Asked by Edna  |  Submitted January 07, 2014

Is there a rule of thumb for how much homeowner's insurance you should have, or what percentage of your income should go to insurance?

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  Answers  |  1

July 08, 2014

The short answer is "not really". Rules of thumb often provide useful shortcuts for us Edna. They can also be misleading, especially if your situation deviates from the "norm" on which they're predicated. Homeowners insurance has coverage limits for several different areas, and they're pretty much all based on what you have. For example, dwelling replacement coverage (often called "Coverage A") is based on the cost to replace your physical structure. Divide this limit on your policy by the livable square footage and check with local builders to see if this is adequate (or excessive) for your area. Very important to keep in mind that the cost to rebuild one house can be much more than one of several in a new development. As we saw in New Jersey after Sandy, cost of construction can rise rapidly if many homes are damaged. Be sure to factor in upgrades to kitchens & bathrooms, finished basements, unusual features like mother-in-law apartments.

And that's just one of the coverages. Other coverages to review with a local professional insurance agent would include liability, personal property, other structures, water backup and jewelry & other items that may carry specific, lower limits on your policy.

Beware, though, of letting any crude rule of thumb drive your coverage decisions as not having enough coverage will be far more in expensive should something happen.

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