How much homeowners insurance do you need?


You should have enough homeowners insurance to fully rebuild your home if it’s destroyed by a covered event, like a house fire. You should also have enough liability coverage to protect all of your assets from expensive litigation.

Pat Howard 1600Kara McGinley


Pat Howard

Pat Howard

Property and Casualty Insurance Expert

Pat Howard is a senior editor at Policygenius specializing in property and casualty insurance. His work has been featured on Property Casualty 360, Fatherly, MarketWatch, and more.


Kara McGinley

Kara McGinley

Property and Casualty Insurance Expert

Kara McGinley is an insurance editor at Policygenius, specializing in home, auto, and renters insurance. She's been writing about insurance since 2019, and her work and insights have been referenced in Kiplinger and WRAL.com.

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Deante' Peake - Licensed Property & Casualty Producer

Deante' Peake - Licensed Property & Casualty Producer

Operations Sales Manager, Property & Casualty

Deante' Peake is a property and casualty operations sales manager at Policygenius in New York City.

Updated October 4, 2021|4 min read

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If you own a home, you already know you need a homeowners insurance policy to protect it. But how do you determine how much you need? Homeowners insurance is made up of six basic protections. Before you start shopping, there are three things you should know that will help you figure out how much of each type of coverage you’ll need to buy:

  • The rebuild cost of your home

  • The total value of the personal belongings in your home

  • The value of your combined assets

A Policygenius expert can also help you figure out exactly how much coverage you need and compare quotes from top companies to make sure you’re getting the best price.

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Key Takeaways

  • You should have enough homeowners insurance to cover a complete rebuild of your house, replace all of your belongings, and cover all of your combined assets

  • If you have lots of expensive valuables, you’ll need more than the standard amount of personal property coverage to protect them

  • Your personal liability coverage should be high enough to cover the value of your assets, including your house, cars, belongings, and future wages

How much dwelling coverage do I need?

Dwelling coverage is the part of your homeowners insurance policy that reimburses you when the structure of your home is damaged, like if you have a house fire or your roof is damaged by a windstorm. 

That means if your home’s replacement cost is $400,000, you should have $400,000 in dwelling coverage so you can afford to rebuild it from the ground up if disaster strikes. If you don’t have enough coverage to fully protect and rebuild your home, you’ll have to foot the bill for any remaining repairs, which could end up costing you thousands of dollars.

Genius tip

Homeowners insurance is based on the rebuild cost of your home, or replacement cost, not its market value.

How to calculate your home’s rebuild cost

There are many factors that affect a home’s rebuild cost, from local construction costs to your home's square footage to the type and age of its roof. Insurance companies will provide you with a rebuild estimate based on the information submitted in your application — but if you want to get a rough idea of how much your home’s rebuild value is, there is a simple way to do it: Multiply the square footage of the home by the average cost per square foot to build in your area. 

➞ To find your home’s replacement cost, check out our homeowners insurance calculator here

Genius tip

Home insurance helps pay to rebuild your home, but doesn’t account for inflation or the increased prices of labor and construction materials after a natural disaster, or the cost of bringing an older home up to code during a rebuild. Check with your insurance company to learn if they offer any coverage add-ons that you can add to your policy for an additional fee, like inflation guard or ordinance or law coverage.

How much personal property coverage do I need?

Personal property coverage covers your belongings, like your furniture, televisions, and wardrobe, if they’re damaged by a covered peril

Personal property coverage is usually set at around 50% to 70% of your dwelling coverage amount. If your home is insured for $400,000, your personal property coverage limit will be anywhere from $200,000 to $280,000. But when it comes to setting personal property coverage, there are a few things you’ll need to consider: 

  • Take a home inventory: You should make a detailed list, or inventory, of all your personal possessions. This way you have a better idea of how much personal property coverage you need, and you’ll have records of your belongings if you need to file a claim. 

  • Upgrade your personal property coverage: Your personal property is insured at its actual cash value (ACV), meaning that depreciation is subtracted from the total reimbursement amount. To fully protect your belongings and get paid enough to replace them with new ones, you’ll need to upgrade your coverage to replacement cost coverage. This typically costs 10% more than standard personal property coverage, but it can be worth it. 

