How much insurance homeowners need

By Aaron Crowe

As any first-time homebuyer can attest, there are plenty of costs in owning a home. Home insurance is at the top of the list, with additional riders for things like flooding and earthquakes, depending on where you live.

Having insurance to cover your most expensive asset includes more than protecting it from fire, theft and other types of damage. There’s also title insurance, home warranties, and making sure you have enough coverage to rebuild if it comes to that.

Here are some basics to remember when shopping for insurance for your home:

Dwelling coverage

Base the amount of dwelling coverage on the cost to rebuild the home, and not the market value, says Eric Stauffer, who runs an insurance review website. The cost of the land is irrelevant, Stauffer says, and people can easily over-insure themselves if they’re not careful.

An insurance agent will use a “replacement cost calculator” to determine the cost per square foot to rebuild the home. It should use “actual cash value” at today’s market value to determine the rebuilding costs, and not depreciate the home’s value, says Sierra Knight Magee, owner of KMI Solutions, an independent insurance agency in Richmond, VA.

If you own a new home, you may get an insurance premium discount because things aren’t as likely to fall apart, Knight Magee says.

“A lot of companies give very good rates for new construction,” she says.

A high deductible from $2,000 to $5,000 can lower the cost of dwelling coverage, says Scott Cameron, a State Farm Insurance agent in Oscala, Fla. Home liability coverage should be more than your net worth and more than 1.5 times your income, Cameron says.

There’s much more to this story. To read the full story, go to MortgageLoan.com.