Homeowner's Insurance Limits & LiabilityTornado!  Fire!  Rampaging dinosaurs!  Multiple disasters are great for the movies.

But real life, not so much.  That’s why homeowner’s insurance exists: to protect you from real disasters you don’t even want to think about, typically fire, windstorm, hail, rain, riots, explosion, or theft.  It also provides liability coverage if someone gets hurt on your property.  You can legally own a home without homeowner’s insurance; however, most lenders will not give you a mortgage without it.  If you own a home, we’re going to assume you have a policy.

The question is: Is your policy good enough?

Every policy has a limit, meaning the total amount an insurance company will pay to replace your home and possessions.  Generally, you should be insured for at least 80% of replacement cost.  Take inventory of your things.  If disaster struck, would you be able to replace your awesome new TV?  What about your shiny new countertops?  You should have enough coverage to replace your possessions as they are now, not as they were 20 years ago.  These days, the cost of building a home is about $150 per square foot, but costs vary greatly depending on where you live.  To get figures for your area, check with your local builder’s association.

What About Liability Coverage?

Make sure you have enough liability coverage, too.  Most standard policies provide $100,000.  However, if someone breaks a hip on your icy sidewalk, $100,000 can disappear pretty fast.  Think about raising your liability limit to $300,000, or consider an umbrella policy.  Umbrella policies protect you if a home or auto accident exhausts your insurance coverage.  Remember, in a really bad accident, plaintiffs can sue for damages above what your insurance covers.  Once your policies are exhausted, your personal assets are on the line.

The Bottom Line

Yikes.  And that’s why insurance exists: to protect us from disasters we don’t even want to think about.  Check your policy and make sure it’s keeping up with inflation, remodeling, and rampaging new TVs.  No one likes buying more insurance that they’ll probably ever need.

But the key word is probably. Just get covered.  Keep multiple disasters where they belong– in the movies.

Article by Molly Fuscher