How much home insurance do you actually need?
Home insurance is not one number — it is several. Get each component right and you are fully protected without overpaying; get them wrong and a claim could leave you short.
Insure the rebuild, not the price tag
The most common mistake is confusing market value with replacement cost. Insurance exists to rebuild your home after a loss, so your dwelling coverage should reflect what construction would cost today — materials, labour, permits, and debris removal.
- A home might sell for $650,000 but cost $520,000 to rebuild
- In expensive cities the reverse can be true
- Land is not at risk from fire, so it does not need insuring
Your personal property
Most policies set contents coverage as a percentage of dwelling coverage, often 50% to 70%. Walk through your home mentally: furniture, electronics, clothing, kitchenware — it adds up faster than people expect. Note the special limits for categories like jewellery, bicycles, and collectibles, which are capped unless you schedule items separately.
Guaranteed vs actual cash value
- Guaranteed replacement cost pays whatever it takes to rebuild, even if costs exceed your limit — the strongest protection.
- Extended replacement cost adds a cushion, typically 25% to 50% above your limit.
- Actual cash value subtracts depreciation, so a 10-year-old roof pays out far less than a new one costs.
Liability and when to reassess
Liability coverage — $1 million is common, $2 million increasingly standard — protects you if a guest is injured or you damage someone else's property. It is one of the cheapest parts of a policy to increase.
Tip: Reassess your coverage after any renovation, major purchase, or whenever construction costs jump. A limit set five years ago may no longer rebuild your home today.
The bottom line
Size your policy to rebuild costs, not real estate prices. Take an inventory of your belongings, confirm you have replacement-cost coverage on both structure and contents, and top up liability to at least $2 million.
This article is for informational purposes only and does not constitute financial advice. Rates and product details change frequently — always compare current offers before making a decision.
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