How Much Home Insurance Coverage Do I Actually Need?

By McAdams Insurance Agency · August 2026 · 4 min read

A common mistake is insuring a home based on what it would sell for. Home insurance should actually be based on what it would cost to rebuild it — and those two numbers are often very different.

Dwelling coverage: rebuild cost, not market value

Your home's market value includes the land underneath it, which doesn't burn down or blow away. Rebuild cost is based on local construction costs — labor, materials, permits — to reconstruct your specific home. In a hot real estate market, market value can actually be higher than rebuild cost, and vice versa in a slower market.

Personal property coverage

This covers your belongings — furniture, electronics, clothing — and is typically set as a percentage of your dwelling coverage (commonly 50–70%). If you have a lot of high-value items, it's worth doing a rough inventory to make sure this number is realistic.

Liability coverage

This protects you if someone is injured on your property or you're found responsible for damage to someone else's property. Minimum limits are often lower than what's actually smart to carry — many homeowners choose higher liability limits, or add an umbrella policy, for extra protection.

Don't forget scheduled items

Jewelry, fine art, musical instruments, and certain tools often have limited coverage under a standard policy unless they're specifically scheduled (listed and insured individually). If you have anything particularly valuable, ask your agent whether it needs its own line item.