So you’re buying a new house — congratulations! And as anyone who’s ever gone through the process knows, there are a lot of factors (and paperwork) to consider before you can move in.

An essential part of protecting your new investment is reliable homeowners insurance — something that might not come to mind in the midst of all the home-buying hullabaloo. But that doesn’t make it any less important.

Not only does a quality homeowners policy protect your dwelling, but it also financially safeguards your belongings, personal liability, additional living expenses (in case you need to live elsewhere temporarily after an incident), and much more.

So just how much homeowners insurance coverage is the right amount for you and your family? Check out these 5 pointers on how to calculate some basic home coverage limits for you and your budget.

1. Take advantage of Esurance’s home insurance calculator

We know how tedious it can feel when trying to determine the level of homeowners insurance coverages for your new policy. Luckily, we put together this handy-dandy home insurance calculator — all you have to do is answer a few simple questions to get estimates on some of your most important homeowners coverages.

2. Estimate your home insurance coverage limits

Every home — and therefore every home insurance policy — is unique. And while it doesn’t take a rocket scientist to calculate homeowners insurance coverage limits that feel right for you, it does require a little math.

First, calculate your home’s replacement cost

This is arguably the most important factor to consider when determining the level of dwelling protection coverage on your home policy.

Replacement cost is different from your house’s market value, which often takes your land and/or property into consideration in its valuation. Your home’s replacement cost, on the other hand, is simply the amount of money it would take to rebuild your home from the ground up should a covered disaster turn it to rubble (which means your land isn’t included in the calculation).

To calculate your home’s replacement cost (or replacement value), start by researching the average cost-per-square-foot that home builders in your area charge. When you multiply your home’s square footage by the average rate, you can get a pretty good idea of your house’s replacement value.

The national average rate charged by building contractors in 2011, for example, was $80. So if your home is 1,500 square feet, its replacement cost would be $120,000. And that’s not including other important features of your home — like the cabinetry, flooring, appliances, HVAC system, and windows, to name a few — that should be added to your home’s replacement cost estimation.

Your average homeowners insurance company can also help you calculate your house’s replacement cost with just one easy phone call.

Then take a home inventory

So we’ve covered the most essential details of your dwelling, from exterior siding to interior appliances. But what about all the prized personal possessions inside your home? We’re talking furniture, clothing, fancy rugs, electronics, tiny-spoon collections … the list could go on and on.

Personal property insurance on your home policy could pay to replace destroyed belongings after a covered incident like a fire or theft. By maintaining a thorough inventory of your home’s contents and keeping pertinent receipts in a safe place, you can help expedite the claims process should you ever experience a loss.

3. Consider all your assets

If a guest is ever injured on your property, or if you accidentally damage someone else’s property, family liability protection on your home policy could come to the rescue by paying your legal expenses if your guest or neighbor decides to sue.

That’s why it’s important to calculate the cost of all your assets — including, but certainly not limited to, stocks, bonds, savings, and other property like real estate. If you’re ever involved in a nasty lawsuit where you’re found liable, having sufficient liability coverage on your homeowners policy could save you from major financial hardship.

4. Choose a deductible that’s right for your budget

It’s pretty likely that you’re going to have to choose a deductible for certain homeowners insurance coverages. The deductible is the amount you agree to pay out of your own pocket before your insurance policy steps in to cover the rest (up to the limits you choose).

While a low deductible means you won’t have to pay much out-of-pocket in the event of a claim, it generally spells higher insurance premiums. And a high deductible requires more cash if you file a claim, but you can typically look forward to lower insurance premiums.

5. Explore additional coverages that can provide extra protection

There are also a wide range of other policy protections to ask about when you get your quote, like:

  • Additional living expense coverage
  • Other structures coverage
  • Water backup coverage
  • Guest medical payments coverage
  • Building code coverage
  • Identity theft coverage
  • Home day care coverage

Ready to get started? Get a free quote for reliable homeowners coverage from Esurance today.*

*Not available in all states.

Insurance 101 | Homeowners 101


about Megan

After beginning her Esurance career in 2012 as a sales agent in Phoenix, Megan made her way out to San Francisco to join the company’s editorial team and pursue her love of writing. She spends most of her free time baking fancy cookies and forcing her cats to snuggle with her.