What is dwelling insurance?

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If you are a homeowner, you probably have dwelling insurance. It is part of most homeowners insurance policies — some would say the most important part. Dwelling insurance is the part of the policy that helps you pay to repair or rebuild your home (along with structures attached to your home, like a garage or porch) in the event of a covered loss.

If your dwelling (in other words, your home) gets destroyed by something your home insurance covers, like a fire, your dwelling coverage pays for the cost of rebuilding or repairing damage (up to your policy limits). Since your home is likely the most expensive thing you own, this is critical coverage.

What dwelling insurance covers

When it comes to home insurance, your policy most likely includes multiple sections of coverage. There is coverage to protect your personal belongings and coverage for the house itself, for example.

To help get a handle on the different coverage types, let’s look at an HO-3 policy, the most common type of homeowners policy. Each HO-3 home insurance policy has four basic components:

  • Coverage to repair or rebuild your house
  • Coverage for your personal belongings
  • Liability protection to cover if someone is injured or their belongings are damaged on your property
  • Additional living expenses to cover your costs of living in a hotel (and more) while your home is being repaired after a covered loss

So, what is dwelling insurance? It is the first of these four components and is also referred to as “Coverage A.” In general, it will cover damage from any of these causes:

  • Fire and smoke
  • Lightning strikes
  • Wind damage
  • Hail
  • Explosions
  • Vandalism
  • Theft
  • Damage caused by the weight of snow, sleet or ice
  • Falling objects
  • Damage from an aircraft or auto
  • Volcanic eruption
  • Water damage caused by appliance overflow or heating/AC malfunction
  • Frozen plumbing/heat ducts/sprinkler system/appliance

Check your policy to ensure that it covers these common disasters.

If you experience any of these covered losses, your dwelling policy can step in. Dwelling insurance covers damage to your home, including the foundation, frame, walls and roof. It also generally covers things that are built into your house, like cabinets and appliances like your furnace and water heater. It may also cover other structures that are attached to the house, such as an attached garage, deck or porch.

Structures that are not connected to your house, like a detached garage, driveway, fence, shed, gazebo or in-ground swimming pool are not likely to be included in your dwelling coverage. Other structures coverage can help you to cover costs if these structures are damaged by a covered peril. Generally, this coverage is 10% of the coverage on the dwelling itself. For example, if your dwelling coverage is for $250,000, your other structures coverage will be $25,000.

Although a detached structure like a garage may not be covered in your dwelling insurance, items within that garage would be covered by your personal property homeowners insurance, which covers your belongings no matter where they are.

What dwelling insurance does not cover

Not all disasters are covered by homeowners insurance dwelling coverage. For these perils, supplementary insurance may be available.

Flooding

Flood damage is not included in most homeowners insurance policies. If you live in a flood plain or near a body of water that is prone to overflow, you may want to consider flood insurance coverage. This coverage is available from the National Flood Insurance Program (NFIP) and through select private carriers.

Flood insurance may be advisable even if you don’t live in a flood-prone area. The Insurance Information Institute reports that 20% of flood claims come from those living in low to moderate flood risk areas. With changing weather patterns, areas of our country that have never flooded in the past are more likely to do so now.

Earthquakes

The top states for earthquakes in the U.S. are Alaska and California, followed by Nevada, Hawaii and Washington. If you live in one of these areas or another part of the country that is liable to damage from earth tremors, you may want to consider adding earthquake coverage to your policy.

Damage from earthquakes can quickly add up.. A quake can seriously damage your foundation, and even a minor tremor may cause cracks in walls and extensive property damage. Your HO-3 policy will cover fire damage following an earthquake, but structural damage is not covered.

If you live in an area where there is significant oil drilling, such as parts of Oklahoma, seismic activity may also be common and make the need for earthquake insurance more urgent.

Maintenance damage

A home is a complex structure with different systems — plumbing, heating, electrical — all working together to keep you comfortable and safe. It is your job to keep those systems running properly. You need to be vigilant in your attention to problems, which could be anything from signs of termite infestation to a wet basement. If you fail to do so and your lack of regular maintenance results in damage, your dwelling insurance may not cover it.

Sewer issues

Sewer and drain line backup coverage, sometimes called water backup coverage, is a common endorsement to add to homeowners insurance that adds coverage for your dwelling and personal property if they are damaged by a drain line backup. Backup losses commonly happen during heavy rains when a sump pump cannot keep up with the influx of water and overflows, spilling water into a basement or crawlspace. However, it is possible for sewer lines to back up anywhere in a home, including toilets, sinks and floor drains. The water backup endorsement must be added to a homeowners insurance policy to provide coverage for this type of loss.

Service line coverage

Service line coverage protects you against losses relating to the various service lines running into your home. Each company covers different service lines, but commonly covered ones include water and gas lines, internet cables and electrical wires. This is a relatively new coverage in the insurance industry and your particular company may not yet offer it. Talk to your agent about the service line coverage options available to you.

