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Your homeowners insurance policy is actually in parts. What covers your home—not your belongings—is dwelling coverage. It will rebuild your home after a fire or other disaster, so it's important not to skimp on your dwelling coverage.
Did you know that your homeowners insurance policy is actually broken into several smaller parts? The section of your insurance policy that covers your actual home — not your television or refrigerator, but the floors, walls, and roof that make up your house — is referred to as your dwelling coverage.
This is the portion of your insurance policy that will rebuild your home if there is a fire or other disaster, so it is important not to skimp on your dwelling coverage.
What is the difference between dwelling coverage and homeowners insurance?
Your homeowners insurance is actually made up of several types of coverage that all come together to protect you in the event of a disaster. Whether you lost your home to a fire or a neighbor injured themselves falling through your deck, there is a section of your homeowners insurance that is designed to protect you in almost every situation. Your homeowners insurance will typically include:
Dwelling coverage is the largest part of your homeowners insurance policy and the rest of the coverages (except for liability) are determined based on the dwelling coverage limit you've chosen. For example, personal property coverage is usually set at 50% of your dwelling coverage limit, so if you have $150,000 in dwelling coverage your personal property coverage would have a maximum benefit of $75,000.
How much should dwelling coverage be for a house?
It is vital that you have enough dwelling coverage to rebuild your home, but how much will that cost? Dwelling coverage is usually the most expensive part of your homeowners insurance for a good reason — your home is almost always the most valuable thing you own.
Your dwelling coverage should always be enough to completely rebuild your home from the ground up, which does not include the cost of the land because the land is almost never affected by covered disasters such as fires or windstorms. This means that your dwelling coverage is not the same as the amount of your mortgage. In fact, the two aren't necessarily connected at all.
Because everyone's situation is different, there is no specific amount that dwelling coverage is "supposed" to cost. You need enough to cover the cost of replacing your home, which means you need to consider all of the details of your home. Do you have detailed crown moulding, wainscoting, or other decorative details that would need to be replaced if you suffered a total loss? You need to keep these things in mind when choosing a dwelling coverage limit.
Is dwelling coverage the same as replacement cost?
Dwelling coverage is, by definition, replacement cost insurance. What would it cost to replace your home if every inch of it were destroyed? That is how much dwelling coverage you need to have in your insurance policy.
Don't fool yourself into thinking you can lower your dwelling coverage to save money on your insurance. Most lenders require you to carry enough insurance to completely rebuild your home. In fact, there are many people who should consider increased dwelling coverage rather than lowering their limits.
Is there dwelling coverage for a condo?
Condo insurance is different from a typical homeowners insurance policy. Because the physical structure of your condo is owned and insured by an HOA master policy, dwelling coverage for people living in a condo is usually (but not always) much closer to renters insurance than it is a traditional homeowners insurance policy.
However, each condo situation is different, so you want to know what type of insurance policy your condo association has in place to figure out exactly what coverage you need. Your HOA may have one of three types of coverage, including:
Goosehead Insurance typically recommends a single entity or "walls-in" policy for condo policies, but every situation is unique. If you have questions about your condo insurance you can reach out to our experts for more information.
How is dwelling coverage calculated for homeowners insurance?
There are many factors you should consider when determining how much dwelling coverage you need, including:
All of these things will impact the amount of dwelling coverage you need to be fully protected. If you have questions or want someone to guide you through the process of determining the right amount of dwelling coverage you can always reach out to one of our experts here at Goosehead Insurance for assistance.
Article written by: Agent: Ashley Dolan
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