Understanding the 80% Rule in Scottsdale Homeowners Insurance

Let’s clear this up: You might think your home is fully covered by your insurance — but if you’re not meeting the 80% rule, you could be in for a nasty surprise after a claim. This rule quietly affects thousands of Scottsdale homeowners every year, especially when roof or storm damage occurs.

In this article: We’ll explain what the 80% rule means, why it matters for roof repairs, and how to make sure your Scottsdale home is properly insured before you need to file a claim.

Local story: One homeowner in North Scottsdale had a $500,000 home insured for $350,000 — sounds like plenty, right? Not to their insurer. Because their coverage didn’t meet 80% of the replacement cost ($400,000), the company only paid part of their roof claim. The rest — more than $8,000 — came out of pocket.

1. What the 80% Rule Means

Most insurance policies require you to carry coverage equal to at least 80% of your home’s total replacement cost — not its market value. If your policy falls below that, your insurance company may only cover a proportional share of any claim.

That means if your home would cost $500,000 to rebuild, your policy should cover at least $400,000 (80%). Anything less, and you’ll be penalized for being “underinsured.”

2. Why This Rule Exists

The 80% rule helps insurers make sure homeowners carry enough coverage to rebuild in case of major loss. It also protects against people underinsuring just to save on premiums — but it can hurt you if you haven’t updated your policy in years, especially with Scottsdale’s rising rebuild costs.

3. How It Impacts Roof Claims

If you’re under the 80% threshold, your insurer may only pay part of your roof replacement — even for covered damage. Here’s how it works:

Example:
Home replacement cost = $500,000
Policy coverage = $350,000 (only 70%)
Roof damage claim = $20,000

Because you’re underinsured, the insurer only pays a percentage based on your coverage ratio (70/80 = 87.5%). So they’ll only cover $17,500 — and you’ll pay the remaining $2,500 plus your deductible.

4. Why Scottsdale Homeowners Are at Risk

Construction and roofing costs in Scottsdale have jumped 25–35% over the past five years due to labor shortages, material costs, and stricter building codes. Many policies haven’t been updated to reflect those increases — meaning even careful homeowners may be underinsured without realizing it.

5. How to Check If You’re Properly Covered

• Look at your policy’s “Dwelling Coverage” (Coverage A) limit.
• Ask your agent what your home’s current replacement cost would be — not market value.
• Ensure your policy covers at least 80% of that number.
• If not, request a policy update or “revaluation.”

6. How Roof Upgrades Help

Installing a new or upgraded roof not only improves protection but can help maintain your home’s insurable value. Many Scottsdale insurers reduce premiums for newer roofs and use that update to recalculate your coverage level, ensuring you stay above the 80% rule threshold.

7. What Happens If You Don’t Meet the Rule

• Your insurance payout will be reduced proportionally.
• You could lose eligibility for replacement cost coverage (switching to ACV).
• Premiums might increase once the policy renews at corrected values.

Final Thoughts

Bottom line: Don’t assume you’re fully covered — check your policy’s 80% rule compliance now, before a storm hits. Roof damage is one of the most common claims in Scottsdale, and being underinsured can cost thousands more than a quick policy review ever would.

Need help understanding how your roof affects your coverage? Talk to the experts at Sky Shield Roofing Company or get a quick Instant Quote to assess your roof’s replacement cost. You can also explore more insurance-related answers in our Scottsdale Roofing FAQs.