How Much Dwelling Insurance Coverage Do I Need?

Dwelling coverage is one of the most important parts of a homeowners insurance policy. If your house burns to the ground or a fallen tree crushes your roof, dwelling coverage would pay to help you repair or rebuild.

Understanding your home insurance deductible can help you decide how best to protect what may be the most expensive purchase you ever make. Unfortunately, it’s not always easy to understand your policy’s fine print.

Dwelling insurance pays either to repair or rebuild your home when a covered disaster — called a peril — strikes. A policy will specify what damage is covered and by what types of disasters, but you can often supplement your coverage with another insurance product to address the gaps. This includes adding a flood insurance policy to a home located in a flood zone.

What is dwelling insurance?

Dwelling insurance, also known as dwelling coverage, is the foundational coverage type of a home insurance policy. For insurance purposes, your dwelling includes your house and the structures attached to your home. This includes attached garages, decks, and porches.

Structures that aren’t attached to your house, like a fence or shed, are covered under the “other structures coverage” portion of a homeowners insurance policy.

When buying a homeowners policy, you can choose the coverage limit and deductible for the dwelling insurance. Typical coverage limits range from $100,000 to $500,000, while deductibles may be anywhere from $500 to $2,000, depending on the policy and insurer. Insurers reimburse claims based on a fixed dollar amount, rather than a percentage.

Dwelling coverage for homeowners

Dwelling coverage is the part of a homeowners policy that pays to repair damage to the structure of your home, or to rebuild it if it’s destroyed. It will cover you up to the limit of your policy.

Your home’s structure includes the roof, foundation, floors, doors, windows and walls. Dwelling coverage also generally extends to any attached structures, such as garages, porches, decks, and built-in appliances and fixtures. However, it doesn’t include your belongings, unattached structures (such as a shed) or the land your home sits on.

Dwelling coverage for condo owners

In a condo insurance policy, dwelling coverage works differently. Most condo residents own only their own unit, not the building itself, so your policy’s dwelling insurance doesn’t need to cover things like the roof or outer walls. Your condo association likely has a master insurance policy that covers the structure of the building.

However, you may need dwelling coverage for built-in cabinets, appliances and floors within your unit. Exactly what you need to cover depends on what your association’s policy includes.

For example, many condo associations cover your unit’s walls, ceiling and floor but not anything attached to them. So if you want coverage for your carpet, built-in cabinets and appliances, you’ll need dwelling insurance.

Other homeowners insurance coverage types

Here are more coverage types found in a standard home insurance policy.

Other structures coverage

This pays to repair or replace structures that aren’t attached to your property, such as a fence, detached garage and shed.

Liability insurance

This pays for accidental injuries and property damage you cause to others. For example, if your dog bites a guest, liability insurance can cover their medical bills. Court judgments, settlements and the cost of a legal defense are also covered by liability insurance.

Medical payments to others coverage

This pays for minor injuries to others if they’re hurt on your property. This coverage is usually sold in small amounts, often between $1,000 and $5,000. Medical payments to others can be a good way to cover small medical expenses without legal complications, like whether or not you are actually legally liable for the injury.

More expensive medical claims would be covered under liability insurance.

What does dwelling insurance cover?

The most common home insurance policy is an HO-3. It covers your house (dwelling structure) from all problems unless they are listed as exclusions in the policy. This is known as an “open peril” policy. Perils is just insurance jargon for “problems.”

Your belongings, on the other hand, are covered for 16 specific problems in an HO-3 policy. These include fire, theft, wind, explosions and other typical issues. If you want home insurance that covers all problems for your dwelling and personal property (except exclusions that are listed), ask your agent about an HO-5 policy.

Homeowners can expect dwelling insurance to cover their main structures from a variety of approved hazards and perils, including the following:

Fire and smoke damage, whether caused by lightning strikes, electrical malfunctions, or a dishcloth that got too close to the stove
Windstorms or hail, which can damage your roof, knock trees onto your house, break windows, and ruin siding
Snow, ice, and sleet, leading to frozen pipes or roof damage
Water damage, such as a ceiling or walls that are ruined by leaking pipes
Explosions, which can occur when aerosol cans malfunction or a gas grill combusts
Motor vehicles that run into dwellings, causing significant damage to a garage door, for instance
Falling objects, such as asteroids, satellites, airplane parts, and meteors (no matter how unlikely this is to occur)
Vandalism, which can involve intentionally destroying property

What does dwelling insurance not cover?

Dwelling insurance is just one type of coverage provided in your homeowners’ insurance policy. Although it protects the physical structure of your home from many perils, there are some things that are not included in dwelling coverage. Even the best homeowners or condo policy won’t cover certain disasters, though you may be able to buy extra coverage.

Here are some common dwelling coverage exclusions in a standard HO-3 home insurance policy:

Earthquakes, landslides and mudslides

Homeowners and condo policies generally won’t cover damage due to “earth movement,” which includes earthquakes, landslides, mudslides and sinkholes. Your insurer may offer additional coverage for these disasters.

Flooding

If a hurricane pounds your area with rain or a nearby river overruns its banks, your dwelling coverage usually won’t pay for any resulting water damage to your home. If your home is at risk, you can buy flood insurance through the federal government or a private company.

Infestations

Termites, rodents and other invasive pests can do plenty of damage to the structure of your home, but your dwelling insurance probably won’t cover it. Insurers consider this kind of damage a maintenance issue that homeowners should expect to pay for themselves.

