What is dwelling insurance?
Key takeaways
- The most common type of home insurance is an HO-3 policy, which covers the dwelling structures, other structures and your personal belongings.
- Flooding and earthquakes are not covered under dwelling insurance.
- Condos and mobile homes need special dwelling coverage.
In the event of a catastrophic incident like a fire or tornado, the dwelling coverage portion of your homeowners’ insurance policy helps you rebuild your home. This part of your coverage protects your home’s actual structure. If you imagine turning your home upside down and shaking it, dwelling insurance generally covers anything that would stay put. Meanwhile, personal property coverage protects anything that would shake loose.
Dwelling insurance will pay to repair damage on an open-perils basis, or otherwise for all perils not specifically excluded in your policy. Pay attention to policy limits, because they outline how the maximum amount your insurer is willing to pay out.
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What does dwelling insurance cover?
When it comes to homeowners insurance, your policy most likely includes multiple types of coverage. To help get a handle on the different coverage types, let’s look at an HO-3 policy, the most common type of homeowners policy. Standard HO-3 policies have six basic components:
- Dwelling coverage: Pays to repair or rebuild your home and attached structures. Installed fixtures such as attached appliances, kitchen counters and bathroom fixtures are also included under dwelling coverage — however, land is not.
- Other structures coverage: Pays to repair or rebuild any detached structures on your property, such as detached garages, sheds or gazebos.
- Personal property coverage: Pays to replace your personal belongings, which are usually items that are not attached to your home. This can include stand-alone appliances, electronics, furniture and clothing.
- Liability coverage: This coverage can pay for legal fees and expenses if someone is injured or their belongings are damaged on your property and you are found liable.
- Medical payments coverage: This coverage helps pay for guest injuries on your property for which you are not legally liable
- Additional living expenses coverage: Also called “loss of use,” this coverage pays for your costs of living in a hotel, meal expenses and more while your home is being repaired after a covered loss.
What perils does dwelling insurance cover?
So, what is dwelling coverage? It is the first of these six components and is also referred to as “Coverage A” within a home policy. In general, it will cover damage from any of these causes:
- Fire and smoke
- Lightning strikes
- Wind damage
- Hail
- Explosions
- Vandalism
- Theft
- Damage caused by the weight of snow, sleet or ice
- Falling objects
- Damage from an aircraft or auto
- Volcanic eruption
- Water damage caused by appliance overflow or heating/air conditioning malfunction
- Frozen plumbing/heat ducts/sprinkler system/appliance
It is important to note that different types of home insurance cover different causes of loss, called insurance perils. Reviewing your policy and talking with a company representative is the best way to know what coverage you have. Standard HO-3 policies include dwelling insurance with open perils coverage, meaning your dwelling is covered for anything not specifically excluded from the policy.
If you experience any of these covered losses, your dwelling coverage becomes essential. Dwelling coverage, meaning the portion of your policy that covers damage to your home, includes the foundation, frame, walls and roof. It also generally covers things built into your house, like cabinets, permanent air conditioner units, furnaces and water heaters if they are damaged or destroyed by a covered loss like a fire. Dwelling coverage also typically covers structures attached to the house, such as an attached garage or porch.
What dwelling insurance does not cover
Your dwelling insurance does not cover any perils specifically excluded from your home insurance policy. This includes:
Flooding
Flood damage coverage is not included in most standard homeowners insurance policies. With changing weather patterns generating more severe storms, areas of our country that have never flooded in the past may be more likely to do so now. You may want to consider purchasing a separate flood insurance policy to help cover flood losses should they occur. Flood insurance is available from the National Flood Insurance Program (NFIP) and through select private carriers.
Keep in mind this coverage gap is in reference to weather-related floods. If you experience water damage in your basement due to a broken pipe or other unexpected damage, your event may still be covered.
