A step-by-step guide to calculating the right coverage amounts for your dwelling, personal property, and liability — so you're never underinsured when disaster strikes.
Nearly 60% of American homes are underinsured by an average of 20%. That means if your home burns down, your insurance check won't cover the full cost to rebuild. This guide walks you through exactly how to calculate the right coverage amounts for every part of your homeowners policy.
Construction costs rose 35% between 2020–2026. Many homeowners set their coverage based on their purchase price years ago — but the cost to REBUILD is what matters, not what you paid. Always base your dwelling coverage on current rebuild cost per square foot in your area.
Rebuilding your home's structure. This is the most critical number — must equal full rebuild cost.
Detached garage, fence, shed. Usually 10% of dwelling coverage automatically.
All your belongings. Usually 50–70% of dwelling. Consider a home inventory.
Hotel and living costs if you can't live in your home. Usually 20% of dwelling.
If someone is injured on your property. Minimum $100k, recommend $300k+.
Minor injuries to guests regardless of fault. Usually $1,000–$5,000.
Multiply your home's square footage by the local cost to rebuild per square foot. In 2026, this ranges from $120/sqft (rural South) to $350+/sqft (urban Northeast/West Coast). A 2,000 sqft home in the Midwest might need $280,000 in dwelling coverage (2,000 × $140/sqft).
Do a quick home inventory — walk through each room and estimate replacement value of everything. Most people are surprised to find they have $40,000–$80,000 in personal property. Set coverage at actual replacement value, not what you paid originally.
The minimum $100,000 is rarely enough. If someone slips on your walkway and sues, medical bills and legal costs can easily exceed $100k. Most experts recommend at least $300,000. If your net worth exceeds $500k, consider an umbrella policy for $1M+ in extra liability protection.
Replacement Cost Value (RCV) pays what it costs to buy new items. Actual Cash Value (ACV) pays replacement cost minus depreciation. Always choose RCV — the premium difference is small but the payout difference is enormous. A 5-year-old TV worth $200 ACV might cost $700 to replace new.
Standard policies EXCLUDE: floods (need separate NFIP policy), earthquakes (separate rider), sewer backup (add-on), and high-value jewelry/art above $1,500–$2,500 (need scheduled rider). Identify your risks and fill gaps with endorsements.
| State | Avg Annual Premium | vs National Avg |
|---|---|---|
| Oklahoma | $4,445 | 🔴 +211% |
| Kansas | $3,931 | 🔴 +175% |
| Nebraska | $3,741 | 🔴 +162% |
| Texas | $3,429 | 🔴 +140% |
| Florida | $3,183 | 🔴 +123% |
| National Average | $1,428 | — |
| Oregon | $934 | 🟢 -35% |
| Wisconsin | $912 | 🟢 -36% |
| Idaho | $889 | 🟢 -38% |
| Hawaii | $582 | 🟢 -59% |
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