Can I choose my own coverage limits for my home?

Young couple holds paper roof over themselves and their young child, symbolizing a home

Coverage limits are the max amount an insurance policy will pay out in the event of a covered loss. When we are talking about the structure of your home, we are referring to Dwelling Coverage, or Coverage A in your homeowner’s policy. In the event of a complete loss, such as if your home burns down or is hit by a tornado, you’ll want these limits to be high enough to cover the costs of rebuilding your home.


There are a few things that go into determining just how much that could cost, including:

  • Cost of building materials
  • Local construction costs
  • Debris removal costs
  • Improvements to meet updated building codes

When these things are taken into consideration your dwelling coverage limits are not likely to match the current market value of your home. In most cases the amount you would get for selling your home is significantly less than the cost to rebuild your home. Costs to rebuild your home can increase even when the market value of your home decreases. This can be a point of frustration for many homeowners because increased costs to rebuild require increased coverage limits – which ultimately means increased homeowners’ insurance premiums.
For some, it may be tempting to decrease their coverage limits (and thus their premium costs) to something more in line with the value of their home. However, insurance companies do not negotiate what the required minimum limits of your policy are. Each company has their own method of calculating the cost to rebuild your home which can lead to different amounts being required by different carriers. Yet once they have decided on a number, there is no changing the amount.

Luckily there are other was to save on your insurance costs. Many insurance companies offer discounts for paid in full, multipolicy or bundling, installing security or alarm systems, and more. Talk to your insurance advisor today about ways you can save on your insurance.