Quick answer
- Insure your home for its full rebuild cost, not its market value or purchase price.
- Rebuild cost is roughly square footage times the local cost per square foot to build.
- Belongings are often insured at 50% to 70% of the dwelling amount, and loss of use at about 20%.
- Pick liability limits that protect your savings and home equity, typically $300,000 or more.
In this article
Rules of thumb
- Dwelling (A): full cost to rebuild the house
- Other structures (B): about 10% of A
- Personal property (C): about 50% to 70% of A
- Loss of use (D): about 20% of A
Typical starting points from the Insurance Information Institute. Ask your insurer for a rebuild cost estimate for your home.
How much homeowners insurance do I need? It is the question behind every quote, and the answer starts with one number: what it would cost to rebuild your house from the ground up at today's labor and material prices.
Work through each part of your policy below, then check every number with your agent before you buy.
Sizing each part of your policy
| Coverage | Common starting point | Example: $400,000 rebuild cost |
|---|---|---|
| A: Dwelling | Full cost to rebuild | $400,000 |
| B: Other structures | About 10% of A | $40,000 |
| C: Personal belongings | 50% to 70% of A | $200,000 to $280,000 |
| D: Loss of use | Often about 20% of A | $80,000 |
| E: Liability | $300,000 to $500,000 if you have savings to protect | $300,000 |
To estimate rebuild cost, multiply your home's finished square footage by a local cost to build per square foot. Your insurer or a local builder can give you that figure, and it varies a lot from one area to the next. Land is never part of the number, because land does not need rebuilding.
Why market value is the wrong number
Market value includes
- The land, which does not burn down
- Location and school district demand
- Local housing market swings
Rebuild cost includes
- Clearing debris and demolition
- Labor and materials at today's prices
- Permits and current building codes
In a hot market, market value can be far above rebuild cost. In an older neighborhood with custom details, rebuild cost can be higher than what the house would sell for.
Get quotes for the right amount of coverage
SponsoredHow to estimate your belongings
- Walk through each room and film it on your phone, opening closets and drawers.
- Add up the big items first: furniture, electronics, appliances, clothing.
- Compare the total with the 50% to 70% default on your policy and raise or lower it.
- List valuables such as jewelry or art separately and ask about scheduling them.
Actual cash value pays what your used things are worth today. Replacement cost pays what it costs to buy new ones. Learn the difference in our replacement cost vs actual cash value guide.
Price the coverage you just estimated
Rates change from one ZIP code to the next. Add yours to see homeowners insurance options available where you live, with no commitment.
How much liability coverage is enough?
Is $100,000 enough?
It is a common minimum, but a serious injury lawsuit can cost far more.
What do most people choose?
$300,000 to $500,000 is a common choice for homeowners with savings to protect.
When does an umbrella policy make sense?
When your net worth is above your liability limit, or you have a pool, trampoline, teen drivers or a dog.
Frequently asked questions
Should I insure my home for what I paid for it?
No. Insure it for what it would cost to rebuild. The purchase price includes land and market demand, which are not part of a rebuild.
What happens if I am underinsured?
You pay the difference yourself after a total loss. Some policies also reduce partial claims if you insured for less than 80% of rebuild cost.
How often should I update my coverage?
Review it every year and after any renovation, addition or big purchase. Building costs change, and so do your belongings.
What is extended replacement cost?
An add-on that pays a set percentage above your dwelling limit, often 5% to 25%, if rebuilding costs more than expected.
See home insurance options for your address
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