With at least 80 million owner-occupied housing units in the U.S., homeowners insurance is one of the most burning topics for both the lucky dwellers and those looking for their first or next private house. And 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.
When it comes to homeowners insurance policy, the devil is in the details. Not only do you have to research the market through and through before taking action – there are dozens, if not hundreds, of insurers, all sounding like the butter wouldn’t melt in their mouths – but you also have to understand what parts your homeowners policy encompasses and which part is responsible for what.
Speaking of which, dwelling coverage is arguably the most essential part of any homeowners insurance policy, as 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 the part of the house, etc.). What’s more, 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, as well as understand how you can be the most effective with it, let’s first review the four typical parts of any homeowners insurance policy.
Perusing your insurance policy declarations page might not be the most enjoyable pastime – and especially so if you’re spending on 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:
Dwelling insurance differs from homeowners insurance: while the latter encompasses a few types of coverage, the former is the one exact type that you may need the 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.
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.
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:
More often than not, the damage caused by earthquakes, floods, as well as the damage caused by negligence or lack of maintenance will not be compensated. Therefore, if you want to protect your dwellings from, say, flood, you may consider buying a separate flood insurance policy. The same goes for other specific cases not covered by your dwelling insurance.
When you are 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 most of the time,
The given numbers, though, are not exact and may vary depending on the contents of your house, as well as your lifestyle, routine, and other individual factors.
Just like auto insurance, dwelling insurance has three major components two proceed from: premium, limit, and deductible.
When calculating the coverage, take into account the replacement cost of your home in the first place. A wisely chosen dwelling coverage limit should be equal to the replacement cost of your dwelling so that you could rebuild your house without paying anything from your pocket. On top of that, you may also opt for dwelling extension coverage, the type of endorsement that will allow you to get increased dwelling coverage – by up to 50% of your standard dwelling coverage – at the expense of a higher premium.
Your insurance policy may also contain replacement cost coverage, which covers both the frame of your home and your belongings. But then again, it is not the same as dwelling coverage, so it would only be wise to consult with your agent to determine the exact type and amount of coverage you need.
Oleksandr is an expert in deep research. He covers various insurance topics across verticals, adopting to every local law.