Dwelling Coverage: Protecting the Physical Structure of Your House From the Unexpected

With at least 80 million owner-occupied housing units in the U.S., homeowners insurance is one of the most burning topics for lucky dwellers and those looking for their first or next private house. 

While about 95% of the real estate owners have their dwelling covered, spending on average $100 a month – or $550 per unit annually – on their homeowners insurance, at least 5% of about 80 million homeowners remain uninsured, and even more of them do not fully understand their policy.

The devil is in the details when it comes to a homeowners insurance policy. You have to not only research the market through and through before taking action – dozens, if not hundreds, of insurers, all sounding like the butter wouldn’t melt in their mouths – but also understand what parts your homeowners policy encompasses and which part is responsible for what.

As for dwelling coverage, it is an essential part of any homeowners insurance policy. After all, it covers not only the physical structure of your building but also the physical structure of the adjacent buildings or structures (for example, a garage attached to your house, a porch that is part of the house, etc.). 

On top of that, dwelling coverage can be purchased separately from the homeowner’s insurance policy, meaning you don’t necessarily have to overpay for the coverage you don’t need, which might make sense if you own a house but don’t live there.

But let’s not get ahead of ourselves. To fully understand dwelling coverage in the context of homeowners insurance and how you can be the most effective, let’s first review the four specific parts of any homeowners insurance policy.

The Four Pillars of Your Policy: Coverage A, B, C, D

Perusing your insurance policy declarations page might not be the most enjoyable pastime, especially if you’re spending your free time on it. 

But no way around it, as the declarations page contains the rundown on the main points of your policy, which typically comprises four types of coverage:

• Coverage A: Dwelling. As said, dwelling coverage protects you from the financial losses caused by the damage to the physical structure of your home and the attached buildings. 

 

It is evident that your dwelling coverage refers to the dwelling property on your declarations page, but there might be nuances. If you’re not living at the insured property or lending it, it’s better to clarify with your agent whether your dwelling is covered as it should be.

• Coverage B: Detached Structures. You may or may not have outhouses, garages, fences, and other detached structures on your property. Whether you have these detached structures and want to insure them, you can include or exclude Coverage B from your homeowners insurance policy.

• Coverage C: Personal Property. While dwelling coverage only covers the frame of your building, Coverage C can help you protect jewelry, precious metals, money, and other belongings. 

But remember the following:

• The coverage limits may only apply to specific events.
• Some events may be excluded from the coverage.
• Some personal property may require itemization and other special procedures before it can be insured.

• Coverage D: Additional Living Expenses. In some situations, restoring your building may require you to leave it for some time. That, of course, will incur additional expenses – accommodation, public transport, food, etc. – which, however, will be reimbursed if you own Coverage D.

 

Dwelling insurance differs from homeowners insurance: while the latter encompasses a few types of coverage, the former is the exact type you need most. That said, in some cases, dwelling insurance can be the only insurance you want to have – for example, if you are only interested in covering the physical structure of your house.

Everything You Should Know About Dwelling Insurance Coverage

So, as being said, dwelling coverage – either as a part of homeowners insurance or as separate insurance – allows you to protect the frame of your home AND the attached structures (!) from the damage caused by various hazards. The hazards vary depending on the policy, but most policies include lightning strikes, fire, windstorms, theft, smoke, hail, vandalism, explosions, and damage caused by a motor vehicle or aircraft.

Note that all your attached structures – porch, deck, garage, etc. – will be protected by your dwelling coverage just as much as your main building is protected. At the same time, if your garage or shed is detached, it will not be covered.

The Parts of Your Home That Are Covered

In addition to bricks, wood, and concrete – the main elements of the structure of your home – your dwelling insurance covers the foundation, roof, chimney, in-ground pools, fixed inside fixtures like cabinets or flooring, and in-built appliances like, for example, a furnace.

On that note, depending on the amount of coverage you want to get, you can choose between three typical types of dwelling policies:

• HO-2 – protects your house from the perils listed in your home insurance policy (typically, 16 perils).
• HO-3 – protects your house from almost all potential perils, allowing more room for claims that HO-2 wouldn’t cover.
• HO-6 – a specific policy for condominiums, which covers just as many items as a typical homeowners policy and comes in two types, the so-called “All-Inclusive” and “Bare Walls.” The latter only covers the exterior of your condo, leaving the insides unprotected, while the former covers the exterior and the interior, including attached structures.

The Damage That Is Likely Not Covered by Your Dwelling Insurance

More often than not, the damage caused by earthquakes and floods and the damage caused by negligence or lack of maintenance will not be compensated. Therefore, consider buying a separate flood insurance policy if you want to protect your dwellings from a flood. The same goes for other specific cases not covered by your dwelling insurance.

The Two Types of Insurance That May Depend on Your Dwelling Coverage

When planning your homeowners insurance policy, you want to find the right balance between all its parts, from A to D, and the amount of your dwelling coverage can help you with that. The rule of thumb says that two things happen most of the time:

• Personal property coverage (Coverage C) amounts to 75% of your dwelling coverage.
• Additional living expenses (Coverage D) amount to about 25% of your dwelling coverage.

The given numbers, though, are not exact and may vary depending on the contents of your house and your lifestyle, routine, and other individual factors.

Here’s How Much of It You Need

Just like auto insurance, dwelling insurance has three significant components two proceed from premium, limit, and deductible.

• Premium is your monthly or annual payment.
• Limit is the maximum amount that you can be reimbursed.
• A deductible is how much you will have to pay before your insurer pays the rest.

 

When calculating the coverage, consider your home’s replacement cost in the first place. A wisely chosen dwelling coverage limit should equal the replacement cost of your dwelling so that you can rebuild your house without paying anything from your pocket. 

On top of that, you may opt for dwelling extension coverage, the type of endorsement that will allow you to get increased dwelling coverage – up to 50% of your standard dwelling coverage – at the expense of a higher premium.

Your insurance policy may also contain replacement cost coverage, covering the frame of your home and belongings. But then again, it is not the same as dwelling coverage, so it is wise to consult with your agent to determine the exact type and amount of coverage you need.