How Much Home Insurance Do I Need: An Insurance Agent’s Guide To Success

Oct 20, 2020 | Personal Insurance

Insurance premiums can go up for many homeowners. This definitive guide from an expert insurance agent can help steer you in the right direction.

Having homeowners insurance is the best way to protect your investment. And an agent’s goal as an insurance agent is to ensure that their client’s dream house will be secured and covered by their policy. Now, for any good insurance agent to do that, you must let your agent know what you want and want you to need for your home. Good communication is the key to be successful in fulfilling the job. 

Now, going back to the main question: How much should you insure your house for?

As per the National Association of Insurance Commissioners (NAIC), the average homeowner’s insurance premium is $1,228 per year. Though, each state has its rates when it comes to homeowners insurance. And aside from the location, there are lots of factors that can affect the amount of your policy. For example, the
Therefore, for you to determine how much you must insure your house, you should know first how much is the estimated amount of your home. Knowing the general way of determining your house’s value is vital. Yes, I say ” general way ” because what I will discuss first is the process that applies to all, no matter which state you are. 

Our job as agents is to make sure that you will not be underinsured in case you make a claim. Thereupon, first, you need to understand and know how to calculate the sum insured. 

What is Sum-Insured? 

Sum-insured is the maximum amount of money that you can claim. Let us set an example, your house is insured for $500,000, your contents total is $100,000, then your sum-insured total is $6000,000. The total sum-insured must be able to cover all the costs needed to fix or rebuild your house the same as before. 

On average, the minimum amount of policies in liability coverage is $100,000. However, you should at least insure your house for $30,000-$500,000 or higher if you can to ensure that you will be fully covered. Again, just to make sure that you are fully and rightfully covered. It means over-insuring the house won’t help. Other homeowners sometimes over-insured their homes. Unfortunately, doing so will just cause you to lose your money. How so? Here is an example: Your house’s value is just $600,000, but you insured it for $700,000. Then a qualified peril destroyed your home to the ground and it needs to be rebuilt again. You then filed a claim, but the insurance company calculated your house’s value for only $600,000 which is the right amount of your house. Even if you insure it for $700,000, your insurance will just pay you $600,000 for the actual amount needed to build your home. This is why talking to us is so important for you to have a professional guide on what to and what not to do. 

How to calculate Sum-Insured? 

You can always contact us and we will be happy to schedule a visit. Most insurance companies have agents who can help you to properly calculate the value of your house. By that, you can be sure that you can get the most accurate amount. On the contrary, if you want to do it by yourself, you can do so. There are just certain things that you need to do to determine your house’s value. Think of all the things needed to rebuild your home the same as before. Make a list of all the materials that were used in your house, and how much that material cost if you buy it today. But remember, over time, the amount of certain materials is either appreciated or depreciated. For this reason, knowing the right amount of the materials is vital to ensure that you will get the right value of your house. 

Things you need to know to properly determine how much should you insure your home: 

  1. Get the total building cost- Make a list of all the things that were used to your house. 

Every small detail counts so make sure to check everything. For example: -What kind of flooring your house has, wood, tiles, or vinyl. -What kind of cement was used and what is the quality? -What are the features of the house, like air conditioning, heater, and security system? Is there any balcony and garages, how many bathrooms are there? Is there a gazebo or swimming pool? -Are there any renovations that were made? If there is, what is that and how much does it cost you? -When is the period of construction? For example Contemporary, Federation, and Victorian. 

  1. The number of house contents- This may be too much for some. I understand that listing and remembering all the tiny details about your purchases is quite overwhelming at first. Thus, since you want to do the calculation on your own, patience is very important. And doing this simple trick will surely help you: 

Gather all the remaining receipts of your past purchases, if possible. For the items that no longer have receipts, you can just make a list of the names and try to remember what year you bought it. By doing so, you can start making research online. Nowadays, you can search for almost everything using the internet. For example, you already lost the receipts of your television set. You can just search for its brand and item code which is usually at the back of the television. Once you learned the trick, start going in each room to list all the things you find valuable such as: 

  • Appliances (television, refrigerator, dishwasher, oven ) 
  • Pieces of Furniture ( dining sets, lamps, couches, beds, cabinets, closets) 
  • Jewelry 
  • Kitchenwares ( cutlery, pans ) 
  • Groceries ( the estimated amount of the food you have ) 
  • Bathroom content ( bathtub, jacuzzi ) 
  • Decors ( paintings, figurines ) 
  • Bed sheets and linens 
  1. The cost of the house per-square-meter- The cost of your house depends on the 

average building cost in your area. Though the national average per square foot is $91.51. Areas that are prone to natural disasters like hail, storms, tornadoes, earthquakes, and hurricanes pays the highest amount of homeowners insurance. It is for the reason that they need to pay extra coverage due to certain perils that their areas are vulnerable to. That being the case, each state has their rates depending on the area’s exposure to perils. If you happen to live in an area where you think is at risk of any of the natural disasters, you can contact us to know all the options available. 

