September 2026 · 5 min read
Look at your homeowners declarations page and find Coverage A, the dwelling limit. That number is supposed to be what it would cost to rebuild your home from the ground up after a total loss. Not what you paid for the house. Not what it would sell for. What it would cost to build it again, today. For a lot of homeowners, that number is out of date, and nobody told them.
Rebuilding a home costs far more than it did a decade ago. Verisk, whose data many insurers use to price rebuilding, found that national residential reconstruction costs, including materials and labor, rose 63.7% over the ten years to October 2024.
The climb has slowed but not stopped. Total U.S. reconstruction costs rose 5.2% from April 2024 to April 2025, after a 4.6% increase the year before. The latest figures show a 3.6% rise from April 2025 to April 2026, with labor now the main driver. If your dwelling limit was set when you bought the house, or copied forward at each renewal with small automatic adjustments, it may not have kept up.
This isn't just a theory. After Colorado's 2021 Marshall Fire, University of Colorado researchers examined insurance contracts from 24 insurers covering nearly 5,000 policyholders who filed claims. They found 74% were underinsured, and 36% were severely underinsured, with coverage limits below 75% of what it would actually cost to rebuild.
A Pulitzer Prize-winning San Francisco Chronicle investigation showed how it happens. Most insurers set rebuild values with estimating software, and the leading tool, Verisk's 360Value, is used by insurers representing two-thirds of the U.S. market. The Chronicle found the data behind these estimates is often outdated and incomplete, and that agents rarely take the time to verify the details.
The consequences were concrete. In one case cited by California regulators, a State Farm agent ran the estimator 26 times over several years, lowering the home's quality grade to produce a lower estimate; the owner ended up underinsured by $86,000, nearly 25%. In another, a homeowner's rebuild estimate came in at about $640,000, and rebuilding actually cost $1.4 million. Those cases are from California, but the tools and the habits behind them are used nationwide.
Many policies include extended replacement cost, which typically adds an extra 10% to 50% of coverage above the dwelling limit. It is a useful buffer. But if the base limit is too low to begin with, even extended coverage can't close the gap. In the Colorado study, 87% of policies included extended replacement coverage, and nearly three-quarters of those homeowners still fell short of the full cost to rebuild.
When your dwelling limit was last really reviewed. Not just nudged up at renewal, but recalculated.
Your replacement cost estimate itself. Ask your insurer or agent for a copy, and check that it describes your actual home: square footage, number of stories, finishes, and any renovations or additions.
Whether you have extended replacement cost, and what percentage.
Ordinance or law coverage. This pays the extra cost of rebuilding to current building codes, which can be significant on an older home.
Whether you have told your insurer about improvements. A new kitchen, a finished basement or an addition raises what it costs to rebuild.
At The AI Insurance Group, the first review is free. Send us your current declarations page. Our AI reads every page and flags anything that looks out of line, like a dwelling limit that hasn't moved in years. Then a licensed agent checks every finding. Software is a starting point, not the final word; that is why a person verifies what the AI finds. You get a plain-English summary of what your policy covers, what it doesn't, and whether the price still matches, and you decide what to do.
Insurance should be reviewed, not simply renewed.
Verisk, 360Value Quarterly Reconstruction Cost Analysis (April 2025), and the Q2 2026 edition as reported by IA Magazine. Verisk ten-year reconstruction cost analysis, as reported by ProInstaller Magazine. Cookson, Gallagher and Mulder, University of Colorado Boulder, 2025, via CU Boulder Today and the authors' article in The Conversation. San Francisco Chronicle, A broken system is keeping California homes underinsured (2025). The Pulitzer Prizes, San Francisco Chronicle winners page.
Sal Martorano is the founder of The AI Insurance Group, a licensed independent insurance agency in New Jersey, Pennsylvania and Florida. NJ Producer License No. 3004245927.