Earthquakes
Many areas of the U.S. experience earthquakes, especially along the West Coast. If you live in one of these areas or another part of the country where earth movement is common, you may want to consider adding earthquake coverage to your policy.
Damage from earthquakes can quickly add up. A quake can seriously damage your foundation, and even a minor tremor may cause cracks in walls and extensive property damage. Your HO-3 policy will cover fire damage caused by an earthquake, but structural damage is not covered.
If you live in an area where there is significant oil drilling, such as parts of Oklahoma, seismic activity may also be common and make the need for earthquake insurance more urgent.
Neglect/wear and tear
A home is a complex structure with different systems — plumbing, heating, electrical — all working together to keep you comfortable and safe. It is the homeowner’s responsibility to keep these systems running properly. You’ll likely need to be vigilant to problems, which could be anything from signs of termite infestation to a wet basement. If you fail to do so and your lack of regular maintenance results in property damage, your dwelling insurance will not cover it unless you have purchased additional coverage endorsements.
Sewer backup/sump pump damage
Sewer backup and sump pump damage coverage are typically not automatically covered by a standard home insurance policy. Sewer and drain line backup coverage, sometimes called water backup coverage, or sump pump damage coverage, is a common endorsement to add to homeowners insurance that provides coverage for your dwelling and personal property if they are damaged by a drain line backup. Backup losses commonly happen during heavy rains when a sump pump cannot keep up with the influx of water and overflows, spilling water into a basement or crawlspace. However, it is possible for sewer lines to back up anywhere in a home, including toilets, sinks and floor drains. A water backup endorsement must be added to a homeowners insurance policy to provide coverage for this type of loss.
Service line damage
Damage to your service line is another common policy exclusion for a standard homeowners insurance policy. Service line damage coverage protects you against losses relating to the various service lines running into your home. Each property insurer covers different service lines, but commonly covered ones include water, gas and sewer lines, as well as internet cables and electrical wires. This is a relatively new coverage in the insurance industry, and your particular carrier may not yet offer it. Talk to your insurance professional about the service line coverage options available to you.
How much dwelling coverage do I need?
Determining how much home insurance you need may seem daunting, but there are some simple steps you can take to determine a ballpark figure.
- Know the difference between market value and replacement value: How much you paid for your home isn’t necessarily how much you’ll insure it for. Home prices can be artificially high or low depending on factors like the home’s location or the state of the housing market. What you really want to know is your home’s replacement cost, which is how much it will cost to rebuild your home after a total loss.
- Factor in your home’s size: Bigger homes will likely need more coverage, since they typically cost more to rebuild than smaller homes. Similarly, homes on a finished basement likely need more dwelling coverage to account for the extra space.
- Consider your home’s features: Every home has its own set of features. Builder-grade homes, for example, will likely need less dwelling coverage than comparably-sized upgraded or custom homes with high-end finishes.
- Think about your home’s age: Older homes may be more expensive to repair or rebuild due to non-standard lumber sizes or outdated building techniques. Older homes are also more likely to have plumbing or electrical systems that are on the verge of needing replaced when you buy the home.
Although having an idea of how much dwelling coverage you need may be helpful while you are gathering quotes, each insurance company has its own replacement cost estimator that will help you determine your proper coverage amount. You can also speak with a licensed agent about any unique home aspects that might affect your coverage needs. Keep in mind that more dwelling coverage will usually result in a higher home insurance cost.
Types of dwelling coverage
When it comes to dwelling insurance, there are multiple different policy types. Some apply to homes, while others apply to condos and other property types. We’ve already touched on HO-3 policies, but there are a few other options out there depending on your home type and coverage needs.
Homeowners insurance dwelling coverage
Virtually all property insurance policies include dwelling coverage, including HO-1, HO-2, HO-3, HO-5 and HO-8 policies. That means that if you are buying home insurance, you are most likely getting dwelling insurance as well.