  • Add extra coverage for high-value belongings: Home insurance companies set restrictions on how much they’ll reimburse you for high-value items like jewelry or computers. That means if your engagement ring is stolen, you’ll only be reimbursed a specific amount. If you have high-value property, check with your insurance company to see if they offer a scheduled personal property endorsement to increase your coverage limits for specific items.

→ Learn more about personal property coverage

How much liability coverage do I need?

If someone is badly injured and you’re held liable (like if someone slips and falls on your icy front steps) how much money do you think you’d need to put up an adequate fight in court and pay the settlement amount? It’s probably more than you think.

Standard homeowners insurance typically offers up to $500,000 maximum in personal liability coverage, but to know how much coverage you actually need, you’ll need to add up all of your assets — like your home, car, savings, retirement funds, boat, etc. 

If you get taken to court and the injured party wins the lawsuit, you may be liable for paying for legal defense, their medical bills, funeral expenses, other death benefits if the victim's family is without life insurance, and more.

On top of that, the injured party can go after all of your assets in a lawsuit, not just assets that are attached to the insured property. So if you have $400,000 in assets, you should have at least $400,000 in personal liability coverage.

Genius tip

If your assets total more than the maximum personal liability coverage limit in your policy ($500,000), consider adding a personal umbrella policy. With umbrella insurance, you can typically increase your liability insurance to $1 million to $5 million.

How much additional living expenses coverage do I need?

Additional living expenses (ALE) (also called loss of use coverage), is the part of home insurance that pays for you to live elsewhere if your home becomes unsafe to live in after a covered disaster. It can help pay for things like hotel stays, restaurant meals, public transportation fees, and laundry services.

A standard home insurance policy sets ALE coverage at 20% of your dwelling coverage, but some insurers will let you choose higher coverage limits for an additional cost. If your home is located in an area that’s susceptible to natural disasters, or you can afford to pad this section of your policy, it may be worth it.

→ Learn more about additional living expenses coverage

Additional coverage to consider

There are some disasters and hazards that homeowners insurance does not cover. So you may need to add coverage to your policy or purchase a separate standalone policy to protect you from some of the types of damage that are excluded from a typical policy. 

Flood insurance

While it does cover certain types of water damage, like damage from a burst pipe, home insurance doesn’t cover flood damage. If you live in an area that’s high-risk for flooding, you should consider purchasing a standalone flood insurance policy. Homeowners who live in flood zones may also be required by their mortgage lender to have a flood insurance policy in addition to their regular home insurance.

→ Learn more about flood insurance

Earthquake insurance

Your policy also won’t cover earthquake damage. You may be able to add an earthquake endorsement to your homeowners insurance, or purchase a standalone earthquake insurance policy — something you should probably consider if you live in an area where earthquakes are common. 

→ Learn more about earthquake insurance

Water backup coverage

Damage from water that backs-up through your sewers or drains, or overflows from a sump pump, isn’t typically covered by a regular homeowners insurance policy. If you want protection from this type of water damage, you can add water backup coverage as an endorsement, or add-on to your policy. Water backup coverage typically costs around $30 a month for $10,000 worth of coverage.

→ Learn more about water backup coverage

Frequently asked questions

How much is home insurance a month?

On average, home insurance in the U.S. costs around $105 a month, or about $1,250 a year. Insurance prices vary greatly from house-to-house and ZIP-code-to-ZIP-code, so the best way to find out what you’ll pay for coverage is to get quotes from different insurance companies.

Do I need more home insurance coverage every year?

You may not need to update your coverage amounts frequently — the rebuild value of your home will probably stay similar year-to-year. But it’s never a bad idea to reshop your home insurance yearly, especially if your rates go up. Speaking to a Policygenius expert about your current coverage can help you make sure you’ve got the right amount of protection and that you’re not missing out on better rates from another company.

What is the difference between market value and replacement cost value?

Your home’s market value is the price it would sell for on the open market. Its replacement cost value is how much insurers estimate it would cost to rebuild your home from the ground up using the same or similar building materials as prior to the loss. Your dwelling coverage is based on your home’s replacement cost value, not its market value.

Is foundation repair covered by home insurance?

Home insurance covers foundation repair if the damage was caused by a peril that’s covered in your policy, like a fallen tree or explosion. But home insurance doesn’t cover flood or earthquake damage to your foundation. It also won’t cover any gradual damage, like if your foundation cracks over time due to age.

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