What is dwelling coverage and how much do you need?

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Dwelling coverage is the part of your homeowners insurance that pays to rebuild or repair your home after a covered loss. Known as Coverage A, it covers your home’s structure as well as attached garages and permanently installed features such as flooring and built-in appliances.

If your coverage is lower than what it would cost to rebuild, you pay the difference yourself. And if it drops below 80% of that cost, your insurer can pay only part of any claim you file, even a small one — a home insured for 60% of its rebuild cost gets 60% of a roof repair.

Multiply your square footage by local construction costs for a rough figure, then ask your agent to run a replacement cost calculator on your address. That gives you the number your Coverage A limit should match, and it’s the one to rerun after any renovation.

How to protect yourself financially

Add extended replacement cost coverage. It lifts your payout ceiling 10% to 50% above the dwelling limit on your policy, which is what covers you when building costs spike after a hurricane or wildfire.
Ask about guaranteed replacement cost. It pays the full rebuild no matter the price, though fewer insurers offer it.
Call your agent after any renovation. A finished basement or a new bedroom raises your rebuild cost while your coverage sits where it was, and that’s how homeowners slip under 80% without noticing.
Skip actual cash value coverage on the structure. It pays the depreciated value of what burned, leaving you to cover the rest of a rebuild yourself.
Get an insurance quote before you close on a house. Give your agent the address early so a coverage problem surfaces while you can still walk away.

What is dwelling coverage? And what does it actually protect?

Dwelling coverage is what pays to rebuild your home if it’s damaged or destroyed by a covered peril. For that reason, you should purchase coverage in an amount equal to 100% of the cost of rebuilding your home from scratch at today’s prices.

Standard policies cover fire, storm damage, vandalism and explosions, among other things. You’ll generally need a separate policy or endorsement for flood, earthquake and hurricane coverage.

“Insurers pay claims up to the limits in your policy,” says Mark Friedlander, senior director of media relations at the Insurance Information Institute. “However, if you don’t have enough coverage, you could face a significant insurance gap, which would make you responsible for covering the difference if the claim payout is not enough.”

Most insurers adjust limits annually, so as long as you initially purchased the right level of coverage, you should remain mostly protected. However, construction costs can increase faster than the rate of inflation. An extended or guaranteed loss endorsement offers protection against this risk.

Peril	Covered by a standard policy	What covers it instead
Fire and smoke	Yes	—
Wind, hail, tornadoes and lightning	Yes	—
Explosions	Yes	—
Theft and vandalism	Yes	—
Falling objects, including trees	Yes	—
Weight of snow, ice or sleet	Yes	—
Burst pipes and other sudden water damage	Yes	—
Slow leaks and seepage	No	Nothing — insurers treat gradual water damage as a maintenance problem
Sewer and drain backup	No	A water backup endorsement
Flood	No	A separate flood policy through the NFIP or a private insurer
Earthquake	No	Earthquake insurance or an endorsement
Hurricane wind near the coast	Sometimes	A windstorm policy or your state’s wind pool, plus a separate hurricane deductible

Key Takeaways

Dwelling coverage is the part of a homeowners insurance policy that covers the physical structure of a home.
A replacement cost calculator can estimate how much dwelling coverage you need, but more accurate calculations are necessary for proper coverage.
Experts recommend dwelling coverage equal to 100% of the replacement cost of your home.
You will need an additional policy or endorsement to be covered for things like earthquakes and floods.

What dwelling coverage protects — and when you’ll pay out of pocket

Dwelling coverage pays to repair or rebuild the physical structure of your house — walls, roof, floors, built-in systems and anything permanently attached to it.

Dwelling coverage doesn’t pay for anything that isn’t part of the building. Your furniture, a hotel room while repairs are underway, and a guest’s injury on your property are all covered too — just by other parts of the same homeowners policy.

Coverage will be excluded from gradual damage, which insurers treat as maintenance you were responsible for, and catastrophes big enough to need their own policy.

Covered by dwelling coverage	Not covered	What covers it instead
Walls, roof and gutters	Foundation cracks and settling	Nothing — insurers treat this as a structural or maintenance issue
Flooring, cabinets and permanently installed features	Sewer and drain backups	A water backup endorsement
HVAC, electrical and plumbing systems	Wear, tear and neglected maintenance	Nothing — this is the homeowner’s cost
Built-in appliances	Pest and termite infestations	A pest control contract, not insurance
Attached garages, decks and porches	Mold and mildew, with limited exceptions	A mold endorsement, where a carrier offers one
Your belongings inside the house	—	Personal property coverage, Coverage C
A hotel while your house is unlivable	—	Additional living expenses, Coverage D
Someone injured on your property	—	Personal liability, Coverage E

How much dwelling coverage do you need?

