Homeowners Want to Know: What Is Dwelling Coverage?

Kudos to you for reviewing your homeowners insurance and trying to figure out what you’re paying for! You probably noticed that dwelling coverage is the most expensive part of your homeowners insurance policy. You may have also noticed that this is the figure that tends to increase more than any other each year. So what’s up with this dwelling coverage anyway?  What is it exactly?

Below, we’ll explain the different components of your home insurance policy. Once you understand what you’re paying for, if you decide you’d like to try for a lower insurance rate for your home or condo, contact us and we’ll pair you up with a trustworthy insurance agent.

Now, back to dwelling insurance: According to the dictionary, a dwelling is a house, apartment or any other place of residence. So, it only follows that dwelling coverage on your homeowners insurance refers to the main structure (i.e your home, not the shed). With that said, often times when there is a natural disaster or other covered peril (like dwelling fire) that causes damage and destruction to your home and other existing structures (shed or a garage). You may be surprised to learn that the shed and garage are also covered by your insurer.

Other structures that are often included in the “dwelling” insurance:

• Fences
• Decks
• Built-in appliances (furnaces; water heaters)

But beware: Just as often, you’ll find that the separate structures listed above are not covered by your homeowners insurance! It can feel pretty arbitrary too, especially when neighbors are hit just as hard and have different items covered in comparison to you. This is why it’s important to ask an agent questions before disaster strikes!

Note that with a condo insurance, things are calculated differently because parts of your “dwelling” are shared with other owners. Also, if you have a condo, make sure to insure all parts of your unit that fall under personal property. Sometimes, they are not on your declaration page, which forfeits their coverage when you need it the most.

How Do I Determine How Much Dwelling Coverage I Need?

Dwelling coverage is prominently displayed in your policy’s declaration page because it is the most important part of your coverage. This is the part that pays for damages to your house if it is damaged or destroyed. Contrary to what you may have heard, insurance doesn’t pay you the market value of your home. Think of it as a rebuilding fund because that is what it is designed to do, pay to rebuild your house so that it is at the same or similar condition as before the event that caused the damage. The amount of land you own, for instance, never figures into the dwelling coverage amount.

What Does Dwelling Insurance Cover?

Each insurer has different rules and stipulations for what they will and will not cover. You’ll find a list of “covered perils” on your policy’s declaration page in your policy jacket. You’ll see some if not all of the following coverages. Be sure to communicate with your agent if you don’t see some of the valuables you’d like to cover (i.e. you’ll need a floater or rider for expensive jewelry because, most likely, it won’t be covered under dwelling insurance).

These are typical covered perils:

• Burst pipes
• Damage caused by (the weight of) excess snow, ice or sleet
• Fire
• Smoke
• Theft
• Vandalism
• Motor vehicle collision
• Aircraft collision
• Volcano eruption
• Explosions
• Lightning
• Hail
• Windstorm
• Falling objects

What’s Not Covered by Dwelling Insurance

Dwelling coverage, and homeowners insurance policies in general, do not cover flooding and earthquakes. Both flood insurance and earthquake insurance are separate policies and each is a standalone. Do not assume that you’ll be covered for these types of damages to your home even with the most comprehensive home insurance plan. 

Other perils not covered include:

• Sinkholes
• Sewage backups
• Dry rot (caused by negligence and poor upkeep).

In general, if it’s determined that the damage to your home was a result of bad maintenance, you’ll have a hard time getting reimbursed for related costs. This often happens with roof damage and homeowners are left wondering why they were only partially covered after a natural disaster. It’s often because the insurer determines there was poor upkeep with aging roof tiles, which made the home more prone to damage. Basically, they’ll determine that some of the damage was your fault and they’ll only pay a percentage.

Why Does My Dwelling Coverage Go Up Each Year?

Most homeowners insurance policies guard against inflation with a small increase every year to offset inflation and to ensure that you are not underinsured if anything happens to your home.

Remember: You Have a Deductible!

Just as you do with auto insurance, you have a deductible on your homeowners insurance policy. What that means is that after you file a claim, you’re covered only after you pay that portion of the bill. Deductibles for home insurance range from homeowner to homeowner, but generally do not dip lower than $500. If you want to read more about homeowners insurance deductibles and how to choose the right one, visit here.

If you have questions about your dwelling insurance or want to see if you qualify for a lower homeowners insurance rate, fill out our form here so we can pair you up with the right agent.