Having insurance can definitely insure your peace of mind, or can it? What if you don’t have enough insurance or are you over insured. Sometimes figuring out the answer to these questions isn’t as easy as it sounds.

Basically you need enough insurance to cover the structure of your home, your personal possessions, the cost of additional living expenses if your home is damaged and you have to live elsewhere during repairs and your liability to others.

In addition to this, snce for most people their home is their biggest asset, you want to make sure you have it adequately insured in the event of a partial or complete loss. Mortgage lenders require all borrowers to get homeowners' insurance before the property closes. Some banks require you to buy homeowners' insurance to cover the amount of the mortgage, but this figure will unlikely cover the cost to rebuild. What you should do is insure for the replacement value of the home, not the value of the mortgage.

Therefore, what you need is a replacement cost policy. Most policies cover replacement cost for damage to the structure. A replacement cost policy pays for the repair or replacement of damaged property with materials of similar type and quality, without a deduction for depreciation. Remember you’re only insuring the structure, not the land. So if your 1,500 square foot house sits on a beachfront lot the market value could be a million dollars but replacement cost for the house only $500,000.

Also, the cost to replace vintage or historic homes could be substantially more than the average home as well as newer homes with many expensive upgrades. In these cases specialized policies can be purchased or riders can be added to a standard policy with an inventory of home improvements as well as expensive personal items. It is also possible to add an inflation guard clause to a homeowners’ policy which will automatically adjust the insured limit.

It’s easy to overlook the expense you and your family could be facing if you need to vacate your home while it is being repaired in the event of a fire or our biggest fear, a hurricane. Make sure your policy covers hotel bills, restaurant meals and other living expenses during this time. This part of the policy differs depending on the company and will probably not cover all your expenses and will also have a time limit. These limits can be adjusted based on your personal financial position, and additional coverage can be added.

Finally, lacking adequate liability insurance can be as devastating as losing your home. The liability portion of your homeowners’ policy covers you against lawsuits from bodily injury or property damage that you or your family members cause to other people. It pays for both the cost of defending you in court and for any damages a court rules you must pay.

Most homeowners’ policies provide a minimum of $100,000 worth of liability, but in my opinion this is way too little. In today’s litigious environment, you need at least $300,000 to $500,000 in liability coverage. In fact purchasing an umbrella policy, which gives you additional liability, is definitely something to consider. Just the thought of a child wondering into your yard and falling in your pool should be enough to call your broker for additional coverage.

It’s impossible to completely relieve your mind of insurance and liability stresses, but at least understanding the basics and asking the right questions will go a long way to putting your mind at peace.