Have you ever wondered, “How much home insurance do I need?” Well, you might, especially when you’re faced with a lengthy list of policy options from your insurance agent. Do you really need all that coverage?

On average, at least 6% of homeowners make a claim to their home insurance company each year. This might not seem like many, but those claims are far from small. The Insurance Information Institute estimates that insurers paid out an average of $10,592 to homeowners last year, covering everything from fire and lightning damage to theft.

Choosing the right level of insurance is key—if you don’t buy enough, you’ll be out of pocket for any shortfall. Buy too much, and you’ll be paying for coverage you don’t need.

Here’s how to make sure your major costs are covered in case of an emergency, and why taking a close look at your policy can save you money and heartbreak down the road.

So really, how much home insurance do I need?

The goal of any home insurance policy is to ensure you’re covered in case of a total loss of your home, says Ralph DiBugnara, president of Home Qualified.

“This means if the home was destroyed, the policy will cover the cost to completely rebuild it to the exact condition of when it was insured,” DiBugnara explains.

If you have a mortgage on your home, your lender will likely require your coverage to equal 100% of the replacement cost of the home. And even if your home is paid off—or no requirement is in place—it’s still a good idea to buy enough coverage to cover complete replacement, DiBugnara says.

What is ‘total loss coverage’ based on?

While your home insurance policy needs to be large enough to cover 100% of your home, there’s no fixed number for the best home insurance, says Stefan Tirschler, product and underwriting manager at Square One Insurance Services.

Total loss coverage varies from area to area as well as from home to home. For example, a 2,600-square-foot Victorian in one town may cost significantly more or less to rebuild than a similarly sized Victorian three towns over.

“Size, materials, quality of finish, and a number of other factors will influence that rebuilding cost,” Tirschler says.

This is where talking face to face with an experienced home insurance agent comes in handy.

“When you purchase home insurance, your insurance provider will likely have access to electronic reconstruction cost-estimating tools to help provide a sense of how much coverage you need,” Tirschler explains.

An experienced agent will not only take the square footage of your home into consideration, but also any special features your home may have, the local construction market, and, of course, the current market value of the house.

Inside your home insurance policy

When writing a policy, your insurance agent will likely quote a number that’s much higher than the market value of the home. What gives?

It turns out, most policies cover what’s inside the home as well, DiBugnara says. If your home is destroyed by fire or damaged by a hurricane, it’s not just the roof and walls that take the hit. Often your appliances, electronics, furniture, and other personal items are also damaged or even destroyed.

Most policies will cover interior items, but that doesn’t mean everything inside your home is safe. For instance, a named perils policy typically covers only a specific, narrow list of causes of loss, and depending on why you place the claim, you may find your insurance company won’t pay up!

To make sure you are fully protected, Tirschler suggests looking for an insurance provider who offers an open perils (or “all-risk”) policy.

“Open perils policies provide the strongest protection, because they cover all possible causes of loss except for those which are specifically excluded,” he notes.

You’ll also need to evaluate whether you need additional coverage for the personal items your coverage might not include. Your house, appliances, electronics, and furniture might be covered, but what about heirloom antiques?

“If you have any high-value items such as jewelry or expensive art, you will want to make your agent aware because these will require a different policy to truly cover their actual worth,” DiBugnara warns.

What’s not covered by home insurance

Home insurance is designed to cover your home, your belongings, and liability risks at your home, such as a neighbor being nipped by your dog. But there are limits.

Home insurance does not extend to cars, motorcycles, or even watercrafts of a certain size, Tirschler notes. Instead you’ll need to purchase separate vehicle or watercraft insurance.

Home insurance will also not cover losses incurred due to flooding.

“If your home is in a flood zone, you will need a completely different policy to cover that portion of it, and they can be very expensive,” DiBugnara explains. “We also have seen a lot of the flood zones expand over the last three years with an increase in extreme storms, and some owners have not addressed the fact that they need flood coverage added to be protected.”

One final tip: If you haven’t updated your home insurance policy in a few years, call your agent to make sure you’re fully covered.

“The most common mistake is homeowners have had a policy for a few years without reviewing it, and their coverage is outdated because of the increase in value,” DiBugnara says.