How much dwelling coverage do I need?

• Market value — what a buyer would pay. Includes the land, the location, and the school district. None of those are destroyed by a fire.
• Loan balance — what you owe. Your lender requires coverage at least this high because it protects their interest. It has no relationship to what rebuilding costs, and it falls every month while build costs rise.
• Replacement cost — what a contractor charges to rebuild the house as it was, at today's prices. This is the only one a dwelling limit should be set from, and it is the one nobody quotes you unprompted.

Insuring to purchase price means insuring the dirt, and the share of a price that is dirt varies enormously. Across US counties it runs from under 5% to over 70% — in San Francisco roughly seven-tenths of a typical price is land.

A buyer there who insures to the purchase price is paying premium on more than three times the structure they own. That is the error running in the expensive direction, and it is the one people notice, because it shows up on the bill every year.

Subtracting the land does not give you the replacement cost either, and the gap goes the dangerous way in cheaper markets.

A contractor's bill does not fall because a neighbourhood is inexpensive. Lumber, labour, permits and a dumpster cost roughly what they cost anywhere. So in a low-cost market it frequently costs more to rebuild a house than the structure is worth on the open market. Older houses with plaster, real timber or detailed trim make the gap wider, because replicating them is skilled work.

And after a wildfire or a hurricane, every damaged house in the region is bidding for the same builders and the same materials at once. Demand surge is a well-documented reason rebuild estimates made in calm weather come in low.

So treat the structure's market value as a floor, not a target. Your dwelling limit should usually sit above it, sometimes well above.

You ask, and the tools that do this properly need details no calculator on the open web has: square footage, year built, construction type, roof material, number of storeys, and the finish level of kitchens and bathrooms. Insurers run those through replacement-cost estimators built on regional construction pricing.

• Ask your insurer or agent for the replacement cost estimate behind your quoted dwelling limit. They have one; it is rarely volunteered.
• Check what it assumed about square footage and finishes. A wrong square footage is the most common cause of a wrong limit.
• Ask whether the policy includes extended replacement cost, an endorsement that pays above the dwelling limit when rebuilding runs over. It exists precisely for demand surge; insurers differ on how far above, so ask for the figure rather than assuming there is one.
• Revisit it after any renovation, and every few years regardless. Build costs move; your limit does not move by itself.

Most people know their deductible as a dollar figure. In wind, hail and hurricane country it is often a percentage instead — and it is a percentage of the dwelling limit, not of the claim.

On $400,000 of dwelling coverage:

• 1% — you pay the first $4,000
• 2% — you pay the first $8,000
• 5% — you pay the first $20,000

Florida law requires insurers to offer hurricane deductibles of 2%, 5% and 10%, alongside a $500 option. A 10% deductible on a $400,000 limit is $40,000 before the policy pays anything — and it applies to the storm damage most likely to actually happen there.

Raising the dwelling limit raises a percentage deductible with it. That is worth knowing before you round the limit up for comfort.

Two of the most expensive things that can happen to a house are excluded from every standard homeowners policy, no matter how high the dwelling limit:

• Flood. Needs a separate policy through the National Flood Insurance Program or a private insurer. Lenders require it inside a mapped high-risk zone — and FEMA reports that nearly a third of NFIP claims between 2014 and 2024 came from outside those zones, where nobody required anything of anyone.
• Earthquake. Also separate. In California that usually means the California Earthquake Authority, with its own deductible structure.

Neither appears as a gap on your declarations page. They are simply absent, which is a much easier thing to miss.