The right amount of homeowners insurance is not what your house would sell for. It is what it would cost to rebuild it, replace what is inside, and protect what you have saved.
1. Dwelling: rebuilding cost, not market value
Your dwelling limit should reflect what it would cost to rebuild your home from the ground up at today's labor and material prices. That is a different number from market value, which includes the land and reflects the local housing market.
In older Terre Haute neighborhoods, rebuilding cost can actually exceed market value. Plaster walls, hardwood trim, and period detail are expensive to recreate. Building costs have also risen sharply in recent years, so a limit that was right five years ago may be short today.
This endorsement pays a set percentage above your dwelling limit if rebuilding costs more than expected, such as after a widespread storm when contractors are in short supply.
2. Replacement cost vs. actual cash value
This one setting can change a claim check by thousands of dollars.
- Replacement cost pays to repair or replace with new materials of similar kind and quality.
- Actual cash value (ACV) subtracts depreciation first.
Many carriers now apply ACV to older roofs even on otherwise replacement-cost policies. After a hail storm, a 20-year-old roof on ACV might pay only a fraction of the cost of new shingles. Check your declarations page and ask us if you are not sure.
3. Other structures
Detached garages, sheds, fences, and pole barns are covered under other structures, which defaults to 10% of your dwelling limit on most policies. A $200,000 dwelling limit gives you $20,000 for everything else on the property. If you have a large garage or outbuilding, that probably will not rebuild it.
4. Personal property
Contents coverage is usually set at 50% to 70% of the dwelling limit. The better test is to walk through your home, room by room, and estimate what it would cost to replace everything new. Include the garage, the basement, and the closets.
- Make a quick video walkthrough of every room and store it in the cloud. It is the easiest inventory there is.
- Ask for replacement cost on contents, not ACV.
- Jewelry, firearms, collectibles, and similar items have low per-category limits. Schedule anything valuable. See antiques and collectibles insurance.
5. Loss of use
This pays for housing and added living costs if you cannot live in your home during repairs. Major repairs can take months. Make sure the limit would realistically cover a rental in your area for that long.
6. Personal liability
Liability protects your savings if someone is hurt on your property or you are responsible for damage elsewhere. Many policies start at $100,000. Raising it to $300,000 or $500,000 usually costs relatively little. If your net worth is higher than your liability limit, an umbrella policy adds a layer on top of both your home and auto coverage.
7. The gaps no limit will fix
Some losses are excluded no matter how high your limits go:
- Flood requires a separate policy. See our flood insurance guide.
- Sewer and drain backup requires an endorsement.
- Wear and tear and maintenance issues are never covered.
A 15-minute review
Once a year, or after a renovation or major purchase, pull out your declarations page and check each of these numbers. Better yet, call us at (812) 234-0766. We will review your current policy at no cost and compare it against other carriers. Start with our homeowners insurance overview.
This guide is general information, not a statement of coverage. Every policy's terms, limits, and exclusions differ by carrier and by state filing. Talk with a licensed agent about your specific situation before making coverage decisions.