What is Dwelling Insurance?

If you’ve recently purchased a home, you’re probably new the world of homeowners insurance. Although it’s not required by law, homeowners insurance can save you a lot of money over the long term.

If you’re in the process of shopping for homeowners insurance, you should understand the different components of your policy and know what each one covers. The biggest one to know is dwelling insurance because it’s one of the parts of your insurance policy that you’re most likely to use.

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    In this article, we’ll explain what exactly dwelling insurance covers, how much you need and how to save money on your premium.

    In this article

      What is dwelling insurance?

      Dwelling insurance is the portion of your homeowners insurance policy that protects the dwelling, meaning the physical structure of your home. If the exterior of your home were damaged or destroyed by a covered peril, the insurance company would help you pay for the repairs based on how much dwelling coverage you have.

      What does dwelling insurance cover?

      Most dwelling insurance policies cover the same basic perils, or qualifying events. According to the Insurance Information Institute (III), your dwelling insurance likely covers damage that results from:

      • Fire and smoke
      • Lightning
      • Extreme weather, like hail or windstorms
      • Explosions
      • Vandalism
      • Burglary
      • Damage from snow or ice
      • Falling objects
      • Damage from a car or aircraft

      Homeowners insurance policies vary based on the state or region, so check with your insurance provider to confirm the dwelling meaning according to them and what perils are covered under your policy.

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      What’s not covered?

      The list of common covered perils is pretty comprehensive, but it’s important to be aware of the situations that are not covered by your dwelling insurance.

      The most notable events not covered are floods and earthquakes. If you live in an area that is prone to flooding from hurricanes, or is within an earthquake zone, you can purchase a separate policy that specifically covers those events. Sewer backups are also not covered, but you can add-on coverage with a specific policy for that as well.

      Additionally, your dwelling insurance won’t cover basic maintenance for your home. The upkeep of your home is your responsibility, so it must be paid for out-of-pocket. If you find termite damage, mold, rusty pipes or general wear and tear, you won’t be able to file a claim to cover it.

      Lastly, dwelling coverage only pertains to the main physical structure of your home. Like we mentioned earlier, your attached garage is most likely included in that. Any detached structures you have on the property, like a shed in the backyard or a fence, probably won’t qualify for coverage. You’ll need to purchase a separate policy to cover damage for detached structures if you have any.

      How much coverage do I need?

      When it comes time to purchase homeowners insurance, the biggest question people have is how much coverage they need. To start, let’s look at the two main parts of your dwelling coverage: the coverage limit and deductible.

      Your coverage limit is the highest amount of money that the insurance company will give you for a covered loss. If you had a coverage limit of $100,000 and your home sustained $150,000 in damage, the insurer would pay $100,000. You would be responsible for $50,000.

      Your deductible is the amount of money you have to pay out-of-pocket before the insurance company will step in. If you had a $1,000 deductible and your home sustained $10,000 worth of damage, you would be responsible for paying $1,000. The insurance company would cover the remaining $9,000.

      As a rule of thumb, your dwelling coverage limit should be roughly what it would cost for you to rebuild your home in its current state. Keep in mind that your coverage might not be the actual market value of your home. To estimate the cost of rebuilding your home, III recommends multiplying the total square footage of your home by local, per-square-foot building costs. A realtor or local construction company can provide that information.

      As for your deductible, that depends on how much you can comfortably afford to pay out-of-pocket if you needed to repair your home. Maybe you can afford to put $2,000 towards the damages or maybe you can only afford $500. The lower your deductible, the higher your annual premium will be.

      How can you save money on dwelling insurance?

      Although homeowners insurance can be expensive depending on where you live, most insurance companies offer discounts that can help you save money on your annual premium. As you’re shopping, get quotes from multiple providers to make sure you’re getting the best rate.

      Most insurance providers offer savings for customers who have certain safety features or equipment in their home, like fire alarms and anti-theft systems. You’ll also get a deduction if you make minor home improvements that could strengthen the integrity of your home, like installing an impact-resistant roof. You can also expect to save money by bundling your insurance premiums, paying your policy in full every year and remaining claim-free. Most importantly, you can slash your premium by raising your credit score and increasing your deductible.

      Elizabeth Rivelli

      Contributing Writer

      Elizabeth is a contributor to The Simple Dollar, where she reviews insurance providers and policies. She has more than three years of experience writing for top online insurance and finance publications, including Bankrate, Coverage.com and Reviews.com.