How much insurance coverage do I need?
When purchasing property insurance, you should make sure to insure the home for an amount that would permit you to reconstruct the home, if necessary. This would include the cost of the home when you paid for it or the amount you paid if you constructed it yourself.
You should consider any improvements or enhancements, which would include simple things, such as new light fixtures, draperies, fixtures, flooring, paint treatments, or anything else that would increase the value of the home.
For luxury homes
For more expensive homes, it is often difficult to increase the coverage for the value of the land itself because the land is not insured, only the house is. But this does not mean that you cannot ask for increased coverage for these issues.
Suffice to say, you never want to under-insure your property – not only because you may need it, but also because the increased premium for more coverage is very little. As odd as that sounds, increasing the amount of property insurance coverage itself does not impact the premiums as much as changing the kind of coverage you have.
Your best bet
The best thing to do is to ask how much more the premium is for a particular amount and see how much it would increase for more coverage.
Your focus should be on the “Coverage A” limit on your policy. While you should assure that the “Replacement Cost” endorsement is in your property insurance policy, do not rely on it as a basis to state the amount of coverage you have.
What your insurance company wants
Insurance companies are funny; they want your money but not too much. They want you to believe these “supplemental” endorsements are good enough to avoid increasing the amount of Coverage A coverage under the policy.
If an insurance agent tries to get you to limit your coverage in any way, you should shop around. As a public service, we often consult with property owners regarding the amount of coverage they need, and there is almost always a great deal of misinformation floating around about how your property insurance policy covers you. If you find you have sinkhole damage later, it is going to get pretty interesting.