All You Need to Know about Dwelling Insurance
In the event of a catastrophic incident such as a fire or tornado, the dwelling coverage portion of your homeowners’ insurance policy assists in rebuilding your home. This coverage protects the actual structure of your home. To visualize it, imagine turning your home upside down and shaking it; dwelling insurance generally covers anything that would remain fixed. On the other hand, personal property coverage protects items that would shake loose.
Dwelling insurance covers repairs on an open-perils basis, meaning it pays for damages from all perils not explicitly excluded in your policy. It is crucial to pay attention to policy limits, as they specify the maximum amount your insurer is willing to pay out.
What does dwelling insurance cover?
When it comes to homeowners insurance, your policy likely includes several types of coverage. To understand the different coverage types, let’s examine 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. This includes installed fixtures such as attached appliances, kitchen counters, and bathroom fixtures. However, it does not cover the land.
- 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, typically items not attached to your home. This can include stand-alone appliances, electronics, furniture, and clothing.
- Liability Coverage: Covers legal fees and expenses if someone is injured or their belongings are damaged on your property and you are found liable.
- Medical Payments 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 living costs, such as hotel stays and meals, while your home is being repaired after a covered loss.
What perils does dwelling insurance cover?
Dwelling coverage, also known as “Coverage A” in a homeowners policy, is the first of the six essential components of an HO-3 policy. It generally covers damage to your home from various causes, including:
- 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 automobile
- Volcanic eruption
- Water damage caused by appliance overflow or HVAC malfunction
- Frozen plumbing, heat ducts, sprinkler systems, or appliances
It’s important to note that different types of home insurance cover different causes of loss, known as insurance perils. Reviewing your policy and discussing it with a company representative is the best way to understand your specific coverage. Standard HO-3 policies include dwelling insurance with open perils coverage, meaning your dwelling is covered for any loss not specifically excluded from the policy.
If you experience any of these covered losses, dwelling coverage becomes essential. It includes the foundation, frame, walls, and roof of your home. It also generally covers built-in features like cabinets, permanent air conditioner units, furnaces, and water heaters if they are damaged or destroyed by a covered peril. Additionally, dwelling coverage typically includes attached structures such as garages or porches.
What dwelling insurance does not cover
Your dwelling insurance does not cover any perils specifically excluded from your homeowners insurance policy. These exclusions include:
Flooding
Flood damage is not included in most standard homeowners insurance policies. With changing weather patterns causing more severe storms, even areas that have never experienced flooding before may now be at risk. Therefore, you may want to consider purchasing a separate flood insurance policy to help cover potential flood losses. Flood insurance is available through the National Flood Insurance Program (NFIP) and select private carriers.
It’s important to note that this coverage gap pertains to weather-related floods. Water damage from incidents like a broken pipe or other unexpected events may still be covered under your standard homeowners insurance policy.
Earthquakes
Many areas of the U.S., particularly along the West Coast, are prone to earthquakes. If you live in one of these regions 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 escalate. A quake can severely damage your foundation, and even a minor tremor can cause cracks in walls and extensive property damage. While your HO-3 policy covers fire damage resulting from an earthquake, it does not cover structural damage.
Additionally, if you live in an area with significant oil drilling, such as parts of Oklahoma, seismic activity may also be common, making earthquake insurance even more essential.
Neglect/wear and tear
A home is a complex structure with various systems—plumbing, heating, electrical—all working together to ensure your comfort and safety. As a homeowner, it’s your responsibility to maintain these systems properly. This requires vigilance for potential issues, such as signs of termite infestation or a wet basement. If you neglect regular maintenance and it results in property damage, your dwelling insurance will not cover the repairs unless you have purchased additional coverage endorsements.
Sewer backup/sump pump damage
Sewer backup and sump pump damage are typically not covered by a standard home insurance policy. To protect against these risks, homeowners can add a common endorsement for sewer and drain line backup coverage, sometimes called water backup coverage, or sump pump damage coverage. This endorsement covers damage to your dwelling and personal property caused by a drain line backup. Such backups often occur during heavy rains when a sump pump can’t handle the excess water, leading to overflows into basements or crawlspaces. Sewer lines can also back up elsewhere in the home, including toilets, sinks, and floor drains. To ensure coverage for these types of losses, a water backup endorsement must be added to your homeowners insurance policy.
