Comprehensive Guide
Learn more in our Insurance Guide.
How it works
Home insurance covers rebuild cost, not sale price — the land is not replaceable, so insuring your home's market value overpays. The engine multiplies your square footage by a local rebuild cost per square foot, adjusted for build quality, to get the dwelling figure. Standard policy structures follow as percentages of dwelling: 10% for other structures (garage, sheds, fences), 50% for personal property (your contents on a named-peril basis), and a default liability limit of $100,000 with loss of use running around 20% of contents. The coverage number is only ever an estimate and hides two classic gaps: contents are often underinsured because 50% of dwelling rarely tracks what a household actually owns, and rebuild costs vary wildly by region — a $200/sq ft assumption is fine in the Midwest and low for coastal metro areas. Run the numbers before talking to an agent, so you can tell underinsurance from a fair quote.Formula
Dwelling = sq ft x cost per sq ft x quality multiplier | Other 10% | Contents 50% | Liability $100k
Tips
- Insure to rebuild cost, not market value — the difference can be tens of thousands of dollars of waste.
- Raise contents coverage to what you would actually need to replace, not a formula percentage.
- A replacement-cost endorsement for electronics and jewellery beats schedule limits.
- Re-run after renovations — kitchens and additions silently invalidate old dwelling numbers.
Frequently asked questions
Is insurance based on market value or rebuild cost?
Rebuild cost. Market value includes the land, which is never replaced. Rebuild cost is the construction price of the structure — typically lower than market value in expensive cities and sometimes higher in rural areas with scarce labour.
How much dwelling coverage do I need?
Multiply your home's square footage by the local per-square-foot rebuild cost, adjusted for finishes. Your insurer's estimator does this too — using your own figure lets you audit their number for quality and square-footage mistakes.
What is loss of use coverage?
It pays the extra cost of living elsewhere while your home is repaired after a covered loss — hotel, rent, meals. It typically runs about 20-30% of dwelling coverage and is one of the most-used and least-understood sections of a claim.
Should I insure contents for replacement value?
Yes — replacement-cost coverage pays what new items cost, while actual-cash-value pays only the depreciated amount. The premium difference is small and the claim difference is often 2-3 times on older items.