What Does Home Insurance Actually Cover?

A standard homeowners policy bundles several coverage types into one policy, each with its own limit: the structure itself (Coverage A), other structures like a detached garage (Coverage B), your belongings (Coverage C), additional living expenses if you're displaced (Coverage D), and liability protection (Coverage E/F). This calculator estimates reasonable starting limits for each.

Replacement Cost, Not Market Value

Market value includes land value and local market conditions — neither has anything to do with what it actually costs to rebuild the structure. Always insure based on replacement cost, which your insurer or a contractor can estimate.

The 80% Rule

Per Liberty Mutual, most insurers require dwelling coverage of at least 80% of replacement cost — fall below that, and your insurer may pay out proportionally less even on a partial claim, not just a total loss. As renovations and inflation raise rebuild costs, policies that aren't updated can quietly drift below this threshold.

How to Use This Calculator

Enter your home's replacement cost — not its market value. If you know your current dwelling coverage limit, add it to check against the 80% rule. Add your net worth to size an appropriate liability limit, following the same matching principle used for auto insurance.

Personal Property and Loss of Use Defaults

• Personal property (Coverage C): commonly defaults to around 50% of dwelling coverage, though high-value items like jewelry or art often need separate scheduled coverage
• Loss of use (Coverage D): typically 20% of dwelling coverage, covering temporary housing, meals, and related costs if your home becomes uninhabitable

Liability Coverage: Match Your Net Worth

The same net-worth-matching principle that applies to auto insurance applies here: your liability coverage should be at least as much as you have to lose. If your combined home and auto liability limits don't cover your net worth, an umbrella policy fills the gap above both.

Worked Example

A home with a $350,000 replacement cost should carry at least $280,000 in dwelling coverage to satisfy the 80% rule, ideally closer to the full $350,000. Personal property defaults to roughly $175,000 (50%), and loss of use to about $70,000 (20%) — all standard starting points before any agent customization for your specific belongings or risk factors.

Where This Fits Your Bigger Picture

If your liability coverage doesn't fully cover your net worth between home and auto, check our umbrella insurance calculator to size the gap. Pair this with your mortgage calculator if you're still financing, since your lender requires adequate dwelling coverage as a loan condition.

Frequently Asked Questions