Your dwelling coverage should equal 100% of your home’s replacement cost — what it would cost to rebuild the house from the ground up at today’s prices. That’s a different number from what your house would sell for, and usually a higher one.

The formula you should use is: Dwelling coverage = square footage × local rebuild cost per square foot

You can get close to that figure yourself in a few minutes, but the number your policy carries should come from an agent.

Start with a rough estimate. Multiply your home’s square footage by the average construction cost per square foot in your area, which a real estate agent or local builder can give you.
Ask a licensed agent to price your specific house. Their replacement cost calculators go past the local average, pricing the labor and materials in your ZIP code along with anything unusual about your home.
Revisit the number every few years. Insurers nudge your limit up at each renewal, but construction costs can climb faster than that adjustment, and a renovation raises your rebuild cost without touching your coverage at all.

“These calculators factor in the price of goods and labor in your ZIP code, along with features of the house which include square footage, quality (and) unique features,” says Patrick O’Keefe, senior benefits insurance specialist with Inszone Insurance Services.

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What happens if your home is underinsured?

If your home is underinsured, your insurer pays less than your repair costs and you cover the difference — on any claim, not just a total loss. This kicks in when your dwelling coverage drops below 80% of what your home would cost to rebuild, a threshold insurers call the 80% rule.

“If you suffer a covered loss and your home is insured for less than 80% of its replacement cost value, your insurer may cover less than the full amount of your claim,” Friedlander says.

Standard policies settle an underinsured claim at whichever of these two amounts is higher.

The depreciated value of what was damaged. What that section of the house is worth today, with age and wear subtracted from the cost of new materials.
A share of the repair bill. Your coverage divided by 80% of your home’s rebuild cost, applied to what the repair costs.

What underinsuring costs you

You bought a house that would cost $300,000 to rebuild and insured it for that amount. A few years later you finish the basement and add a bedroom, so rebuilding now costs $500,000 — but your coverage never moved.

Your insurer wants to see $400,000 of coverage, which is 80% of $500,000. You carry $300,000, three-quarters of what’s expected, so your claims get paid at three-quarters.

A storm takes out your roof and the repair runs $40,000. Your insurer pays $30,000. You cover the remaining $10,000 plus your deductible, on a claim you thought was fully insured.

Call your agent whenever you finish a project that adds space or upgrades finishes. Raising your dwelling limit to match the new rebuild cost costs far less than the share of a claim you’d otherwise absorb.

Do you need extended or guaranteed replacement cost coverage?

Homeowners can choose from replacement cost or actual cash value coverage. Replacement cost sets your policy limits to what it would cost to rebuild your home today. That limit is a fixed dollar amount, and construction costs can outrun it — after a hurricane or wildfire, demand for labor and materials in one region spikes and rebuilding costs more than the limit anyone set at renewal.

“Extended dwelling coverage is designed to give wiggle room from the replacement cost coverage listed on your policy,” O’Keefe says.

Extended replacement cost pays 10% to 50% above your dwelling limit, so a rebuild that comes in over budget still gets covered.
Guaranteed replacement cost pays whatever the rebuild costs with no ceiling, though fewer insurers sell it.

Ask your agent what each endorsement adds to your annual premium. Both cost a small fraction of the gap they cover.

What’s the difference between replacement cost and actual cash value?

Your homeowners insurance may include the following coverage levels. Here’s what each means.

Insurance term	What is means
Replacement cost	Cost to rebuild your home at today’s prices
Actual cash value (market value)	What your home might sell for today
Extended replacement cost	Adds a 10% to 50% buffer to a policy’s listed replacement cost
Guaranteed replacement cost	Policy will rebuild a house, regardless of the cost

How much does homeowners insurance cost in your state?

The cost of your home insurance largely depends on how much dwelling coverage you buy, but where you live matters too. Select your state below to see average costs for various dwelling protection levels.

