What is Dwelling Coverage? How Much Dwelling Coverage Do I Need?

How does dwelling coverage work? How much dwelling coverage do you need? Keep reading to find out everything you need to know about dwelling coverage.

What is Dwelling Coverage?

Dwelling coverage, or dwelling insurance, covers the physical structure of your home.

If your home is damaged by a covered event – like a fire or burst pipe – then your dwelling coverage covers the cost of restoring your property to pre-loss condition.

Dwelling coverage covers structural parts of your home – like your walls, roof, and attached garage. It also covers many installed components and appliances.

Dwelling coverage does not, however, cover your personal property (like your couch, TV, and other movable items), nor does it cover liability.

What Does Dwelling Coverage Cover?

Dwelling coverage covers the physical components of your home and any attached structures.

Specifically, dwelling coverage covers the cost of repairing or rebuilding physical components of your home, like:

• Walls
• Roof
• Structural components
• Installed fixtures (like cabinets and countertops)
• Permanently attached appliances (like stoves and water heaters)
• Other parts of the physical structure of your home
• Attached buildings (like an attached garage or sunroom)

If these components of your home are damaged by a covered event, then your insurance company should cover the cost of making you “whole” again after that event.

Some of the types of events covered by dwelling insurance include:

• Fire and smoke damage
• Lightning strikes
• Wind and hail damage (unless specifically excluded because of your location in a wind-prone area)
• Explosions
• Damage caused by snow, sleet, or ice
• Vandalism, theft, and other covered events

How Much Dwelling Coverage Do I Need?

Generally, you need enough dwelling coverage to cover the cost of rebuilding your home with similar materials.

If your home was destroyed today and you needed to rebuild it, how much would it cost? That’s the amount of dwelling coverage you should carry.

Typically, your homeowners insurance company calculates dwelling coverage for you. When you buy a house, your insurance company considers the size of the house, the location of the house, and the cost of building a house in your area.

Once your dwelling coverage is set, this is the maximum amount your insurance company will pay towards a covered loss. For example, If you have $300,000 of dwelling coverage and your house burns to the ground, then your insurance will pay you $300,000 (minus your deductible). In theory, this covers the cost of rebuilding your home.

What Dwelling Coverage Doesn’t Cover

Dwelling coverage is the most important part of a homeowners insurance policy, but it doesn’t cover everything.

Some of the notable exceptions to dwelling coverage include:

• Flooding
• Earthquakes
• Sewer backups
• Wear and tear
• Damage caused by maintenance issues
• Other exclusions (say, windstorm insurance if you live in a coastal area)

Does Dwelling Insurance Cover Detached Structures?

If you have a detached structure, then dwelling coverage is unlikely to cover that structure by default.

Detached structures could include:

• Detached garages
• Detached sheds
• Other structures not physically attached to your home

Typically, you need to buy other structures coverage to cover these structures. Your insurer may charge an extra amount to extend dwelling coverage to these detached structures.

Some insurers use a percentage system to cover detached structures. If you have $300,000 of dwelling coverage for your home, for example, then you may have up to 10% coverage ($30,000 of coverage) for detached structures, if you choose to add other structures coverage to your policy.

How Dwelling Coverage Limits & Deductibles Work

When making a dwelling coverage insurance claim, you need to pay your deductible. Depending on the claim, you may also need to consider dwelling coverage insurance limits.

Here’s what you need to know about dwelling coverage limits and deductibles:

• Dwelling coverage policies, like all insurance policies, have a specific coverage limit.
• The limit is the maximum amount your insurer will pay towards a covered loss.
• When filing a dwelling coverage claim, you’ll need to pay a deductible. A typical dwelling coverage deductible is $2,500 to $10,000 per incident.
• If a fire burns your home to the ground and you had $350,000 of dwelling coverage and a $5,000 deductible, then your insurer may pay you $345,000 to cover the cost of rebuilding your home, minus your deductible.

Homeowners Insurance vs. Dwelling Coverage

Some use homeowners insurance and dwelling coverage interchangeably. Technically, they’re two different things:

• Homeowners insurance is an insurance product typically consisting of multiple insurance coverages, including dwelling coverage (to protect the physical structure of your property), personal property coverage (to protect your possessions), and liability coverage (to cover injuries and property damage linked to your property).
• Dwelling coverage is one part of a standard homeowners insurance policy. It covers the physical structure of your home, including your walls, roof, and other structures.

Types of Dwelling Coverage Policies

Insurers offer three broad types of dwelling coverage policies, including:

• DP-1
• DP-2
• DP-3

DP-1 policies are affordable but cover less than the other two policies. Here’s how they work:

DP-1: DP-1 insurance covers the actual cash value of your dwelling, which is the cost of your property minus depreciation. A DP-1 policy also does not include additional living expense coverage by default, and it may have more exclusions than a DP-2 policy.

DP-2: DP-2 insurance covers a similar scope of losses to a DP-1 policy, but it compensates you based on replacement cost instead of actual cash value. Some DP-2 policies also cover losses a DP-1 policy would not – like sudden water damage, smoke damage, burglary damage, and other damages excluded from a DP-1 policy.

DP-3: DP-3 is the broadest possible type of dwelling coverage. It covers losses on an “open peril” basis. That means your policy covers everything except losses specifically excluded. You’re also compensated based on actual cash value. This is the most expensive type of dwelling coverage but it covers the broadest range of items.

Other FAQs on Dwelling Coverage

Our experts get plenty of questions on dwelling coverage and how it works. Here are other answers to some of our most frequently asked questions about dwelling coverage.

Q: What is extended dwelling coverage?

A: Extended dwelling coverage covers losses exceeding your current dwelling coverage limits. Some insurers let you pay extra for extended dwelling coverage.

Q: How much is my dwelling coverage deductible?

A: A typical dwelling coverage deductible is between $2,500 and $10,000 per claim.

Q: What is a dwelling fire policy?

A: A dwelling fire policy covers properties that aren’t your primary residence. It can include secondary residences, vacation homes, cabins, cottages, investment and rental properties, or vacant homes.

Q: What’s the difference between dwelling coverage and home insurance?

A: Dwelling coverage covers the physical structure of your home, including the roof and walls, while home insurance covers multiple parts of your home – from the structure itself to liability to personal possessions within the home.

Q: How much dwelling coverage do I need?

A: Typically, insurers set a minimum dwelling coverage limit for you based on the cost of repairing or rebuilding your home in a total loss. If you have a mortgage, you need enough dwelling coverage to cover the estimated cost of rebuilding your home in a total loss.

Final Word

Dwelling coverage is a critical part of homeowners insurance. It covers everything from your walls and roof to your kitchen countertops and water heater.

Check your homeowners insurance policy to verify your dwelling coverage has the right limits.

For any dwelling coverage questions – or dwelling coverage disputes – contact ClaimsMate for a no-cost consultation.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.