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What Is Dwelling Insurance Coverage?

When you think about homeowners insurance, you probably think first about dwelling coverage, even if you don’t know it. This is the portion of your policy that protects your house. In your home insurance policy, you’ll find this info in Section I listed as Coverage A. This is the amount your policy will pay to rebuild or repair your home after a covered peril. 

Make sure you have the right amount listed in Coverage A to fully protect you when you need it most. This guide walks you through the details of dwelling coverage so you can make an educated decision about the amount of coverage you need. 

How does dwelling coverage work?

Your dwelling coverage applies whenever your home is damaged or destroyed by a covered peril. After a disaster like a fire or a tree falling on your house, you submit a claim to your home insurance provider. After reviewing your claim and potentially sending an appraiser to your home to assess the damage, the provider will cover the cost of repairs. 

That check has a cap on it, though. Specifically, your home insurance provider won’t pay  more than the amount of dwelling coverage listed in the Coverage A section of your policy. Usually, you and your insurance provider work together to agree on this amount based on how much it would cost to fully rebuild your house with current construction material and labor prices. You can also increase your coverage as needed.

What does dwelling insurance cover?

Dwelling insurance coverage protects you against any perils listed in your home insurance policy. You have the choice of what kind of policy to get.

HO-1 home insurance

Even the most basic type of home insurance, HO-1 or basic form coverage, protects you against:

  • Fire and smoke
  • Lightning
  • Windstorms
  • Explosions
  • Hail
  • Theft
  • Vandalism
  • Riots and civil unrest
  • Damage from vehicles and aircrafts
  • Volcanic eruption

Most people choose either an HO-2 or an HO-3 policy, though, for the added protection they offer. 

HO-2 home insurance

HO-2 policies cover everything HO-1 policies do, plus:

  • Damage caused by the weight of snow, ice or sleet
  • Falling objects
  • Damage caused by frozen household systems
  • Sudden, accidental problems with your pipes
  • Overflow or discharge of water or steam
  • Sudden, accidental damage caused by electrical currents

HO-2 policies also extend to the personal property you store in your home and cover your and your family’s liability if you cause bodily injury or property damage up to your policy limits.

HO-3 home insurance

Many homeowners choose this type of coverage because it offers broad protection. With an HO-3 policy, you get protection not against the things specifically listed in your policy, but against everything except what’s specifically listed in the exclusions portion of your policy. 

Don’t assume that an HO-3 policy gives you complete coverage, though. Read your exclusions and you’ll most likely see you’re not protected against floods and earthquakes, for example. Your exclusions might also depend on where you’re living. If you have a high risk for specific natural disasters, your insurer may limit their protection in those areas. 

What does dwelling coverage protect me from?

The specific dwelling insurance coverage protection offered by your policy depends on the type of policy you choose. Review your policy to understand your specific coverage. Even with an HO-1 policy, though, you can rest easy knowing that you’re protected against fires, theft, vandalism, civil unrest and a car driving into your living room. 

Dwelling insurance coverage generally won’t protect you against:

  • Floods
  • Earthquakes, sinkholes and other earth movements
  • Mold damage
  • Pest or animal infestations
  • Water damage
  • Damage resulting from neglected maintenance

Read through your policy so you can have clarity about where your dwelling coverage protects you — and where it doesn’t.

How much dwelling insurance do I need?

Determining the right dwelling insurance coverage amount doesn’t have to be a headache. Use this quick two-step process.

Step 1: Figure out your replacement cost value

While it’s tempting to look at the actual cash value (ACV) of your home and assume that its market price right now will cover the cost to rebuild, don’t. Rebuilding your home with similar materials and the same quality of labor might cost more than buying your home on the market.

Skip ACV and instead calculate the replacement cost value (RCV), or the cost to rebuild your home with today’s material and labor costs. You can do a fairly simple calculation to figure this out. HomeAdvisor estimates that in 2020, it costs about $150 per square foot to build new. Multiply your square footage by $150 to get a rough replacement cost value estimate.

Of course, labor and material costs vary by location. Do some research to find estimates for your specific area, and you’ll be able to get a more accurate idea of your replacement cost value.  

Step 2: Consider additional protection 

You may want more coverage than the amount it would likely cost to rebuild. Unexpected expenses often arise during construction. You might need to make changes to your house to bring it up to code. You might also want to adjust the material you use (e.g., choose more eco-conscious materials). Fortunately, you have a couple of options for increasing your dwelling coverage policy limit.

Extended replacement cost

This policy option adds between 20 and 50 percent to your replacement cost value. With this extra bump, you can do more during your rebuild without out-of-pocket expense or stress about unexpected costs. Be advised, though, that choosing extended replacement cost will increase the cost of your home insurance policy. 

Guaranteed replacement cost

If you want to rest easy, choose guaranteed replacement cost. This coverage pays for the full cost of rebuilding your home just like it was before the covered peril, even if it’s well above your replacement cost value. Again, though, you’ll pay more for your home insurance if you choose this option.

What can I get dwelling insurance for?

Obviously, homeowners choose dwelling insurance to protect their houses — and their investment in them. But they’re not the only ones who can benefit from this coverage. Condo owners and landlords can (and should) get condo or rental dwelling insurance to protect the buildings they own.

Renters insurance doesn’t include dwelling insurance. Instead, it’s designed to cover the tenant’s belongings and liability. While the landlord’s insurance pays to repair or rebuild the structure of the rental property after a covered peril, the renter’s policy pays to help them replace any of their personal property that was damaged in the peril.

The takeaway

Your dwelling insurance coverage is one of the most — if not the most — important pieces of your homeowners insurance policy. For the full protection you need after a disaster, make sure you have a sufficient amount of dwelling coverage in place and are covered against the right perils.

Kacie Goff

Kacie Goff is an insurance writer for Coverage.com. She loves taking complex concepts and distilling them down to make it easier for people to understand their coverage options. Over the last five years, she’s written about personal and commercial coverage for Bankrate, Freshome, The Simple Dollar, local insurance providers and more.

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