@Carl Graff The article you posted sums up the general determination process for coverage amount used (as far as I know) by all admitted carriers in CA. I am an independent agent so I can't speak for the direct writers of the world (StateFarm, Allstate, Farmers...etc), but that is the process I am familiar with.
As an agent focused on REI, I understand your concerns, almost all investors have a certain sensitivity to these values.
The biggest thing you need to think about which you haven't yet mentioned is called "co-insurance" which is your obligation (and possible penalty if you fail) to insure your property within a reasonable realm of likely replacement cost.
Co-insurances is between 80-100% requirement usually with a 10-20% penalty in the event of a failure to comply.
In the example of a 90% co-insurance requirement with a 10% penalty (in my experience the most common), here is the math.
You have a house insured for 355k. It burns down, a claims adjuster comes out, brings a GC, examines the inspection reports...etc and then determines that your house will cost 400k to rebuild.
You will have not met your co-insurance requirement 400k-355k= 45k > 10% of 400k. Your insurance company will then not disperse funds until you have provided 40k (your 10% penalty as an added deductible) + your deductible. Then, they will only provide the amount your insured for -- 355K to rebuild.
In total you will have to pay 45k to get the 355k to rebuild your house--
(10% penalty) 40k + 1k (deductible) + 4k (remaining difference balance) to activate a 355k dispersal = 400k balance for construction.
now, what is the cost difference between 355k and 400k of coverage from the off? likely less than $10/mo.
Does that mean any one should be grossly over covered out of a fear of co-insurance penalties? No.
What happens if you are insured for 410k and the bid/value comes back as 400k. That is a determination that varies between carriers and adjusters. That is not (as far as I know) paid out as a bonus check at the end and here is why. The carrier is paying the actual cost to rebuild. As you know in the REI world, there is almost never a perfect estimation of costs associated with rebuilding a property.
So, your replacement cost coverage is an initial estimate, when the house burns you get a second estimate and as construction occurs, costs can change. Unfortunately, it is impossible to make a perfect estimation for even the most gifted investor or contractor or carrier. The goal is to air on the side of too much than too little.
So what happens if you are underinsured, but within 10% of the replacement cost so you avoid the coinsurance penalty? The insurance company will pay the full amount required to build your home.
Ultimately, as a homeowner you view this as a "micro" event--your property destroyed or the 10k too much coverage on your policy. The insurance company views your "micro" event from a "macro" perspective. Meaning, for every homeowner who is under insured by 5% (remember, that valuation is subjectively determined and subject to change depending on a contractor's skill...etc) there will be one who is 5% over insured (again subjective and subject to non-robotic human craftsman, and variables).
But, that is why carriers use the 3rd party rating systems mentioned in your posted article. It gives a standardized method. As independent agents, we do not have the authority in most cases to write policies that do not comply with those valuations--carriers will simply refuse.
It is not worth it to a carrier (or agent) to potentially open up a legal battle down the line where an insured says "Mr. Judge, if I had known that 400k was only $10/mo more than 355k, I would have been an idiot not to take it. My agent and carrier were negligent, they let me under insure my house and didn't explain the consequences to me."
Overall, I think you are right on on your personal property amounts. I think your condo is underinsured--the less the square footage, typically the higher price per square ft in general because more of the house is bathroom kitchen walls...etc rather than open air.
The house seems ok, but my guess is that depending on the quality of the finishes and property, you might have a carrier come back and want to bump it closer to between 600-650k in accordance to one of the rating systems in your article.
You can look into using a "non-admitted carrier" to get around the rating systems--you will have a lot more freedom with coverage amounts, but the co-insurance requirements are still in play and typically much more stringent.
But, I would bet a quote at 518k (or even 450k) would be basically equivalent in price if not possibly higher than your hypothetical 625k with an admitted carrier.
So, I understand the frustration and lack of information available in regards to these factors. But, it is better to air on the side of enough than not enough if you have the choice.
Best,
Parker