How much homeowners' insurance do I need?
Generally, your home must be insured for at least 80% of the purchase price or appraised value. 80% is usually sufficient, since the land and land improvements are generally represent at least 20% of the value of a home's purchase price. If you have less than 80% coverage, you are subject to coinsurance provisions - meaning that you share some of the loss with the insurance carrier. The insurance generally pays the actual cash value of what you've lost by a named peril.

The other feature to consider is a replacement cost option. This feature protects you if the replacement cost of your home or furnishings exceeds the actual cost of what you have lost. This is important where your home or personal property is unique, has considerable workmanship or materials that are high quality or are elaborate. The replacement cost provision may be very reasonably priced for the protection that it provides.