Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Full Bio →

Written by

UPDATED: Sep 15, 2020

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

The homeowners insurance policy is intended to replace or repair your home if it is damaged by a covered peril so the insurance company wants the home insured to its full replacement cost. They don’t want to over insure the home, but if it’s underinsured, the premiums the company collects will not reflect the actual financial exposure they face. In view of this, insurance contracts include a clause that says if the home is insured for less than 80% of the replacement cost, the policyholder will be penalized with a reduced payment for the covered loss. Also, you do not want to be underinsured, especially if there is a total loss, since you wouldn’t be paid enough to rebuild the home.

You can contact another agent to see if they agree with the amount of insurance that your present company is requiring. Insurance companies have different ways of determining rebuilding costs, so you may find a company that will write a lower amount of insurance. However, you still want to be sure you have enough insurance to rebuild the home.