Half of Homeowners Think They're Fully Covered...Many May Be Underinsured

Key Findings

We surveyed homeowners to find out how much they know about their home replacement cost and coverage limits, and how protected they think they are. This is what we found out:

• 50% of homeowners believe their home insurance will cover the full cost of rebuilding their homes
• 47% of homeowners don’t know their insurance coverage limits
• When asked if they learned their current coverage would not fully cover the cost to rebuild their home, would they change their policy, 87% said they would be somewhat or very likely to do so.

Why Replacement Cost Keeps Climbing

Replacement cost is basically a “construction invoice” that moves with the real world. Several forces have been pushing it higher:

1) Materials and supply-chain volatility

Even when inflation cools, construction materials can stay jumpy. This is especially true after major storms or wildfire seasons when demand spikes regionally. Industry groups point to persistent inflation and prolonged supply chain issues as key drivers of rising replacement costs.^[3]

2) Labor shortages and wage pressure

Rebuilding isn’t just lumber and shingles. It’s skilled labor. When contractors are booked out, labor costs rise and timelines stretch. Construction cost reporting continues to note labor-market tightness and ongoing cost pressure (even as the pace of increases moderates).^[4]

3) “Demand surge” after catastrophes

After a large disaster, everyone needs the same trades at the same time—roofers, electricians, framers, and drywall crews. That surge can push rebuild bids far above what your insurer estimated when the policy was renewed.

4) Building code upgrades (the sneaky multiplier)

A rebuild often has to meet current code, not the code your home was built under. That can mean updated electrical, plumbing, roof requirements, wildfire-resistant vents/materials, flood elevation rules, and more. If you don’t have enough ordinance or law coverage (more on that below), those upgrades can come out of pocket.

5) Tariffs and policy-driven input costs

If the cost of imported construction inputs rises, replacement costs can follow. For example, reporting on tariffs on building materials has tied them to higher construction costs and additional upward pressure on home insurance pricing.^[5]

The Caps Homeowners Often Don’t Realize They Have

Here’s where a lot of the “I thought I was covered” pain comes from: Policies frequently include replacement-cost features with ceilings.

Cap #1: Your dwelling limit is still the main ceiling

On most policies, the insurer’s obligation to rebuild is anchored to Coverage A (Dwelling), which is your stated limit. If your rebuild costs exceed that, you need specific endorsements to go higher.

Cap #2: Extended replacement cost is usually capped at 10%–50%

Many carriers offer extended replacement cost (sometimes called “extended dwelling” or “increased replacement cost”). This can provide a buffer above your Coverage A limit—but it’s typically capped, commonly in the 25%–50% range.

Example:

• Dwelling limit: $400,000
• Extended replacement cost: +25%
• Maximum available for rebuild: $500,000

If the real rebuild cost is $560,000 after a disaster-driven demand surge, you may be short $60,000 (plus potential code upgrade costs).

Cap #3: Ordinance or law coverage is often limited (and sometimes low by default)

Even if your home is insured for replacement cost, code upgrades may be capped under a separate bucket—often expressed as a percentage of Coverage A or a flat amount. If local code changes require upgrades, that gap can be significant.

Cap #4: “Guaranteed replacement cost” is not the norm

Some insurers offer (or once offered) guaranteed replacement cost, which can pay to rebuild even if costs exceed your policy limit. But it’s not universally available, may come with conditions, and isn’t common in high-risk regions. So many homeowners think they have “full replacement” when they actually have a capped extension.

Cap #5: Other sub-limits that can quietly derail a rebuild

Even when the dwelling amount looks adequate, specific parts of the claim can have limits or special rules, such as:

• Debris removal limits
• Trees/landscaping caps
• Certain roof-payment structures (varies by policy/endorsement)

Separate limits for detached structures, like garages or sheds

How to Make Sure You’re Not Underinsured

Even if you’re one of the 50% of people who think you’re covered, statistics show you may not be. It’s never a bad idea to double-check. 

1. Ask for a replacement-cost estimate. Review the assumptions (Square footage, roof type, exterior materials, quality grade, special features, etc.)
   
   
2. Confirm whether your policy has extended replacement cost—and the exact percentage cap. 10%? 25%? 50%? (Get it in writing on the declarations page or endorsement.)
   
   
3. Check ordinance or law coverage. This is especially important in wildfire, hurricane, and older-housing markets.
   
   
4. Revisit your dwelling limit after renovations or major price swings. Renovation costs often rise faster than owners expect.
5. Understand “demand surge” risk in catastrophe-prone areas. The rebuild bid you’d get in a normal year may not be the bid you get after a regional disaster.

Methodology

The survey above on home replacement coverage was part of a monthly user survey through the Marble App. There were 1,081 participants.