Homeowners insurance is one of those bills people set once and forget for a decade — which is exactly how so many families end up underinsured. Construction costs have risen sharply, and a policy written to rebuild your home in 2016 may cover only a fraction of what rebuilding costs today. Here is how to check whether your coverage still fits.
Start with dwelling coverage (Coverage A)
This is the number that pays to rebuild your house after a total loss. It is not your home’s market value and it is not your purchase price — it’s the cost to rebuild from the ground up at today’s labor and material prices. The fastest gut check: multiply your home’s square footage by local rebuild cost per square foot (your insurer or a local builder can estimate this). If your dwelling limit is well below that figure, you are underinsured on the most important line of the policy.
Walk your home and total your stuff (Coverage C)
Personal property coverage is usually set at 50–70% of your dwelling limit by default — but that’s a guess, not an inventory. Do a quick room-by-room pass:
- Kitchen: appliances, cookware, small electronics.
- Living room: TV, sound system, furniture, gaming consoles.
- Bedrooms: clothing, jewelry, laptops, furniture.
- Home office: computers, monitors, equipment.
- Garage & storage: tools, bikes, seasonal gear, sports equipment.
Photograph or video each room and keep the file off-site (cloud storage works). This inventory is what turns a stressful claim into a straightforward one.
Watch the sub-limits on valuables
Standard policies cap certain categories — jewelry, watches, firearms, fine art, collectibles — often at just $1,000–$2,500 for theft. If you own an engagement ring, a nice camera kit, or a musical instrument worth more than that, you likely need a scheduled personal property endorsement (a “rider”) to cover its full value.
Don’t skip liability and loss-of-use
Two coverages people forget:
- Personal liability (Coverage E) protects you if someone is injured on your property or you’re held responsible for damage. Many advisors suggest at least $300,000, and an umbrella policy if your assets exceed your limits.
- Loss of use (Coverage D) pays for hotels and meals if a covered loss makes your home uninhabitable. Check that the limit reflects real local costs.
Know what standard policies exclude
The two big surprises are flood and earthquake — neither is covered by a standard homeowners policy. Flooding is common and increasingly expensive; if you’re in or near a flood-prone area, a separate flood policy is worth pricing out. Ask your insurer for a plain-language list of exclusions so there are no surprises at claim time.
Replacement cost vs. actual cash value
Finally, confirm your policy pays replacement cost, not actual cash value. Actual cash value subtracts depreciation — a ten-year-old roof pays out as a ten-year-old roof. Replacement cost pays what it takes to buy new. The premium difference is usually modest and the claim difference can be enormous.
The bottom line
Review your policy once a year and after any major purchase or renovation. The goal isn’t to buy the most coverage — it’s to make sure the limits that matter (dwelling, liability, and valuables) reflect today’s reality, and to compare that policy against a couple of competitors so you’re paying a fair price for it.
