When Hurricane Katrina tore through New Orleans in 2005, it destroyed more than 134,000 homes.

More recently, the November 2018 “Camp Fire” in southern California devoured over 7,600 homes.

No matter which part of the country you live in, none of us are immune to natural disasters. With each passing year (and each passing disaster), it’s more and more important to have homeowner insurance coverage.

The question is: How much home insurance do you need?

In this post, we’ll walk you through everything you need to know about insurance for homeowners. That way, you can rest easy knowing your new home is covered.

Homeowners Insurance 101

New homebuyers are almost always required to buy home insurance. This protects both the homeowner and the mortgage lender should anything tragic happen to your home.

The mistake 60% of Americans make is not purchasing enough coverage for their home insurance. Those who live in high-risk areas for tornadoes, earthquakes, or hurricanes may reason that it could never happen to them.

Others mistakenly believe that their policy covers everything (such as floods) when in reality it doesn’t. Most policies cover major events like fires, storms, and burglaries, but there’s always fine print to read.

To help you make an informed decision (and ensure you have the coverage you need), here are the four main considerations for homeowners insurance.

1. Dwelling or Replacement Coverage

This is the first and most obvious facet of homeowners insurance. In the unfortunate event that you lose your home in a disaster, the insurance pays you to rebuild your home.

Provided you have enough coverage, that is.

To calculate the coverage you need, you need to know the exact amount it would take to completely rebuild your home. This includes the structure, the materials used to build it, and any additions (garage, deck, or patio).

Start by taking the square footage of your home and multiplying it by the local costs of construction. This will give you a rough idea of what it would cost to rebuild your house, but you need to dig deeper.

Compare your figures with an online calculator or consult a local insurance agent to make sure you’re on the right track. You should also be aware of factors that could affect replacement costs, such as:

• Remodeled bathrooms or kitchen
• Additions built after purchase
• Rising costs of labor and supplies
• Any unique features (molded ceilings, arched windows)

Another factor to consider is the age of your home. If it was constructed decades ago, some of the building codes may now be out of date. Your new home will be built following the latest codes, which could cost significantly more than the original construction.

2. Personal Property Coverage

As any homeowner knows, a home is more than just four walls. It also contains all of your worldly possessions

For this reason, homeowners insurance also covers personal property inside your home. This includes:

• Appliances
• Furniture
• Clothes
• Electronics
• Sporting equipment

The trick is knowing how much your possessions are worth so you know how much it would cost to replace them all. Because we tend to buy items over time, it’s easy to lose track of how much we have–and what we paid when we bought them.

Set aside a weekend to take inventory of every item you own. That’s right–everything. Start with your bedrooms and closets and work your way into the attic and garage.

Make a list of everything you have and its estimated worth. It’s also a good idea to take photos of more expensive items, as your insurance company may want to see them.

Keep in mind that personal property coverage has its limits. If you own a rare antique piano, designer fur coat, or heirloom jewelry, you’ll want to purchase a separate policy to cover those items.

3. Liability Coverage

Over a third of all homeowners insurance claims are for dog bites. The idea behind liability insurance is to cover anyone who gets injured on your property.

What if someone trips over a step or falls off the swingset? Medical bills and legal fees can skyrocket in a blink, so you want to ensure you have enough liability coverage to protect yourself.

Many policies offer a minimum of $100,000 in liability coverage. Even if you have the safest backyard and sweetest dog imaginable, increase your coverage to $300,000 (or $500,000) if you can. Accidents happen to the best of us.

Did you know that your homeowners insurance may also cover you if an airplane crashes in your backyard or a wild animal breaks into your house? Mathenia Insurance Group has more information.

4. Additional Living Expenses (ALE) Coverage

A final consideration for your homeowners insurance policy is optional ALE coverage.

Let’s say that despite your best home protection ideas, your house is destroyed by a powerful hurricane. How many months (or years) will it take to rebuild? Where will you sleep and what will you eat in the meantime?

If you’re without a bed to sleep in and a kitchen to cook in, these additional living expenses may be covered by your policy. This gives you the funds you need for a hotel, restaurant meals, or other temporary living arrangements.

Insurers generally take your total dwelling coverage and add 20%-30% in ALE coverage. If your home is insured for $300,000, for example, you can add on $60,000-$80,000 in ALE coverage.

How Much Home Insurance Do You Need?

So, how much home insurance coverage do you need?

The answer will vary from place to place, but one thing is for certain: Make sure you have enough coverage.

Hopefully, you’ll never lose your home to a fire, flood, or other disaster. But in the unfortunate event that you do, your homeowners insurance will help you rebuild it.

Looking for more helpful advice on buying a home? Check out our latest posts for home buyers.