Is your largest financial asset actually protected? Most homeowners are underinsured and don’t even know it—a gap that could cost you everything. Buying a home in San Diego comes with a checklist a mile long, and securing homeowners insurance is often treated as just another box to check before closing. But getting it wrong is a catastrophic mistake. Let’s move you from confusion to confidence by breaking down exactly what you need.

Homeowners insurance isn’t a box to check at closing. It’s the financial firewall protecting your investment. Know your numbers.

The Problem: Signing on the Dotted Line, Blindly

So, what is homeowners insurance, really? It’s a contract. You pay a regular fee (a premium), and in exchange, an insurance company agrees to cover specific damages or losses. But here’s where things go sideways.

Normal: You’re excited to close on your new home. Your lender says you need insurance, so you get a few quotes, pick the cheapest one that satisfies the mortgage requirement, and sign. You barely glance at the details. It’s just paperwork, right?

Explosion: Six months later, a freak storm hits. A tree falls, smashing your roof and causing $30,000 in damage. You file a claim, relieved you have insurance. Then the adjuster calls. You learn your policy has a $5,000 deductible you have to pay out-of-pocket, and your dwelling coverage limit won’t cover the full cost of the specialized roof repair.

New Normal: You realize your insurance policy isn’t just a formality; it’s a critical financial tool. The numbers in the fine print—the deductible and the coverage limits—matter immensely.

The Solution: Understand Your Coverage from the Ground Up

A standard homeowners policy (often called an HO-3) bundles several types of protection. Here’s what’s typically inside.

Dwelling Coverage

This is the core of your policy. It protects the physical structure of your house—the foundation, walls, and roof. Your dwelling coverage limit should be high enough to completely rebuild your home from scratch if it were destroyed. This is the replacement cost, not the market value you see when you search for properties.

Other Structures Coverage

This protects structures on your property that aren’t attached to the main house.

• Detached garages

• Sheds

• Fences

• Guesthouses

Coverage is usually set as a percentage of your dwelling limit, often around 10%.

Personal Property Coverage

This covers the contents inside your home, from your furniture and electronics to your clothes and cookware. If your belongings are stolen or destroyed in a covered event, this helps pay to replace them. This coverage is typically set between 50% and 70% of your dwelling coverage.

Loss of Use Coverage

Also known as Additional Living Expenses (ALE), this is a lifesaver. If your home becomes uninhabitable due to a covered disaster, this coverage helps pay for temporary expenses like hotel bills, rent, and meals while your home is being repaired.

Personal Liability & Medical Payments

Liability coverage protects you financially if someone is accidentally injured on your property and you’re found legally responsible. It helps cover their medical bills and your legal defense. Medical payments coverage handles smaller medical expenses for guests injured on your property, regardless of who is at fault.

What Your Policy Won’t Cover

While comprehensive, standard policies have notable exclusions. Knowing them helps you avoid nasty surprises.
▶ Floods: Standard policies do not cover flood damage from overflowing rivers or storm surges. You need separate flood insurance for that.
▶ Earthquakes: Especially critical in California, damage from earthquakes and other ground movement is excluded. A separate policy is required.
▶ Maintenance Issues: Insurance is for sudden and accidental events, not routine wear and tear, mold, or pest infestations.
▶ Sewer Backup: Damage from backed-up sewers is typically excluded, but you can often add this coverage with an endorsement.
▶ High-Value Items: Standard policies have low coverage limits for items like jewelry, fine art, and collectibles. You’ll need a special add-on (a “floater” or “rider”) to insure them for their full value.

How Much Coverage Do You Actually Need?

Choosing the right limits is a balancing act between robust protection and an affordable premium. Here’s how to calculate what you need.

Determine Your Dwelling Coverage

This is the most important number to get right. It should equal the total cost to rebuild your home, which is its replacement cost, not its market value. Market value includes land, which doesn’t need to be insured.
■ How to Calculate It: Insurers calculate this based on your home’s square footage, building materials, and local construction costs, which average around $153 per square foot nationally but can be much higher in San Diego [1].
➜ Action Step: Use an online home replacement cost calculator as a starting point [7]. For the most accurate figure, consult a professional appraiser or your insurance agent. They use specific software to account for features that impact build costs, from custom cabinetry to roofing materials [5]. Getting this right ensures you can fully rebuild after a total loss [3].

Calculate Your Personal Property Needs

The default 50-70% of dwelling coverage is often enough, but you should verify it.
➜ Action Step: Do a home inventory. Go room by room, making a list or video of your possessions and their estimated value. This will tell you if you need to increase your coverage.

Select Your Liability Limit

Most experts recommend a minimum of $300,000 to $500,000 in liability coverage [6].
➜ Action Step: If your total assets (savings, investments, home equity) exceed $500,000, you should strongly consider an umbrella policy. This adds an extra layer of liability protection, typically in $1 million increments, at a relatively low cost.

Getting your insurance right is fundamental to protecting your investment. As real estate experts, we at The Cassity Team have seen how proper planning provides peace of mind. We’ve also seen the financial devastation that comes from being underinsured. While we aren’t insurance agents—I still can’t make sense of my own car insurance policy half the time—we guide our clients through every step of the home-buying process, including connecting them with trusted insurance professionals who can build the right go-to-market playbook for their protection.

Your Strategic Next Step

Don’t wait for a disaster to discover you’re under-protected. Take control of your financial security now.

Ready to build a smart strategy for your San Diego real estate goals? Schedule a consultation with The Cassity Team today. We’ll help you navigate the marketplace pulse and connect you with the vetted professionals you need for a secure and successful homeownership journey.