What Is Dwelling Coverage and Is It a Policy You Need?

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. 

On This Page

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  What Is Dwelling Coverage?

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  What Does Dwelling Insurance Cover?

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  What Is Not Covered By Dwelling Insurance?

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  Understanding Different Types of Dwelling Insurance Policies

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  Dwelling Coverage Types

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  How Much Dwelling Coverage Do I Need?

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  Dwelling Insurance Limits and Deductibles

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  How Do I Determine Homeowners Insurance Limits?

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  Condo Insurance: How It Differs From Homeowners Insurance

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  Dwelling Coverage FAQs

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  Sources

What Is Dwelling Coverage?

Dwelling coverage is a specialized form of property insurance tailored for property owners who don't reside in their buildings full-time. Unlike standard homeowners insurance, which is ideal for those who live in their homes year-round, dwelling insurance caters to unique needs that arise from properties being vacant or used differently.

Who Needs Dwelling Coverage?

This type of policy is particularly useful for:

• Vacation Homes: If you have a getaway spot that remains unused for parts of the year, dwelling insurance can address the specific risks involved.

• Hunting Cabins: Remote properties that aren't occupied regularly can be insured against potential damages unique to their location and usage.

• Investment Properties: Buildings acquired for rental income or appreciation don't always fit the typical homeowner's insurance model.

• Homes Under Construction: Properties still being built face different kinds of risks, making dwelling insurance more suitable.

• Landlords with Limited Tenants: If you manage a rental property with four or fewer tenants, this policy provides tailored protection while addressing landlord-specific concerns.

Dwelling Coverage Key Features

A dwelling insurance policy often includes coverage for risks that aren't typically covered under standard home insurance. It provides a safety net for property owners whose buildings require a different level of care and attention due to their unique circumstances.

Overall, if you own a property that isn't your primary place of residence, dwelling insurance offers vital coverage to protect against various risks that arise from being unoccupied or used for specialized purposes.

What Does Dwelling Insurance Cover?

Dwelling insurance covers your home’s structures, including walls, roof, and additional structures like a deck or detached garage. It typically covers perils listed in a home insurance policy. It’s important to buy enough dwelling coverage to protect against these named perils:

• Fire or lightning
• Windstorm or hail
• Explosion
• Riots
• Aircraft
• Vehicles
• Smoke
• Vandalism
• Theft
• Falling objects
• Weight of ice, snow, or sleet
• Accidental discharge or overflow of water or steam
• Sudden and accidental tearing, cracking, burning, or bulging
• Freezing
• Sudden and accidental damage due to short circuiting
• Volcanic Eruption

Dwelling policies, often referred to as DP-1, DP-2, or DP-3, offer a structured approach similar to standard home insurance policies. These policies include comprehensive coverage types that work together to safeguard your property against unexpected perils.

Dwelling coverage pays to rebuild or repair damage to your home's physical structure and additional structures.

Core Coverage Types

• Dwelling (Coverage A): This replaces or repairs the building’s physical structure, encompassing walls, floors, foundation, roof, and any attached structures.

• Other Structures (Coverage B): It covers detached structures on the property, such as gazebos or sheds.

• Personal Property (Coverage C): This provides coverage for the insured's personal belongings.

• Fair Rental Value (Coverage D): If the property is rented and a covered loss makes it uninhabitable, this coverage helps compensate for lost rental income.

• Additional Living Expenses (Coverage E): If the property is owner-occupied and rendered unsafe to live in due to a covered peril, this helps with hotel, restaurant, and related expenses. Note that this is not automatically included in DP-1 policies.

Even though the aforementioned perils are covered in most standard homeowners insurance policies, it’s a good idea to check yours to ensure none of these perils are excluded. Understanding the specific coverages and variations in dwelling policies can help you better protect your home and finances in the event of a loss.

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What Is Not Covered By Dwelling Insurance?

Dwelling insurance doesn't cover damages from the following events:

• Flooding
• Earthquakes
• 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
• Fencing
• Playsets or trampolines
• Tiny homes
• Shed*
• Treehouses

*May be covered by other structures coverage

Understanding Different Types of Dwelling Insurance Policies

When it comes to protecting buildings that you don't live in, such as rental properties or unoccupied homes, dwelling insurance policies are the way to go. Each policy type offers distinct levels of protection.

Dwelling Coverage Types

1. DP-1 Policy:
   DP-1 is the most basic form of coverage. It provides essential protection but is limited in scope. Typically, it covers specific perils such as fire and vandalism. It's an affordable option, making it suitable for those who want coverage without breaking the bank.

2. DP-2 Policy:
   The DP-2 policy enhances the coverage offered by a DP-1 plan. It includes protection against additional risks, like windstorms and hail, beyond the basic perils covered by DP-1. This mid-tier policy strikes a balance between cost and scope of coverage, catering to property owners seeking moderate risk protection.

3. DP-3 Policy:
   At the top tier, DP-3 policies offer the most comprehensive coverage, shielding your property against a broad range of unforeseen events. Unlike the named-peril basis of DP-1 and DP-2, DP-3 operates on an open peril basis, meaning it covers all perils except those specifically excluded in the policy. While this is a costlier option, it provides the maximum peace of mind for property owners.

Choosing the right type of dwelling insurance policy involves considering your property needs and budget, ensuring you’re adequately protected against potential risks.

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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Carry enough dwelling coverage to repair or replace your home and attached structures if a covered hazard destroys them.

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.

Sources

• 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.