Is Your Home Underinsured? The 80 Percent Rule

Assumptions on sliders · method reviewed September 7, 2026

Checks your dwelling coverage against the cost to rebuild and shows what the policy would pay on a loss when the coverage falls short. About

In plain words. A homeowners policy requires you to insure the house for at least a share of what it would cost to rebuild, usually 80 percent. If you carry less, the insurer pays claims in proportion. Carry three quarters of what the policy requires and a claim is paid at 75 cents on the dollar, less the deductible. This tool estimates the rebuild cost from the size of the house or takes your figure, finds the coverage the policy requires, and shows what a loss you choose would actually pay.

Why it matters. Coverage set at the purchase price years ago is measured against rebuild costs that have risen since. The penalty shows up on the first claim, which is the wrong time to learn about it.

An example. A 2,400 square foot house at $200 a foot costs $480,000 to rebuild, so an 80 percent clause requires $384,000 of coverage. With $350,000 carried, a $100,000 loss with a $2,500 deductible pays about $88,646, and about $8,854 of the loss goes unpaid beyond the deductible.

Where it stops. The rebuild cost is an estimate, and the agent's replacement-cost estimator is the real one. Extended replacement cost, an inflation guard, ordinance-or-law coverage, and an actual-cash-value policy each change the result, and the policy's own wording governs. The tool does not price the coverage or model the contents, other structures, or living expenses. Everything it leaves out.

Dwelling coverage on the policy

Coverage A on the declarations page. The limit on the house itself, not the contents.

Square feet of living space

From the listing or the county assessor. The tool multiplies it by the cost per square foot below.

Cost to rebuild per square foot

What a builder would charge in your area today. Your agent's replacement-cost estimator is the better source.

Or enter the rebuild cost directly

Fill this in and it replaces the square-foot estimate.

Share of rebuild cost the policy requires

80%90%100%

The coinsurance clause. Most policies say 80 percent. Some say 90 or 100.

A loss to test

A kitchen fire, a fallen tree, a burst pipe. Set it to the rebuild cost for a total loss.

Deductible

From the declarations page. A percentage deductible is a share of the dwelling coverage.

What the policy would pay on a $100,000 loss

$88,646

Your coverage is short of what the policy requires. The claim is paid at 91.1% of the loss, less the deductible.

Coverage the policy requires: $384,000; 80% of the $480,000 it would cost to rebuild
Coverage short of the requirement: $34,000; Add this much to be paid in full on every claim
Share of every claim the policy will not pay: 8.9%; The penalty applies to partial losses, not only a total loss

The coverage is measured against the cost to rebuild, not the price the house would sell for. The land is not rebuilt, and in some neighborhoods a house costs more to rebuild than it is worth on the market. Your coverage is 73% of the rebuild cost on these figures. Extended replacement cost endorsements, an inflation guard, ordinance-or-law coverage, and actual-cash-value policies each change the arithmetic, and an agent runs the real replacement-cost estimator.

This is an assumption tool, and every input is yours to set. It applies the plain coinsurance clause in a homeowners policy, coverage carried over coverage required times the loss, less the deductible, up to the limit, to the rebuild cost you estimate. It leaves out extended and guaranteed replacement cost endorsements, inflation guards, ordinance-or-law coverage, depreciation under an actual-cash-value policy, and the contents, other structures, and living expenses. Method reviewed September 7, 2026. Hypothetical; educational, not advice.

This is a simplified model, not your actual tax return or plan. It only knows what you type in, leaves out rules that may apply to you, and cannot weigh the other facts and trade-offs a real decision depends on. Before you act, talk with a professional who knows your whole situation.

Educational only, not investment, tax, or legal advice. Results are hypothetical estimates that vary with each use and over time and are not guaranteed accurate or complete. Using this tool creates no client relationship with Considerate Capital, and the site that linked here is not affiliated with it. By using it you agree to the tool terms.