How much dwelling insurance do homeowners need?

Your dwelling coverage limit should be high enough to rebuild your home in case of a total loss.

Standard homeowners insurance policies provide a slew of coverage options to protect your home, personal property, and even your family from perils like natural disasters, theft, and other accidental property damage. But the amount of coverage your policy includes is the key to making sure your home insurance policy will actually protect you in case of emergency.

Everything from your deductible to the type of coverage you have and even your home’s condition can affect whether your insurance company will reimburse certain damages. But make sure you have enough insurance coverage starts with how much dwelling coverage your policy includes.

Once you know how much homeowners insurance you should have, use Insurify to compare insurance quotes based on your coverage needs. Even if your home is already covered, it never hurts to see how much you could save.

Dwelling Insurance 101

Home insurance policies include various coverage types to make sure your home and personal property are completely protected.

Homeowners coverage typically includes:

  • Dwelling coverage

  • Other structures coverage

  • Personal property coverage

  • Personal liability coverage

  • Additional living expenses ( loss of use ) coverage

The dwelling coverage portion of your policy, also called Coverage A, covers the physical structure of your home. This helps cover damages to the foundation of your home, including your roof, walls, stairs, permanent carpeting, and even features that are built into your home, like cabinets and water heaters, and attached structures, like porches and garages.

Most dwelling coverage policies list driveways, sidewalks, detached garages, and fences as exclusions, although your other structures coverage should cover these.

As with the rest of your policy, dwelling coverage will only pay for damages caused by covered perils. Typically, dwelling insurance covers losses caused by natural disasters, including fire, windstorms, hail, and the weight of snow and ice, plus other perils like theft, vandalism, falling objects, and other sudden accidental damages.

Earthquakes, landslides, floods, sewer backups, and other water damage are typically not included as covered losses. You’ll need to purchase additional coverage like flood insurance and earthquake insurance for full protection from these perils.

Calculating Your Dwelling Limit

An insurance limit is the largest amount of money your insurer will pay you for any damage your home or personal belongings sustain. That’s why it’s so important to make sure your policy has the right amount of coverage to replace your entire home and all of your belongings in case of a total loss.

Your home’s replacement cost is likely to be different than the amount you paid for your home or even its current market value. So when considering your dwelling coverage limit, you should base your estimates on your home’s square footage and construction costs in your area.

A simple way to calculate this is to multiply local rebuilding costs by your home’s size in square feet.

Making sure your limits are high enough is only the first step in ensuring proper home protection. If you ever need to file an insurance claim, your insurer will either reimburse your home’s actual cash value or replacement cost value.

Actual cash value policies take your property’s depreciation into account, so your insurer will pay you less for your older possessions than for your newer ones. Replacement cost coverage ensures that you’ll be reimbursed for the entire cost of repairing or replacing your damaged home, minus your deductible.

No matter your dwelling coverage limit, be sure to know what type of policy you have so you can anticipate which repair costs you should file a claim for and which you’ll need to pay out of pocket.

Compare Home Insurance Quotes Instantly

  • Personalized quotes in 5 minutes or less
  • No signup required

How Dwelling Insurance Affects Your Insurance Coverage

Now that you know how much dwelling insurance you need, you might be wondering about the other elements of your home insurance policy.

In general, after choosing your dwelling limit, you’re good to go. This is because other elements of your policy are typically set as percentages of your dwelling coverage limit. Other structures coverage is typically 10 percent, personal property coverage is 50–70 percent, and additional living expenses coverage is 20 percent of your dwelling limit.

Liability insurance is the only portion of your policy not based on your dwelling coverage limit. Most insurers automatically include $100,000 in liability coverage, but policyholders can usually increase this to $500,000 or higher, depending on their specific needs.

Let’s see how this breaks down for a policy with a $300,000 dwelling limit:

  • Dwelling coverage: $300,000

  • Other structures coverage: $30,000

  • Personal property coverage: $150,000 to $210,000

  • Additional living expenses coverage: $60,000

Your policy should have enough coverage to pay for nearly all of your repair or rebuilding costs in the event that you lose your entire home and all of your personal belongings to a covered loss. The best way to make sure you’re adequately covered is to accurately determine how much dwelling insurance you need.

Dwelling Insurance FAQs

  • Your renters insurance policy covers your personal belongings since your landlord is responsible for insuring the building. The best way to determine your renters policy limit is to make a home inventory to calculate the cost of replacing all of your belongings in case of a total loss.

  • Your dwelling limit should be based on the cost of rebuilding your home today, not the amount you originally paid for your home.

  • If you aren’t sure how much dwelling coverage you need, you can calculate the cost of rebuilding your home on your own or talk to your insurance agent.

Calculating the Perfect Dwelling Coverage

Homeowners insurance provides peace of mind and a financial safety net for homeowners in case of emergency. But before you need to file a claim, you need to make sure you have the right amount of coverage for your home and property. That way, you can rest assured that you’re getting your money’s worth of protection without overpaying for coverage you don’t need.

The dwelling coverage portion of your homeowners insurance policy covers the physical structure of your home. You can calculate your dwelling limit by multiplying local rebuilding costs by your home’s square footage.

Compare Home Insurance Quotes Instantly

  • Personalized quotes in 5 minutes or less
  • No signup required
Jacklyn Walters
Jacklyn WaltersInsurance Writer

Jacklyn Walters is a personal finance writer. She has a bachelor's degree from SUNY-Buffalo and specializes in home insurance, striving to help customers make informed decisions about their insurance policies.