Estimate the dwelling coverage you need to rebuild your home.
Home insurance is priced on rebuild cost, and the single most common error is confusing it with market value. Market value includes the land, which does not burn, and reflects location premiums that have nothing to do with construction; rebuild cost is bricks, labour and a crane. Multiply your floor area by a local rebuild rate to get dwelling coverage, then layer the standard components on top: contents at typically 50 to 70% of dwelling, loss of use at around 20% to pay for somewhere to live during the rebuild, and detached structures at their own value. Ordinance-or-law cover is the one people skip and regret — rebuilding an older house to current code often costs 10 to 20% more than replacing what was there.
Home Insurance Coverage
Dwelling = area x rebuild cost per sq ft; contents = dwelling x contents%; loss of use = dwelling x 20%; total = dwelling + code upgrade + contents + loss of use + detached structures
An estimate for discussion with your insurer, not a valuation or advice. Rebuild rates vary by region, construction type and access, and policy definitions of replacement cost differ — obtain a professional replacement cost appraisal for a figure you can rely on.
Because purchase price includes land and market conditions. Rebuilding involves demolition, site access, current-code construction and today's material prices, which in many areas exceeds the price of an existing comparable house.
Most policies require you to insure at least 80% of full replacement cost. Fall below that and even a small claim is settled at a reduced proportion, so under-insuring does not just cap the big loss — it discounts every loss.