How Much Dwelling Coverage Do You Need?
The amount of dwelling coverage you need depends on rebuilding costs — not your home’s market value.
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Dwelling coverage is part of a standard homeowners policy. It protects the physical structure of your home against damage from perils like fire, windstorms, and vandalism.1
Choosing the right dwelling coverage amount ensures you can repair or rebuild your home after a loss. So, how much dwelling coverage do you need? Here’s what you should know about comparing home insurance quotes, as well as some tips to help you find the best insurance coverage at an affordable price.
Dwelling coverage explained
Dwelling coverage, also known as Coverage A in a standard homeowners insurance policy, covers the physical structure of your home, including the walls, roof, flooring, and any attached structures, such as a garage or deck. Most home policies also provide other structures coverage (Coverage B) to protect structures that aren’t attached to your home, such as a shed or gazebo.
A peril is a specific risk or reason for loss, such as a fire, windstorm, or flood. Dwelling policies may offer all-perils coverage or named-peril coverage. All-perils policies, also called open-perils policies, cover every peril except for those your policy specifically lists as exclusions. Named-peril policies cover only those perils named in the policy.
If a covered peril damages or destroys your home, dwelling coverage helps pay for the repair or rebuilding costs.2
What dwelling insurance covers
While coverage can vary between insurance products, a standard home insurance policy typically covers damage from the following:
Fire and smoke
Windstorm and hail
Lightning strike
Explosions
Vandalism and malicious mischief
Damage caused by a vehicle or aircraft
Falling objects
Weight of ice, snow, or sleet
Water damage from plumbing, heating, or air conditioning overflow
Electrical damage from artificially generated currents
What dwelling insurance doesn’t cover
Homeowners policies also have exclusions, meaning certain losses aren’t covered. Exclusions typically include:
Earthquakes
Sewer backup
Wear and tear
Neglect
How to choose a dwelling coverage amount
The dwelling limit on your home insurance policy should reflect the cost of reconstructing your home from the ground up. It shouldn’t be based on the purchase price or fair market value of your home (which also includes the value of the land and depends on the real estate market).
Ask your insurance agent to help you decide how much coverage you need. The right amount of coverage is usually based on a rate per square foot. Review your coverage periodically since major home improvements, inflation, and other changes in rebuilding costs can affect the amount of dwelling coverage you need.3
Insurers have a few different ways of valuing your home, and the method used generally affects your premiums and potential payouts when you file a claim. Here’s a closer look at how insurance companies value your home.
How much does dwelling coverage cost?
Dwelling coverage is part of a standard homeowners insurance policy, so it’s not a separate cost. But your annual premium depends partly on the amount of dwelling coverage you choose. Generally, the higher the coverage limit, the higher your premium. You can expect to pay more for coverage on a $300,000 house than you would to insure a $150,000 home.
The table below shows the average annual costs for dwelling coverage at different limits, from various insurers.
What else does a home insurance policy cover?
In addition to dwelling coverage, a standard homeowners insurance policy includes several other coverages.
Liability coverage
Liability coverage protects you if someone is injured on your property or if you, a family member, or a pet causes damage to someone else’s property. It covers legal fees, medical bills, and any settlements or judgments, up to your policy limits.
How much liability coverage to buy
Homeowners liability insurance limits typically start at $100,000, but experts recommend purchasing at least $300,000–$500,000 of liability coverage to ensure you’re well protected against potential lawsuits and large claims.4
An umbrella policy can provide extra coverage beyond those limits if needed.
Personal property coverage
Personal property coverage helps pay to repair or replace your personal belongings, such as furniture, electronics, clothing, and appliances, if they’re stolen, damaged, or destroyed by a covered disaster. Coverage typically applies to property damage for belongings in your home, items in your car or away from home while traveling, and the contents of an offsite storage unit.
How much personal property coverage to buy
Personal property coverage is usually set at 50%–70% of your dwelling coverage limit. Doing a home inventory can help you decide if this standard amount is enough or if you need to buy additional coverage for expensive items, like jewelry, silverware, furs, or computers.
Additional living expenses (ALE) coverage
ALE, also known as loss of use coverage, pays for extra costs you incur if you can’t live in your home temporarily after a covered loss.
For example, if a fire destroys your kitchen, ALE covers expenses like hotel bills, restaurant meals, and other costs that exceed your normal living expenses. This ensures you can maintain your standard of living while your home is being repaired.
How much ALE coverage to buy
ALE coverage is usually set at 20% of your dwelling coverage limit, but some insurance companies provide an unlimited dollar amount for a limited time. You may want to ask about purchasing additional coverage if you’re in an area with a high cost of living.
Dwelling coverage amount FAQs
Here’s some additional information about dwelling coverage to help you determine how much homeowners insurance you should buy.
What’s the 80/20 rule for home insurance?
The 80/20 rule means you should insure your home for at least 80% of the home’s replacement cost to receive total coverage on partial losses. If your dwelling coverage limit is less than 80% of the full replacement cost, the insurance company may reduce your claim payout.
Is dwelling coverage required?
While not legally required, your bank or mortgage lenders typically mandate dwelling coverage to protect their financial interest in the property. Even if not required, it’s a good idea for most people, as the coverage ensures they can afford to repair or rebuild after a major loss.
What’s the difference between homeowners insurance and dwelling insurance?
Homeowners insurance is a comprehensive policy covering dwelling, liability, personal property, and additional living expenses. Dwelling insurance is part of your home insurance policy that specifically covers the structure of your home.
What are the coverages in a standard homeowners insurance policy?
A standard homeowners insurance policy includes dwelling coverage, liability coverage, personal property coverage, and additional living expenses coverage.
What is extended dwelling coverage?
Extended dwelling coverage offers additional protection by covering costs that exceed your dwelling coverage limit — usually by an extra 20%–25%. It helps cover unexpected increases in construction costs or repair expenses.
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