Dwelling Insurance: What to Know
Dwelling insurance differs from a traditional home insurance policy, but a home policy also includes a dwelling coverage section. Both cover damage to the physical structure of a home.
Homeowners dwelling coverage: what it is and how it works
Dwelling coverage (also called Coverage A) is one of the most important parts of your home insurance policy. It protects the main structure of your home, along with anything attached to it, like a garage or porch.
In this guide, we’ll walk through how dwelling coverage works, what it includes, and how it differs from a separate policy type called a dwelling policy.
Your dwelling coverage limit is the maximum amount your insurer will pay to rebuild your home after a covered loss. Most policies use replacement cost value, which means depreciation isn’t factored in; you’ll usually get the full cost to rebuild.
For example, if your dwelling coverage limit is $200,000, that’s the most your insurer would pay to rebuild your home and any attached structures.
💡 Zebra Tip:
Dwelling coverage is part of your homeowners policy; it protects your main home (called Coverage A). A dwelling policy, on the other hand, is a separate policy often used for rental homes, vacation properties, or homes that aren’t your primary residence.
Other parts of a standard policy
To get a better sense of where dwelling insurance fits into your overall homeowners policy, it’s important to know the specific coverages that your home policy contains. Most home policies are broken down into six specific coverage types:
- Coverage A: Dwelling
- Coverage B: Other structures
- Coverage C: Personal property
- Coverage D: Loss of use
- Coverage E: Personal liability
- Coverage F: Medical payments to others
How to Read a Homeowners Insurance Policy | The Zebra
Homeowners insurance policy documents may seem intimidating, but we break it down so that you know exactly what your policy covers.
What does dwelling insurance cover?
Along with your home, dwelling coverage also applies to attached structures. For instance, if you have an attached garage, it too is covered, as is an attached fence. Detached garages or other stand-alone buildings, however, are covered as part of your other structures coverage.
The specific perils that your dwelling insurance covers are based on the homeowners policy type that you choose. One of the more common homeowners policies in the United States is what’s known as an HO-3 policy. It is what’s known as an open peril policy, meaning that it covers against most types of damage unless they are specifically excluded on your homeowners policy.
Other policy types, such as an HO-2 or HO-8, may only cover specifically listed perils.
It’s also important to note that insurers rarely cover damage related to floods or earthquakes. If you live in an area prone to either, you’ll need to look into flood insurance or earthquake coverage.
Looking for flood coverage? Get a quote from Neptune Flood Insurance.
Commonly excluded perils include:
- Freezing pipes and systems in vacant dwellings
- Damage to foundations or pavements from ice and water weight
- Theft from a dwelling under construction
- Vandalism to vacant dwellings
- Latent defects, corrosion, industrial smoke, pollution
- Settling, wear-and-tear
- Pets, other animals and pests
- Weather conditions that aggravate other excluded causes of loss
- Government and association actions
- Defective construction, design and maintenance
Don’t pay more than you need
How much dwelling coverage do I need?
One of the biggest factors in determining how much coverage you need is your home’s value. However, there are a number of other factors in play that could influence your home’s coverage limit. It’s likely that your insurance company will have its own calculation and will suggest a coverage level for your dwelling. Some may base this limit on your mortgage, but this isn’t always enough to fully replace your home. For this reason, it’s important to be informed so that you can get the appropriate amount of coverage for your needs.
Dwelling coverage limits are often calculated based on your house's square footage and local construction costs.
Other structures can also impact the amount you choose for your dwelling coverage. Other structures coverage is usually only a small percentage of your overall dwelling insurance, usually 10%. This means that, for a home with a $200,000 dwelling limit, all other structures on your property would only be covered up to $20,000. If you have a detached garage or guest house that would cost a significant amount to rebuild, you may want to increase your primary dwelling coverage to ensure it is properly covered.
Market value is simply what your home could sell for on the open market. But that’s not the same as what it would cost to rebuild your home.
In most cases, your home’s market value is higher than its replacement cost, especially if you live in a desirable area or near good schools. That’s because market value includes factors like location and land value, while replacement cost only covers the structure itself.
In other words, your land isn’t part of the rebuild cost, so your replacement cost will likely be lower than your home’s market value.
