What is Dwelling Coverage?
Everything you need to know about dwelling coverage: what it protects, coverage limits, and exclusions.
- What does dwelling insurance cover?
- What is not covered under a dwelling policy?
- How much dwelling coverage do you need?
- What does dwelling coverage cost?
- Dwelling coverage limits and deductibles
- How is dwelling coverage different from home insurance?
- Other coverages dependent upon your dwelling coverage
- Dwelling coverage FAQs
Dwelling coverage, also known as dwelling insurance, is the part of your homeowners insurance that covers the physical structure of your home. This applies to homeowners insurance, if you own a condo, your dwelling coverage works differently and typically covers only your unit’s interior.
If disaster strikes, dwelling coverage helps pay to repair or rebuild your home to its original condition.
TL;DR
- Dwelling coverage protects your home’s structure from disasters like fire, wind, and vandalism
- You need enough to rebuild your home at today’s costs, not what you paid or its market value
- Excludes floods, earthquakes, wear and tear, and pest damage, these need separate coverage
- Costs 70-80% of your total homeowners insurance premium
What does dwelling insurance cover?
For homeowners, dwelling coverage usually protects your house and attached structures (like your garage) from covered perils like fire, windstorms, vandalism, and theft. Some policies cover any losses to the dwelling not specifically excluded by the policy (called “open perils” coverage), while others only cover losses from perils specifically listed in your policy.
Dwelling insurance covers four main things:
| What’s covered | Examples |
|---|---|
| Your house’s structure | Walls, roof, floors, built-in cabinets |
| Attached structures | Attached garage, screened porch, deck |
| Built-in systems | Plumbing, electrical, heating/AC |
| Permanent fixtures | Built-in appliances, fireplace, built-in shelving |
Covered perils (the bad things that can happen to your home) typically include:
- Fire and smoke damage
- Windstorms and hail
- Vandalism and theft
- Lightning strikes
- Weight of snow or ice
- Falling objects
Your homeowners insurance policy lists exactly what’s covered, so check your coverage documents for details.
What is not covered under a dwelling policy?
Understanding what’s not covered (called exclusions in insurance-speak) is important for any homeowner:
| Not covered | What this means |
|---|---|
| Floods | Water damage from outside sources |
| Earthquakes | Ground movement damage |
| Wear and tear | Normal aging and maintenance |
| Pest damage | Insects or animal damage |
| Intentional damage | Damage you cause on purpose |
These exclusions are standard across most insurance coverage options, which is why additional coverage like flood insurance or earthquake insurance may be necessary depending on your location. Exclusions will vary by policy so it is important to read policy documents to understand any additional exclusions that may apply.
How much dwelling coverage do you need?
You need enough dwelling coverage to rebuild your home from scratch. That’s called reconstruction cost: what it would cost to rebuild today, not what you paid for it.
This matters because if your home is destroyed, your insurance company will reimburse you based on rebuilding costs, not what you paid or what it’s worth today.
Consider factors like:
- Local construction costs
- Your home’s square footage and materials
- Special features or custom work
- Current labor and material prices in your area
There are also all of the other coverages (Personal Liability, Loss of Use, etc.) to take into account as well.
It’s important to remember that your home’s reconstruction cost (what it would cost to rebuild your home) is different from your home’s appraised value (an estimate of how much it could sell for on the open market). This value may also fluctuate over time along with labor and materials costs in your area.
How much dwelling coverage cost?
Dwelling coverage typically represents 70-80% of your total homeowners insurance premium. The cost depends on several factors, which may include things like:
Cost factors:
- Your home’s replacement value
- Location and local construction costs
- Age and condition of your home
- Coverage limits and deductible chosen
- Local weather risks
Average cost expectations:
Based on national data, here’s what you can expect to pay annually for dwelling coverage:
| Dwelling coverage amount | Average annual cost |
|---|---|
| $200,000 | $1,450 |
| $350,000 | $2,151 |
| $500,000 | $2,891 |
| $1,000,000 | $5,287 |
Keep in mind these are national averages. Your actual costs will vary significantly based on your location, home features, and which insurer you choose. A home in tornado-prone Oklahoma will cost more to insure than the same house in Vermont, for example.
The takeaway? The more your home is worth, the more you’ll pay to protect it.
Dwelling coverage limits and deductibles
When choosing dwelling insurance, you’ll need to make two important financial decisions that directly affect both your protection and your premium costs.