Some insurers will refer to your home insurance policy as hazard insurance. This is not a separate policy. Hazard insurance is a general term that may be used to mean homeowners insurance. It refers to the coverage for specific risks that you financially protect yourself against by purchasing your policy. Hazard insurance includes dwelling coverage, other structures coverage and personal property coverage.
Condo insurance dwelling coverage
HO-6 policies financially protect condominium owners. Here, dwelling coverage is a little complicated. Your HO-6 policy generally covers the interior of your property, your personal property and your liability needs. Your association’s primary policy should cover the bulk of the structure itself. However, each condo association has its own unique primary policy, which will influence how much dwelling coverage you need to purchase on your condo policy. Your association may cover nearly the entire structure of your condo, for example, which means you’d be able to purchase less dwelling insurance.
Rental property insurance dwelling coverage
If you own a rental property, it’s important to consider rental property insurance and understand how it works. Also known as a DP-3 policy type, this insurance policy includes dwelling coverage to cover the structure of your rental property in the event of a covered loss but also includes several coverage options not found in a standard HO-3.
Because landlords face different risks compared to homeowners, rental property insurance takes this into account with coverage options like wrongful eviction and loss of use. Additionally, because many cities and states have their own rental laws, it may be worthwhile to speak to a local insurance agent to learn more about rental properties in your area and what additional coverage choices they recommend.
Mobile and manufactured home insurance dwelling coverage
Home insurance for mobile and manufactured homes is covered under an HO-7 policy. This type of insurance is designed for sectional homes, trailers, RVs and modular homes. Notably, these policies are active when your home is stationary; damage that occurs while your home is in transit is typically not covered.
Like HO-3 insurance and other types of dwelling coverage, an HO-7 policy will reimburse you for a variety of covered perils. Mobile and manufactured home insurance will typically provide protection for your home’s structure and personal belongings, as well as coverage for personal liability and medical expenses.
Frequently asked questions
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The best home insurance company will depend on your unique situation. For example, someone who wants the cheapest home insurance may choose a different carrier than someone who is looking for highly robust coverage. Understanding your situation and shopping around could help you find a company that fits your needs.
Popular home insurance companies include Allstate, Amica and USAA. When comparing insurance policies, make sure to choose similar terms in each quote to give you a more accurate picture of how much you’re likely to pay for your desired coverage.
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Most insurance experts recommend carrying a home insurance policy, including dwelling coverage, if you own a home or condo. However, if you are a renter, you do not need to worry about covering the dwelling. In that case, your landlord is responsible for insuring your structure, but you may want to consider renters insurance for your personal belongings. If you own a condo, your condo association would be responsible for purchasing insurance for the structure of the building, the cost of which would likely be passed down to owners via condo association dues. The interior of your condo would be covered by your personal condo insurance, called an HO-6 policy.
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If you own a home that you rent out, you’ll likely still want an active insurance policy, including dwelling coverage. If you do not have a mortgage on the home, you won’t be required to purchase insurance, but it’s usually a good idea. If you don’t carry insurance, you’ll be responsible for damages to the home, as well as any liability claims and lawsuits, out of pocket. Because of this, most insurance professionals recommend that you buy coverage even if you own the home in full.
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Yes, several exclusions will apply to your standard dwelling coverage, some of which may require an additional policy endorsement if you want to purchase that type of coverage. Thoroughly reviewing your policy may help you understand what is covered and evaluate whether additional coverage is needed. Common exclusions include floods, earthquakes, damage from neglected maintenance and common wear and tear.
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Dwelling insurance typically includes coverage for damage caused by wildfires, as they are considered a covered peril under most standard homeowners insurance policies. This means that if your home sustains damage due to a wildfire, the costs to repair or rebuild the structure would generally be covered, up to your policy limits. However, it is important to read through your policy documents carefully as some home insurance companies exclude wildfire as a peril for homes in high-risk areas, like California. Some insurers have even begun to pause business in areas where wildfires are common.
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