How Much Home Insurance Do I Need? Replacement Cost Guide
Home insurance is sized to rebuild cost, not market value. A house that sells for $620,000 might cost $410,000 to rebuild, or $730,000 — the answer depends on construction type, ZIP code labor costs, and finishes. Most homeowners under-insure by 20–40% because they confuse market value with replacement cost.
Use the calculator
Home Insurance Calculator
Step-by-step
- 1
Calculate dwelling coverage at full replacement cost
Multiply your home's square footage by current local rebuild cost. In 2026 that is roughly $180–$240/sqft for tract-grade construction, $240–$360/sqft for mid-grade, and $360–$600+/sqft for custom or coastal. A 2,400 sqft tract home in suburban Atlanta = $475,000–$575,000 dwelling.
- 2
Add an extended replacement cost endorsement
Standard policies cap at the dwelling number. Extended replacement adds 25–50% on top, so if rebuild costs spike (post-disaster labor + materials), you are not on the hook. The endorsement costs 2–5% of the base premium and is essentially mandatory in fire-prone or hurricane-prone areas.
- 3
Set personal property at 50–75% of dwelling
Default policies often set this automatically at 50%. If you have above-average belongings — bicycles, electronics, jewelry, art, instruments, professional equipment — push it to 70–75%. Jewelry, firearms, and collectibles need separate scheduled riders above $1,500–$2,500 sub-limits.
- 4
Choose actual cash value vs replacement cost
Replacement cost pays to replace stolen or damaged items new. Actual cash value pays depreciated value. Always pick replacement cost on personal property — the premium difference is small, the claims difference is large.
- 5
Set liability to $300K minimum, $500K if you have assets
Standard $100K liability is inadequate. Lawsuits over dog bites and slip-and-falls regularly settle for $50K–$250K. The premium gap from $100K to $500K is typically $40–$90/year. Add a $1M umbrella above that for $200–$400/year.
- 6
Confirm loss-of-use is at least 20% of dwelling
Loss-of-use covers temporary housing while your home is rebuilt. After major events, "temporary" can mean 12–24 months. 20% of dwelling is standard but in tight rental markets like the Bay Area or Boston, push to 30%.
💡 Tips
- Get a third-party rebuild estimate every 4–5 years. Construction costs jumped 38% from 2020–2025 nationally; your dwelling figure from 2020 is almost certainly too low.
- If your home is in an HOA or condo, your master policy covers the structure to a defined point ("walls-in" or "all-in"). Your HO-6 condo policy fills the gap — request the master policy declarations to know what gap you are filling.
- Old plumbing (galvanized steel, polybutylene) and old electrical (knob-and-tube, aluminum branch wiring, FPE/Zinsco panels) cause carriers to non-renew. Update before shopping; getting a quote with these flags is harder than getting one before they're documented.
FAQ
Should my dwelling coverage match my home's purchase price?
No. Purchase price includes the land, which does not need insuring. In coastal areas and dense metros, land can be 30–60% of total value. Use rebuild cost only — your insurer or a local appraiser can give you a current estimate.
Does standard home insurance cover floods or earthquakes?
Neither. Flood requires a separate NFIP policy or private flood carrier; earthquake requires a separate policy from the state plan (CEA in California) or a private carrier. About 90% of US natural-disaster losses involve at least one of these uncovered perils.
What is the difference between HO-3 and HO-5 policies?
HO-3 covers your dwelling on an "open perils" basis (anything not excluded) but personal property on a "named perils" basis (only specific listed events). HO-5 extends open-perils to personal property. HO-5 costs 5–15% more and is worth it if your contents value is substantial.
Will filing one home insurance claim raise my rate?
Usually yes, by 10–20%, and the surcharge typically lasts 3–5 years. Two claims in a 3-year window often triggers non-renewal. As a rule, do not file claims under $5,000 over your deductible — pay out of pocket and preserve the loss-free history.
Should I increase my home insurance deductible to save money?
Going from $1,000 to $2,500 typically saves 8–15% on premium. Going from $2,500 to $5,000 saves another 5–10%. The breakeven on $2,500 is about 6–8 years between claims, which most homeowners exceed.