Texas replacement cost calculator

The most common Texas coverage error is not choosing the wrong carrier. It is insuring the wrong amount.

Dwelling coverage is rebuild cost, not market value, not your mortgage

Your Coverage A dwelling limit should equal what it would cost to rebuild your home from the foundation up at current local construction prices. It is not:

• What you paid. The purchase price includes land, and land does not burn.
• What it would sell for today. Market value is set by school districts and interest rates. Construction cost is set by lumber, labor, and code.
• Your mortgage balance. Your lender requires only enough to protect its loan. That is the lender's interest, not yours.

Working a real Texas number

Rebuild cost in Texas runs around $210 per square foot, the midpoint of a published $150-$270 regional band. It covers materials, labor, and general contractor overhead and profit — and excludes land.

For a 2,000 square foot home:

• 2,000 x $210 = $420,000 at the midpoint
• Low end of the band: 2,000 x $150 = $300,000
• High end: 2,000 x $270 = $540,000

That $240,000 spread is the honest width of a statewide estimate in a state where Austin and Houston metro costs run well above rural West Texas. Use $420,000 as a starting point, then adjust for your actual market and construction.

Note how far this sits from Texas's statewide median home price of $345,000. In much of Texas — particularly in older neighborhoods and smaller markets — rebuild cost exceeds market value. A homeowner who insures to the purchase price in those areas is underinsured, sometimes badly. In Austin's hottest submarkets the relationship inverts and the market price runs above rebuild cost. Neither number tells you the other.

Two adjustments worth making:

• Ordinance or law coverage. If your 1990s home is substantially destroyed, you rebuild to the current code, and standard policies often include only a modest percentage of Coverage A for that upgrade cost.
• Extended replacement cost. An endorsement that pays a defined percentage above your dwelling limit — commonly 25% or 50%. After a widespread hail or hurricane event, regional construction costs spike above the annual average, and thousands of Texas homes compete for the same roofers at once.

The 80% coinsurance rule, and what a shortfall does to a partial claim

Most homeowners policies contain a coinsurance provision requiring dwelling coverage of at least 80% of full replacement cost in order to be paid replacement cost on a partial loss. Below that threshold, your partial claim is reduced proportionally.

Work it on the 2,000 square foot home:

• Full replacement cost: $420,000
• 80% threshold: $336,000
• You actually carry: $300,000
• Coinsurance ratio: $300,000 / $336,000 = 89.3%

Now a hailstorm and the wind behind it do $100,000 of damage. You are nowhere near your $300,000 limit, so you expect $100,000 less your deductible.

Instead:

• $100,000 x 89.3% = $89,286
• Minus your 2% wind/hail deductible on $300,000 = $6,000
• You receive $83,286. You are out $16,714, not the $6,000 you planned for.

And that assumes replacement-cost settlement. If the roof portion of that loss is settled at ACV, the shortfall is larger still. The penalty applies to every claim for as long as you are underinsured, which is why re-checking your dwelling limit against current construction costs annually matters — in a period of construction inflation, a limit that was adequate three years ago can slip below the coinsurance threshold without you doing anything.