Service line damage
Damage to your service lines is another common exclusion in a standard homeowners insurance policy. Service line damage coverage protects against losses related to the various service lines running into your home. The specific lines covered can vary by insurer but typically include water, gas, and sewer lines, as well as internet cables and electrical wires. This coverage is relatively new in the insurance industry, and your provider may not yet offer it. Consult with 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 might seem daunting, but you can simplify the process with these steps:
- Understand Market Value vs. Replacement Value: The price you paid for your home isn’t necessarily the amount you should insure it for. Market prices can fluctuate due to factors like location and the housing market’s condition. Instead, focus on the replacement cost, which is the amount needed to rebuild your home after a total loss.
- Consider Your Home’s Size: Larger homes typically require more coverage since they cost more to rebuild than smaller homes. Homes with finished basements also need additional dwelling coverage to account for the extra space.
- Evaluate Your Home’s Features: The specifics of your home matter. Builder-grade homes generally require less dwelling coverage than similarly sized homes with high-end finishes or custom features.
- 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. Additionally, they are more likely to have aging plumbing or electrical systems that might need replacing soon after purchase.
While it’s useful to have an estimate of your dwelling coverage needs when gathering quotes, each insurance company has its own replacement cost estimator to determine the proper coverage amount. Discussing unique aspects of your home with a licensed agent can also ensure you get accurate coverage. Remember, more dwelling coverage usually means a higher home insurance cost.
Types of dwelling coverage
When it comes to dwelling insurance, various policy types cater to different property types. While we’ve discussed HO-3 policies for homes, there are other options available depending on your property type and coverage requirements.
Homeowners insurance dwelling coverage
Nearly all property insurance policies encompass dwelling coverage, including HO-1, HO-2, HO-3, HO-5, and HO-8 policies. Therefore, when purchasing home insurance, you’re likely acquiring dwelling insurance simultaneously.
Certain insurers might label your home insurance policy as hazard insurance, although it’s not a distinct policy. Hazard insurance is a broad term often used interchangeably with homeowners insurance, referring to coverage against specific risks. This encompasses dwelling coverage, alongside other structures coverage and personal property coverage.
Condo insurance dwelling coverage
HO-6 policies provide financial protection for condominium owners. However, dwelling coverage within these policies can be a bit intricate. Typically, your HO-6 policy covers the interior of your property, your personal belongings, and your liability requirements. The primary policy of your condominium association should primarily cover the structure itself. However, each condo association’s primary policy varies, affecting the amount of dwelling coverage you need to buy. For instance, if your association covers most of the condo structure, you may require less dwelling insurance.
Rental property insurance dwelling coverage
For rental property owners, it’s crucial to consider rental property insurance and grasp its functionality. Also referred to as a DP-3 policy type, this insurance incorporates dwelling coverage to safeguard the structure of your rental property against covered losses. Unlike a standard HO-3 policy, it also offers several coverage options tailored to the unique risks faced by landlords.
Given that landlords encounter distinct risks compared to homeowners, rental property insurance includes coverage options such as wrongful eviction and loss of use. Moreover, since rental laws vary among cities and states, consulting a local insurance agent can be beneficial to understand more about rental properties in your area and the additional coverage options they recommend.
Mobile and manufactured home insurance dwelling coverage
Home insurance for mobile and manufactured homes falls under an HO-7 policy, specifically tailored for sectional homes, trailers, RVs, and modular homes. It’s essential to note that these policies are effective when your home is stationary; damages that occur while your home is in transit are usually not covered.
Similar to HO-3 insurance and other forms of dwelling coverage, an HO-7 policy will compensate you for various covered perils. Typically, mobile and manufactured home insurance offers protection for your home’s structure and personal belongings, along with coverage for personal liability and medical expenses.