INSURANCEONE AMERICA’S GUIDE TO BETTER COVERAGE
Step 2 of 6 Guide contents

The part many people skip

Would your policy actually rebuild your house?

The short answer

Only if the policy pays replacement cost, not a depreciated value, and your limit has kept up with building costs. Many policies also cut claims when the house is insured for less than 80% of its rebuild cost.

Only if two things are true: the policy pays replacement cost, not a depreciated value, and your limit has kept up with what building costs now. Rebuild costs rose nearly 30% in five years (Insurance Information Institute, 2025).

Don't know a word? Press any purple word to see what it means. They're all listed at the bottom of the page.

Two ways a claim can be paid

Your declarations page says which you have, for the house and for your things.

Replacement cost“the cost to rebuild your home or repair damages using materials of similar kind and quality.”
Actual cash value“the value of your home considering its age and wear and tear,” which “often doesn’t pay enough to fully repair or replace the damage.”

Definitions: National Association of Insurance Commissioners.

An example

A fifteen-year-old roof paid at actual cash value is paid as a fifteen-year-old roof, not a new one.

The 80% rule

It can apply to partial losses too.

If it drops below 80% of the full replacement cost of your home, your insurance company may reduce the amount that it will pay on a claim.National Association of Insurance Commissioners

Many policies pay replacement cost only if you insure the house for at least 80% of what it would cost to rebuild.

Try it

What does the 80% rule do to a repair claim?

Move the sliders. A simplified illustration of the rule, not a quote or a claim decision. Nothing is saved or sent anywhere.

$400,000
$280,000
$40,000
Share of the repair paidThe full repair

Why limits fall behind

A limit set when you bought the house can quietly drop below 80%.

Nearly 30%rise in rebuild costs in five yearsInsurance Information Institute, 2025
30%of homeowners had raised their limits for higher building costsIndustry survey, 2022
Do this

Look for these on your declarations page

  • Replacement costOn the house and on your belongings.
  • An inflation adjustmentRaises the limit each year.
  • Ordinance or lawPays the extra cost of meeting today’s building codes when you rebuild. In Florida it is included at 25% of the house limit unless you turned it down in writing.

Florida law as of October 2026; check your own policy.

Remember this

Check three words on your declarations page: replacement cost, inflation adjustment, and ordinance or law.

Words on this page

Actual cash value
What the thing was worth on the day it was damaged, with wear and age taken off. Less than the cost of a new one.
Replacement cost
Enough to replace the thing, not what it was worth secondhand.
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