Home insurance should cover the cost to rebuild. Here is how to estimate it and compare quotes.
Updated November 2026
Insure the rebuild cost, not the market value
The most important number on a homeowners policy is the dwelling coverage. It should be close to what it would cost to rebuild the house, not what it would sell for. Market value includes land and location, which do not burn down. Use the home insurance calculator to turn your size and local rebuild cost into a coverage target.
Step 1: Estimate rebuild cost
Multiply the size of the home by a rebuild cost per square foot. In the example, 2,000 sq ft x $200 per sq ft = $400,000. The $200 figure is only an illustration. Ask a local contractor or your insurer for a realistic number, because costs vary by area, materials and finishes.
Step 2: Add contents
Many policies set personal property coverage as a percentage of the dwelling coverage. At 50 percent, contents coverage is $200,000 and the total is $600,000. Check your own policy and, if you own valuable items, ask about scheduled coverage.
Step 3: Compare quotes by cost per $1,000
If a quote of $1,800 a year buys $400,000 of dwelling coverage, the cost is 1,800 / 400 = $4.50 per $1,000. In Excel: =B5/(B2/1000). Comparing this figure helps when quotes have different coverage amounts, but also compare deductibles and exclusions. A cheaper policy with a high deductible or fewer protections is not the same product.
What affects the premium
- Location, weather risk and claims history in the area.
- Age, roof type and construction of the home.
- Deductible size and coverage limits.
- Your claims history and, in many places, credit-based factors.
Check what is not covered
Standard policies commonly exclude flood and earthquake damage, which usually need separate coverage. Read the exclusions and ask your agent. If you have a mortgage, your lender will require coverage; see how your loan is structured with the home loan EMI calculator and track your home equity.
These are illustrations to help you plan, not financial advice.
Frequently asked questions
How much home insurance do I need?
Enough dwelling coverage to rebuild the home at local costs, plus contents and liability coverage that fit your belongings and risk.
Is coverage based on market value?
No. It is based on rebuild cost.
How do I compare quotes?
Compare coverage amounts, deductibles, exclusions and cost per $1,000 of dwelling coverage.
Does homeowners insurance cover floods?
Usually not. Flood and earthquake are typically separate policies.