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Estimating the replacement cost of your home is quick and easy. Here’s how.

If your home is damaged by a disaster and needs to be rebuilt, you’ll need to figure out your home’s replacement cost. Once you do, homeowners insurance will pay for the repairs, up to your coverage limit. 

Your homeowners insurance policy’s coverage should be based on your home’s replacement cost so that you can rebuild your home and limit out-of-pocket expenses.

Replacement Cost Formula :

To calculate your home’s replacement costs, multiply the square footage of your home by the local rebuild cost.

This replacement cost formula is free, but not always the most accurate. Hiring an appraiser will get be the most accurate replacement cost estimator. 

You can also add endorsements to your policy to ensure you’re fully covered. 

What is the replacement cost of your home?

The replacement cost of your home is the dollar amount that it would take to rebuild your home after it has been damaged or destroyed. This cost should reflect how much it costs to repair your home today, and not when you originally purchased it. 

The replacement cost covers your home’s dwelling coverage and personal property coverage, which include your home, attached structures, and your personal possessions. If any of these are damaged and need to be rebuilt, your replacement cost should be able to cover them. For example, if your home and an attached gazebo are damaged in a fire, your policy’s replacement cost should cover their repairs.

Insurers abide by an 80% rule when it comes to replacement costs — they will only cover replacement costs if you purchased homeowners insurance coverage that equals 80% of your home’s replacement value. For this reason, it is vital to get enough coverage. 

How to estimate the replacement cost of a home

There are a few different ways you can calculate the replacement cost of your home:

  1. Hire a licensed appraiser: A local appraiser will inspect your home to assess the damages and how much a rebuild will cost. 
  2. Get an estimate from a replacement cost calculator: Online dwelling replacement cost calculators use the information you provide to estimate how much it would cost to rebuild your home. 
  3. DIY: Multiply the square footage of your home by the local rebuild cost for a rough estimate. You can find local rebuild costs on local construction company websites or from a contractor.

Hiring a licensed appraiser is the most expensive way to determine the replacement cost of your home, but it is also the most accurate. 

Factors that affect the cost to rebuild your home

The details of your home affect its replacement cost. When calculating the replacement cost, the following details should be taken into account:

  • Building codes: If there are newer building codes in your area, your home may be more expensive to rebuild. 
  • Construction costs: Construction costs are different across the country. You can get an estimate from a local contractor.
  • Foundation of your home: The type of foundation you have, such as a basement, can increase how much your home costs to rebuild.
  • Outdoor features: Patios, sheds, gazebos, and decks, all factor into your rebuild cost.
  • Renovations: If you’ve upgraded your home, it will increase the value of your home. 
  • Square footage: The more square footage your home has, the more expensive it will be to rebuild.

How to calculate dwelling coverage

The dwelling coverage you have in your policy is what pays to rebuild your home after a disaster. If you have $500,000 in dwelling coverage, then your homeowners insurance policy will pay out a maximum of $500,000 to rebuild your home, regardless of construction costs. 

Your dwelling coverage should equal (or exceed) your home’s replacement cost because you want it to fully cover the costs of rebuilding your home. You can calculate it by multiplying your home’s square footage by your local rebuild cost. Rebuild costs are generally given per square foot, but make sure to double-check. 

Supplemental replacement cost coverage

For some people, in certain situations, may find their dwelling coverage won’t be enough to cover the cost to rebuild their homes. People who live in disaster-prone areas, for example, may find that their rebuild costs are a lot higher due to demand after a disaster. If there’s a chance you could be subject to fluctuating replacement costs, there are two endorsements to consider adding to your policy: extended replacement cost coverage and guaranteed replacement cost coverage.

Extended replacement cost coverage

With an extended replacement cost endorsement, your homeowners insurance policy will pay for repairs that exceed your dwelling coverage, up to a limit. This limit caps at a 50% maximum of your dwelling coverage but can be less depending on the policy.

Guaranteed replacement cost coverage

With a guaranteed replacement cost endorsement, your homeowners insurance will pay for all of the rebuild costs, no matter how much it costs. That means even if your rebuild costs are double your dwelling coverage, your homeowners insurance policy will pay for it.

The replacement cost of your home is an important consideration when you’re buying homeowners insurance — you’ll want to make sure your dwelling coverage is high enough to cover the costs of a total rebuild. But you can always add on endorsements to ensure you have adequate coverage. 

Frequently asked questions

Is replacement cost the same as market value?

No. Replacement cost is how much it costs to rebuild your home to its prior condition after a disaster. Market value is how much someone would pay to buy your home.

How do you calculate replacement costs of a home?

To calculate the replacement costs of a home, multiply the square footage of your home by the local rebuild cost per square foot.

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Nupur Gambhir
Managing Editor


Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.

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