Home Insurance Insights

How Much Dwelling Coverage Do I Need?


Dwelling Coverage and Other Structures Coverage are two closely related parts of your Homeowners Policy. While Dwelling Coverage protects the structure of your home as well as structures attached to it, Other Structures Coverage typically protects things like a detached garage, separate shed or entertainment area, as well as your fences, retaining walls, and even your mailbox.

Together, these two coverages make a strong team, helping you pay for repairs, replacements, or, in a worst-case scenario, the cost to rebuild after a covered loss. Because Dwelling Coverage and Other Structures Coverage offer such vital financial protection, it is crucial for homeowners to have the right amount of both.

What is the recommended amount of Dwelling Coverage?

If a major event, such as a fire or tropical storm, does irreparable damage to your house, you want peace of mind that your home insurance will be there to support you. To help ensure this is what happens after a disaster, it is essential to choose a Dwelling Coverage limit that is equal to or greater than 100% of what it would cost to reconstruct your home today. Otherwise, you could end up being responsible for the gap between what your insurance company pays out on your claim and the price tag for restoring your home to the way you and your family remember it.

It is important to know that your home’s reconstruction cost is not the dollar amount you paid to purchase your home or its current market value. Instead, your home’s reconstruction cost should be calculated based on a variety of factors, including the size and architectural style of your house, all of its special features, and the cost of the construction materials and labor you’ll need for the rebuild.

An insurance agent in your community is in the best position to assist you with estimating your home’s reconstruction cost and selecting your Dwelling Coverage limit. They work closely with your insurance company to provide an appropriate reconstruction cost estimate. Plus, based on their local familiarity with and knowledge of your house, its location, and its risks, they may advise you to extend your home’s Dwelling Coverage limit an additional 25%–50% to be sure you have enough protection today and in the future.

What is the recommended amount of Other Structures Coverage?

Once your Dwelling Coverage limit is set, deciding the limit for your Other Structures Coverage will seem easy. Generally, Other Structures Coverage is set at 10% of your home’s Dwelling Coverage limit. For example, if your home’s Dwelling Coverage is $750,000, then your Other Structures Coverage would be $75,000.

But is this straightforward math approach going to result in the right amount of coverage for the detached structures on your property? Possibly. However, if you have one or more higher-priced structures on your property, such as a covered barn, large shed, or detached two-car garage with an in-law or office space area above it, you may want to discuss the benefits of increasing your Other Structures Coverage limit with your insurance professional. Also, if you rent out any of these structures or use them for business purposes, it is important to let your agent know so they can advise you on any home insurance endorsements that need to be added to your policy to cover these buildings and their usage.

Remember, your home and other structures will only be repaired up to the limits you choose, so it is important to choose the coverage amounts carefully, with the input of a local expert, and regularly update your agent on any changes that might affect your home’s reconstruction cost estimate. For more guidance on properly protecting your dwelling and detached structures, contact one of the local independent agents in The Andover Companies network. They can review your home insurance policy and its current limits and, if needed, share some solutions that may help broaden the coverage for your house and the other separate structures on your property.

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