What is the minimum percentage of replacement cost that a dwelling must be insured for in forms HO-2, HO-3, and HO-5?

In property insurance, particularly for homeowners' policies like HO-2, HO-3, and HO-5, the minimum percentage of replacement cost that a dwelling must be insured for is 80%. This requirement is critical to ensure that the policyholder receives adequate coverage to fully replace or repair their home in the event of a loss.

Insuring a dwelling for at least 80% of its replacement cost allows for more effective financial protection against losses. If a homeowner does not meet this threshold and suffers a loss, they may face significant penalties in claims settlements, potentially being underinsured.

This principle is aimed at preventing a situation where homeowners could benefit from not fully insuring their property, which could lead to moral hazard. By ensuring that homes are covered to this minimum level, the insurance market promotes responsible ownership and maintains financial integrity.