How Much Should I Insure My House For?

In Ventura County real estate values have climbed again to almost 2007 levels so we get asked several times a week now by clients if they have enough insurance on their homes. This is a great question to get answered as our homes are most frequently our biggest asset, and we don’t want to find out after a big loss that in fact we do not have sufficient coverage. While not a common claim, in 24 years I have had 3 clients suffer a major loss of their homes.

To calculate how much coverage you need you first need to know that there are 2 parts to the value of your home. The first is the actual land that your house sits on. In Ventura County the dirt our homes sit on is expensive all by itself. This morning in fact, I received a call from one of my clients with this very question. His home‘s reconstruction cost is estimated to be $275,000 but he thought the value of his home was over $500,000. He thought he might be underinsured but he is not. If the home burns to the ground the real dirt will still be there to rebuild on so he only needs enough to rebuild the house. The bank cannot require you to insure the loan balance but can as for verification that you have sufficient coverage to reconstruct the home.

There are additional coverages you need. One is to cover any additional features required by the city to conform to current building codes. For example you home may not currently have fire suppression sprinklers but if the house suffers major damage the city may require them put in before they will issue permits to do the needed repairs.  Another is coverage for incidental labor you hire done at your home. If they are hurt while working, you may be held liable for their injuries so you need Personal Injury coverage.

Condominium owners should have their own policy as the HOA policy does not cover the kitchen cabinetry or any interior additions. This policy can also cover you for any portion of a loss to an HOA common area you are assessed as an owner.

Take some time and look at your policy to see what you are covered for. Hopefully you can find your policy. Make sure you know what you have as you don’t want to find out at the time of a loss. As attorneys are involved in writing policies sometimes there are items that are difficult to understand so ask for an explanation. You don’t want to learn the hard way.