Estimate what it would cost to rebuild your home from scratch. This determines how much dwelling coverage you need on your homeowners policy.
Replacement cost is not the same as market value. Market value includes land, location premium, and market conditions. Replacement cost is purely what it would cost to rebuild the structure from the ground up at today's construction prices. This is the number your homeowners insurance should be based on.
Being underinsured is one of the most common — and costly — insurance mistakes. If your coverage is less than 80% of replacement cost, most policies will only pay a proportional amount of any claim (the coinsurance penalty). We recommend insuring for 100-110% of estimated replacement cost to account for construction cost inflation and code upgrade requirements.
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