Dwelling Coverage in Your Home Insurance Policy

Image of a ladder in an unfinished room with a window

Your home works hard to keep you safe. It provides shelter from storms, a welcoming place to relax at the end of a long day and keeps you comfortable no matter the weather. But while your home is working hard for you, who’s working hard for your home?

A standard homeowners insurance policy provides complete protection for your home, the items inside and the liability of those who live there. The most significant portion of this coverage is your dwelling insurance. To help you learn the insurance lingo and make sure your home is properly protected, check out our guide to dwelling insurance coverage.

Key takeaways:

  • Dwelling coverage protects your home’s structure and is also known as Coverage A in your home insurance policy.
  • Your dwelling is generally covered under an open peril policy, meaning you’ll be protected from all perils that aren’t explicitly listed as excluded.
  • Dwelling coverage should provide you with enough coverage to completely rebuild your home if it’s destroyed from a covered peril.

What is dwelling coverage?

A portion of most home insurance types, dwelling coverage is often referred to as Coverage A in your home insurance policy and protects your home’s structure. This means that not only are your interior and exterior walls protected in the event of a storm or fire, but any structures attached to your home (such as a garage or porch) have coverage too.

What does dwelling insurance cover?

So what exactly is your home protected from by this coverage? As mentioned above, your dwelling coverage protects your home’s structure and any attached structures such as garages or rooftop solar panels. Your dwelling is generally covered under an open peril policy, meaning you’ll be protected from all perils that aren’t specifically listed as excluded. This means you’ll have coverage from standard perils such as:

  • Aircraft or vehicle damage
  • Explosions
  • Falling objects
  • Fire
  • Hail
  • Lighting
  • Smoke
  • Theft
  • Vandalism
  • Windstorms

Dwelling insurance will likely be the biggest portion of coverage in your home insurance policy, and for good reason. Your home is a huge investment, and making sure that you have the backup you need to pay for repairs is crucial to maintaining your financial health. Most other categories in your policy depend on how much dwelling coverage you have.

For example, many insurance agents recommend basing how much personal property and loss of use insurance you have off of your dwelling coverage. To make sure you have enough protection for your home contents, you should have personal property coverage that equals out to at least 50% of your dwelling coverage. And in case your home ever becomes uninhabitable, having your loss of use coverage equal out to at least 30% of your dwelling coverage is recommended.

What does dwelling insurance not cover?

While dwelling coverage is a big portion of your home insurance protection, it doesn’t cover everything. There are typically several exclusions listed in your coverage, such as catastrophes that require their own insurance rider. Some typical exclusions include:

  • Earthquakes
  • Floods
  • Government seizures
  • Mudslides
  • Ordinance updates
  • Sewer backups

If you want coverage for detached structures on your property — such as sheds, fences and carports — you can get protection for those through additional structures insurance. Other things that dwelling insurance doesn’t cover have their own insurance policies, such as loss of use coverage, equipment breakdown coverage and extended replacement cost.

How much dwelling coverage do I need?

Dwelling coverage should provide you with enough coverage to completely rebuild your home if it’s destroyed from a covered peril (and keep in mind that the market value of your house does not necessarily equal the cost to rebuild your house). But how much it costs to rebuild your home can vary greatly depending on your location, your home’s estimated value and the cost of building materials in your area. And if you make any upgrades to your home, that cost will likely grow.

It’s also important to determine how your replacement costs are reimbursed. If your replacement cost is under actual cash value (ACV), your home will be replaced at its current value, with depreciation included. Replacement cost value (RCV) will replace your home and it’s contents with similar items of the same value, without depreciation taken out.

How much it costs to rebuild your home can vary greatly depending on your location, your home’s estimated value and the cost of building materials in your area.

Once you’ve determined how much dwelling coverage you need, you’ll also need to decide your deductible amount. Your deductible is the amount of money you will be required to pay out of pocket before your insurance kicks in to cover the remaining costs. Typically, deductibles are chosen as a percentage of your total dwelling coverage. So if you have $300,000 in dwelling coverage and your deductible is 10%, you’ll be required to put down $30,000.

If you’re interested in keeping your yearly insurance premiums low, you can raise your deductible to help accomplish that. But you’ll need to have a nice cushion of savings to avoid a fire or other disaster from causing financial distress.

Dwelling coverage and other insurance types

Whether you just bought your first home, own a condo or rent out your property to tenants, it’s crucial you understand how your home’s structure is protected. Your dwelling coverage will change slightly depending on the type of home insurance you have. 

For example, if you have HO-6 insurance and are part of a condo association, your condo’s master policy may help cover external walls and other common areas. If this is the case, your dwelling insurance would only protect interior walls. Though no matter your policy type, making sure you have an adequate combination of dwelling, personal property, liability and additional structure insurance is the best way to achieve total home wellness.

Understanding every part of your policy is the first step to making sure you have the protection you need. The next step is making sure that you have an insurance company that really puts you first. If you find yourself ready for that next step, give us a call and we’ll walk you through the process of changing providers.