Your house is worth $700,000. Your insurance company doesn't care.

I read declarations pages for a living. It's the kind of reading where you go line by line on somebody's homeowners policy and figure out what happens to them on the worst day of their life.

One mistake shows up more than any other, and it's on the first number on the page. Coverage A, the dwelling limit. It's set too low on a large share of the policies I look at.

The conversation usually goes like this.

"What's your home worth?"

"About $700,000. Zillow says $715."

"Okay. What's your Coverage A?"

"...I think it's around $550,000?"

And the homeowner is comfortable with that, because they did math. House is worth $700k, the lot is worth maybe $150k, so the structure is worth $550k, so that's what they insured. That reasoning feels airtight.

It's wrong. And it stays invisible until there's a fire truck in the driveway.

Market value and rebuild cost are different numbers

Market value is what a buyer will pay you for your house today. It's driven by school districts, comps down the street, interest rates, how many people want to live in Forsyth County this year, and whether your neighbor keeps a boat in the front yard.

Rebuild cost is what a contractor charges to put your exact house back on your existing foundation, at today's labor and material prices, to today's building code.

Those two numbers move independently. In a soft housing market, market value can fall while rebuild cost climbs. In a hot one, market value runs way past what the structure costs to build.

Your policy pays rebuild cost. Zillow has no vote.

Run the actual math

Take a common profile in my market. A 2,800 square foot semi-custom home in metro Georgia: Forsyth, Cherokee, north Fulton. Upgraded cabinets, hardwoods, tile, garage, probably a bonus room over it.

Here's what it costs to rebuild that house right now:

	Per sq. ft.	2,800 sq. ft.
Low end	$260	$728,000
Midpoint	$295	$826,000
High end	$330	$924,000

Semi-custom construction, metro Georgia counties. Excludes land, site prep, and demolition or debris removal.

The homeowner who insured the structure for $550,000 is short about $276,000 at the midpoint. And look at the footnote: that range doesn't include hauling off what's left of the old house. Debris removal is real money, and on most forms it comes out of the same Coverage A bucket.

$276,000 is a second mortgage on a house that no longer exists.

Why Coverage A drifts low

Two causes, and they're different problems.

Construction cost inflation. Construction input prices are up more than 43% since early 2020, per the Bureau of Labor Statistics. Fabricated structural metal is up over 60%. About 94% of contractors say they can't fill open positions, so labor keeps climbing too.

Most policies carry an inflation guard that nudges Coverage A up a few points at renewal. A few points a year doesn't keep pace with 43% over 5 years. If you bought your policy in 2019 and kept renewing it, the gap widened every year while you did nothing wrong.

Some agents set Coverage A low on purpose to win the quote. I'll say it plainly, because it's the second cause and it's a choice somebody made.

Dwelling limit is the biggest single lever on a homeowners premium. Drop Coverage A by $150,000 and the price falls enough to beat the incumbent. The customer sees a lower number, says yes, and finds out what got traded away at claim time. I have a lot to say about this. It's getting its own post.

For now: if somebody beat your renewal by a few hundred dollars, go look at what your Coverage A was before, and what it is now.

Underinsurance costs you on ordinary claims too

A low Coverage A does more than leave you short in a total loss. It changes how the policy settles a $10,000 claim, a $40,000 claim, every claim. Here's the mechanism.

Most standard homeowners forms carry a loss settlement condition tied to 80%. Your policy pays replacement cost on a partial loss only if your Coverage A is at least 80% of what your home actually costs to rebuild. Fall below that line and the form changes how it settles every claim you file.

Back to our house. Full rebuild cost is $826,000. Eighty percent of that is $660,800. Coverage A is $550,000, which is under the line.

Now something ordinary happens. Grease fire in the kitchen, spreads into the family room. Nobody's hurt. It's a $120,000 repair. Bad day, but a normal one.

Here's what the policy does. Below the 80% threshold, most forms pay the greater of two numbers: the actual cash value of the damaged portion (depreciated, and those cabinets are 12 years old), or a proportional share calculated as your limit divided by the required 80% amount.

$550,000 ÷ $660,800 = 0.83

0.83 × $120,000 = about $99,900

Then subtract the deductible. At the 1% we recommend on a $550,000 dwelling limit, that's $5,500.

Check paid: roughly $94,400. Repair bill: $120,000.

That homeowner budgeted for a $5,500 deductible. They're writing a check for about $25,600.

Nothing went wrong at claim time. They filed correctly, the claim was covered, the adjuster was fair, and the carrier paid exactly what the contract said. They lost $20,000 because of a number set incorrectly years earlier on page 1 of their policy.

Extended replacement cost won't fix this

When people learn about this gap, somebody always says: "That's fine, I have extended replacement cost. It'll cover the difference."

That's not what it's for. Extended replacement cost gives you a cushion above your dwelling limit, often 25%, for demand surge. It exists for the week a tornado goes through Rome or a hurricane runs up through south Georgia and every contractor within 100 miles is booked while lumber prices double.

It's a buffer against a market spike after a catastrophe. Buying a 25% cushion on top of a wrong base number gives you 25% more of a wrong number.

And on the partial-loss math above, an extended replacement cost endorsement does nothing at all. You were already under the 80% line before the cushion ever came into play.

Set the base number right. Then talk about cushions.

While you're in there: ordinance or law

Look for ordinance or law coverage, sometimes called code upgrade.

Most standard forms include about 10% of your dwelling limit for it. On our example policy, that's $55,000.

Insurance pays to rebuild what you had. The county makes you build to current code. If your house went up in 1998, the distance between those two requirements is not small: electrical, egress windows, insulation and energy code, sometimes structural. Some jurisdictions require the entire structure be brought current when a big enough portion is destroyed, not just the damaged part.

$55,000 goes fast. On most of the homes I look at, that limit needs to be higher.

What to do this week

Three things. You can do the first two yourself in about 10 minutes.

1. Find your Coverage A. First dollar figure on your declarations page. Write it down.

2. Divide it by your square footage. If you land under $200 per square foot on a decent home in metro Atlanta, Nashville, Birmingham, or Columbus, something's off. Not automatically broken, but off enough to ask about.

3. Get a real rebuild estimate. Built from your square footage, your county, your construction quality, and what contractors charge in your market this year. A tax assessment won't tell you this. Neither will what you paid for the house.

We'll do the third one for free

Send us your current declarations page. Whoever it's with, we don't care, and we're not going to pretend every policy we look at is broken. Plenty of them are fine. When yours is fine, I'd rather tell you that and keep the relationship than invent a problem to solve.

We'll run your rebuild cost, show you the math, and tell you whether your Coverage A clears the 80% line. If it does, you'll hear "you're good, go enjoy your weekend." If it doesn't, you'll see how short you are and what it costs to fix.

Either way you keep the numbers.

Send your dec page to michael@ins.insure, or book a 15-minute review.

We win clean or we don't win.

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INS. (In Noble Service) is an insurance agency based in Alpharetta, Georgia, writing personal home and auto in Georgia, Alabama, Tennessee, and Ohio.