Your house is one of the precious things in your possession. As a homeowner, dwelling insurance is a must in your policy. In the event of structural damage, this would help you pay the covered loss.
Hazards such as natural disasters, fires, or theft, can be inevitable. Before you know, you’re already looking for the best home repair services in town to get your house fixed.
The consultation and damage assessment can be costly. Let alone the actual repair and restoration. That’s when dwelling insurance comes in.
Dwelling insurance is usually mistaken for homeowners’ policy. What many people don’t know is that it has its distinct features and uses.
To learn more about the benefits of dwelling coverage, please watch the YouTube video below:
What Is Dwelling Coverage?
Dwelling coverage is insurance that is part of the homeowners’ policy. It protects your home and its structures from the hazards that can damage it. Thus, it helps you rebuild or repair your house without the risk of financial loss.
Like the chimney and garage, every part of your home is covered by dwelling insurance. Moreover, it also covers built-in systems and appliances such as plumbing and water heater.
More About Dwelling Insurance Coverage
You can choose what type of policy you would get to protect your home against the perils listed in your policy.
HO-1 Home Insurance Policy
The HO-1 policy is also known as the primary form coverage and is part of any basic type of home insurance. This policy protects you from:
- Fire
- Windstorm
- Theft
- Vandalism
- Damages due to vehicles
- Volcanic eruption
For additional protection, people usually choose an HO-2 or HO-3 insurance policy.
HO-2 Home Insurance Policy
Some homeowners’ insurance policies limit the hazards they are covering. This HO-2 dwelling policy is also known as “named perils.” This means that the dangers should be indicated on the specific hazard list to be qualified for the coverage.
Volcanic eruptions, power surges, freezing, and burning household systems are just some of the items commonly included in the named perils policy.
HO-3 Homes Insurance Policy
This covers the damages from hazards that are beyond the HO-2 coverage. It is also known as “open perils” and expands the scope of dwelling insurance. It covers any home damages excluded in the list of homeowners’ insurance.
What Are the Limitations of Dwelling Coverage?
Not all hazards are protected by the dwelling coverage. So make sure to read the conditions of the policy and decide whether to add some supplementary protection.
Flooding
In most homeowners insurance policies, flooding is one of the items excluded from this coverage. If your house is located in an area prone to overflow or in a flood plain site, you may consider getting flood insurance coverage. This policy can be obtained from the National Flood Insurance Program (NFIP) and other selected private carriers.
Earthquake
You should consider getting earthquake coverage in your policy, especially if your house is prone to earth tremors. Seismic activities are common for places with oil drilling like Oklahoma. Having said that, it’s more necessary for people living in that area to get earthquake insurance.
Depending on the intensity, an earthquake can cause mild to severe damages to your home’s foundation. The repair may cost you a lot!
The structural damage brought about by a fire that occurs after the earthquake is covered, but not the one caused directly by the earthquake.
Maintenance Damages
Your home is a structure that is composed of several systems like electrical, plumbing, and heating. It is a complex form to ensure comfortability and safety. As a homeowner, it is your responsibility to maintain the systems.
You may want to prevent minor damage from escalating. Yes, dwelling insurance will not cover the pay for the maintenance damages.
Sewer Issues
Water backup coverage (or sewer and drain line backup coverage) is a joint supplement on your homeowners’ insurance to expand your dwelling and personal property. Such losses are common during heavy rains.
The water pump may not be able to keep up with the inflow and outflow, resulting in water spilling in the basement or any sewer lines in the house. Water backup coverage intends to cover up the losses due to this type of issue.
Coverages Dependent on Dwelling Insurance
Other coverages are dependent on your dwelling insurance policy:
1. Personal Property Coverage
The personal property coverage is also known as the contents insurance, wherein the amount will be limited between 50% – 70% of your dwelling coverage. You could also get extra coverage to have additional protection if the current amount is not enough to cover all your items.
2. Loss of Use Coverage
Loss of use or additional expenses coverage is also based on dwelling coverage like personal property. You get to choose between 20% – 30% of your dwelling insurance.
In selecting the amount, consider your lifestyle. This usually covers your personal spending, like food, property storage, and moving expenses.
How Much Dwelling Insurance Do You Need?
The amount of dwelling insurance you need varies. It depends on how much it would cost to rebuild your house, considering the current labor and materials prices.
For Own Personal Home
To find out how much dwelling coverage you will purchase, you need to know the cost of rebuilding your house. Do not look at the actual cost value (ACV), calculate the replacement cost value (RCV) instead. This is the amount of the current expenses for materials, construction, and labor.
You can get the current replacement costs through a local real estate agent or home construction company then multiply it by the square footage of your home. Next, consider getting extended replacement cost or inflation coverage as additional protection. The reason is the estimate may still fall short in rebuilding your home.
You should know that materials and labor vary in location. That is why it’s important to research your specific area to get an accurate estimate of replacement cost value.
For Own Condo
You won’t need homeowners insurance if you live in a condominium, but you still need coverage to protect your property. The condo’s homeowners association (HOA) is also known as a master policy.
This usually covers the exterior and common areas such as outside walls and picnic sites. There are two types of dwelling coverage in master policy:
- The bare wall-in policy (also called as studs-out policy) covers the condo’s exterior walls. The HOA will provide coverage in rebuilding the framework of the unit in case there is damage.
Everything inside is the responsibility of the owner. There is an HO-6 policy that will pay for the interior part such as floors, walls, cabinets, and fixtures.
- The all-in policy covers both the interior and exterior of the unit. HOA will provide for all aspects of the condo, including the fixtures and interior attachments. The belongings and personal property like clothing, electronics, and dishes would be the owner’s responsibility.
For Own Rental Property
Most homeowners’ policies will not cover losses if you rent your house to someone else, so landlords need to obtain dwelling coverage.
Take note that the coverage wouldn’t protect the renters’ belongings. They would need to get a renters insurance policy for that.
As a landlord, look for dwelling coverage policies that would cover the:
- Structural damage due to hazards,
- Personal property used in maintenance or used by the renters,
- Liability coverage if the tenant got hurt in your property,
- Rental loss income if the property is under repair or construction,
Know that premiums for landlord policies are generally 25% more expensive compared to regular homeowners’ policies.
Bottom Line
When getting the coverage, check all the expulsions included to learn what is covered and not. This is also for you to understand what additional policies could you add to expand the protection. You cannot expect basic insurance coverage to cover everything.
To accurately estimate how much dwelling coverage you need for your property, you need to first calculate your replacement cost value. Then, check the amount of extended coverage you’re considering.
You should also assess the policies included if you live in a condominium or rent your house to someone. Communicate with your agent to learn more about dwelling insurance and other policies that best suit your needs.
If you have plans to get a mortgage for your home, homeowners insurance is one requirement of the lender before giving out the loan. Dwelling coverage is a crucial factor as this will help you cover the structural repair.
If you like this article, you can also check out the following:
- What Is Hazard Insurance And Why Is It Important?
- Rent to Own Homes: Know All About How They Work
- Top Questions To Ask When Buying A House: A 2021 Guide
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