How Much Home Insurance Do You Need?
Updated June 6, 2026 · 5 min read
The most expensive home insurance mistake is insuring your house for the wrong number. Many homeowners insure for what they paid — or what the home would sell for — when what matters is what it costs to rebuild. Here’s how to size every coverage correctly.
Insure for rebuild cost, not market value
Your home’s market value includes the land, location, and the housing market. Your rebuild cost is only what it takes to reconstruct the structure with today’s labor and materials. These are different numbers — and your dwelling coverage should match rebuild cost.
In some markets the rebuild cost is higher than the sale price (especially older homes or cheaper land); in others it’s lower. Don’t guess from your purchase price.
Setting each coverage
- Dwelling (Coverage A): Set it to the full rebuild cost. Ask your insurer for a replacement-cost estimate, and consider an extended replacement cost rider that adds a cushion (e.g., 25%) for when rebuild costs spike after a widespread disaster.
- Other structures (B): Default is ~10% of dwelling. Increase it if you have a large detached garage, workshop, or fencing.
- Personal property (C): Default is ~50–70% of dwelling. Do a quick home inventory — many people underestimate the value of their belongings. Add scheduled coverage for high-value items (jewelry, art, instruments) that have low standard limits.
- Loss of use (D): Usually a percentage of dwelling; make sure it’s enough to cover months of living elsewhere if you’d need to rebuild.
- Liability (E): Start at $300,000–$500,000. If you have significant assets, an umbrella policy adds $1M+ cheaply.
Choose replacement cost coverage
Make sure both your dwelling and personal property are insured at replacement cost, not actual cash value — otherwise claims are reduced for depreciation. See replacement cost vs. actual cash value.
Pick a deductible you can actually pay
A higher deductible lowers your premium but raises your out-of-pocket cost per claim. Choose an amount you could comfortably cover, and note that wind/hail or hurricane deductibles are often a percentage of your dwelling limit, not a flat dollar amount.
The bottom line
Insure your home for its rebuild cost, right-size personal property and liability to what you actually own and risk, and keep coverage at replacement cost. Then compare quotes — the same coverage can cost hundreds of dollars more or less depending on the carrier.