What Is 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.
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.
