How Do I Estimate the Replacement Cost of My Home?

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You can estimate how much it would cost to replace your home by researching building costs in your area, inputting your information into an online replacement cost estimator tool or hiring an appraiser. Knowing your home’s replacement cost can help you decide how much dwelling coverage to purchase.

Keep reading to learn about replacement cost homeowners insurance and the factors that determine how much it would take to rebuild your home after a covered loss.

Key Takeaways

  • Your home’s replacement cost is the amount of money it would cost to completely rebuild it after a total loss.
  • A home’s replacement cost can depend on its size, style, materials, features, fixtures and renovations, along with local prices and regulations.
  • It's recommended that you set your dwelling coverage limit at 100% of its replacement cost and no lower than 80% or you may not be fully reimbursed for claims.
  • Insurance companies use replacement cost estimator tools to recommend how much dwelling coverage you should buy.
  • You can estimate your home’s replacement cost yourself by multiplying its square footage by local building costs, using an online home replacement cost calculator or hiring an appraiser.

What Is the Replacement Cost of a Home?

The replacement cost of a home is the amount of money it would take to rebuild it in a similar style and structure with similar materials if it were to be destroyed. It’s recommended that you set your dwelling coverage limit at your home’s replacement cost so you can completely rebuild your home after a total loss.[1]

Keep in mind that your home’s replacement cost doesn’t take into account any of the belongings within your home since your dwelling insurance only covers the structure of your home and any attached structures.

Your possessions are instead covered by your personal property insurance, which usually has a coverage limit between 50% and 70% of your dwelling coverage limit.[1]

Replacement Cost vs. Market Value

While your home’s replacement cost is the amount required to rebuild it, its market value is how much it would sell for on the housing market. Alongside the features of the house itself, your home’s market value could depend on the land it is situated on and its proximity to schools, shops and other amenities. Conversely, your home’s replacement cost is solely based on the structure of the home itself.


Homeowners insurance policies typically insure the structure of your home at its replacement cost value (RCV) and your belongings at their actual cash value (ACV). However, you may have the option to upgrade your policy so that your home and belongings both receive RCV coverage.

When determining the ACV of an item, your insurance company will deduct money based on depreciation factors like age or wear and tear. For example, if you bought a $2,000 refrigerator that was expected to last 10 years, it might depreciate in value by $200 each year. As a result, if the refrigerator was stolen after five years and you filed a homeowners insurance claim, your insurance carrier may pay out $1,000 minus your deductible if you have an ACV policy.

how actual cash value works

Conversely, a policy with RCV coverage would pay whatever it would cost to cover your loss. So if you had an RCV policy and your $2,000 refrigerator was stolen after five years, you could receive an initial payment of $1,000 minus your deductible followed by a recoverable depreciation payment of $1,000 after buying a new refrigerator.

Similarly, if your home was to burn down, then your homeowners insurance would pay for the full cost to rebuild it in a similar style and structure instead of deducting for the age of the roof, the wear and tear on the siding, etc.

What Is a Replacement Cost Estimator?

A replacement cost estimator is a tool used by insurance companies to calculate how much it might cost to replace your home. For example, companies like Allstate, State Farm, Liberty Mutual and USAA use construction pricing software called Xactimate.[2] By putting information from your insurance application and data from outside sources into a home replacement cost calculator, insurers can recommend how much dwelling coverage you should purchase.

Since building prices can increase over time, it’s possible that your insurance provider will recommend that you raise your dwelling coverage limits whenever you renew your policy.

Be sure to use an insurance marketplace like SmartFinancial to compare quotes from multiple companies and make sure your insurer is fairly assessing the replacement cost of your home.

How Do I Calculate the Replacement Cost of My Home?

To calculate the replacement cost of your own home, you could do the math yourself, use an online replacement cost estimator or hire an appraiser. The simplest method is to ask a local real estate agent, insurance agent or builders association what the building costs per square foot are in your area and multiply that number by your house’s square footage.[1]

According to a 2022 survey by the National Association of Home Builders, the average construction cost per square foot is $153 for a single-family home.[3] Depending on the size of your home, you can expect to pay anywhere from $100,000 to over $300,000 to rebuild your home.

