How Much Home Insurance Do You Really Need in Washington State?

Finding the Right Coverage Amount

One of the most common questions we hear from Washington homeowners is: How much home insurance do I actually need?

The short answer: enough to fully rebuild your home if it were destroyed, not just its market value.

Replacement Cost vs. Market Value

Market value includes the price of your land, which doesn't need to be insured. Replacement cost covers the actual cost to rebuild your home with similar materials at today's labor and material prices.

Market value and rebuild cost are two different numbers, and neither one predicts the other. Market value includes your land, which does not burn. Rebuild cost is what a contractor would charge to put the structure back, at today's labor and material prices. Depending on the neighborhood, rebuild cost can land well below market value or well above it. What matters is that the number on your policy was calculated recently, and for most homes we review it was not.

What actually drives rebuild cost in this market

Two homes with identical square footage can carry very different rebuild costs, and the difference is rarely the size. It is the finishes, the age, and the site.

Custom or discontinued materials. Millwork, tile, cabinetry and windows that cannot simply be reordered take longer and cost more to replicate.
Age and code. A house built in 1925 has to be rebuilt to current code, not to 1925 code, and that difference is not automatically covered. More on that below.
Access and site conditions. A steep lot, a narrow street or a house set well back from the road all raise the cost of getting materials and equipment in.
Demolition and debris removal, which people almost always forget is part of a total loss.

This is why a figure set at closing several years ago is usually the wrong number today, in either direction. We rerun replacement cost as part of every review, and it takes a few minutes.

Key Coverage Areas to Review

Dwelling coverage: Should equal your home's full replacement cost
Personal property: Typically 50 to 70% of dwelling coverage, and watch whether it is replacement cost or actual cash value
Liability: We recommend a $500,000 floor, with a personal umbrella policy sitting above it
Additional living expenses: Covers hotel/rental costs if your home is uninhabitable

The coverage most Seattle homeowners are missing

Ordinance or law coverage

A standard policy pays to rebuild what was there. It does not automatically pay the extra cost of bringing the rebuild up to codes adopted since the house was built. In neighborhoods where much of the housing stock predates modern requirements, and that includes a great deal of Ballard, Wallingford, Queen Anne and Capitol Hill, the difference on a serious loss can run well into six figures.

Ordinance or law coverage is the endorsement that closes it. It is inexpensive relative to what it does, and it is the single most common gap we find when reviewing an older Seattle home.

Water backup

Sewer and drain backup, and sump pump failure, are excluded from most standard policies and added by endorsement, often with a modest limit that can be increased. If you have a finished basement, this is worth a conversation.

Extended or guaranteed replacement cost

If a rebuild runs past your dwelling limit, a standard policy stops at the limit. Extended replacement cost adds a percentage above it, and guaranteed replacement cost removes the ceiling entirely on the carriers that offer it. This is the coverage that matters most in a market where construction costs have moved faster than most policy limits.

Washington-Specific Risks

This is the part of the review that matters most here, and it is worth slowing down on.

Earthquake

Excluded from every standard homeowners policy written in this state. It has to be arranged separately, and the part that decides the whole question is the deductible, which is a percentage of your dwelling limit rather than a flat amount. On a home insured for $900,000, a 15 percent deductible means the first $135,000 is yours. We wrote a full explanation of how that math works and how to think about it.

Landslide and earth movement

Earth movement covers landslide, mudflow and settling as well as earthquake, and coverage for one does not mean coverage for the others. For homes on or below the steep slopes common around Puget Sound this is a real exposure, and one most owners assume is already covered. It is coverable, often through a difference in conditions policy that combines several excluded catastrophic perils under one contract.

Flood

Flood is excluded from standard policies and bought separately. If your property sits in a high risk flood zone and you have a mortgage, your lender will almost certainly require it. Outside those zones nobody makes you carry it, which is why so few people do. In this region the water often arrives from a creek, a blocked culvert or a saturated hillside rather than from the Sound, which is why a meaningful share of flood claims here come from homes that were never in a mapped zone.

A five minute exercise worth doing today

Pull out your declarations page and check four numbers. Not the premium, the coverages.

Dwelling limit. Ask yourself whether that number was calculated in the last two years. If you cannot remember, it was not.
Whether it says replacement cost or actual cash value, on both the dwelling and the contents.
Your liability limit.
Whether ordinance or law, water backup and earthquake appear anywhere on the page. If they are not listed, you do not have them.

If any of those give you pause, send us the declarations page. We will read it and tell you plainly where the gaps are, at no charge and with no obligation.

Get a Professional Review

The best way to ensure you have the right coverage is to work with an independent agent who can compare options across multiple carriers. Our team at Moreland does this every day, and we'd love to help. Request a review and quote.