When purchasing homeowners insurance, it is important to concentrate on the physical dwelling. More than your possessions, living expenses, and liability, your primary focus should be purchasing sufficient coverage to replace your home in the event of a named peril. When calculating the coverage amount, do not base it on your home’s appraised value, which includes land costs. Instead, use the current per-square-foot replacement costs in your area, which can be provided by the local homebuilders association. In light of recent catastrophic events, which may lead to inflated labor and material costs, consider extended or guaranteed replacement policies if you live in a disaster-prone area. It is also important to know what perils are included in your policy.
NOTE: Standard homeowners policies exclude damage resulting from earthquakes and landslides as well as flooding.