Dwelling Coverage vs Homeowners Insurance: What’s the Difference?

Dwelling Coverage vs Homeowners Insurance: What’s the Difference

Homeownership is a journey filled with ups and downs, and having the right insurance coverage can make all the difference when the unexpected strikes.

One of the ways you can ensure you’re protected is by understanding the difference between dwelling coverage and homeowners insurance. While both types of insurance protect you in case of mishaps, there’s more to it than meets the eye.

In this blog post, we’ll break it down to help you further understand the difference between dwelling coverage and homeowners insurance and why it matters.

Dwelling Coverage Versus Homeowners Insurance

In the realm of homeownership, navigating insurance can feel like stepping into a maze of jargon and policies. Among the key terms thrown around are dwelling insurance and homeowners insurance, often used interchangeably but with subtle yet significant differences.

So, what sets them apart, and why does it matter?

Let’s start with the basics: dwelling insurance versus homeowners insurance. Understanding these distinctions is crucial for protecting your most significant investment – your home.

Imagine your home as a fortress, standing tall against the elements. Dwelling insurance is like fortifying the walls and foundation of this fortress. It covers the physical structure of your home, ensuring that if disaster strikes – be it a fire, storm, or other covered event (perils) – you have the financial means to rebuild or repair.

Now, homeowners insurance, on the other hand, is the full armor protecting not just the fortress walls but everything inside them, too. It encompasses dwelling insurance but goes further by safeguarding your personal belongings and providing liability protection. Think of it as a comprehensive shield that protects not only the bricks and mortar but also your possessions within those walls.

Let’s break it down further.

Dwelling coverage, often referred to as “Coverage A” in a standard HO-3 insurance policy, focuses solely on the structure itself – the walls, roof, floors, and everything that makes up the physical shell of your home. It ensures that your home can be rebuilt or replaced if the worst happens. Common covered perils typically include:

  • Fire and smoke
  • Lightning strikes
  • Wind damage
  • Hail
  • Explosions
  • Vandalism
  • Theft
  • Damage caused by the weight of snow, sleet, or ice
  • Falling objects
  • Damage from an aircraft or auto
  • Volcanic eruption
  • Water damage caused by appliance overflow or heating/air conditioning malfunction
  • Frozen plumbing/heat ducts/sprinkler system/appliance

But dwelling coverage isn’t just about protecting the bare bones of your home. It may include installed fixtures like cabinets, counters, and permanently attached appliances. These integral components make your house a home, and they’re protected under dwelling insurance.

So, where does homeowners insurance fit into all of this? Well, think of it as the all-inclusive package. Home insurance typically encompasses several main coverage areas, each serving a unique purpose in protecting homeowners from financial losses due to various unforeseen circumstances. It’s the safety net that extends beyond the physical walls of your home to safeguard against life’s uncertainties.

These coverage areas may include:

  1. Dwelling coverage
  2. Personal property coverage
  3. Liability coverage
  4. Additional living expenses coverage
  5. Other structures coverage
  6. Medical payments coverage

In essence, dwelling insurance is the cornerstone of your homeowners insurance policy, focusing on bricks and mortar. In contrast, homeowners insurance adds layers of protection for everything else – from furniture to finances.

Understanding the nuances between dwelling and homeowners insurance empowers you to make informed decisions about protecting your home and everything it holds.

So, the next time you review your insurance policy – which you should do annually – remember that it’s not just about the roof over your head; it’s about safeguarding the life you’ve built.

Do You Need Dwelling Coverage?

Most insurance experts strongly recommend having a home insurance policy that includes dwelling coverage if you’re a homeowner or condo owner.

But what if you’re a renter? Do you need to worry about dwelling coverage? The good news is, no, you don’t. If you’re renting a place, your landlord is typically responsible for insuring the structure of your building. That means you don’t need to stress or spend your hard-earned money covering the physical structure.

However, there’s something important to consider: your personal belongings. While your landlord’s insurance may cover the building, it won’t protect your belongings. That’s where renters insurance comes into play. Renters insurance safeguards your personal belongings, like furniture, electronics, clothing, and more. Even though you might not need dwelling coverage as a renter, renters insurance is definitely something to consider to protect your belongings from unexpected events like theft, fire, or water damage.

Dwelling Coverage Limits and Exclusions

Essentially, dwelling coverage is the maximum amount your insurance will provide if unforeseen circumstances wreak havoc on your home.