The cost of your coverage is determined by a number of factors, including personal factors such as your credit history and age, as well as non-personal factors such as the age of your home and ZIP code. Below, you’ll find an average annual cost for home coverage with the following dwelling policy limits.
| Dwelling Coverage Limit | Average Annual Premium |
|---|---|
| 100K | $1,159 |
| 200K | $1,680 |
| 300K | $2,263 |
| 400K | $2,863 |
| 500K | $3,491 |
| 600K | $4,110 |
Do I need dwelling coverage for a condo?
Due to the nature of most condominiums, insurance works a bit differently. In general, your condo policy will include coverage for damage to the interior of your home. It’s likely that your condo association will have a policy that covers the exterior of your building, as well as for shared spaces such as stairwells or walkways. The type of policy that they carry will affect what’s covered in your home:
If your condo association has a master policy with an “all-in” option, it may cover items that are built into your unit, including things like appliances, lighting fixtures, wiring and plumbing.
If your condo association has a “bare walls” policy, this will only cover the structure of the condo and common areas things that are collectively owned. Things like plumbing fixtures or appliances would not be covered, meaning that you would need to increase your dwelling coverage.
What is extended dwelling coverage?
The cost to rebuild your home can increase over time. Inflation can drive up the costs of building materials and labor costs. Also, certain events (natural disasters, such as hurricanes, tornadoes or wildfires) can drive up the costs of materials due to demand. As such, your current level of coverage may not be enough to fully cover the cost of rebuilding your home.
Many home policies offer what’s known as guaranteed replacement coverage. Essentially, this coverage will increase your dwelling coverage beyond your current limits in order to help cover any additional costs that come about during rebuilding. This type of coverage is a good idea for homeowners who plan to stay in their homes for a long time, especially if their home requires more expensive building materials or has special architectural features.
What Does Homeowners Insurance Cover? | The Zebra
What is covered by home insurance depends on the type of policy. Learn which policy is the most comprehensive to ensure you and your property are protected.
Dwelling policies: definitions and details
Sometimes a property doesn’t need a full homeowners insurance policy. A hunting cabin, for example, might require different coverage than your primary home. Similarly, a beachfront vacation home or a rental property might have its own insurance needs. In these instances, the best coverage option could be a dwelling policy, especially if the owner does not reside at the covered property.
A dwelling policy offers relatively flexible coverage. Dwelling insurance allows you to pick and choose the various coverages to apply to your property. A standard dwelling policy only covers the dwelling itself, with other coverages as optional add-ons. Liability coverage, for instance, doesn't come standard but can be added via an endorsement. Have a look at the information below to find out more about dwelling policies and whether or not they provide the coverage you need.
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How is a dwelling policy different from a homeowners policy?
A dwelling policy is entirely different from standard homeowners insurance. It is often used to cover a house or dwelling not occupied by its owner. Dwelling policies don’t go as far to cover you or your property as do typical homeowners policies, which have greater levels of built-in coverage. Dwelling insurance policies are typically designed for those who own properties other than where they live.
Dwelling policies may cover properties considered too risky for standard homeowners policies, which is one of the reasons they typically don't provide robust coverage. This form of coverage is not to be confused with the dwelling coverage that comes with a homeowners policy. The “dwelling” in a homeowners policy refers to the actual house or primary structure in which the owner lives.
The following structures are those most commonly insured via dwelling policy:
- Vacation homes
- Rental properties
- Older homes
- Certain mobile homes that are permanently located
- Dwellings currently under construction
Dwelling policy coverages
Many different coverages are available as part of a dwelling policy. While levels of coverage differ depending on the level of policy, many of these coverages must be added to the standard coverage:
- Coverage A (Dwelling): Covers the main dwelling, including attached garages or carports.
- Coverage B (Other Structures): Covers detached structures on the property.
- Coverage C (Personal Property): Covers personal belongings. If the covered dwelling is used as a rental, the tenant’s property is not covered.
- Coverage D (Fair Rental Value): Covers rental properties, ensuring a property owner receives compensation if a rental property is deemed unfit for normal use.
- Coverage E (Additional Living Expenses): Covers the cost of living expenses should your property become uninhabitable due to a covered loss. This coverage is not standard on the basic form (DP-1) but can be added as an endorsement.
What are the different types of dwelling policies?
Like homeowners insurance policies, dwelling policies come in different tiers of coverage. These include DP-1 (basic), DP-2 (broad) and DP-3 (special), with DP-3 providing the most coverage.
What does a DP-1 policy cover?
