If you own a home, it’s crucial that you also own home insurance. Home insurance helps protect you in the event that something like fire or other calamity affects your home. With a good home insurance policy, if damage occurs to your home, you’ll pay a deductible, and the home insurance company will cover the rest. That can save you from debilitating repairs and crippling debt.
As with everything else, it’s important to be an informed consumer before purchasing a home insurance package. You want to understand the terminology, know what you’re getting, and for what price. And, perhaps most importantly, you want to know if you’re getting a good price for the product you’re buying.
To help find out if you’re getting a good price on your current home insurance policy, or when looking at home insurance quotes, you need to know how much you should be spending for your plan. Thankfully, determining how much your home insurance coverage should cost is relatively easy.
Consider average home insurance coverage costs
The average cost of home insurance won’t tell you how much you should be spending, but it at least establishes a baseline. The figure will fluctuate rather dramatically depending on what state you’re in, so it’s worth looking through a state-by-state list to see what the average cost of home insurance is in the state you live in.
Knowing the average price that home insurance consumers are paying can provide you with an estimate of what is a fair amount for your coverage.
Tailoring the cost to your specific home
The largest factor in determining the cost of your home insurance is simple: how much is your home worth? That said, many people make a potential mistake when calculating their home insurance. It’s very common for people to insure their home based on the price of the mortgage (in other words, their insurance will only cover the cost of the mortgage). Others insure their home based on the market value.
Instead, home insurance should insure their home based on the cost to repair or rebuild the home, which is often a bit more than the market value of the home. The purpose of home insurance is to keep you from a financial disaster if something happens to your home, so you should avoid underinsuring your property.
For instance, insurance covering $400,000 of your ruined home helps; but if it costs $500,000 to repair your home, then you’re still going to be in a difficult situation.
Since most people underinsure their home, you should probably end up paying a little bit more than the average cost of home insurance in your area.
Factor in additional coverage costs
Depending on where you live, it may be important to add additional coverage to help you in the event of disasters that are common in your area. For instance, if tornadoes or flooding are common in your area, you should invest in home insurance coverage for those potential emergencies.
Anytime you’re trying to determine how much your home insurance coverage should cost, it’s important to factor in the additional costs you’ll have for specific coverages.
Figuring out how much your home insurance coverage should cost is fairly easy. Set a baseline with average costs in your area, then adjust for the cost of your home, full insurance, and potential emergency coverage. That should give you a pretty accurate estimation for what you should be paying to have your home insured.