However, before your insurer chips in, you’ll generally have to pay your deductible out-of-pocket. Once that’s done, the policy covers the rest up to the predetermined maximum payout.

That said, there are some common exclusions you ought to be aware of, such as:

  • Sewer backups
  • Flooding
  • Pest damage
  • Earthquakes
  • Sinkholes
  • Mudslides
  • Routine wear and tear
  • Damage following a lack of maintenance

Additional coverage may be necessary to cover these risks, so it’s always a good idea to read and understand what is and isn’t covered in your insurance policy so that you can work with a local insurance agent to insulate yourself from risks.

How to Get the Right Amount of Dwelling Coverage

Choosing the right amount of dwelling coverage requires careful consideration of various factors, including the method used to determine your home’s value and any additional endorsements you may need for added protection. Remember, it’s not just about the cost of premiums but also ensuring adequate coverage to rebuild your home and restore your peace of mind in the face of adversity.

Now, here’s where things get interesting. When considering how much dwelling coverage you need, it’s essential to think beyond just the current market value of your home. Market value may not reflect the actual cost of rebuilding from scratch, especially considering factors like inflation and rising construction costs.

In fact, 60% of homeowners are now underinsured due to rising building costs and inflation. This is where replacement cost coverage comes into play, ensuring you have enough coverage to rebuild your home at today’s prices, not yesterday’s market value.

Pro tip: Read Will Your Homeowners Insurance Cover a Disaster? Maybe today.

When it comes to dwelling coverage, it’s generally better to err on the side of caution and have a bit too much rather than risk being underinsured. The goal is to have enough coverage to fund rebuilding your home and its attached structures. This includes the main building and built-in appliances like water heaters, HVAC systems, and electrical or plumbing systems.

Your insurance costs hinge largely on the value of your home. Factors like square footage and age play a role, but it’s ultimately about the value of what you’re insuring. Insurance companies use different methods to determine this value, and your choice can significantly impact the quality and cost of your dwelling coverage.

Replacement Cost Value (RCV)

The Replacement Cost Value (RCV) policy essentially treats your home’s value as the cost to rebuild it using similar materials and quality based on today’s prices for material and labor. Under this policy, if you experience a covered loss, like a tree falling on your garage, insurance will cover the cost of replacing it with a brand-new one, regardless of age.

Actual Cash Value (ACV)

An Actual Cash Value (ACV) policy factors in depreciation. With this policy, you’ll only receive the market value of the damaged property, which could be significantly less than the cost of replacing it with new items.

Guaranteed Replacement Cost (GRC)

Replacement Cost (GRC) will cover all necessary rebuilding costs, even if they exceed your coverage limit. However, be prepared for higher premiums with these options.

For example, if your standard policy’s coverage limit is $400,000 and a fire destroys your home, but the cost to rebuild is estimated at $500,000, a GRC endorsement would cover the extra $100,000 after an additional deductible.


Whether you opt for a homeowners or a dwelling policy depends on your unique living situation and insurance needs. By understanding the differences between the two and evaluating your circumstances, you can make an informed decision that ensures your home – primary residence, investment property, or vacation getaway – is adequately protected.

Lastly, it’s worth mentioning that certain groups, such as veterans, may be eligible for targeted discounts, so be sure to explore all available options when considering your insurance coverage.

We recommend reading 11 Ways to Lower Your Homeowners Insurance Rates or contacting a local insurance agent to learn more today.

Need to learn more about dwelling coverage or homeowners insurance?

Our agents are ready to help you out, so contact us to learn how we can customize your insurance policies to meet your needs.

*Disclaimer: We offer content for informational purposes; Co-operative Insurance Companies may not provide all the services or products listed here. Please contact your local agent to learn how we can help with your insurance needs.


Bankrate. What is Dwelling Insurance? https://www.bankrate.com/insurance/homeowners-insurance/dwelling-insurance/

CNN Business. Farmers Insurance pulls out of Florida, affecting 100,000 policyholders. https://www.cnn.com/2023/07/12/business/farmers-insurance-florida/index.html

Farmers. How Is Dwelling Coverage Different than Home Insurance? https://www.farmers.com/learn/insurance-questions/dwelling-coverage-home-insurance/

MarketWatch. What Is Dwelling Coverage? (2024). https://www.marketwatch.com/guides/insurance-services/dwelling-insurance/

Nationwide. What is dwelling coverage? https://www.nationwide.com/lc/resources/home/articles/what-is-dwelling-coverage

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