Home Insurance Coverage: Costs & Types

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

After reading this lesson, you will be able to figure out how much home insurance you need based on your circumstances. You will also understand how the type of home and the personal belongings you have affect how much insurance you need.

Home Insurance

If you own a home, then you most likely are required to have home insurance. This type of protection insures your home in case your house or your belongings in the house get damaged. The damage may be caused by different things, such as burglary, fire, or vandalism.

Every home insurance policy spells out which types of damages are covered and which are not. You can get very basic insurance that protects against a limited number of damages. Or you can get a very comprehensive insurance policy that covers just about everything!

The amount of home insurance you need depends on several factors. In this lesson, we'll take a look at the factors you need to consider when determining how much home insurance coverage you need.

House Type

The very first factor to consider is the type of home you have. Is it a stand alone single-family structure? Is it a manufactured home? Is it made of brick? Is it stucco? These factors are important because your insurance company needs to know how much it will cost to rebuild your house in case of a disaster. If your house is built with expensive materials, then you will need to get more home insurance for your type of house.

The cost to rebuild a home is different than the amount of money you can sell your house for. Your home's real estate value, the amount of money you might get when you sell your home to another buyer, has little bearing on how much home insurance you need.

Your Possessions

The next factor that comes into play involves the material things you own. If your home insurance also covers the physical objects in the home, then your insurance company will need to know if you have anything of high value. If something is stolen or otherwise destroyed, your home insurance will be able to reimburse you for the value of the object. If you have a grand piano worth $10,000 or photography equipment worth $50,000 dollars, you will want to list these items in your home insurance policy so your home insurance can cover these items in case something happens to them. Of course, if you have expensive items, you will need more home insurance coverage than the average person.

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