0 HO3 policy - How much insurance do I need?

Determining how much insurance for your home is an important task.  On one hand, you don't want to pay more than you have to.  On the other, if you have a catastrophic claim, such as your home burning to the ground, you want to make sure you have enough.  Let's take a look at the different coverages available in the HO3 policy and how to figure how much you need.

The first section to look at is called Coverage A on the policy.  This is the coverage that most people will refer to when they look at their policies.  Coverage A gives the limit of insurance paid out on a claim to your home from the standpoint of the building itself.  To determine how much insurance you need, you need to be able to know how much money it would cost to rebuild your home just as it is standing now.  There are several ways to do this, but most companies use what is known as a replacement cost estimator to calculate building material cost and labor.  The agent you are working with can do this for you.

The second number to figure is the replacement cost of your property in the home.  On the HO3 policy this is found in Coverage C.  This includes all movable property such as furniture and clothing.  It is helpful to take a quick inventory of your personal property room by room to figure how much coverage you need.  A good HO3 policy will cover your personal property at 75% of what is written for Coverage A, which is usually sufficient, but it never hurts to make sure.

Next you want to look at the liability coverage on your policy, which will be found under Coverage E on the HO3 policy.  This pays for legal claims against you for covered occurrences.  Most people will use the default minimum of $100,000, but look at what you have to loose in a court case, and you can quickly see that the minimum is usually not sufficient.  The liability coverage of the policy is one of the least expensive parts of the premium, so in this case, it is better to have too much than too little.

Lastly, take a look on the HO3 policy under Coverage F, called Medical Payments.  This part of the HO3 insurance policy pays for medical bills in the event someone gets hurt on your property, such as a neighbor kid breaking an arm.

Take a little time to figure out how much coverage is proper for your home.  It takes some time to get the right HO3 policy, but better to be prepared beforehand than find out later you don't have enough.