How to Determine Your Home Insurance Coverage Needs

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.

If you aren’t sure what else your home insurance covers, ask your question below.

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.

Your dwelling coverage should equal the cost to rebuild your home from the ground up, not its market value or mortgage balance. While insurers can estimate this for you, it helps to understand what drives rebuilding costs:  

• Size & Construction: Square footage, roof type, exterior walls, style (e.g., ranch, colonial).
• Features & Upgrades: Fireplaces, custom trim, extra bathrooms, or renovations add to costs.
• Local Costs: Per-square-foot construction rates in your area, plus labor and material prices.
• Other Structures: Garages, sheds, and driveways also factor into coverage needs.

Some additional considerations when determining how much dwelling coverage you need include:

• Building Codes: You may need extra coverage (Ordinance or Law endorsement) to meet updated codes.
• Older Homes: A modified replacement policy may cover with modern materials instead of originals.
• Inflation & Disasters: Inflation guard coverage automatically increases your policy's dwelling coverage to account for inflation. This keeps your coverage up-to-date, preventing you from losing your house in a disaster, only to find that your dwelling coverage levels are inadequate for rebuilding.

Other structures coverage protects things like detached garages, sheds, fences, and driveways. Most policies set this limit at 10% of your dwelling coverage, but that may not be enough if you have multiple or high-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.

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.

Liability coverage pays for medical bills, property damage and legal costs if you’re held responsible for an accident, and the right limit depends on your financial situation. Start with the value of your home equity, savings and investments; your liability coverage should at least match the total amount you want protected from a lawsuit. 

Some questions you can ask yourself include:

• If someone sued me tomorrow, how much could they realistically go after?
• Do I have significant assets, like investments, savings or rental property, that I’d want shielded?
• Would my current limit cover both medical costs and a potential legal judgment?
• Do I need an umbrella policy for added protection beyond my homeowners policy?

While most policies default to $100,000, that usually isn’t enough; it might be best to increase to $300,000 to $500,000 as a safer baseline. If your assets exceed those limits, consider an umbrella policy, which adds extra protection at a relatively low cost.

Medical payments coverage limits are usually modest, often between $1,000 and $5,000 per person, because this coverage is meant for small, no-fault claims that can help avoid lawsuits. When choosing your limit, think about the types of risks on your property, like a pool, trampoline or frequent visitors, and consider opting for the higher end of the range for extra peace of mind, since the added cost is typically minimal.

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.

Review which of these add-ons apply to your home and location.

This table shows recommended coverage for a home with a $350,000 replacement value. This is the rebuilding cost, not your mortgage amount.

The right 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 proeprty coverage, depending on location and lifestyle.

Knowing how much coverage you need ensures proper protection without overspending. These frequently asked questions address common concerns about homeowners insurance.