Dwelling Insurance

This is the main event of your home insurance policy – the portion of your coverage that protects the actual structure of your home.

What Is Coverage A – Dwelling Insurance?

Also known as main structure coverage, dwelling coverage is the part of your home insurance that pays to repair or rebuild your home’s physical structure (think: walls, floors, roof, windows, support beams, and foundation) when a covered incident damages it.

What Does Dwelling Insurance Cover?

Standard HO3 dwelling coverage typically covers all sources of damage to the home except those the policy lists as exclusions. That means it can cover most common events, such as:

  • Fire or smoke
  • Hurricane
  • Hail
  • Lightning
  • Explosion
  • Water damage caused by burst pipes or overflowed household appliances
  • Theft
  • Vandalism
  • Falling objects
  • Weight of ice, snow, or sleet
  • Impact by aircraft or land vehicle
  • Riots

Different perils may have different limits (the dollar amount of coverage available), so read your policy! If you have questions about what your dwelling coverage can and can’t do, just give us a call.

What Dwelling Insurance Doesn’t Cover

Remember how we mentioned some events are excluded from coverage? Most of the time, dwelling insurance doesn’t cover damaged caused by:

  • Earthquakes / earth movement
  • Floods
  • General wear and tear
  • Lack of regular and proper maintenance
  • Infestations
  • War and/or nuclear hazards
  • Intentional loss
  • Smog, rust, corrosion, and rot
  • Settling, expansion, shrinking, or bulging

In some cases, like floods and earthquakes, you can simply add on flood or earthquake coverage to address the risk.

Not All Dwelling Insurance Is Equal

If you make a claim for damage to your home itself, the type of payout you’ll receive depends on whether you have actual cash value coverage or replacement cost coverage.

Actual cash value coverage is typically cheaper, but it can also leave you high and dry when you need to repair your home. By contrast, replacement cost dwelling coverage pays out what it costs to rebuild your home and replace its elements at the current market rate.

Here’s a better look at each type of coverage.

Actual Cash Value Dwelling Coverage

This type of coverage takes depreciation into account when calculating your payout. While depreciation calculations may vary from insurer to insurer, a common method is to estimate the lifespan of the home’s components and subtract a certain percentage for each year since the purchase.

Take your roof, for example. Let’s say it has a 15-year lifespan and it’s 12 years old when you file a claim for its repair. If it’s $10,000 for a new roof, an insurer may use this formula to figure out the payout for your claim:

R × (E - C) / E = ACV

R = replacement cost of the item E = expected life (lifespan) of the item C = current life of the item ACV = actual cash value

Not a math person? Here’s what it comes to:

$10,000 x (15-12) / 15 = $2,000

The short answer is you will be paying the majority of the cost for that new roof if you have ACV coverage. With this calculation, your payout would be a mere $2,000.

You end up saving some money with this option, but the payouts may pale in comparison to what you need to actually repair your home.

Replacement Cost Dwelling Coverage

This type of coverage can cover the cost to replace or rebuild your home with materials of similar kind and quality. So if you need to make a claim, you get the payout you need to repair or rebuild your home to its former glory.

To estimate your home’s replacement cost, you multiply the building cost per square foot in your area by your home’s square footage. You’d also need to factor in other costs, such as flooring, fixtures and appliances, your roof, and exterior features.

If that sounds like a lot of legwork, don’t sweat it. We can calculate your home’s replacement cost for you.

How Much Main Structure Insurance Do I Need?

The amount of dwelling coverage you need depends on the cost to rebuild your home (including labor and materials) if the house is completely destroyed by a covered event. Our application automatically calculates and recommends the replacement cost for you, though you can adjust this amount.

Just remember not to underinsure your home. Your insurance is only worthwhile if you can depend on it in times of upheaval.

To get started, give us a call at 855-717-0022, or get a quote here.

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