What Is Dwelling Insurance Coverage and Do You Need It?
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A homeowners insurance policy has four main components. Dwelling insurance coverage, or "Coverage A," is the main component of your homeowners insurance policy. Dwelling coverage pays to rebuild or repair damage to your home's physical structure and additional structures like fences, storage sheds, roof, exterior and interior walls and garages. However, dwelling coverage does not cover belongings and land. It's important to have adequate dwelling coverage in case you ever need to rebuild that home. Your dwelling coverage also establishes how much coverage you have for personal property. Here’s more.
What Does Dwelling Insurance Cover?
Dwelling coverage: Covers your home’s structures, walls, roof and additional structures like a deck or detached garage. Dwelling insurance typically covers perils listed in a home insurance policy. Buy enough dwelling coverage to protect against the following named perils:
- Fire or lightning
- Windstorm or hail
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or steam
- Sudden and accidental tearing, cracking, burning, or bulging
- Sudden and accidental damage due to short circuiting
- Volcanic Eruption
Even though the aforementioned perils are covered in most standard homeowners insurance policies, it’s a good idea to check yours to make sure none of these are in the list of exclusions but are on the list of covered perils.
Other Homeowners Insurance Coverages:
Most Americans have an HO-3 homeowners insurance policy, which covers the following
- Personal property coverage: Covers your personal belongings, such as furniture, appliances, clothing and electronics.
- Loss of use coverage: Pays for living expenses, such as hotel bills and meals, while your home is uninhabitable after a covered loss (e.g., your home is being rebuilt after a fire).
- Liability coverage: Pays for legal expenses and reimbursement when you can be held responsible for another person's injuries or property damages while they were on your property, including dog bites and more.
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What Is Not Covered By Dwelling Insurance?
Dwelling insurance doesn't cover damages from the following events:
- Sewer backups/Sump pump
- Damage from lack of regular maintenance
- Regular maintenance fixes
- Service line coverage
- Infestations (mold, bed bugs, etcetera)
- Detached garage*
- Above-ground swimming pool
- Playsets or trampolines
- Tiny homes
*May be covered by other structures coverage
You will have to purchase a separate policy for these perils. For instance, if you live in a flood-prone area, you can buy private flood coverage or one from the National Flood Insurance Program to cover flood damage.
If you live in a quake-prone location, you can get earthquake coverage. Although an HO-3 policy won't cover earthquake-related structural damage, it will pay for fires that result from the quake.
Service line coverage will cover water, gas and sewer lines, as well as internet cables and electrical wires.
How Much Dwelling Coverage Do I Need?
Carry enough dwelling coverage to repair or replace your home and attached structures if a covered hazard destroys them.
Your coverage value will differ from the value of your home. The insured value is what it will cost to rebuild your home. These factors will determine how much coverage you need:
- Your home's square footage
- The price of materials
- The labor for rebuilding your home
- Your home's custom features (your roof, flooring, light fixtures, renovations)
- Your home's style and upgrades or high-end finishes
- The age of your home
- Number of rooms
- Number of stories
You will also want to consider buying a replacement cost policy versus an actual cash value policy, especially if you don’t want to reach very deep into your own pocket. Either way, you will have to pay a deductible and there will be a limit to a payout if you file a claim.
Dwelling Insurance Limits and Deductibles
Dwelling insurance has limits and deductibles. The limit on your policy is the maximum amount your homeowners insurance policy will pay toward a covered loss. Your other structures coverage limit is usually about 10% of your dwelling coverage limit.
Most homeowners insurance policies have a minimum of $100,000 in liability coverage, but the average price of dwelling coverage is $300,000 to $500,000. So, if you have a dwelling coverage limit of $500,000, your other structures limit would be $50,000 (10%).
The deductible is the portion you'll pay out of pocket toward a claim your policy covers. It can be as low as $250 or as high as $1,000. The higher the deductible, the lower your monthly premium.
How Do I Determine Homeowners Insurance Limits?
An easy formula to determine what limits to set on your homeowners insurance policy is to multiply the square footage of your home (minus the land) by building costs per-square-foot. The total will vary according to location and inflation.
Condo Insurance: How It Differs From Homeowners Insurance
Also called an HO-6 policy, a condo policy is for homeowners who live in a condominium. It’s important to check the master policy to see what the homeowners association insurance policy covers. If you’re not required to take out a condo insurance policy by your lender, it may cover more of the dwelling than if you had to buy a policy.
Find out which type of policy you need by figuring out which of these two types of policies the homeowners association (HOA) has:
The All-In (All-Inclusive) Policy
This type of master policy covers all interior surfaces of the walls, floors and ceiling. It includes the attached fixtures, sinks and toilets. Coverage may not include upgrades to certain fixtures and flooring. You are responsible for insuring your personal belongings, furniture and clothing. (You’ll need more dwelling coverage for this type.)
Walls-In Insurance Policy
This type of master policy only covers the exterior frame of the unit inward but not covering fixtures within the unit. You are responsible for purchasing an HO-6 insurance for the inside of your dwelling, including the walls,upgrades to the flooring, your belongings and liability coverage. (You may need very little dwelling coverage and only for upgrades.)
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It’s important to understand whether or not you are responsible for rebuilding your home if something unforeseeable happens.If you own a house, buying enough dwelling coverage to be able to do so without paying for expenses out of pocket is important. It may also be wise to carry dwelling coverage as a condo owner if you’ve made upgrades to the floors and systems. Consider other structures, too, because coverage amounts to only 10% of the dwelling coverage you buy. This is important if you have attached structures on your land. Your best bet is to buy the coverage you need and at the lowest prices by comparing rates.
- Insurance Information Institute. "Are There Different Types of Policies?." Accessed February 2, 2023.
- Insurance Information Institute. "Coverage for Renting Out Your Home." Accessed February 2, 2023.
Insurance Information Institute. "How Much Homeowners Insurance Do I Need?." Accessed February 2, 2023.