Quick answer
Start with the biggest number: rebuilding your home
The main part of your policy is called dwelling coverage. It pays to fix or rebuild your house after something like a fire.
The right amount is what it would cost to rebuild your home today. That's often very different from what your home would sell for.
- The sale price includes the land, which doesn't burn down.
- Rebuilding costs depend on workers and supplies, which cost a lot more than they did a few years ago.
A $300,000 house could cost $400,000 to rebuild. Or it could cost $250,000. Ask your insurer how they figured your number. If you've remodeled, added a room, or upgraded your kitchen, tell them.
Think about extra rebuild coverage. This add-on, often called extended replacement cost, pays more than your limit, often 25% more, if rebuilding costs more than you thought. That often happens after big storms, when builders are busy.
Ask about ordinance or law coverage. If your home is older, you may have to rebuild to today's building rules. That can cost more. Many policies pay little for it.
How to find your rebuild cost
Your insurer usually estimates it using your home's size, age, materials, and features. Check their numbers: square footage, number of bathrooms, roof type, and any upgrades. If something's missing, your estimate may be too low. For a big or custom home, a professional appraisal for insurance can help.
Other structures
This covers things like a detached garage, shed, or fence. It's often set at 10% of your dwelling coverage. If you have a big garage or workshop, you may need more.
Your things
This part covers your stuff. It's often set at 50% to 70% of your dwelling coverage. But the right amount is what it would cost to buy everything you own again.
Make a home inventory. Walk through your home with your phone and take a video of every room. Open closets and drawers. Save it somewhere online, not just on your phone.
Pick replacement cost, not actual cash value. Replacement cost pays to buy new things. Actual cash value pays what your used things are worth, which is often not much.
Watch the limits on special items. Jewelry, watches, guns, and art often have low limits, like $1,500 for all your jewelry. If you own pricey things, you can add more coverage for them.
Liability: protection if you're sued
Liability pays if someone gets hurt on your property or you damage someone else's property. It also pays for your legal defense.
Many policies start at $100,000. A lot of people choose $300,000 to $500,000. If you have a pool, a trampoline, a dog, or a lot of savings, think about more. Umbrella insurance can add $1 million or more on top.
Loss of use: where you'll live during repairs
If a fire or storm means you can't live at home, this pays for a hotel or rental, plus extra costs like meals. It's often set at 20% to 30% of your dwelling coverage. Big repairs can take many months, so check that your limit is enough.
A worked example
Here's how the common percentages could look on a home that costs $400,000 to rebuild. Your policy's numbers may differ.
| Coverage part | Common setting | Example amount |
|---|---|---|
| Dwelling (rebuild cost) | Your rebuild estimate | $400,000 |
| Other structures | About 10% of dwelling | $40,000 |
| Your things | About 50% to 70% of dwelling | $200,000 to $280,000 |
| Loss of use | About 20% to 30% of dwelling | $80,000 to $120,000 |
| Liability | Often $300,000 to $500,000 | $300,000 |
Example only, using the typical ranges above. Not a quote.
What's usually not covered
- Floods. You need separate flood insurance.
- Earthquakes. You need a separate policy or add-on.
- Slow leaks, wear and tear, and pests. Insurance covers sudden damage, not things that wear out over time.
- Sewer backup. Often needs an add-on.
Check your deductibles
Your deductible is the part of a claim you pay yourself. Many homes in storm areas have a separate wind, hail, or hurricane deductible. It's often a percentage of your dwelling coverage, like 2%. On a $300,000 home, that's $6,000. Know this number before a storm.
Review it every year
Building costs change. Your home changes. Your life changes. Look over your coverage once a year, and after any remodel or big purchase.
Ready to compare? See how much homeowners insurance costs.
Related pages
More home insurance guides: Homeowners insurance cost · Condo insurance · Renters insurance · Landlord insurance · Mobile home insurance · Flood insurance · Umbrella insurance · Renters insurance basics · How to get renters insurance · All insurance
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