Dwelling Coverage ExplainedDwelling coverage, often known as ‘Coverage A’ in a standard homeowners insurance policy, primarily focuses on the protection of the physical structure of your home. Here’s everything you need to know to ensure your home is appropriately shielded from potential financial hardships.
What is Dwelling Coverage?Dwelling coverage provides financial protection against damages to the physical structure of a home. This includes walls, ceilings, floors, built-in appliances, and other structural components. If an insured peril like a fire or windstorm damages your home, dwelling coverage can help cover the repair or rebuilding costs.
What Does It Cover?While specific coverage can vary based on your policy and provider, typical inclusions are:
- Structural damage (due to fires, hurricanes, lightning, hail, etc.)
- Roof replacements or repairs
- Damaged flooring, walls, or ceilings
- Attached structures like garages or decks
- Built-in appliances
What It Doesn’t CoverThere are also some exclusions:
- Damages from floods (requires separate flood insurance)
- Wear and tear due to age
- Earthquake damage (usually requires earthquake insurance)
- Intentional damage
How Is Dwelling Coverage Amount Determined?It’s essential to have enough coverage to rebuild your home completely in case of total loss. This amount is generally based on:
- Current construction costs in your area
- The size and type of your home
- The materials used in your home’s construction
Replacement Cost vs. Actual Cash ValueWhen selecting a dwelling coverage policy, homeowners can usually choose between replacement cost or actual cash value:
- Replacement Cost: Provides the amount necessary to rebuild or repair your home with materials of similar kind and quality, without deducting for depreciation.
- Actual Cash Value: Covers the amount to rebuild or repair your home after depreciation. This means if your 10-year-old roof is damaged, you’ll receive the value of a 10-year-old roof, not a brand-new one.
How to Choose the Right Coverage AmountTo determine the appropriate dwelling coverage:
- Get a home appraisal or estimate on rebuilding costs.
- Adjust for any home improvements.
- Periodically review your policy, especially after significant home renovations.
Factors Affecting PremiumsSeveral factors can influence the cost of dwelling coverage:
- Location of the property
- Age and condition of the home
- The home’s construction type
- The chosen deductible
- Replacement cost value
Dwelling Coverage (Coverage A) is the part of a homeowners insurance policy that covers the cost to repair or rebuild your home if it is damaged by a covered peril, such as fire, wind, hail, or other specified risks. It includes the structure of the home, as well as any attached structures, such as a garage or deck.
The amount of dwelling coverage you need depends on the cost to rebuild your home, not its market value. You should have enough coverage to rebuild your home at current construction costs. A local builder or a home insurance agent can help you estimate this amount.
No, personal property is covered under a separate part of your homeowners insurance policy, typically known as Personal Property Coverage or Coverage C.
While dwelling coverage is not required by law, it is typically required by mortgage lenders as a condition of the loan. If you own your home outright, dwelling coverage is highly recommended to protect your investment.
The deductible is the amount you agree to pay out of pocket before your insurance coverage kicks in. For example, if you have a $1,000 deductible and your home sustains $5,000 in covered damage, you would pay $1,000, and your insurance would pay the remaining $4,000.
Coverage for other structures on your property, such as a detached garage or a fence, is typically provided by Other Structures Coverage (Coverage B), not Dwelling Coverage.
If your home is damaged, you should contact your insurance company as soon as possible to report the damage. They will guide you through the claims process, which typically involves an inspection of the damage, an estimate of repair costs, and payment of your claim, minus your deductible.
Yes, you can request to increase your dwelling coverage if you believe you need more protection. Keep in mind that this may increase your premium.
The amount of dwelling coverage you choose, along with other factors such as your home’s location, construction type, and safety features, will affect your insurance premium. Generally, more coverage will result in a higher premium.