other structures is usually 10% of your dwelling coverage.
Inflation guard clause. This option automatically increases your coverage amount at each renewal to account for the increased costs of repairing or rebuilding. While some companies only apply an inflation guard to dwelling coverage, others make it available for all types of coverage.
Extended replacement cost. Another safeguard against inflation, this boosts your dwelling coverage by between 10% to 50%. The price of this add-on varies but is typically an extra $25 to $50 per year. If you live in a region that is prone to natural disasters, extended replacement cost is worth considering.
Equipment breakdown coverage. If an appliance or smart home system is damaged, this add-on coverage can pay for the cost of repairs or replacements. It doesn’t cover normal wear and tear, however. Â
Service line coverage. Homeowners are responsible for pipes and wiring running into their property. This add-on covers repairs caused by wear and tear, freezing, electrical malfunction, root and tree invasion and other issues.
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Bottom line
To know if you have the right amount of homeowners insurance, start by getting an estimate on rebuilding your home. From there, look at the value of your possessions, how much it would cost to live somewhere else and what you might pay if someone was hurt in your home.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every insurance review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.