Understanding Dwelling Insurance

February 26, 2018


You need homeowner’s insurance when you have a mortgage – it’s required. It protects you in the event of loss or damage. On your homeowner’s insurance, you’ll see something called dwelling insurance. Just what does that mean? We discuss it below.

Dwelling Insurance Defined

Even though dwelling insurance makes it sound like only the physical structure is covered, it covers everything. It’s coverage for disasters including fire, storm damage, hail damage, and theft. It covers not only the physical structure of your home, but everything that makes up a home. Think of things like the flooring, carpeting, fireplace, and roofing. Everything that makes your house a house is covered.

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Dwelling coverage also covers any attached parts of your home. If you have an attached garage, it’s part of the coverage. It also covers things like porches and decks. Things that are excluded from this coverage include any type of fence, antenna, or satellite, no matter where they are on the house.

What Dwelling Insurance Does not Cover

We talked about what dwelling insurance covers. Now let’s look at what it does not cover. Generally, it does not cover earthquake damage or anything to do with water, such as flood damage, or sewer backup. It also does not cover any damages that occur as a result of a lack of maintenance on the house on your part.

For example, let’s say your water heater breaks. It has a leak. The water causes damage on your floor. You will be responsible for the cost of the new water heater as that’s normal maintenance. However, your dwelling insurance may cover the cost of replacing the damaged flooring.

How Much Protection Should you Get?

Your mortgage company requires you to have enough coverage to rebuild your home in the event that it was completely destroyed, say in a fire. However, it’s recommended that you get replacement cost coverage, rather than actual cost coverage.

Replacement cost coverage ensures that you have enough money to rebuild your home at the time it needs to be rebuilt. Let’s say your house burns down 10 years from now. Chances are that construction costs 10 years from now are going to be much higher than they are today, as are the materials to build the home. Getting the coverage that replaces your home at the cost of the time will help you stay afloat.

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Insurance for Non-Covered Dwellings

If you have non-covered dwellings, such as the following, you may want other structures insurance:

  • Unattached garage
  • Shed
  • Guest house
  • Swimming pool

This works like a rider on your insurance policy, providing protection for these structures. For example, if a fire wiped out your home and your unattached garage, the dwelling insurance would only cover the house. It would not cover the cost of rebuilding the garage. If you have other structures insurance, though, you will have protection and help to rebuild your garage.

It’s important to talk to your insurance agent and your mortgage company about the required insurance for your home. Your mortgage lender will require a specific amount, at least enough to cover your loan amount. You will likely want more coverage than the minimum, however. Compare policies and see which one works the best financially as well as provides the coverage you need. Your dwelling insurance is one of the best ways to protect one of the largest investments in your life.

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