How much dwelling coverage do I need?

It may cost more than you realize to rebuild your home if it is destroyed or damaged. Your home’s assessed value is based on what someone might pay for your house on the market, but that number is not the same as replacement cost coverage (RCC). RCC is the actual costs you would incur to repair or rebuild your house with materials that are similar in kind and quality without deducting for depreciation.

To determine the RCC for your home, you’ll need to do some math: research what builders are charging in your area per square foot, and multiply that by the number of square feet in your house. Then consider details in your home: does it have hardwood floors? Gumwood trim? Antique light fixtures? A newly-renovated kitchen? All these add to the RCC value. Also add in the amount to replace your roof and the value of your exterior finish. Talk to your agent regarding your home’s replacement cost value. Most insurance companies have a tool that allows agents to calculate this value, which can be easier than calculating it by hand.

Additionally, some homeowners choose to add an eco-friendly materials endorsement to their home. Generally, greener materials cost more. If you know you would want to rebuild with eco-friendly materials, talk to your agent about adding this endorsement to increase your dwelling coverage.

Your final number may be more than the cash value or assessed value of your home, but it is the number you should use when you talk to your agent about dwelling coverage. Your goal is to be able to replace your home with a structure that is similar in size and design, or repair it in a way that is consistent with the style of the rest of the house.

If your home is older and includes period finishes that you would not want restored in the event of a loss, talk to your agent about functional replacement cost. This endorsement will lower your dwelling amount (and subsequently could make your premium lower) and any period finishes will be replaced with modern building materials. For example, plaster walls insured on a functional replacement cost basis will be repaired with drywall in the event of a covered loss.

Another reason to be generous with your dwelling coverage limits is that after a catastrophe that impacts multiple homes in an area (such as a hurricane or a wildfire), it is likely that contractors will be stretched thin. The cost per square foot to rebuild your house may be higher than it would be otherwise. It can pay to sign up for as much dwelling coverage as you can afford.

In short, the things that affect how much dwelling insurance you need include:

  • The cost to rebuild your home
  • The type of materials you would want to use in your rebuild
  • The likelihood that you’ll need your home rebuilt at the same time as multiple others in your community
  • How much you prioritize eco-friendliness

Types of dwelling coverage

When it comes to dwelling insurance, there are multiple different policy types. Some apply to homes, some apply to rentals and some apply to condos.

Homeowners insurance dwelling coverage

Virtually all home insurance policies include dwelling coverage, including HO-1, HO-2, HO-3, HO-5 and HO-8 policies. That means that if you are buying home insurance, you are most likely getting dwelling insurance as well.

Some insurers will refer to your home insurance policy as hazard insurance. This is not a separate policy. Hazard insurance is a general term that may be used to mean homeowners insurance. It refers to the coverage for specific risks that you protect yourself against by purchasing your policy. Hazard insurance includes dwelling coverage, other structures coverage and personal property coverage.

Condo insurance dwelling coverage

HO-6 policies protect condominium owners. Here, dwelling coverage is a little complicated. Your HO-6 policy covers your property and liability needs. Your association’s master policy should cover the bulk of the structure itself.

That said, you are responsible for the interior of your condo, and you will need dwelling insurance (which an HO-6 policy can include) to protect it. Often called walls-in coverage, this dwelling insurance can help to repair the parts of your condo for which you are responsible, like your flooring and built-in appliances.

Renters insurance dwelling coverage

This doesn’t exist. HO-4 policies — the policies that offer renters protection for their personal property and liability — don’t include dwelling coverage. When you rent, it is your landlord’s policy that insures your dwelling.

Finding the best renter’s insurance is not difficult, as many of the larger insurance companies, such as Erie Insurance and State Farm, offer it.

Frequently asked questions

What is the best home insurance company?

It depends on your specific needs, like how much dwelling coverage you require and your budget. Get quotes from some of the best home insurance companies to find the right policy for you and your home.

Does everyone need dwelling coverage?

If you own your dwelling, yes. But if you are a renter, you do not need to worry about it. In that case, your landlord is the one responsible for insuring your dwelling.

How do I get the right dwelling policy?

It is important to calculate how much dwelling coverage you need. Do the math to determine a rough estimate of the cost to rebuild your home with all the materials and finishes you’d want, and discuss that number with your agent, who can use your company’s replacement cost tool to double check your figure. Make sure you choose a dwelling policy with enough coverage to hit that number.

Written by
Kacie Goff
Personal Finance Contributor
Kacie Goff is a personal finance and insurance writer with over seven years of experience covering personal and commercial coverage options. She writes for Bankrate, The Simple Dollar, NextAdvisor, Varo Money, Coverage, Best Credit Cards and more. She's covered a broad range of policy types — including less-talked-about coverages like wrap insurance and E&O — and she specializes in auto, homeowners and life insurance.