How Much Home Insurance Do You Really Need?
Learn how to calculate the right coverage, not just for your house, but for everything tied to it
Home insurance is about more than protecting the building itself. It also safeguards your personal belongings, protects you from liability claims, and helps you maintain stability if disaster strikes. But many homeowners underestimate how much coverage they truly need, or assume the market value of their home is enough.
This matters when you’re updating your policy after renovations, refinancing your mortgage, or just trying to understand whether your insurance really reflects what it would cost to recover. You might think about this the next time you see home prices rise or a neighbour experiences a major loss.
Key Coverage Areas to Review
When evaluating how much home insurance you need, consider these four components:
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Rebuild cost of the home (not market value)
Your dwelling coverage should reflect how much it would cost to rebuild your home with similar materials and labour, not how much it could sell for. Market prices include land and fluctuate with real estate trends, but your insurance should be based on construction costs, which are typically higher than expected. -
Personal belongings
Most policies insure contents for a set percentage of the dwelling limit, often 60 to 80 percent. But if you own high-end furniture, electronics, or designer clothing, that default may not be enough. You’ll need to inventory your items and potentially increase this limit or add item-specific coverage. -
Liability protection
This covers legal costs and damages if someone is injured on your property or if you accidentally damage someone else's. A standard limit might be $1 million, but consider higher limits if you entertain often, own pets, or have features like a pool or trampoline that raise risk. -
Additional living expenses (ALE)
If your home becomes uninhabitable after a fire or other covered event, ALE pays for hotel stays, meals, and temporary accommodations. Your coverage should reflect the realistic cost of maintaining your lifestyle in your area.
| Coverage Area | How to Set the Right Limit |
|---|---|
| Dwelling | Use rebuild cost calculator or insurer's estimate |
| Contents | Create a home inventory and assess total value |
| Liability | Consider lifestyle risk, guests, and local legal norms |
| Living Expenses | Estimate 6–12 months of rental costs in your area |
Tip: Keep records of renovations, upgrades, and expensive purchases. They can help you justify coverage increases and streamline a future claim.
When to Increase Your Coverage
There are key moments when it makes sense to review and possibly raise your home insurance limits:
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You renovate your kitchen, add a deck, or finish a basement
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You buy expensive electronics, jewelry, or furniture
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Your family grows, or your living expenses increase
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You notice construction or material costs rising sharply in your region
Note: Your insurer may automatically adjust your limits for inflation, but that doesn’t always capture major lifestyle or property changes. It’s smart to check annually.
Enough to Rebuild, Enough to Rebound
The right amount of home insurance is not just about the value of your house. It’s about ensuring you can rebuild your life without financial strain if disaster strikes. By focusing on what it would cost to repair, replace, or relocate—not just what your home is worth—you can make sure your policy does its job when you need it most.