Whether you’re a new homebuyer or a longtime homeowner, shopping for the best homeowners insurance can be a confusing process full of jargon-y terms and coverage types you might not know, such as dwelling coverage.

What Is a “Dwelling”?

Dwelling coverage is sometimes called “dwelling insurance.” It’s 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.

What Is Covered By Dwelling Insurance?

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.

What Is Not Covered By Dwelling Insurance?

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

  • Earth movement, such as earthquakes, shockwaves or tremors due to volcanic eruption, sinkholes, mudflow, mudslides and any other earth movement, including shifting, sinking or rising
  • Land, including the land under your house
  • Water damage, including floods, leaks from swimming pools or other structures, water damage caused by fire, explosion or theft and water which backs up through drains or sewers
  • Settling, shrinking, expansion or bulging of bulkheads, pavement, patios, footings, foundations, floors, walls, ceilings or roofs
  • Neglect
  • Intentional loss
  • Power failure
  • Nuclear hazard
  • Wear and tear, deterioration and marring
  • Smog, dry rot, rust or other corrosion
  • Smoke damage 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
  • Birds, insects, rodents or vermin
  • Damages caused by an animal you own or keep on your property
  • Government action, such as the destruction, seizure or confiscation of property

Who Needs Dwelling Coverage?

If you have a mortgage, your bank or financial institution will likely require you to have dwelling insurance. That’s because your lender wants to protect their investment. For example, if a fire destroys your house, home insurance would pay to rebuild it (up to your policy limits).

Your home insurance premium may be rolled into an escrow account for payment (along with your property taxes). An escrow account is a separate account where your mortgage lender will collect money for home insurance and make payments on your behalf.

Even if you don’t have a mortgage, dwelling insurance is a good idea because it helps to rebuild or repair your home if disaster strikes. Without dwelling insurance, you would have to pay out of pocket to rebuild your home if it was destroyed by a problem such as a fire.

Related: New homebuyer’s guide to home insurance

How Much Dwelling Coverage Do You Need?

When you purchase a home insurance policy, you choose your dwelling coverage policy limits, which is the maximum amount your insurer will pay if your dwelling is damaged or destroyed due to a problem covered by your policy, such as a fire or tornado.

For example, if your dwelling coverage has a $300,000 coverage limit, that’s the maximum amount your insurer will pay if your house is destroyed by a fire.

Your dwelling coverage limits should be based on the cost to rebuild your house if it is destroyed. If your dwelling coverage is insufficient, you won’t receive enough insurance money to fully rebuild your home.

Related: How much homeowners insurance do you need?

How Much Does Dwelling Insurance Cost?

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

  • The cost to rebuild 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.

Other Dwelling Coverage Considerations

Replacement cost coverage

Most standard home insurance policies cover a dwelling for replacement cost. 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.

Not all insurers offer extended replacement cost coverage, but here are some companies that do:

Guaranteed replacement cost coverage

Guaranteed replacement cost coverage is generally the best, if you can find it. Guaranteed replacement 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.

Here are some companies that offer guaranteed replacement cost coverage:

  • AAA
  • Acuity, A Mutual Insurance Co.
  • AIG
  • Berkley Insurance
  • Central Mutual
  • The Cincinnati
  • Connect, powered by American Family Insurance
  • Donegal
  • Erie Insurance
  • Farmers
  • The Hanover
  • MAPFRE Insurance
  • Nationwide
  • Palisades Property & Casualty
  • Rock Ridge Insurance
  • Shelter Mutual
  • Vault Insurance
  • West Bend Mutual Insurance

Related: Why you want home insurance with extended or guaranteed replacement cost

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.

How Dwelling Coverage Influences Other Home Insurance Coverage Types

Your personal property coverage and additional living expenses coverage are typically set at a percentage of your dwelling coverage. Here’s a closer look at both coverage types.

Personal property coverage

Personal property coverage pays to repair or replace your belongings after a problem covered by the policy (like a fire). Personal property includes items such as your furniture, electronics, clothes, jewelry, rugs and kitchen items.

Your personal property coverage is generally set between 50% to 70% of your dwelling coverage. For example, if you have dwelling coverage of $300,000 and your personal property is set at 50%, you would have up to $150,000 for personal property.

If you need more personal property coverage, you can typically buy more.

Additional living expenses coverage

Additional living expenses coverage (ALE) pays for expenses such as hotel bills, restaurant meals and other services (like pet boarding or laundry services) if you cannot live in your home due to a problem covered by your policy (like a fire).

ALE is also called “loss of use” and is often set as a percentage of your dwelling coverage. For example, if you have dwelling coverage of $300,000 and your ALE is set at 30%, you would have up to $90,000 for additional living expenses. You can typically buy more coverage if you would like to.

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.

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Dwelling Coverage FAQ

Is dwelling coverage the same as homeowners insurance?

Dwelling insurance is just one part of a homeowners insurance policy. Dwelling insurance covers your house and its attached structures, such as a deck or garage.

Other portions of a home insurance policy cover personal property, liability and other expenses.

Does dwelling insurance cover floods?

Dwelling insurance doesn’t cover floods. If you want coverage for flood-related problems, you should purchase a separate flood insurance policy.

The majority of homeowners who have flood insurance buy it through the federal plan managed by FEMA, but you can potentially buy flood insurance from a private insurer.

Does dwelling insurance cover earthquakes?

Dwelling insurance doesn’t cover earthquakes. If you want coverage for earthquake-related problems, consider an earthquake insurance policy.

Do I need dwelling coverage if I rent my home?

You do not need dwelling insurance if you rent your home. Your landlord’s insurance will cover physical damage to the building for problems like fire and tornadoes.

But your landlord’s insurance won’t cover your personal items (like your furniture and clothing). Renters insurance covers your personal belongings and other types of problems, including liability insurance and additional living expenses if you cannot live in your home due to a problem such as a fire.