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You pay the difference. If your dwelling limit is below the cost to rebuild, a total loss settles at your limit and the gap is yours. Many policies also carry a coinsurance provision that can reduce even partial-loss payments if your limit falls too far below replacement cost.
What you need to know
How homes drift into underinsurance
Unreported renovations, rising construction costs, and limits set from a purchase price years ago are the common causes.
Coinsurance penalties on partial losses
Insuring to well under replacement cost can proportionally reduce a kitchen-fire payment, not just a total loss.
The fix is usually cheap
Updating a valuation and adding extended replacement cost typically costs far less than the exposure it removes.
Common mistakes
- Insuring the home to market value or loan balance instead of today's rebuild cost.
- Leaving liability at the lowest available limit with no umbrella above it.
- Assuming flood and earthquake are included — both are separate in California.
- Never scheduling jewelry, art or other items that carry low special limits.
- Filing small claims that cost more in renewal pricing than they paid out.
When to talk to an agent
Talk to an agent when your premium jumps, when you renovate or rent out the home, when you are told you are being non-renewed, or any time you cannot tell from the declarations page what your policy would actually pay.
Frequently asked
This article is general information, not a policy or a promise of coverage. What your policy pays depends on its specific terms, limits and exclusions. Ask us to review your actual policy before making a decision.