If you are looking at homeowners insurance, it can be confusing to research and compare all the different types of coverage that are included in a given policy.
You will probably notice that the most costly component of your homeowners insurance is your dwelling coverage. You may wonder what exactly this is and why it is so expensive.
In this article, we will go into detail and look at exactly what dwelling coverage is, what it covers and under what circumstances, how much coverage your property needs, and how this coverage interfaces with other elements of your homeowners insurance.
What Is Dwelling Coverage?
Dwelling coverage is the part of your homeowners insurance that covers the physical structure of your home.
This includes the floors, walls, ceilings, and roof. Dwelling coverage also includes windows, doors, and other permanent fixtures, as well as permanently-attached appliances.
It specifically does not include the land on which your property is situated, or the contents of your home, which is covered under the personal property component of your insurance policy.
Dwellings coverage will also include secondary structures that are attached to your home, such as a garage or a deck.
However, this type of coverage specifically does not cover structures that are not attached to your home, such as a detached garage, shed, or fence. These can be covered by secondary structure coverage, which will be a different part of your policy.
The idea of dwelling coverage is that it will allow you to repair or rebuild your home in the event of a covered hazard.
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As with most insurance policies, not every possible eventuality is covered. So for example, if your home is destroyed by fire, your policy will pay out; if it is swallowed by an earthquake, you may not be covered.
Which exact hazards are covered varies depending on your policy. Types of hazards that are usually covered include:
- Lightning Strike
- Damaged caused by the weight of snow, sleet, or ice
- Falling objects
- Damage from aircraft
- Damage from a motor vehicle
Hazards that are commonly excluded from dwelling coverage include:
- Sewer backups
- Unresolved maintenance issues
You may be able to add riders to your policy that can cover these eventualities, but they tend to significantly push up price.
Worries about whether your dwelling coverage accounts for mold? Well, it depends on the source of the mold.
How Much Dwelling Coverage Do You Need?
This decision is between you and your insurer to determine exactly how much coverage is needed. You need to set an upper limit, which is the maximum amount of money that the insurance company will pay out for any eventuality.
Coverage significantly affects your premiums and deductibles, so it is a balancing act of getting the coverage that you need while maintaining premiums at a level that you can afford.
Ideally, you should have enough coverage that you are able to rebuild your house, in its current condition without changes, at current market rates.
The exact cost of doing so will depend on your home’s specific features and on where you live.
Some good advice is to research the average cost of new home construction per square foot in your area, and multiply that by the square footage of your home. Insurance during construction is something that should be known too.
To this, you should add the cost of key features such as cabinetry, flooring, built-in appliances, roofing, windows, and so forth.
In this way, dwelling coverage can be considered the same as replacement cost, and it is sometimes referred to as such.
How Does Dwelling Coverage Affect Other Elements Of Your Homeowners Insurance?
It is important to select an appropriate level of dwelling coverage, as the limits of many of the other elements of your homeowners insurance are often set by this number.
For example, coverage for other structures on your property, such as sheds and fencing, is typically capped at ten percent of your dwelling coverage.
Similarly, personal property coverage is usually capped at 50 to 75 percent of your dwelling coverage. This can be problematic for individuals who own a considerable number of expensive items, such as jewelry and art. Extra coverage can be purchased for these items, though you can expect it to increase your premiums significantly.
Loss of Use Coverage covers expenses if you are unable to live in your home for an extended period of time. This is usually capped at 20 to 30 percent of your dwelling coverage.
Homeowners insurance will also usually include liability and medical payment elements, in case someone is injured on your property. But unlike the other elements of homeowners insurance, these numbers are not linked to dwelling coverage.
What Other Factors Influence Homeowners Insurance Premiums?
While your dwelling coverage has a big impact on the cost of your home insurance premiums, it is not the only factor that insurers take into consideration, and there are a few things that you can do to reduce your premiums.
Security features such as alarm system, smoke detectors, deadbolt locks, and so forth can significantly lower the price of your homeowners insurance, as they may reduce the likelihood of theft of or damage to your property.
The location of your home can significantly influence your premiums. If you live in an area where crime rates are high, or natural disasters are frequent, you can expect to pay more. If you live close to local fire protection, your rates might drop, as you can expect an expedient response.
Your Credit Score
Most states use credit scores to help determine how much of a risk you are to insure. In the case of home insurance, insurers justify this by pointing out that people with poor credit scores are more likely to file various types of claims.
Owning A Pool Or Trampoline
These particular fun toys can push up your insurance premiums, as your home insurance will need to pay out if someone is injured while enjoying them.
If you need to reduce your homeowners insurance premiums, you also have the option to increase the level of your deductible, so that you need to pay more out of pocket before your insurance kicks in.
Bundling homeowners insurance with other types of insurance, such as auto insurance, can also result in significant discounts.
What Is The Difference Between A Dwelling Policy And Homeowners Policy?
Dwelling coverage is usually a component of homeowners insurance. Dwelling coverage covers the repair and rebuilding of the physical structure of your home. It is included with other types of coverage– for example, personal property– to create a homeowners insurance package.
Does Dwelling Coverage Include Land?
No, dwelling coverage does not include land; it only includes the physical structure of your home. It will also include additional structures that are attached to your home, such as an attached garage, but does not include detached structures, such as a shed or fencing.
Does Dwelling Coverage Include The Roof?
Yes, dwelling coverage includes your roof, as it is part of the physical structure of your home. It also includes flooring, window settings, doors, and so forth.
What Is The Average Cost Of Homeowners Insurance?
The average American pays $1,600 per year in home insurance premiums (2020). But this varies significantly depending on the state in which you live and the value of your home.
Can You Get Home And Auto Insurance As A Bundle?
Many insurers offer homeowners and car insurance as a bundle, and offer significant discounts for purchasing both policies together.
Is Condo Insurance The Same As Dwelling Insurance?
Your condo insurance policy will cover damage to the walls and interior of your condo unit, while your association’s insurance policy should cover other parts of the building such as the roof, elevator, public areas, and so forth.
In summary, dwelling coverage is the part of your homeowners insurance that covers the physical structure of your home. It will allow you to repair or rebuild your home in case of serious damage.
Dwelling coverage is usually the most expensive component of your homeowners insurance, and can have a significant impact on the overall cost of your insurance premiums.
Dwelling coverage can also limit other elements of your policy, as they are often restricted to a certain percentage of your dwelling coverage.
For this reason, when deciding how much dwelling coverage you need, it is important to determine how much coverage is right for you and for your property.
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