Buy enough protection but no more

Nationally, the average homeowners premium rose about 3 percent this year and will continue to rise, according to the Insurance Information Institute, a trade group. To reduce the pain, get the right level of coverage. Your home’s insured value, or replacement cost, should equal the cost in labor and materials to rebuild from scratch, generally not including the foundation. That’s not the same as the market value, which includes the cost of the land.

You can use an online calculator to estimate your home’s replacement cost. Using the calculator at www.building-cost.net is free; www.accucoverage.com offers evaluations for $7.95. Your insurer will offer its own appraisal, but for a second opinion you can hire an appraiser at a cost of $250 to $500. When you renew your policy, inform the insurer of any improvements you’ve made to determine an accurate premium.

Which coverage to buy

The most common homeowners policy covers an array of perils, including burst pipes, explosions, fire, hail, lightning, theft, vandalism, and windstorm, except when they’re explicitly excluded. The liability portion pays attorneys’ fees and damages in lawsuits involving bodily injury or property damage caused by you, a family member, or a pet.

The best coverage is “guaranteed replacement cost,” which pays for rebuilding, no matter the cost. But it’s expensive, and it might not be available. Next best is “extended replacement cost,” which caps coverage at about 20 percent more than replacement value. Policies also cover your home’s contents, such as furniture, clothing, electronics, musical instruments, and so on, for 50 to 70 percent of the replacement cost.

Most policies generally provide a minimum of $100,000 in liability coverage. That might not be enough if Buy enough protection but no more you’re sued for a serious accident on your property, and your assets could be at risk. You can buy an umbrella policy to add liability protection. Usually you must have $300,000 in homeowners and $250,000 in auto liability coverage to buy one. At an average cost of $150 to $300 per $1 million in coverage, it’s a good deal.

Major exclusions

Flooding

This includes water damage from clogged drainage systems and mudflows. Consider National Flood Insurance, even if you don’t think you’re at risk. The Federal Emergency Management Agency estimates that 25 percent of floods occur in low- to moderate-risk areas. Go to www.floodsmart.gov for more information.

Earthquakes, sinkholes, and landslides

Buy coverage from your state or a private company, if it’s available and affordable.

Upgrades to code

Most policies cover about $10,000 to cover added costs of rebuilding to new codes. If you have an older home or if codes have recently changed, buy a law-and-ordinance rider for an extra 25 percent of the premium.