3 Factors to Determine How Much Homeowners Coverage You Need

Let’s protect one of the biggest investments you’ll make in your lifetime 

The AVMA Trust is here to protect you throughout your veterinary career. But did you know the AVMA Trust offers personal insurance like homeowners, renters and auto insurance to all AVMA members and their employees? If you currently own your home, we wanted to share this resource to help ensure your home and belongings are protected. 

For all that you pay to protect your home, are you sure that you have the right coverage that’s sufficient for every contingency? More than that, do you have the right amount of coverage so if something catastrophic happens, you can recoup without decimating your finances? 

The fact is that three of every five homes in the U.S. are underinsured by an average of 20% below the full value of its assets. If you’re among them and also live in an area prone to the rising number of natural disasters like floods, tornadoes, hurricanes and wildfires, your risk exposure increases exponentially. To evaluate the sufficiency of your homeowners insurance policy, consider what determines the level of protection you need for each category of coverage: 

  • Property damage
  • Additional living expenses (if home is rendered uninhabitable due to an accident or natural disaster)
  • Personal liability
  • Medical payment coverage
Coverage in each category is required for homeowners insurance, but the amount of coverage that you need in each is dictated by three factors:

1. Your Assets

The assets that you want to protect, like your possessions, your type of home and your financial cushion. Combined, they influence your premium, deductible and coverage considerations. A substantial financial cushion, for example, may mean you can lower your premium, since you’ll need less assistance to recoup losses. But it can also make you vulnerable to lawsuits — possibly warranting a boost in liability coverage. 

2. Lender Requirements 

How much your mortgage lender requires — which is at least the balance that you owe in the case of a catastrophic loss. But you need to benefit, too, so it’s important to insure to the cost of rebuilding your house. This can be a lot more than you expect after a catastrophic event, so get guidance from your broker on options (especially if you’re in a high-risk area). Two options:

Extended replacement coverage pays as much as 125% of your policy limit for rebuilding

Guaranteed replacement cost coverage (a very expensive option) covers rebuilding whatever the cost. Despite the potential expensive price tag, it's worth considering due to the increasing costs of rebuilding what we hold dear to us.

3. Insurance Requirements 

Requirements of your insurance company in order for you to purchase general homeowners insurance. Flood insurance, for example, is often required if you live in a flood plain. 

That last requirement raises another consideration worth discussing with the AVMA Trust. You may not live in a flood plain and your insurer may not require flood insurance. But a lot of the U.S. has been underwater recently: Two-thirds of the country dealt with historic flooding in the first half of 2019 alone. Should you get flood insurance? And are you covered for mold and sewage backup (that can accompany all that water)? 

You probably have limited or no coverage for mold or sewage backup. Additional coverage for the sewer issue, which often crops up during heavy rains, is fairly inexpensive. Mold protection is difficult to find and then is costly – upwards from $400 a year. But it might be worth it if your home’s in a high-humidity region and built before mold-resistant materials were available.

Did you Know? As a member benefit, the AVMA Trust offers personal insurance — auto, homeowners and renters — to all AVMA members and their employees. Please share this information with your colleagues whether they are AVMA members or not.