Homeowners coinsurance calculator (the 80% rule)

Many home policies require you to insure at least 80% of what it costs to rebuild. Fall short, and even a partial claim can be cut. Enter your numbers to see what a claim would pay.

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Result

Showing the worked example. Change any number to see your own result.

$37,500Estimated claim payment

You carry less than the required $320,000, so the policy pays only 75% of the loss. This claim would pay about $37,500, which is $12,500 less than if you were fully insured. Raising your limit by $80,000 would remove the penalty.

Claim payment: $37,500
Coinsurance penalty: $12,500
Coverage required by the policy: $320,000
Raise your limit by: $80,000
Share of loss paid: 75%

Claim payment at different coverage levels

Claim payment
Coinsurance penalty

View chart data as a table

Claim payment at different coverage levels
Coverage as % of rebuild cost	Claim payment	Coinsurance penalty
50%	$31,250	$18,750
60%	$37,500	$12,500
70%	$43,750	$6,250
80%	$50,000	$0
90%	$50,000	$0
100%	$50,000	$0

What this loss pays at each coverage level

Coverage as % of rebuild cost	Dwelling limit	Share of loss paid	Claim payment	Coinsurance penalty
50%	$200,000	62.5%	$31,250	$18,750
60%	$240,000	75%	$37,500	$12,500
70%	$280,000	87.5%	$43,750	$6,250
80%	$320,000	100%	$50,000	$0
90%	$360,000	100%	$50,000	$0
100%	$400,000	100%	$50,000	$0

How the result is built

Coinsurance breakdown
Coverage required by the policy	$320,000
Coverage you carry	$240,000
Share of the loss the policy pays	75%
Loss	$50,000
Minus deductible	$0
Estimated claim payment	$37,500
Coinsurance penalty (what you lose)	$12,500

Compare scenarios

Save up to 3 versions of your inputs and compare them side by side.

How to use this calculator

Enter your rebuild cost. Use your insurer's replacement cost estimate or the rebuild cost calculator.
Enter your dwelling limit and required share. Find Coverage A and the coinsurance or insurance-to-value clause in your policy.
Test a loss. Enter a realistic partial loss, such as a kitchen fire, and your deductible.
Read the penalty. The result shows the claim payment and how much you lose by being underinsured.

What the coinsurance rule is

Home insurance assumes you insure your house close to what it would cost to rebuild. To enforce that, many policies include a coinsurance or insurance-to-value condition. The Texas Department of Insurance notes that most companies require you to insure your house for at least 80% of its replacement cost, and some require 100%. The NAIC gives similar advice to insure for at least 80% of replacement value.

If your dwelling limit is below the required share, a claim can be reduced, even when the damage is far smaller than your limit. This calculator shows by how much.

How the calculation works

Required coverage = replacement cost × required share

Share paid = coverage carried ÷ required coverage (maximum 100%)

Claim payment = loss × share paid − deductible (no more than your limit)

Policies word this condition in different ways. Some use the proportional formula above; some pay actual cash value instead of replacement cost when you are underinsured. Treat the result as an illustration and read your own policy’s conditions.

Worked example: a kitchen fire in an underinsured home

The calculator opens with this example. The home would cost $400,000 to rebuild. The owner carries $240,000 of dwelling coverage on a policy that requires 80%. A kitchen fire causes $50,000 of damage.

Step	Calculation	Result
Required coverage	$400,000 × 80%	$320,000
Share paid	$240,000 ÷ $320,000	75%
Claim payment	$50,000 × 75%	$37,500
Penalty	$50,000 − $37,500	$12,500

The owner’s limit was far higher than the loss, yet the claim paid only three quarters of it. Raising the limit by $80,000 to $320,000 would remove the penalty.

The same fire, fully insured

With $400,000 of coverage and a $1,000 deductible, the same claim pays $49,000. The only difference is the dwelling limit.

Why homes end up underinsured

Cause	What happens
Insuring to purchase price or market value	Rebuild cost can be higher, especially for older homes
Renovations and additions	The limit stays where it was before the upgrade
Rising construction costs	Labor and materials go up while the limit does not
Choosing a low limit to save premium	The saving can be wiped out by one partial claim

What changes the answer

The required share. A 100% requirement is stricter than 80%.
Policy wording. Some policies pay ACV instead of replacement cost below the threshold, rather than a proportion.
Extended replacement cost. An endorsement that pays above your limit can help after a widespread disaster, but does not fix a limit that is too low to begin with.
Inflation guard. Automatically raising the limit each year helps keep you above the threshold.

Common mistakes

Assuming a partial loss is always paid in full. Coinsurance applies to partial losses.
Using market value. Land does not need rebuilding; construction does.
Never updating the limit. Review it at each renewal.

Next steps

Estimate your home’s rebuild cost with the home rebuild cost calculator, then compare it with your Coverage A. Our guide to how much dwelling coverage you need explains how insurers estimate rebuild cost and which endorsements help.

Questions people ask

What is the 80% rule in homeowners insurance?

Many policies require you to insure your home for at least 80% of its replacement cost. If you carry less, a claim may be reduced in proportion to how far short you are, even for partial damage.

How is the coinsurance penalty calculated?

A common formula is: claim payment = loss × (coverage carried ÷ coverage required) − deductible, up to your limit. If you carry 60% of replacement cost on an 80% policy, you are paid 75% of the loss.

Does the 80% rule apply to a total loss?

In a total loss you are limited by your dwelling limit anyway. The coinsurance clause matters most for partial losses, where it can cut a claim you might expect to be paid in full.

Is coinsurance in home insurance the same as health insurance coinsurance?

No. In health insurance, coinsurance is your share of a medical bill. In property insurance, it is a rule about insuring to value, with a penalty if you do not.

How do I avoid a coinsurance penalty?

Insure to 100% of replacement cost, review your limit when construction costs rise or you renovate, and consider an inflation guard endorsement that raises the limit each year.

Do all home policies have a coinsurance clause?

Not all, and the wording differs. Some homeowners policies use a replacement cost condition that pays only actual cash value if you are below 80%. Read the conditions section of your policy or ask your agent.

Where do I find my replacement cost?

Ask your insurer for its replacement cost estimate, or use our rebuild cost calculator with a local cost per square foot.

Sources

Home insurance guide — Texas Department of Insurance, accessed October 18, 2026
Homeowners Insurance — National Association of Insurance Commissioners (NAIC), accessed October 18, 2026

Educational information, not insurance, legal or financial advice. Coverlee does not sell insurance. How we calculate