Your house is one of the single largest purchases most people will make in their lifetime. Homeowners should protect their investment with the right type of dwelling coverage to prevent financial losses as a result of a covered event. If you are looking for homeowner’s insurance, you should be aware of how much you need to be secure.

1. Calculating Coverage Amounts

Never guess about the final figure because that could leave you vulnerable to substantial losses. Before you settle on a final figure, you should go over your numbers with the insurance agent.

First, you want to calculate the total value of the structure. If you have contents coverage included in your policy, you will need to calculate the value of contents, which are considered your expensive items such as appliances and appropriately appraised jewelry and artwork. Do not factor in personal items such as clothing in your figure.

You will need receipts and documentation to back up your figures so be sure to save them in a secure location. It also helps to make copies or scan receipts and documents to save to the cloud so you can always have access.

2. Coverage Options

After you get an accurate valuation, you must first consider whether you want a cash value insurance policy or replacement cost. Your decision can make a big difference in the recovery process after a covered loss occurs.

If you select the cash value policy, you will collect an amount that would include depreciation and the current value of the home at the time of the loss. Selecting a replacement cost insurance policy would allow you to collect enough to replace the home and any covered items in the home based on current market value and labor costs.

3. Adjusting Coverage Amounts

If you decide to create an addition to your home or remodel, then you will need to adjust your coverage amount. Keep all of your receipts for the work that is done to the home, and you may even need a new appraisal before you can estimate the amount of coverage you need to provide insurance coverage properly.

If you add a large shed or guesthouse to the property that is not connected to the main dwelling, then you will want to add it to the existing policy or purchase a rider to cover external structures. Smaller sheds and smaller structures are not usually eligible for coverage.

It is critical that you keep your home insured at all times, not just when you are paying on your mortgage. Protect your investment and financial well-being with complete coverage. If at any time, you make improvements to your home, you need to contact your insurance agent to amend your coverage to reflect the current value of the dwelling or structure. Your insurance agent should be able to help you with this process and work as a guide during the policy purchase and the claims process.