When you buy a homeowner’s insurance policy, one of the most important parts of your protection is something called dwelling coverage. But what is dwelling coverage in home insurance, and why is it so important?
In simple terms, dwelling coverage is the part of your policy that protects the physical structure of your home, such as the roof, walls, and foundation. If a covered event damages your house, dwelling coverage helps pay to repair or rebuild it.
Below, we’ll explain in greater detail what dwelling coverage includes, common exclusions to watch for, how to calculate the correct coverage limit, why it matters to have the right amount of dwelling insurance, and more.
What Dwelling Coverage Includes
What is dwelling coverage in homeowner’s insurance? Think of it as protection for everything that makes up your home’s structure. Let’s run through what it generally covers in and around your home.
Home’s Structure
This covers your home structure, such as the foundation, roof, walls, floors, and windows. If a covered event damages part or all of your house, your dwelling coverage helps cover repair costs.
Attached Structures
Dwelling coverage usually extends to attached structures, like a garage, deck, or porch. These are considered part of the home, not separate buildings. Detached structures, such as a shed or fence, are normally covered under a different section of your home policy.
Built-In Systems & Fixtures
Your dwelling policy also covers installed fixtures and permanently attached appliances. This includes your plumbing, electrical wiring, heating and cooling systems, and even built-in cabinets. Basically, if it’s permanently attached to your home structure, it’s likely part of your dwelling insurance coverage.
For a full overview of what’s typically included in a home policy, see our guide on what homeowner’s insurance covers.
Common Exclusions To Be Aware Of
Dwelling insurance has fairly broad coverage, but it doesn’t cover everything. Knowing all your policy’s exclusions is key to avoiding surprises when filing an insurance claim.
Typical dwelling policy exclusions include:
- Flood damage: To cover against a flood, you generally need a separate flood insurance policy.
- Earthquake damage: Much like flood damage, you’ll need a separate earthquake insurance policy if you want protection against these damages.
- Wear and tear: Of course, no insurance policy will cover against the normal aging of your roof or plumbing.
- Neglect or poor maintenance: Damage caused by you, including lack of upkeep, is not something any insurance policy will cover.
Every insurance company sets its own rules, so review your homeowner’s insurance policy carefully to understand exactly what is and isn’t included.
How To Calculate the Right Coverage Limit
Your coverage limit should be high enough to rebuild your home completely if it’s destroyed. That’s different from your home’s market value, which includes land costs.
Some tips to help you calculate the correct limit are:
- Estimate replacement cost: Determine the cost to rebuild your house today, including today’s construction prices, as these can fluctuate greatly, which can impact your ability to rebuild.
- Include upgrades: Don’t forget custom features like hardwood floors, high-end countertops, or specialty roofing. You want to rebuild your home exactly as it was when it was damaged.
Replacement Cost vs Actual Cash Value
- Replacement cost: Pays the full amount to rebuild your home, without subtracting depreciation.
- Actual cash value: Accounts for depreciation and age, often resulting in the insurer paying less than the amount needed to repair or replace your home fully.
Most homeowners prefer replacement cost because it offers more complete protection. For more details on the pricing of these two policy types, review this guide to homeowner’s insurance costs.
Why Having the Right Dwelling Coverage Matters
If you’re underinsured, you could face huge out-of-pocket costs after a disaster. That’s why setting the right dwelling coverage limit matters. A replacement cost policy is superior for two key reasons:
- The 80% rule: Many insurers require that you carry at least 80% of your home’s replacement cost. If you don’t, your insurance claim may be reduced by a proportionate amount. For example, say your home is worth $100,000, and you only have $60,000 in coverage (60%), and then you put in a $5,000 claim for covered damages. The insurer may only pay out $3,000, which is 60% of the $5,000 claim.
- Inflation protection: The cost to rebuild homes can rise quickly. Having coverage tied to replacement cost ensures you’re not left short because of rising prices.
The right homeowner’s insurance policy doesn’t just protect your house — it protects your financial future.
Get a Personalized Home Insurance Quote Today
With a firm understanding of what is dwelling insurance coverage, it’s now time to choose the right dwelling insurance coverage, and comparing options helps you find the best fit. No two homeowners have identical coverage needs, as they vary based on home size, construction type, and local risks.
On top of differing coverage needs, home insurance options vary a lot by location and home profile. The best way to get the right protection at the right price is to compare personalized quotes.
Get a home insurance quote today with EverQuote and see how much you can save on your dwelling coverage.