Before you find out how much homeowners insurance to buy, it's important to know about two parts of homeowners insurance coverage.
In California, Homeowners Insurance Policies are split into 6 total parts, coverages (A) through (F):
Coverage (A) Dwelling - Coverage A does not represent your home's fair market value, but rather the estimated cost of removing debris and rebuilding your home in the event of a total loss. Coverage A is only meant to restore your home to what it was before the loss, not make you a profit. It covers damage to your home's frame, roof, walls, floors, cabinets, windows & window hardware, and anything attached permanently. Your Coverage (A) Dwelling limits are very important because your contents, other structures, and additional living expenses could be expressed as a maximum percentage of Coverage (A) Limits.
Coverage (B) Other Structures - Unattached garages, storage buildings, playhouses, and can even include permanently installed swing sets. 10% of your coverage (A) dwelling limit. Something just parked or sitting on the property that is not permanently installed, will not insured under Coverage (B). Do you have a structure on your property that is worth more than 10% of your coverage (A) dwelling limit, increase your Coverage (B) limit.
Coverage (C) Contents aka personal property. Often referred to as "your stuff." 50% of your coverage (A) dwelling limit. Part (C) contents coverage does not have all-risk coverage like Coverage A and B. Instead there are named perils” in your policy, and if you loss was due to something not contained in the named perils, you are out of luck. For example, certain categories of valuables such as jewelry, guns, antiques, stamp and coin collections, and artwork, are insured for very limited amounts under this coverage and usually only for theft.
Additional expanded coverage can be bought that covers the full value and will include most perils such as fire, wind or hail. If your personal property has value in excess of 50% of your dwelling limit, you need to increase the policy limits on your contents coverage. 10% of your property coverage may follow you anywhere in the world, so if you are covered for $100,000 and take a trip to mexico city, all your luggage, clothes, and personal property you take along are covered for $10,000. You may be able to add more coverage for your home office, home computers and peripheral components for more money.
Coverage (D) Loss of Use aka additional living expense (ALE). Limits vary wildly, but typically could be 20% of coverage (A). For most insured homeowners, 20% will not be enough. ALE covers any necessary increases in living expenses incurred by you so that your household can maintain its normal standard of living.
Chances are you will still have to pay the mortgage for weeks or months while your home is being fixed. Coverage (D) also includes storing your personal effects, getting your clothes cleaned, compensation over what your family normally spends per month on food since you cannot prepare your own meals while away from home.
Additionally, coverage (D) could allow for transportation costs if you have further to drive to work, school, sports, doctors, dentists, etc. Boarding costs for your animals. Other expenses including chairs and beds, pots, pans, silverware, dishes and temporary electronics. Utility installation costs at your temporary residence including deposits utility companies typically require and even garbage pickup at your temporary residence.
The costs of relocating a family can be substantial. Having enough ALE coverage could mean the difference between fleeing to a homeless shelter or a short term leased home with some dignity intact.
Instead of ALE, the Coverage (D) portion of your policy may give you the option to be paid Fair Rental Value or how much would your house rent for minus any expenses that stop while your house is not fit to live in. ALE would not cover garbage pickup, landscaping services or maid services while not in the home.
Coverage (E) Personal Liability - protects you from claims or lawsuits from an accident that results in bodily injury or property damage. In California the limits for Personal Liability will be listed as a dollar amount, usually around $100,000.
The insurer will pay up to $100,000 for damages which the insured homeowner is legally liable. The insurance company can also provide a legal defense for you (so they pay less!). Since Coverage (E) premiums are cheap, buy the highest liability limits your home insurance company offers.
Coverage (F) Medical Payments to Others - if your dog bites someone, or your neighbor gets hurt in your yard, they have medical coverage usually around $1,000 in California. Medical coverage is really cheap and easy to increase, so get as much as your company will allow, just make sure the premiums are reasonable.