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  • Writer's pictureVincent Fuccilli

How Much Should I Insure My Home For?


How much should you insure your home for? Most people believe they should insure their home for the purchase price or mortgage loan amount. It most cases, this is not the accurate amount of insurance.

You should insure your home for replacement cost.


Replacement cost is defined as the estimated cost to rebuild the property to the same specifications and quality (or similar quality) at the time of the loss. Replacement cost is not equivalent to the market value of the property, which is the amount that would be expected from the sale of the home.

The valuation from an insurance carrier is similar to a bid from a contractor to return the property to its original condition. This amount can vary from carrier to carrier.

An Insurance Carrier may calculate replacement cost by using the following factors:

  • Materials and labor cost needed to rebuild the property with similar quality to the original property

  • Market level profit for the contractors

  • Overhead costs for the contractors and builders

  • Fees for permits

  • Foundation costs

  • Fees for engineers, architects and consultants

  • Costs to upgrade home to meet current municipal code requirements

  • Costs to rebuilt Structures attached to the residence, such as decks and garages

  • Costs to replace fixtures such as kitchen cabinets and lighting

  • Costs associated with replacing expensive or antique finishes, as well as built-in furnishings like shelving, customized closets, and fireplace mantels


The cost to rebuild a home is often more costly than building a new home.

Site Access

Delivery of materials to an existing neighborhood is significantly more costly.

Builder Profit

While some builders may reduce their profit margin to remain competitive, because of the specific needs associated with rebuilding damaged property, overhead costs are typically higher than new construction.

Time is of the Essence

If a damaged residence is deemed uninhabitable, the residents may be living in temporary housing. Because of the urgency to rebuild an existing home versus building a new home, costs for the builder can increase due to expedited delivery time for materials and the need to pull workers from other projects.

Price Fluctuations for Building Material and Fuel

Costs for fuel and materials such as lumber and steel can fluctuate depending on the current demand and whether there is a supply shortage.

*The content contained in this blog is for informational purposes only. It should not be considered insurance advice since every client's needs and circumstances are different.. Bergen Insurance Group, LLC makes no representation as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All statements represent the sole opinion of the author and is provided on an as-is basis. For an actual description of all coverages, terms and conditions, refer to your insurance policy.

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