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4 Tips For Calculating Your Home Insurance

The cost of home insurance is based on various factors, which include your residential area and home’s condition. While there’s only so much you can control with the premium cost, you can control the amount of coverage you intend to take out.

To calculate your insurance, consider the different aspects that determine the amount of coverage you require. This guide will help you establish an estimate of your home insurance.

1. Basic Considerations

Approximating insurance costs begins by finding your home’s replacement value. Expect the amount to be lower than its purchase cost since replacement costs eliminate land. Examine a current appraisal or consult your real estate agent or building contractor to obtain this information.

Next, generate or evaluate and if necessary, update your inventory to help estimate your possessions’ value, which doesn’t consider depreciation or cash value, which considers depreciation. Most insurance policies use cash value on personal items and replacement value when it comes to the dwelling.

2. Determine the amount of insurance you require for the structure

Standard home insurance policies offer coverage for disasters, for instance, damage because of lightning, fire, explosions, and hail. Those who reside in regions where there’s a risk of earthquake or flood will require coverage for those disasters too. In each case, you’ll want your policy limits to be high enough to cover the rebuilding cost of your home.

The cost you paid for the home or the existing market price might be less or more than the rebuilding cost. Bear in mind that if the limit of your policy is dependent on your mortgage, it might not cover the rebuilding cost sufficiently.

Although your insurer will recommend a coverage limit for your home’s structure, it’s advisable to be informed as well. To ensure your home has the appropriate amount of structural coverage, consider local construction expenses and the structure’s square footage.

For a fast estimate of the coverage you require, multiply your home’s square footage by local per-square-foot building expenses. To establish construction costs, contact the building association, local real estate agent, or insurance agent.

3. Home’s Replacement Cost

Your home’s replacement cost is the dollar amount it would cost to construct a new version of the home if it underwent complete destruction and you must carry sufficient dwelling coverage to match this amount. The home’s replacement cost differs from the resale value.


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The replacement cost will usually be less than the sale cost because the land your home sits on and the location determine your property’s value. Calculating the precise replacement cost is complex and most often, insurers will use a blend of publicly accessible data you provide to establish the replacement cost.

Moreover, insurers frequently conduct inspections on newly insured properties to verify that the purchased coverage level corresponds to the coverage you require and that the insurer is charging you the appropriate insurance price.

For more insight into how to calculate replacement cost, you should hire an independent expert who’s familiar with local building expenses to give you an estimate or generate one yourself.

4. Coverage Options

Insurance costs vary depending on the kind of policy, the deductible you select, and the dwelling coverage. The kind of policy describes the “perils” covered by the policy. The most common is the “special form” that covers any peril except those purposely excluded.

In most instances, this means earthquakes and floods. Home insurance is available as a package of insured possessions whose limits are dependent on the dwelling coverage.

Limits for structures, for instance, a garage don’t have separate insurance and loss of use cover, are a specified proportion of the amount for which your home is insured. Others like medical payments and personal liability enable you to select the coverage limits.

Final Thoughts

Home insurance is an important product that protects against losses from damage caused by vandalism, fire, and adverse weather. Therefore, it’s important you obtain the appropriate coverage level using this guide.

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