Maintenance or wear and tear

Insurance is designed to help with sudden accidents, not routine maintenance issues. Your dwelling coverage is unlikely to help with things such as a foundation that cracks due to settling or a roof that starts leaking because it’s 20 years old.

Vacancy

If you divide your time between homes, or you’ve got a house sitting empty while you’re waiting to sell it, you might not have as much coverage as you think. Many home insurance policies won’t cover certain types of claims such as vandalism if the house is vacant longer than 30 or 60 days.

Additional exclusions include:

Water damage, including floods, leaks from swimming pools or other structures, water damage caused by fire, explosion or theft and water that backs up through drains or sewers
Settling, shrinking, expansion or bulging of bulkheads, pavement, patios, footings, foundations, floors, walls, ceilings or roofs
Intentional loss
Power failure
Nuclear hazard
Smog, dry rot, rust or other corrosion
Smoke from agricultural smudging or industrial operations
Discharge, migration, seepage, release or escape of pollutants
Mechanical breakdown or latent defect that destroys or causes property damage
Damages caused by an animal you own or keep on your property
Government action, such as the destruction, seizure or confiscation of property

How much does dwelling insurance cost?

There are several factors that insurance companies look at to determine dwelling insurance rates, including:

The cost of rebuilding your home
The materials that make up your home, such as stone, stucco, brick and wood
The age of your home
The claims history in your area, such as crime rates and tornadoes
Your personal claims history
Your area’s fire rating, including your home’s proximity to a water source and fire department
The coverage and policy limits you select

Average homeowners insurance costs

Dwelling coverage amount	Average annual home insurance cost
$49,999 and under	$648
$50,000 to $74,999	$757
$75,000 to $99,999	$825
$100,000 to $124,999	$882
$125,000 to $149,999	$930
$150,000 to $174,999	$975
$175,000 to $199,999	$1,012
$200,000 to $299,999	$1,113
$300,000 to $399,999	$1,278
$400,000 to $499,999	$1,492
$500,000 and over	$2,163

Source: National Association of Insurance Commissioners 2022 Homeowners Insurance Report, based on premiums for an HO-3 homeowners insurance policy.

How much dwelling insurance do you need for a house?

Your dwelling coverage limit should be enough to rebuild your home if it’s destroyed. This amount isn’t necessarily the same as the price you paid for the house. Instead, this number depends on the features of your home and the building costs in your area.

You can get a rough estimate of your rebuilding cost by multiplying the square footage of your home by the average local building cost per square foot. (Local builders and insurance agents may be able to help you find this figure.)

However, this cost may go up or down depending on the specifics of your home. For instance, do you have high-end fixtures and hardwood floors? These would probably cost more to replace than carpets and laminate countertops.

Every insurance company has a slightly different formula for calculating the replacement cost of your home. The more information you can provide about your home’s size and features, the more accurate the estimate will be.

Keep in mind that rebuilding costs can change over time. For example, building costs often go up due to high demand after a hurricane or other natural disaster. Pandemic-related supply chain issues have also sent building costs skyrocketing in recent years. Such increases could leave homeowners underinsured if they haven’t reevaluated their dwelling coverage in a while.

Dwelling coverage deductible

You can choose the amount of your dwelling insurance deductible. The deductible is the amount that is deducted from your insurance check if you make a dwelling claim. For example, if a kitchen fire causes $5,000 of damage and you have a $1,000 deductible, you’ll get an insurance check for $4,000.

The higher the insurance deductible you choose, the lower your home insurance premium. That’s because your insurer will pay less if you file an insurance claim.

Some states allow insurers to use separate, higher hurricane insurance deductibles when there’s hurricane damage.

Other dwelling coverage considerations

Replacement cost coverage

Most standard home insurance policies cover a dwelling for replacement costs. Replacement cost pays to repair or replace your home with similar materials without any deduction for depreciation.

Replacement cost coverage pays up to the limit listed on your policy. If the dwelling rebuilding cost exceeds that, you would need to pay the difference or reduce what’s rebuilt.

Extended replacement cost coverage

Extended replacement cost coverage gives you some cushion when the cost to rebuild your house goes above your dwelling policy limits. This coverage can be particularly useful if your region is hit by a widespread disaster (such as a wildfire or tornado) that causes a spike in local costs of materials and labor.

For example, an extended replacement cost policy might provide an extra 25% above your dwelling coverage, if needed. For example, If you have $300,000 in dwelling coverage, extended replacement cost at 25% would provide up to $375,000 total to rebuild the house.

Guaranteed replacement cost coverage

Guaranteed replacement cost coverage is generally the best if you can find it. Cost is similar to extended replacement cost coverage, but it’s not capped at a certain percentage. This coverage pays any cost needed to rebuild your house.

Dwelling insurance vs. other home insurance coverages

Home insurance comprises four coverage areas. These coverages work together to cover the costs of repairing or rebuilding your home after a disaster destroys it or a lawsuit attempts to hold you liable for an incident on your property. The four coverage areas are:

Dwelling coverage
Personal property coverage
Liability coverage
Additional living expenses coverage

Where dwelling coverage protects the structure of a home, personal property coverage protects a homeowner’s belongings. When a covered peril occurs, the insurance company pays to replace furniture, clothing, electronics and other personal items.

Liability coverage provides financial assistance for legal matters. When someone gets injured on your property, this part of the policy addresses the costs of a lawsuit, including lawyer’s fees and medical payments.

Additional living expenses coverage addresses costs related to loss-of-use situations. Typically, it assists with temporary relocation that might be necessary immediately after the damage and during any subsequent construction.

How Much Dwelling Insurance Coverage Do I Need?