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Pat Howard 1600

Pat Howard

Published August 26, 2019

The easy way to calculate your home insurance needs

Homeowners insurance is an essential form of financial protection for anyone who owns a home. It’s also required by your lender as part of your mortgage contract. But how do you know how much coverage is enough? To get the answer, start by using our homeowners insurance calculator.

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How to calculate your homeowners insurance

There are six coverage components in a standard homeowners insurance policy that cover your home, your personal belongings, your personal liability, and more. But there's one particular section of your policy that acts as its centerpiece: dwelling coverage.

Your home’s dwelling coverage largely informs the coverage in the rest of your policy, as the coverage limits for three other components (other structures, personal property, and loss-of-use) are set as a percentage of the dwelling limit. But how do you know if you’ve calculated the correct amount of rebuild coverage? And how do you know if you have enough personal property and liability coverage?

1. Use a home insurance calculator

For a quick and accurate estimate, take advantage of the Policygenius homeowners insurance calculator above. You’ll simply answer a few questions about your home, like its square footage, the type of heating system you have, whether you have a basement, and more. We then send you an estimate detailing your coverage amounts as well as rates with multiple insurance companies.

2. Estimate your home insurance coverage limits yourself

Here’s a shorthand formula for calculating your home’s replacement cost if you’re looking to obtain a rough estimate:

Home square footage x price-per-square-foot to build in your area ≈ replacement cost

You can find the average price-per-square-foot in your area by contacting a local builder or contractor. They’ll inquire about the construction type of your home and give you a price-per-square-foot estimate based on that. You then multiply the estimated amount by your homes square footage. That will give you a general idea of how much dwelling coverage you should have in your policy.

Although, we must reiterate, the above formula is very much a ballpark estimate; there are a number of other factors that should be calculated into your home’s rebuild estimate, such as the style of cabinetry and countertops, flooring, the foundation type, the roof type, and more.

3. Use the coverage limits from a prior policy

If you insured the home with a different company previously, you could also transfer the information in that policy to your current insurer, provided all the information in the old policy is up to date and correct. (Your dwelling coverage amount should be updated every year to reflect any increases/decreases in the cost of construction material). If you go that route, the insurance agent will likely ask for your old policy’s declarations page to verify the information is correct.

4. Consider hiring an appraiser

If you’re into playing it safe, you could also hire an appraiser that specializes in replacement cost appraisals to get an up-to-date rebuild cost valuation. An appraisal that factors your home’s curb appeal into its RC valuation isn’t a proper replacement cost appraisal. What you’re looking for is an estimate of how much it’d cost just to rebuild the home based on current construction materials and labor.

If you go this route, talk to your insurance agent or a local builder for local appraiser recommendations. The appraiser will conduct a component-by-component analysis of the home from the ground up.

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5. Make an inventory of your personal belongings

You’ll also want to calculate the value of the personal belongings that you own, both inside and outside of the home. The easiest way to do this is to make a home inventory, which can make it easy to categorize and value your stuff by which room it’s located in or by property type. The type of items you’ll want to include in your inventory include, but aren’t limited to:

  • Kitchenware
  • Furniture
  • Clothing
  • Electronics
  • Expensive valuables
  • Camp and sports equipment

Keep in mind that your insurance company often will set your personal property coverage limit at 50% of your dwelling coverage limit. That means if your dwelling coverage limit is $350,000, your personal property coverage limit will default to $175,000.

6. Consider raising your coverage limits

Several insurance companies will give you the option to protect your stuff with 75% of your dwelling amount, if need be. Insuring your home at higher limits or at its replacement cost will typically cost you more, so if you live in an area with mild weather that doesn’t pose much risk to your home, paying for the additional coverage may not be necessary.

You should also consider that most insurance companies have reimbursement limits, or sublimits on rare and expensive types of personal property. Jewelry, art, fine furs, expensive electronics, and rare and vintage instruments typically all have $1,000 or $2,000 sublimits. To increase those sublimits, you can add a scheduled personal property endorsement to your policy for an additional premium and “schedule” items with higher replacement cost sublimits. A home inventory is the best way to gauge which items need to be scheduled.

7. Consider your total assets

Your personal liability coverage (along with medical payments coverage) are the only parts of your policy that aren’t set as a percentage of your dwelling coverage. Most insurers offer personal liability limits between $100,000 and $500,000 in $100,000 increments. So how much liability coverage should you get?

That really depends on two things:

  • How much liability-related risk is associated with your property
  • What your total assets amount to

Keep in mind that personal liability coverage in homeowners insurance is general liability; it doesn’t simply cover your liability if someone is injured on your property, it also protects you if you accidentally injure someone or damage their property away from your home.

By that same token, if you injure somebody and they sue you, they can go after all of your assets in a lawsuit, not simply assets related to the insured property. If you own two homes with a combined value of $400,000, that’s $400,000 in assets alone that you should protect with liability coverage.

You should also consider the liability risk attached to your home. If you have a pool, a trampoline, or a treehouse, those are all considered attractive nuisances that will increase your homeowners insurance premiums. More importantly, they’re an inherent liability risk for guests (especially children) on your property, whether they were invited or uninvited.

8. Consider coverage endorsements

Lastly, see if your provider offers additional coverage for any common risks associated with your home or area that aren’t covered by a standard policy. That could include adding flood coverage, earthquake coverage, or cheap and common policy add-ons like water backup coverage, equipment breakdown coverage, scheduled personal property coverage, and more.

How your homeowners insurance rates are calculated

Homeowners insurance companies consider a number of different factors when calculating your home insurance rates, including:

  • Your coverage amounts - The higher your coverage are, the more you’ll pay in insurance premiums
  • Your location - Location is one of the biggest homeowners insurance premium cost factors. Weather, population density, proximity to fire-prone forested areas or car accident-prone intersections and roads, proximity to a fire station, and insurance claim history are all taken into account when determining rates
  • Credit history - Most states allow homeowners insurance providers to check an individual’s credit history to determine their premium
  • Age of your home - Old homes with character may be charming, but chances are they have older wiring and plumbing, which means your rates will be higher due to the heightened risk of fire and plumbing hazards
  • Discounts or credits - Homeowners insurance companies offer numerous discounts, credits, and bundles that can reduce costs. You can expect to save in the following ways:
    • Opting for a home and auto bundle
    • Taking advantage of loyalty discounts which are offered to customers after a certain number of years
    • Filing claims infrequently or not at all, which can score you a decent discount as well

Interested in comparing quotes from top-rated insurance companies? Apply for multiple policies at once with Policygenius.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.