Standard homeowners insurance covers six aspects by default: your home’s main structure, other structures on your property, personal belongings, temporary living expenses, liabilities and medical payments.
How to Determine Your Home Insurance Coverage Needs
Updated: November 12, 2025
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Key Takeaways
Your home insurance dwelling coverage limits should be enough to rebuild your home if it’s completely destroyed.
Personal property limits should be enough to replace your personal possessions if they are all lost or destroyed.
How much personal liability limits you need depends on your lifestyle and value of your assets.
What Home Insurance Coverage Do You Need?
Dwelling (Coverage A) | Provides financial protection for your home's structure, including walls, roof, foundation and built-in systems. |
Other Structures (Coverage B) | Covers detached property like garages, sheds, fences, and driveways. |
Personal Property (Coverage C) | Pays to replace or repair belongings like furniture, electronics, clothing, and appliances. |
Loss of Use (Coverage D) | Helps cover extra living expenses, like hotel stays and meals, if your home is unlivable after a covered loss. |
Liability (Coverage E) | Provides financial protection if you’re sued for injuries or property damage to others. |
Medical Payments (Coverage F) | Pays medical bills for guests hurt on your property, regardless of who’s at fault. |
If you aren’t sure what else your home insurance covers, ask your question below.
How Much Should I Insure My Home For?
The right amount of home insurance coverage ensures you can rebuild your home and replace your belongings without major out-of-pocket costs. To figure this out, MoneyGeek will list the six standard homeowners insurance coverages and how much you may need for each.
Determining How Much Home Insurance You Need for Your Home’s Structure
Your dwelling coverage should match what it costs to rebuild your home from scratch, not your home's market value or what you owe on your mortgage. Insurers can estimate this for you, but here's what affects rebuilding costs:
- Size and Construction: Your home's square footage, roof type, exterior materials and architectural style (ranch, colonial, etc.)
- Features and Upgrades: Fireplaces, custom woodwork, extra bathrooms or recent renovations
- Local Costs: Labor rates and material prices in your area
- Other Structures: Detached garages, sheds and driveways
You'll also want to account for:
- Building Codes: Newer code requirements may need an Ordinance or Law endorsement
- Older Homes: Modified replacement policies cover rebuilding with modern materials instead of matching original construction
- Inflation and Disasters: Inflation guard coverage automatically adjusts your dwelling limits over time, preventing gaps between your coverage and actual rebuilding costs after a disaster
Higher dwelling coverage limits often lead to higher home insurance costs, but note that this will still depend on other factors, such as your location, credit score, claims history and more. Compare policies from at least three different providers with the same dwelling coverage limits to find affordable home insurance for your needs.
EXTENDED AND GUARANTEED REPLACEMENT COST
You buy insurance based on rebuilding costs, not purchase price or mortgage amount. However, replacement cost is just an estimate. If it's inaccurate or costs change over time, your coverage may not be enough to rebuild completely.
You have two main options for added protection:
- Extended Replacement Coverage: Adds 25% to 50% more coverage on top of your dwelling limit. It helps if rebuilding costs turn out higher than expected, giving you a cushion for underestimated expenses.
- Guaranteed Replacement Cost: Pays the full cost to rebuild your home, no matter how much it exceeds your policy limit. This option covers all rebuilding expenses, even if prices rise far beyond the original estimate.
Determining How Much Home Insurance You Need for Your Other Structures
Other structures coverage applies to detached garages, sheds, fences and driveways. Most policies set this limit at about 10% of your dwelling coverage, but you may need more if you have several or higher-value structures.
If the replacement cost of your detached structures is higher than the default, it’s worth raising your coverage limit to avoid gaps after a loss. Ask your provider if you can increase this separately from your dwelling coverage limits.
Determining How Much Home Insurance You Need for Your Personal Possessions
Your personal property should be high enough to replace everything you own at today’s prices. While many policies default to 50% to 70% of your dwelling limit, the right number comes from a quick inventory and a few smart adjustments.
- 1Take Inventory of Your Belongings
List your items room by room to create a home inventory. Take photos and keep receipts whenever possible.
- 2Choose Replacement or Actual Cash Value
Replacement cost covers new items, while actual cash value deducts for depreciation. Replacement coverage costs more but helps you fully replace what you lose.
- 3Include High-Value Items with Sub-Limits
Most policies limit payouts for certain items, such as $1,500 for jewelry or $2,500 for firearms, regardless of your total personal property coverage.
These limits also apply to valuables like art, collectibles, furs and some electronics. Add endorsements or floaters to cover expensive items at higher or full replacement value.
- 4Set Your Total Coverage Limit
Add up the total value of your inventory and make sure your Coverage C limit is high enough. Round up to leave a little room for new purchases.
- 5Review and Update Regularly
Update your inventory and coverage after major purchases or lifestyle changes. Keeping records current makes filing future claims easier.
Determining How Much Home Insurance You Need for Your Liabilities
Liability coverage helps pay for medical bills, property damage, and legal costs if you’re found responsible for an accident. The amount you need depends on your finances. Add up your home equity, savings and investments. Your liability limit should at least match the total amount you want to protect from a lawsuit.
