Home insurance is the best way to protect your home in the event of a claim. Not only that, but proof of insurance is also typically required in order for a lender to approve a mortgage loan. This means it's hard to both purchase and protect a house without it.
But how do you determine how much home insurance you actually need?
Let's take a look at what home insurance covers. This will help you begin to determine how much coverage you need.
Home insurance covers three main areas:
- The house itself
- Your personal belongings
- Personal liability, which will protect you in the event someone is injured while visiting your home
Market Value vs. Replacement Cost
The first thing to consider is that the cost of your home insurance is not based on the market value of your home or the land it sits on. It is based on the replacement cost of your home.
Insurance professionals often get asked about the different between market value and replacement costs. Let us explain.
- Market Value – What you purchased your house for, or what the house is being sold for.
- Replacement Cost – How much it would cost to replace or rebuild your home or aspects of your home.
Some of the things that factor into replacement cost include the materials used to build your home, your heating system and the age of your heating or electrical system and the size of the home.
If you're not sure what the replacement cost of your home would be, please give us a call at 1-866-523-4111 so we can help you determine it.
Contents Insurance
The material value of your personal belongings (contents) is also factored into the cost of your home insurance. However, you may want to add a separate policy (called a rider or a scheduled personal policy) in order to protect valuable items like jewelry.
In standard home insurance policies, items like jewelry are typically only covered up to a set amount. If you want additional coverage, you can always chat with us about adding a rider to ensure your valuables are protected.
Adding It All Up
Once you've spoken with a broker to determine what it would cost to replace your home and your valuables, you can confidently find a policy that covers the value of these two criteria while also insuring you're not over or underpaying for your home insurance. Did somebody say, Home Sweet Home Insurance?
Click here to get your free home insurance quote from OTIP today, the only non-profit insurance provider specifically for teachers and educators.