Practical guide
Understanding coverage gap estimate — sensitivity table
Everyday editorial team · GEOINNOVATION CO., LTD · Published · Updated
What this calculation is for
A coverage-gap check compares a replacement need with insurance limits and money reserved for a loss. It can highlight underinsurance, but cannot decide whether a policy is suitable or whether a specific claim will be covered.
How the method works
Replacement needs are projected using the entered inflation and review period, then compared with coverage, deductible assumptions and available reserves. Verify each result label because a coverage limit, a deductible and a cash reserve are not interchangeable forms of protection.
A worked example
If rebuilding is estimated at $400,000 but a policy limit is $300,000, a $10,000 cash reserve does not eliminate the remaining replacement exposure. An insurer’s valuation and settlement terms can differ from the estimate.
Assumptions and real-world differences
Actual-cash-value settlements, exclusions, sublimits, coinsurance penalties, flood or earthquake coverage and policy endorsements are not assessed. A budgeted replacement value is not a professional appraisal or a binding insurer valuation.
Reading the estimated replacement value sensitivity table
The tool evaluates the same model across a range of estimated replacement value values while holding other assumptions constant. Choose a realistic low value, high value and number of points. Each row reports the same headline measure; the table is a set of conditional calculations, not a probability distribution or a forecast. Input-step rounding can make nearby rows equal.
Reproduce this tool’s example
These fixed example inputs are independent of edits you make above. Enter them in this tool to reproduce the result, then replace them with your own assumptions.
- Minimum estimated replacement value
- 175,000 $
- Maximum estimated replacement value
- 525,000 $
- Number of comparison points
- 5 points
- Current coverage limit
- 300,000 $
- Deductible
- 2,500 $
- Additional cash reserve
- 10,000 $
- Annual replacement-cost increase
- 3 %
- Years until review
- 3 years
Sensitivity analysis: 5 comparison points
Estimated replacement value ranges from $175,000 to $525,000.
- Estimated replacement value: $175,000: $0
- Estimated replacement value: $263,000: $0
- Estimated replacement value: $350,000: $72,454.45
Frequently asked questions
- Does the result mean a claim will be paid?
- No. Coverage depends on the policy wording, cause of loss, limits and claim assessment.
- Is market value the same as replacement cost?
- No. Land, location and market demand affect sale value differently from the cost of rebuilding.
- Does the most favorable row show the most likely outcome?
- No. The table assigns no likelihood to any row. It shows how the result responds to the chosen assumption, and you remain responsible for selecting a plausible range.