Square Footage Replacement Cost
700 $107,100
1,000 $153,000
1,500 $229,500
2,000 $306,000
2,500 $382,500

Of course, the average cost per square foot will consider where you live. For example, building a single-family home in Los Angeles costs around $440 per square foot on average.[4] As a result, the replacement cost for a 2,500-square-foot home in Los Angeles might be around $1.1 million. While this method can provide you with a general idea quickly, it would not account for all of the unique characteristics of your home.

For a more precise estimate, you could input information about your home and area into an online home replacement cost calculator. Meanwhile, you could hire an appraiser who specializes in replacement cost appraisals to get the most accurate estimate, although this would likely be the most expensive route.

What Factors Impact a Home Replacement Cost Estimate?

Home insurance companies may consider the following factors when estimating the replacement cost of your home:

  • Square footage of the house
  • Age, shape and style of the house
  • Number of bedrooms and bathrooms
  • Number of stories
  • Materials used for ceilings, walls and floors
  • Interior finishes, fixtures and other features
  • Structural framing
  • Roof type
  • Foundation type
  • Electrical systems and wiring
  • Plumbing and pipe systems
  • Heating and cooling systems
  • Renovations and customizations
  • Local demolition, cleanup and labor costs
  • Local building codes and regulations
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What Comes With Extended or Guaranteed Replacement Cost Coverage?

Some insurance companies offer extra homeowners coverage types you can purchase in case your dwelling coverage limit ends up being too low to fully cover the costs of rebuilding your home. For more comprehensive protection, you could buy extended replacement cost coverage or guaranteed replacement cost coverage.

Extended Replacement Cost Coverage

Extended replacement cost coverage usually provides either 25% or 50% of your dwelling coverage limit to cover rebuilding costs if you exhaust the money provided by your dwelling coverage.[5] For example, if you set your dwelling coverage limit at $250,000 and buy an extended replacement cost endorsement, your insurance provider might cover rebuilding costs up to $375,000.

This type of coverage can be useful to protect against unexpected inflation. For example, if a hurricane were to wipe out several homes in your area, demand for materials and labor would rapidly increase and rebuilding prices could skyrocket as a result. In this scenario, extended replacement cost coverage could make up for the extra expenses that you didn’t foresee when you set your dwelling coverage limit.

Guaranteed Replacement Cost Coverage

Guaranteed replacement cost coverage fully pays to rebuild your house after it is destroyed by a covered peril no matter how much it costs. This endorsement is naturally more expensive than extended replacement cost coverage and whether it is available to you at all depends on your state and insurance company.


What is homeowners insurance replacement cost?

The replacement cost of your home is the amount of money it would take to rebuild it in a similar style and structure with similar materials if it was destroyed. 

Are replacement cost coverage and dwelling coverage the same?

Dwelling coverage is a type of homeowners insurance that insures the structure of your home and attached structures while replacement cost coverage refers to a set of endorsements you can purchase to help cover the costs of rebuilding your home if your dwelling coverage limit ends up being too low.

What is the 80% rule?

The 80% rule is that your dwelling coverage limit must be at least 80% of the replacement cost of your home. Otherwise, your insurer may only pay out claims at a proportion of the required costs even if the amount of money you need is lower than your coverage limit.[6]

Why is replacement value important for homeowners insurance?

It is important to know the replacement value of your home so you can purchase enough dwelling insurance to rebuild your home in case of a total loss.


  1. Insurance Information Institute. “How Much Homeowners Insurance Do I Need?” Accessed May 17, 2023.
  2. Bert Roofing Inc. “Xactimate Construction Pricing Software.” Accessed May 17, 2023.
  3. National Association of Home Builders. “Cost of Constructing a Home - 2022,” Page 7. Accessed May 23, 2023.
  4. Build Method Construction. “How Much Does It Cost to Build a House in Los Angeles?” Accessed May 17, 2023.
  5. Nationwide. “Home Replacement Cost.” Accessed May 18, 2023.
  6. Demont Insurance Agency. “Homeowner’s Insurance: What Is the 80% Rule?” Accessed May 18, 2023.

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