How much homeowners insurance?

[Anonymous]

I keep getting letters from our bank saying we might not have enough homeowners insurance. I understand you don't necessarily need as much insurance as you paid for your property since you paid for both the land and the structure and in the event of some catastrophe you would only have to replace the structure. But how does one determine how much is enough? Is it a percentage thing? Why would this have changed since when we bought the place (in 2008)?

[Anonymous]

You need enough to rebuild your above-grade home and replace furnishings. You could get a rough contractor estimate, or use an insurance company calculator. Keep in mind that many insurance companies use "builder-grade" estimates, which would rebuild your kitchen in the cheapest home depot stuff available.

We used an estimate of about $100 psf to rebuild, and $25 psf to replace furnishings. Then we asked for an endorsement to get actual replacement cost, up to an additional 20% of the insured value plus an endorsement that further raised the labor rate in the event that labor costs spiked due to mass rebuilding.

Overall, it costs us about $900 to insure $450,000 face amount. Our house is worth between 750 and 800, because as you noted most of the value is in the land.

Construction costs have gone up significantly since 2008, that could be part of the change.

[Anonymous]

Out of town banks often send those letters because they don't realize how expensive land is around here, but you don't have to insure the value of land.

[Anonymous]

http://www.building-cost.net/

[Anonymous]

The home owner insurance can also cover accidents that occur on your property. For example, if the postman walks on your property, for some reason, the roof came tumbling down. Sure, the postman has insurance but it's on your property. Or if you hire a non-insured person to do work on your home, that includes cutting grass.

Last year, I reevaluated the home owner insurance when i refinanced. Should've done it earlier cause there were some coverage that wasn't necessary and some that i added for emergency purposes. Insurance is a whole set of field.

[Anonymous]

Anonymous wrote:The home owner insurance can also cover accidents that occur on your property. For example, if the postman walks on your property, for some reason, the roof came tumbling down. Sure, the postman has insurance but it's on your property. Or if you hire a non-insured person to do work on your home, that includes cutting grass.

Last year, I reevaluated the home owner insurance when i refinanced. Should've done it earlier cause there were some coverage that wasn't necessary and some that i added for emergency purposes. Insurance is a whole set of field.

What a sick society we live in that people would sue you for that.

[Anonymous]

^^^^ This is why on top of homeowners' insurance you should also purchase a several million dollar umbrella policy to protect you should you be sued. When we first got married, $1M was considered an adequate amount. Now we carry $6M. If someone drowned in our pool, or our kid was driving a car and killed someone, our homeowner's and/or car insurance exhausts pretty quickly, after that it's either sell the house or declare bankruptcy or tap into the umbrella policy. We've now carried it for more than 20 years and thank God have never been sued or needed it, but you never know. Ask your agent about this if you haven't thought about it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The home owner insurance can also cover accidents that occur on your property. For example, if the postman walks on your property, for some reason, the roof came tumbling down. Sure, the postman has insurance but it's on your property. Or if you hire a non-insured person to do work on your home, that includes cutting grass.

Last year, I reevaluated the home owner insurance when i refinanced. Should've done it earlier cause there were some coverage that wasn't necessary and some that i added for emergency purposes. Insurance is a whole set of field.

What a sick society we live in that people would sue you for that.

It's more likely to be the injured party's insurance company coming after you rather than the individual.

[Anonymous]

Anonymous wrote:^^^^ This is why on top of homeowners' insurance you should also purchase a several million dollar umbrella policy to protect you should you be sued. When we first got married, $1M was considered an adequate amount. Now we carry $6M. If someone drowned in our pool, or our kid was driving a car and killed someone, our homeowner's and/or car insurance exhausts pretty quickly, after that it's either sell the house or declare bankruptcy or tap into the umbrella policy. We've now carried it for more than 20 years and thank God have never been sued or needed it, but you never know. Ask your agent about this if you haven't thought about it.

Wouldn't you become a bigger target if you had a larger policy?