After you get the sum-insured, the next thing you need to know is the coverage of your insurance. The typical amount that you need to pay for standard insurance is $35 a month. However, the basic rule still applies. Each state has its rates. Therefore, it is still best to ask us for an accurate amount. 

Most standard insurance policies include Dwelling, Personal Property, and Personal Liability. In this coverage, you can customize or choose how much coverage you want to have in each of these: 

  1. Dwelling – This will cover the damages that may happen to your house caused by a 

qualified peril. The standard insurance policy doesn’t cover all damages. Hence, a house can be rebuilt or repaired if, let’s say, it was destroyed and burnt to the ground by fire which is a qualified peril. 2. Personal Property- When a qualified peril and destroy your appliances, jewelry, furniture, and other personal stuff. 3. Personal Liability – This protects the homeowner against lawsuits for injury or property damage. For example, a visitor accidentally fell on your slippery pavement, then that must be covered as well. 

Now that you have a better grasp of how to determine the value of your house. Let me discuss the other important factors that can affect the amount of your home. 

What is safety net home protection? 

Safety net home protection coverage is broader than the standard homeowner’s insurance. It is an add on policy that covers the natural disasters that are not included on the qualified peril list of a standard homeowner’s insurance such as bush fires, floods, hail, and tornadoes. Moreover, in some insurance companies, vandalism and theft can be covered too. That being said, if you want to make sure that you will be fully covered, having this option is a must. In addition to that, states that are natural disaster-prone require homeowners to carry safety net home protection to avoid being uninsured in case of a claim. 

What is a Temporary Accommodation? 

Temporary accommodation is the policy that will cover you in case your house needs to be built and become inhabitable. This is also an add on policy and is only available in a higher plan. Obviously, you cannot live in your house while there is an ongoing reconstruction. You are lucky if the repair only takes a month or so. But what if it needs more time? Remember, the bigger the damages, the longer it will take for it to finish. Moreover, if the worst happened and your house was destroyed to the ground. It may take more than a year to build a new house the same as before. If that happens, you will need a temporary home to live in. This option is best for those who live in a peril prone area. Also, if you just happen to be the type who always wants to secure things ahead, then this is also for you! 

Your house itself is a big factor to lower your insurance rate 

Your house has a great impact on the amount of your insurance. Always remember this: ” The newer the house, the less expensive your homeowners’ insurance is. ” It is very understandable. If your house is new, there are just very few things that might need to be repaired. On the contrary to an old house, wherein repairs are pretty common due to the long years of use. The most common claims are damages from old plumbing, electrical, and heating systems that have worn off. 

In addition to that, if you live in a high-crime-rate area, your chance of having an above-average amount of insurance is quite high. 

Luxuries can raise your insurance rate 

Over the top jewelry, antiques, furs, and pieces of arts like paintings, are usually not covered by standard homeowners insurance. You must add a separate policy for these extensive items to be covered. Standard insurance does cover an average kind of jewelry, watches, and furs. However, it has a low liability for theft for only $1,500. Here is why jewelry as sole pieces of art can be stolen easily. That is why raising your limit of liability can be your best choice if you have these kinds of possessions. But, insurance companies have a maximum limit per piece of jewelry. So let say, your exquisite and highly expensive set of diamonds was stolen. Even if the total amount of the whole set was $4,000, still your insurance company will pay you $2,000. Another option is having a “floater policy” and “individually schedule your valuables”. This can cover your jewelry even if you lost it for a different reason, and not just because of theft. For example, your gold bracelet accidentally fell in the sink, or you lost your gold necklace while shopping at the mall. 

Adding Umbrella Policy– If you just want to have standard homeowners insurance, but you want to extend the limit of a certain policy; then you might need an umbrella policy added to your insurance plan. This will cover not just you, but also your family members and household. Moreover, injury to others or damage to their possessions will be covered as well. For example, your dog accidentally breaks out and attacks your neighbor. They sued you and asked to pay all the medical bills and lost wages due to the incident. That kind of situation shall be covered under the umbrella policy. 

Bundling your homeowners and auto insurance can save you money 

Bundling your home insurance to your auto insurance under one insurance company can save you some cash. This is one of the best ways to save extra money in your account. You can save up to 20% on your premiums by doing so. Another thing, insurance companies value their loyal customers who keep all of their insurance with them; it’s like hitting two birds in one stone. 

Contact us today at and the best insurance agency in Denver, CO will assist you with getting the best deal that you can have. Our main goal is to ensure that our clients will have exactly what they need. We empower our consumers with the information that we have to provide proper help.

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