How Much Insurance Is Enough?

Insure and forget: a dangerous practice that could cost you in the future. Coverage needs can change for a variety of reasons: home upgrades, new purchases or adjustments in net worth. You should take inventory of your insurance policy every year to assess if any changes necessitate additional coverage. 


We outlined a few common situations that may help you determine if now is the right time to purchase additional home coverage.

Do you have enough coverage to rebuild your home?

Situation: You insured your home for its mortgage or market value amount, but don’t know the replacement cost to re-build.


Solution: Base your insurance on the home’s complete replacement cost – not the market value or mortgage amount. Homeowners often incorrectly think they should base insurance on their home’s “market value” (the purchase price), when actually it’s the “replacement value” (the cost to re-build) they should consider.


Compounding the problem is that banks often require homeowners insurance only to cover the mortgage (the finance amount). Building your home likely would cost more today than when you first purchased it. That’s why insurers calculate the replacement value of a home to cover such things as your recent remodeling job or room additions, demolition and debris removal, current cost and availability of skilled labor and supplies, and building to local codes which may require upgrades.


Determine the replacement cost of your home. Work with your agent to help calculate the cost to rebuild at equal quality, based on current labor and material prices.

Situation: You haven’t looked at your policy limits since purchasing your home.


Solution: Review the replacement cost limits on your homeowner policy. Our Prestige® Home Premier policy provides Full Cost Replacement Coverage*. This coverage adds protection for factors such as state or county building codes, quality of materials, current labor costs, architect fees, and building supplies.


While this is comforting, it’s important to look at the Declarations page of your homeowners policy. If you suspect an underinsurance problem, discuss it with your insurance agent. It never hurts to ask.


Check the limits on your valuables too – such as jewelry, silverware, fine arts and furs.

Situation: You did any of the following home upgrades and forgot to notify your independent agent:

  1. Upgraded kitchens and bathrooms
  2. Remodeled any room
  3. Added new rooms
  4. Altered a room (e.g., recreation room to home theater)
  5. Built porches, decks, garages or other structures
  6. Refinished the basement
  7. Replaced the roof
  8. Upgraded fixtures
  9. Changed window treatments (e.g., custom designed draperies)
  10. Decorated with expensive wall coverings and faux finishes
  11. Purchased a second home or rental property

Solution: Keep your agent informed. Before you start even the smallest remodeling job, be sure to call your agent. Your agent is available to help you make the right insurance decisions for peace of mind.


Review coverages at least once a year. Make sure to discuss any improvements or additions with your agent to assure they are included in your insurance policy.

Do you have enough coverage to protect your assets?

Situation: You have significant personal assets but you don’t have high limit liability protection. A lawsuit could place your personal property and assets at extreme risk – and could go beyond the limits of liability provided by your homeowners policy.


Solution: Look into your liability limits. While the Fireman’s Fund Prestige® line of policies offers you broad protection, Prestige Excess® is a policy that’s important for you to consider because it can cover your entire net worth.


Our personal excess liability coverage can provide you with high limit liability protection over and above what you are carrying for primary auto, homeowners, boats and other personal insurance coverages. This is exactly what you need to safeguard yourself from unforeseen circumstances ranging from a guest tripping and injuring themselves at your home to protection from a lawsuit brought against the non-profit where you are a board member. Ask your agent for help to determine the right amount of coverage for you.

Situation: You recently bought jewelry, furs, fine arts and silverware – but you haven’t told your agent about them.


Solution: Consider Prestige Collections® coverage. Typically, homeowners policies don't provide the level of coverage you need for your valuable possessions. Many homeowners policies limit coverage to only certain kinds of loss, and may even deny replacement of a cherished item. For example, most policies limit coverage on lost, stolen or broken valuable possessions and pay only $1,000 total for a loss to unscheduled items.


The Fireman's Fund Prestige Home Premier policy is flexible to meet your unique needs. Even so, there are limitations to what we cover. That's why you should consider insuring items of exceptional value with our Prestige Collections coverage. Call your independent agent representing Fireman’s Fund today and they’ll be happy to work with you to make sure your assets are protected. 

How You Should Ask for Help

According to Marshall & Swift/Boeckh, recognized consultants to the insurance industry, 64% of Americans underinsure their homes by an average of 18%.


If you haven’t updated your insurance limits in the last year, you may be underinsured. Fireman’s Fund recommends you discuss coverage with your independent agent so that you understand your policies’ benefits and restrictions. Working yearly with your agent to review your policies is the best way to be certain you always have the right amount of coverage to protect your lifestyle.


*Limitations apply in California, Florida, Louisiana and Texas.

This publication provides general information and/or recommendations that may apply to many different situations or operations. Any recommendations described in this publication are not intended to be specific to your unique situation or operation and are not intended to address all possible hazardous conditions or unsafe acts that may exist. Consult with your staff and specialists to determine how and whether the information in this publication might guide you in specific plans for your situation or operations. Additionally, this article does not substitute for legal advice, which should come from your own counsel. 


These descriptions of coverage are abbreviated and are subject to the terms, conditions and exclusions of the actual policy, which forms the contract between the insured and the insurance company. Availability of coverages, credits and options may vary by state.