DP-1 is the term for a dwelling policy tier that covers your home and personal property against named perils. It covers the dwelling, other structures and personal property at actual cash value, which factors in depreciation when considering your claim payout. This means your payout will be less than you originally paid for the covered items.
| Insurance Terminology | Property Covered Against | Contents Covered Against |
|---|---|---|
| DP 1 - Basic Form | Named perils | Named perils |
A dwelling (DP-1) insurance policy is often called a named peril policy. A peril is a cause of loss, such as fire or wind. Each covered peril is specified in the policy documents. Below are the named perils covered by a DP-1 policy:
- Lightning
- Fire (fireplaces excluded)
- Internal explosions
Extended coverage — coverage for the following perils can be obtained at additional cost:
- Wind
- Civil Unrest
- Riot
- Hail
- Aircraft
- Vehicle
- Volcano
- Smoke*
- Explosion**
You can add vandalism and malicious mischief, which are often helpful for properties that sit vacant for many months of the year. It’s important to note, however, that this coverage doesn’t apply to any building that has been vacant for 60 consecutive days or more. This is different than unoccupied, with vacant being defined as “completely empty” of people and property.
*Smoke damage caused by fireplaces is not covered.
**This expands from “internal explosion” to cover external explosions as well.
What does a DP-2 policy cover?
A DP-2, though more robust than DP-1, is still fairly basic. It does, however, cover the dwelling and other structures at replacement cost, which reimburses you for the full amount required to replace an item at market value. Personal property coverage remains at actual cash value.
| Insurance Terminology | Property Covered Against | Contents Covered Against |
|---|---|---|
| DP 2 - Broad Form | Named perils | Named perils |
DP-2 covers all of the basic perils (including DP-1 extended coverage, vandalism and malicious mischief).
It also covers the following perils:
- Burglary damage
- Collapse
- Tearing asunder
- Damage from ice and snow
- Glass breakage
- Falling objects
- Frozen objects
- Accidental water discharge
- Electrical current
What does a DP-3 policy cover?
A DP-3 policy provides the most coverage of any dwelling policy. It is an open peril policy as far as the insured dwelling and other structures go. They will be covered against all perils except those explicitly listed in the policy. Your personal belongings are covered on a named peril basis and are covered against the same perils listed in the DP-2 policy. DP-3 insures the dwelling and other structures at replacement cost while personal belongings are covered at actual cash value.
| Insurance Terminology | Property Covered Against | Contents Covered Against |
|---|---|---|
| DP 3 - Special Form | Open perils | Named perils |
Dwelling policy endorsements
One of the attractive features of dwelling insurance policies is that they allow you to cherry-pick the types of coverage that you need. Along with the coverages listed above, here are some of the other endorsements that can be added:
- Dwelling under construction: If your dwelling is still being built, you can add this endorsement to protect it. Policy limits increase as the construction progresses.
- Mobile home: Coverage for a mobile home can be added to a dwelling policy. However, this endorsement stipulates that the mobile home be permanently located on a secure foundation.
- Automatic increase in insurance: This endorsement allows you to guard against inflation by increasing the amount of insurance coverage in annual increments.
- Theft coverage: This coverage doesn’t come standard in any dwelling policy, but can be added through endorsement. There are two different endorsements available, broad theft coverage which is used for the dwellings that an owner occupies, and limited theft coverage which is used for dwellings in which the owner does not live. Limits may apply to very valuable personal property. Find below some standard limits.
| Sub-limit | Property | Limitations |
|---|---|---|
| $200 | Money, gold, coins | |
| $1,500 | Jewelry, watches, furs | Theft-only |
| $1,500 | Watercraft, trailers | Theft-only |
| $2,500 | Firearms | |
| $2,500 | Silverware | |
| $2,500 | Business property | On-premises |
| $500 | Business property | Off-premises |
| Varies | Electronics |
What does a dwelling policy not cover?
The reach of your dwelling policy depends on the level of coverage you choose. If you choose to go with a DP-1 policy, for instance, your dwelling and personal belongings are left vulnerable to a number of uncovered perils. DP-2 and DP-3 policies add more expansive protections, though important coverages — such as liability and medical payments — would need to be added as endorsements to these policies.
However, certain perils are never covered by a standard homeowners insurance policy.
- Flood
- Earthquake
- Nuclear accidents
- War
- Government acts
- Intentional loss
Don’t pay more than you need
Dwelling insurance FAQs:
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