How Much Is Too Much? The Homeowners Insurance Edition

If you were given the option to pocket $500 or burn it, you would probably pocket the money. Well, not having a homeowners insurance plan is kind of like setting your money on fire. How so? If your house was broken into, vandalized, and your electronics and jewelry were stolen and you didn’t have insurance, you would have to pay to replace all of your stolen property out of pocket. That can add up to tens of thousands of dollars pretty quickly.

On the other hand, having a homeowners insurance policy would cover all of your financial bases, saving you from going in the negative. Doesn’t it seem like common sense to get an insurance plan then?

Before you make your calls and sign a contract, you’ll want to reference the proverbial [homeowners insurance calculator](https://coverhound.com/homeowners-insurance). Does the homeowners insurance policy you’re about to sign cover you when the unexpected happens, or will you be paying a hefty premium for a plan that provides less than adequate coverage?

**The Three Types of Homeowners Insurance**
Homeowners insurance is not a cut-and-dry affair. Every policy is underwritten a little differently, with plans being tailored to fit their policyholders’ lifestyles. There are three general coverage types of homeowners insurance you should be aware of before you settle on a plan for yourself:

*Replacement Cost:* This coverage type is just as it sounds, it covers the replacement costs of your private property if it was damaged, lost or stolen.

*Guaranteed Replacement Cost:* This coverage type will cover the financial costs of repairing or rebuilding your home even if it is above your policy’s limit. This level of coverage is what is known as an *[“inflation buffer"](http://www.investopedia.com/articles/pf/08/homeowner-insurance.asp)*.

*Actual Cash Value:* This coverage type covers the actual cash value of your lost, damaged or stolen items. This type takes depreciation into account, so, if your $300 camera was stolen but your insurance adjustor prices it $50, $50 is what you will get in return.

**Planning for Homeowners Insurance**
There is no one universal homeowners insurance plan because the list of lifestyle factors changes from person-to-person. Factors such as your age, the age of the house, the number of personal items you have and where the house is standing all play a part in the cost of your premium. This is where the discrepancy in premium costs comes in: everyone requires a different form of coverage.

To figure out what type of policy would best suit you, you first need to figure out the total monetary value of your personal items, including:

− Furniture
− Electronics
− Jewelry
− Kitchenware
− Apparel
− Miscellaneous

If you don’t know the costs of particular items, look up their cost online. Remember, if you want to be covered in full for a lost item, you will need to make sure you have a replacement cost homeowners insurance plan.

After assessing the costs of personal property, assess the cost of rebuilding your home. Once you have compiled your financial numbers, it’s time to start looking at insurance plans.

Insure your home for what it’s worth. You can save in premiums by bundling, asking for discounts and raising your deductible. The Insurance Information Institute has an entire [list](http://www.iii.org/article/twelve-ways-to-lower-your-homeowners-insurance-costs) of ways to save on your homeowners insurance premium. Get your [free homeowners insurance quotes](https://coverhound.com/homeowners-insurance) when you visit CoverHound.