How much should I insure my building for

Getting buildings insurance should be dealt with separately from getting contents insurance.  Building insurance is, for the most part, protecting the owner’s investment in the home from natural disaster or calamitous events. Unlike contents insurance, this is often done to comply with mortgage loan requirements.  In other words when a loan is taken out on a property, the institution making the loan might want to hedge its bet and have the buyer insure the building.  This would mean the loan would still be repaid, even if disaster struck. Insurance also buys the owner of a property peace of mind that in the event of fire, flood, earthquake or even criminal action they would not completely lose their investment in the property.   To understand the answer to the question “how much should I insure my buildings for?” it should be understood what the policy will represent.

The first thing to consider is what is to be insured against.  Protection against fire is a given, but what about other possibilities? There might need to be protection for flood or against subsidence.  There might need to be cover for accidental damage. 

With building insurance any part of the building that is permanent and fixed is covered. This means tubs, sinks, pipes, built-in desks, light fixtures and even the structure of the building.  It can also mean anything attached to the property in a permanent way such as fences, sidewalks, patios, outbuildings or similar structures. 

Another part of the “how much should I insure my buildings for?” question is about liability insurance. This type of insurance pays for compensation when the owner is held legally responsible for damaging someone else’s property or causing another individual harm.  While this is mostly a coverage used by businesses, it is not a bad idea for homeowners because in the event of such a lawsuit, this would keep the home from being lost. 

Consider when looking for insurance what might happen without it. Could the home or business be lost during a legal dispute? How could the building or those attachments to the building be replaced without insurance? 

To estimate the price of how much the coverage needs to be, check the actual value of the building and not the property, which is a mistake some make. The land will not have to be repurchased after all. What will be sought, in the worst case scenario, is the cost of having to clear the property of debris and rebuild from scratch.  This would mean the value of a new building and the furnishing, sheds or outbuildings, fences or other similar structures.

For many, the price of insurance can be offset by special deals such as getting both building and contents together as this often reduces the overall cost. Special deals are often made for owners who are willing to add security or safety features, which makes the likelihood of needing to make a claim smaller.