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Help Desk: How to figure our how much home insurance you need

Ask the Expert
Lesley Becker/Globe Staff; Adobe

A collaboration with The Boston Globe’s Help Desk:

There are many misconceptions people have when purchasing homeowners insurance, and Rick Stoeckel has heard them all.

The main one being just how much coverage is necessary, said Stoeckel, who’s been in the business since the 1970s and works with Tonry Insurance Group in Quincy. “We don’t cover for [the home’s] market value, I still have to tell clients,’’ he said. “We want to make sure we put that same house on that piece of land should you have a total loss.’’

Damage from insects and vermin, including rats and squirrels, is typically not covered. Ditto for damage from a nuclear power plant.

“Here’s a big one,’’ he said, “disease is not covered.’’ That one is for anyone wondering how the COVID-19 pandemic could affect their policy. The answer is that for most home policies, the novel coronavirus won’t have much of an impact. Still, Stoeckel said, people should take this opportunity to familiarize themselves with their coverage or educate themselves if they’re insurance shopping.

“If you had a guest over and you were sick, and they got sick, and they had a medical bill and say, ‘I’m going to sue your home insurance,’ well, they can’t,’’ he said.

Business owners and people who are self-employed who had to move their operations into their homes because of the state’s stay-at-home advisory should consult their agents and consider adding business coverage to their current policies, or get a separate business policy, said Brian Donaghue, a partner at David J. Donaghue Insurance Agency in Quincy.

“You need to be aware that there are limitations on [standard] policies,’’ Donaghue said. “Business property might be limited if you run a business from the home. Whatever exposure you have, talk to your agent.’’

For those looking into homeowners insurance for the first time, Stoeckel recommends attending a first-time home-buyer class to learn about insurance options.

“People are going in blind,’’ he said. “The number one thing I would say is buy the replacement cost for the house [and] for the contents, buy enough liability, and go with a higher deductible to save money.’’

The replacement cost, or the amount needed to rebuild a home in the event of a total loss, often is a lot less than the purchase price or market value of a home.

“Some houses in Newton are $1 million, and because they’re not that special inside, they can be replaced for $800,000 in case it’s a total loss,’’ Stoeckel said. “It depends on the neighborhood and in what part of the city or town you live.’’

The average insurance policy for a single-family home can run between $1,200 to $1,500 a year, depending on where you live, he said. In Boston, for example, it might run a bit higher. A recommended policy should cover “open perils,’’ which include fire, windstorm, or robbery. Open peril policies have comprehensive coverage and can cost a little more than “named peril’’ policies, in which only specifically named risks are covered. Major exclusions would be earthquake and flood damage coverage, which can be purchased separately, Stoeckel said.

People buying in a flood zone should know how much flood insurance will cost them before they put in an offer because coverage in certain parts can cost at least an additional $2,000 to $3,000 a year, Donaghue said.

With federal flood maps changing and sea levels rising, homeowners who live just outside a flood zone should consider purchasing flood insurance anyway to lock in the lower rate before the zone extends to include their properties, he said.

“It’s definitely a great idea to buy a [flood] policy before that day comes, because [the insurance companies] will keep you in that rate for the length of time you have that policy,’’ Donaghue said.

Homeowners who live in older houses should consider adding ordinance or law coverage to fill any protection gaps in the main policy, Donaghue said. This would cover unexpected costs of updating areas of the home that may not be up to code, such as too small windows or too narrow staircases.

“You may have an old electric system, and now you have to upgrade to comply with the code,’’ Donaghue said, adding that the extra coverage can help offset the out-of-pocket cost of replacing special features in a home. “If you have a 100-year-old handrail that you’re very fond of, but it’s not the type they make these days, it’ll cost more. Loss is covered in the general coverage, but it’s not until you get a claim that you see these extra things.’’

For some people, depending on where they live, adding extra coverage can increase the annual cost of a policy to around $3,000, Stoeckel said. One way to lower premiums is to have a higher deductible, the money a policyholder would pay out of pocket on a claim. If homeowners can afford it, Stoeckel recommends they go with a higher deductible than the minimum required. He tells his clients to start with a $1,000 deductible, as opposed to $500. Some people go as high as $2,500, he said.

When it comes to liability coverage, policies come with a minimum of $100,000, but Stoeckel said he advises most people to buy $500,000 in general liability, which gives additional protection for an extra $50 a year or so. “Liability is more important than any of the other coverage,’’ he said. In terms of personal items, many policies cover the contents of a home, but there are some limitations: “Mainly jewelry, cash, and business property,’’ said Donaghue.

According to the National Association of Insurance Commissioners, homeowners can increase their coverage with a scheduled personal property endorsement to cover higher value items, such as jewelry, furs, antiques, and computers.

New homeowners should also be aware that it can be hard to find coverage, or premiums can be higher depending on certain factors, including if a home has a pool with a diving board, a pool that’s not fenced in, a trampoline without a net, or if they own certain dog breeds, said Stoeckel.

Buying homeowners insurance can be overwhelming, but taking shortcuts can prove costly, Stoeckel said, adding that the biggest mistake he sees people make is “not getting professional advice.’’

“Relying on the realtor, on the attorney, relying on the bank — they should talk to an insurance agent and get the right kind of counseling,’’ he said.

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