Your coverage limits determine how much protection you have:
- Full replacement cost: Pays to rebuild with new materials (recommended)
- Actual cash value: Pays what your home is worth after wear and tear (cheaper premiums, but less protection)
At Lemonade, dwelling coverage limits range from $125,000 to $1.5 million, depending on your state, allowing you to match your coverage to your home’s actual replacement cost.
Your deductible is the amount you pay before insurance kicks in. Think of it as your financial commitment to each claim. Higher deductibles mean lower monthly costs. Why? You’re promising to pay for smaller repairs yourself, so your insurance company charges you less.
Most dwelling coverage deductibles range from $1,000 to $5,000 for standard perils like fire or theft, depending on the state. Some states use percentage-based deductibles for wind and hail damage, typically 1% to 5% of your total dwelling coverage amount.
Why higher deductibles mean lower premiums: When you choose a $2,500 deductible instead of $500, you’re telling your insurance company you’ll handle the first $2,500 of repairs yourself.
For instance, let’s say you have $300,000 in dwelling coverage with a $1,000 deductible, and storm damage costs $25,000 to repair. You’d pay the first $1,000, and your insurance company covers the remaining $24,000.
How is dwelling coverage different from home insurance?
Dwelling coverage isn’t the same as homeowners insurance, it’s just one part of it. Think of homeowners insurance as a package, and dwelling coverage as one part of that package.
A complete home insurance policy includes:
- Dwelling coverage (protects the structure of your home)
- Personal property coverage (protects your belongings)
- Personal liability coverage (protects you from lawsuits)
- Loss of use coverage (pays for temporary living expenses)
- Other structures coverage (protects detached structures like a detached garage or shed)
Dwelling coverage alone:
- Only protects your home’s physical structure
- Doesn’t cover your belongings, other structures, liability, or temporary living expenses
- Is typically the largest portion of your homeowners premium
When you might see dwelling-only policies:
- Rental properties (landlords don’t need personal property coverage for tenant belongings)
- Vacant homes
- Properties being renovated
Other coverages dependent upon your dwelling coverage
Your dwelling coverage amount serves as the foundation for calculating your other insurance protections, ensuring all your coverage levels work together proportionally.
Other structures
Other structures’ coverage typically equals 10% of your dwelling coverage amount. This protects detached structures on your property like garages, sheds, fences, or that backyard deck. So with $300,000 in dwelling coverage, you’d get $30,000 to rebuild or repair these structures.
Personal property coverage (aka contents insurance)
Most insurance experts recommend choosing 50-75% of your dwelling coverage amount for personal property protection. So if you have $300,000 in dwelling coverage, consider $150,000-$225,000 to protect your belongings. If you own valuable items like fine art, expensive jewelry, or collections, you might need additional coverage options beyond these standard limits.
Loss of use coverage
Loss of use coverage (also called additional living expenses) typically runs 20-30% of your dwelling coverage amount. This covers the extra money you’ll spend living somewhere else while repairs happen, hotels, eating out more, storage units.
You should realistically consider your lifestyle when choosing this amount. Would you stay in expensive hotels or with family? Do you typically cook at home or eat out? These factors help determine whether you need coverage on the higher or lower end of that range.
Before we go…
Dwelling coverage is your financial safety net when disaster strikes. The key is getting enough coverage to rebuild your home without overpaying for protection you don’t need.
Most homeowners need dwelling insurance equal to their home’s replacement cost, not its market value or what they paid for it. Factor in your local construction costs, home features, and don’t forget about the other coverage types that depend on your dwelling amount.
Ready to find the right dwelling coverage for your home? Get your free homeowners insurance quote in minutes.
Dwelling coverage FAQs
Can you lower dwelling coverage?
Possibly, but your mortgage lender usually requires insurance coverage equal to your loan amount or replacement cost. Many carriers require homes to be insured at 100% of replacement cost. Lowering it means you’ll pay out-of-pocket if rebuild costs exceed your coverage.
How is the dwelling insurance coverage limit calculated?
Typically when calculating the coverage limit, insurance companies look at your home’s size and local building costs, then add extra for upgrades like hardwood floors. A 2,000 sq ft home in an area with $150/sq ft construction costs would need around $300,000 coverage.
How is dwelling coverage determined?
Your insurance company estimates rebuild costs based on your home’s size, materials, features, and local construction costs. You can request adjustments if you think the amount is too high or low.
Why is my dwelling coverage so high?
Rebuild costs are often higher than your home’s market value due to expensive materials and labor. So when you’re filling out a quote, it’s important that you provide accurate information about your home. The details you share, like square footage, number of bedrooms, and any upgrades help us calculate the right coverage amount for you.
A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them. Coverage and discounts may not be available in all states.
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