Ask yourself the following:
- If someone sued me tomorrow, how much could they realistically claim?
- Do I have assets like investments, savings or rental property that I want to protect?
- Would my current limit cover both medical bills and a possible legal judgment?
- Should I get an umbrella policy for extra coverage beyond my homeowners policy?
Most policies start with a $100,000 limit, but that’s often too low. Increasing it to $300,000 or $500,000 offers better protection. If your assets are worth more than that, consider an umbrella policy for added coverage at a relatively low cost.
Determining How Much Home Insurance You Need for Your Medical Payments
Medical payments coverage usually ranges from $1,000 to $5,000 per person. It covers small, no-fault injuries and helps avoid potential lawsuits. When deciding on a limit, consider any risks on your property, like a pool, trampoline or regular visitors. Picking a higher limit adds extra peace of mind and it often doesn’t cost much more.
Determining How Much Home Insurance You Need for Your Additional Living Expenses
Additional Living Expenses (ALE) coverage pays for temporary costs, like hotel stays, meals out or even lost rental income, if your home becomes uninhabitable after a covered disaster. A common limit is 20% of your dwelling coverage, but that may or may not be enough depending on your lifestyle and how long rebuilding might take in your area.
To choose the right amount, think about local rental prices, the size of your household and whether you rely on tenant income; if the default limit feels tight, ask your insurer about higher ALE options or policies that offer unlimited coverage for a set time.
Homeowners Insurance Coverage: Additional Policies to Consider
Most insurance companies offer extra coverage options because every homeowner needs a tailored policy. Someone in Houston will want flood insurance, while someone in San Francisco should consider flood and earthquake coverage.
Here are valuable supplemental coverages you can buy:
Jewelry or Expensive Item Coverage
High-value items often need extra protection. This add-on often includes limits like $2,500 per item/$5,000 total.
Flood
Flood damage (caused by rising water from outside sources) differs from water damage (from rain or burst pipes). Hurricane victims often find wind damage covered but flood damage excluded. Ask about your policy specifics and consider purchasing National Flood Insurance Program coverage.
Windstorm
In some regions, insurers don't cover windstorm damage. Homeowners in these areas need separate windstorm coverage.
Earthquake
This coverage pays for damage caused directly by earthquakes, like foundation cracks. If an earthquake causes a fire that damages your home, your standard homeowners policy would cover that.
Umbrella
If you need more liability protection than a standard policy provides, umbrella coverage makes sense. This is especially important if you have valuable assets to protect.
Review which of these add-ons apply to your home and location.
Recommended Home Insurance Coverage Amounts Example
This table shows recommended coverage for a home with a $350,000 replacement value. This is the rebuilding cost, not your mortgage amount.
Coverage Type | Policy Limits |
|---|---|
Dwelling: Pays to repair or rebuild your home after a covered loss. This is based on your home's value, separate from the land. | $350,000 |
Other structures: Covers detached structures on your property like garages, sheds and fences | $35,000 (10% of dwelling coverage) |
Loss-of-use: Pays for extra living expenses during repairs, like hotel stays or restaurant meals | $70,000 (20% of dwelling coverage) |
Personal liability: Pays expenses when you're responsible for property damage or injuries to others, like if someone slips on your unshoveled sidewalk | $300,000 |
Medical payments: Pays for injuries on your property regardless of fault, like if a visitor trips and breaks a tooth | $5,000 |
Personal property: Covers your belongings. You can increase this amount if needed. | $175,000 (50% of dwelling coverage) or replacement cost |
Water backup: Covers damage from sewer or sump pump backups, which standard policies don't include | $10,000 |
Ordinance or law: Pays for upgrades needed to meet current building codes, even if your home isn't damaged | $10,000 |
Jewelry and furs: Covers valuable items up to specified limits | $2,500 per item/$5,000 overall limit |
How to Determine Homeowners Insurance Coverage Needs: Bottom Line
The best home insurance coverage should fully protect your home’s structure, personal belongings, liability risks and living expenses if you’re displaced. Beyond standard coverages, homeowners may also need supplemental policies, such as flood, earthquake, windstorm or scheduled personal property coverage, depending on location and lifestyle.
Homeowners Insurance Coverage Needs: FAQ
Knowing how much coverage you need ensures proper protection without overspending. These frequently asked questions address common concerns about homeowners insurance.
How much homeowners insurance do I need?
Your insurance should cover the cost of rebuilding your home at current construction rates, not its market value. Include enough personal property coverage for your belongings (usually 50% to 70% of your dwelling coverage). Also, add living expenses coverage if you can't stay in your home during repairs.
How much homeowners liability insurance do I need?
Your liability coverage should equal your total assets to protect against lawsuits. Most homeowners choose between $300,000 and $500,000 in liability coverage. Consider an umbrella policy for extra protection if your assets exceed these limits or if you have higher risk factors at home.
Home Insurance Coverage Needs: Related Pages
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
He writes about economics and insurance, breaking down complex topics so people know what they're buying.
sources
- Federal Emergency Management Agency. "Flood Insurance." Accessed August 7, 2025.
- U.S. Bureau of Labor Statistics. "Appraisers and Assessors of Real Estate." Accessed August 7, 2025.