State	Dwelling coverage	Average annual premium
Alaska	$200,000	$1,177
Alaska	$300,000	$1,492
Alaska	$400,000	$1,825
Alaska	$600,000	$2,420
Alabama	$200,000	$2,852
Alabama	$300,000	$3,716
Alabama	$400,000	$4,506
Alabama	$600,000	$6,118
Arkansas	$200,000	$2,458
Arkansas	$300,000	$3,195
Arkansas	$400,000	$3,960
Arkansas	$600,000	$5,450
Arizona	$200,000	$1,895
Arizona	$300,000	$2,397
Arizona	$400,000	$2,917
Arizona	$600,000	$4,011
California	$200,000	$1,244
California	$300,000	$1,653
California	$400,000	$2,090
California	$600,000	$3,092
Colorado	$200,000	$4,058
Colorado	$300,000	$5,511
Colorado	$400,000	$6,847
Colorado	$600,000	$8,994
Connecticut	$200,000	$1,673
Connecticut	$300,000	$2,132
Connecticut	$400,000	$2,600
Connecticut	$600,000	$3,524
Washington, D.C.	$200,000	$1,139
Washington, D.C.	$300,000	$1,558
Washington, D.C.	$400,000	$1,994
Washington, D.C.	$600,000	$2,770
Delaware	$200,000	$1,140
Delaware	$300,000	$1,461
Delaware	$400,000	$1,796
Delaware	$600,000	$2,662
Florida	$200,000	$6,203
Florida	$300,000	$8,471
Florida	$400,000	$11,161
Florida	$600,000	$16,690
Georgia	$200,000	$1,784
Georgia	$300,000	$2,301
Georgia	$400,000	$2,888
Georgia	$600,000	$4,120
Hawaii	$200,000	$558
Hawaii	$300,000	$738
Hawaii	$400,000	$943
Hawaii	$600,000	$1,315
Iowa	$200,000	$2,406
Iowa	$300,000	$3,148
Iowa	$400,000	$3,820
Iowa	$600,000	$5,051
Idaho	$200,000	$1,800
Idaho	$300,000	$2,412
Idaho	$400,000	$3,009
Idaho	$600,000	$4,189
Illinois	$200,000	$2,176
Illinois	$300,000	$2,802
Illinois	$400,000	$3,357
Illinois	$600,000	$4,678
Indiana	$200,000	$2,183
Indiana	$300,000	$2,869
Indiana	$400,000	$3,490
Indiana	$600,000	$4,597
Kansas	$200,000	$3,822
Kansas	$300,000	$5,289
Kansas	$400,000	$6,763
Kansas	$600,000	$9,553
Kentucky	$200,000	$3,587
Kentucky	$300,000	$4,471
Kentucky	$400,000	$5,450
Kentucky	$600,000	$7,030
Louisiana	$200,000	$3,766
Louisiana	$300,000	$5,185
Louisiana	$400,000	$6,613
Louisiana	$600,000	$9,540
Massachusetts	$200,000	$1,616
Massachusetts	$300,000	$2,112
Massachusetts	$400,000	$2,584
Massachusetts	$600,000	$3,543
Maryland	$200,000	$1,743
Maryland	$300,000	$2,242
Maryland	$400,000	$2,728
Maryland	$600,000	$3,659
Maine	$200,000	$956
Maine	$300,000	$1,299
Maine	$400,000	$1,642
Maine	$600,000	$2,377
Michigan	$200,000	$2,249
Michigan	$300,000	$3,071
Michigan	$400,000	$4,044
Michigan	$600,000	$5,545
Minnesota	$200,000	$2,344
Minnesota	$300,000	$3,333
Minnesota	$400,000	$4,257
Minnesota	$600,000	$5,698
Missouri	$200,000	$2,933
Missouri	$300,000	$3,783
Missouri	$400,000	$4,578
Missouri	$600,000	$6,199
Mississippi	$200,000	$1,995
Mississippi	$300,000	$2,602
Mississippi	$400,000	$3,092
Mississippi	$600,000	$4,216
Montana	$200,000	$2,419
Montana	$300,000	$3,221
Montana	$400,000	$3,910
Montana	$600,000	$5,252
North Carolina	$200,000	$2,481
North Carolina	$300,000	$3,799
North Carolina	$400,000	$4,768
North Carolina	$600,000	$6,692
North Dakota	$200,000	$2,173
North Dakota	$300,000	$2,846
North Dakota	$400,000	$3,537
North Dakota	$600,000	$4,776
Nebraska	$200,000	$4,199
Nebraska	$300,000	$5,513
Nebraska	$400,000	$6,754
Nebraska	$600,000	$9,153
New Hampshire	$200,000	$1,013
New Hampshire	$300,000	$1,324
New Hampshire	$400,000	$1,627
New Hampshire	$600,000	$2,206
New Jersey	$200,000	$1,079
New Jersey	$300,000	$1,449
New Jersey	$400,000	$1,837
New Jersey	$600,000	$2,542
New Mexico	$200,000	$2,378
New Mexico	$300,000	$3,497
New Mexico	$400,000	$4,577
New Mexico	$600,000	$6,790
Nevada	$200,000	$1,377
Nevada	$300,000	$1,876
Nevada	$400,000	$2,380
Nevada	$600,000	$3,399
New York	$200,000	$1,401
New York	$300,000	$1,844
New York	$400,000	$2,339
New York	$600,000	$3,356
Ohio	$200,000	$1,687
Ohio	$300,000	$2,109
Ohio	$400,000	$2,564
Ohio	$600,000	$3,530
Oklahoma	$200,000	$3,756
Oklahoma	$300,000	$5,378
Oklahoma	$400,000	$7,105
Oklahoma	$600,000	$10,232
Oregon	$200,000	$1,275
Oregon	$300,000	$1,647
Oregon	$400,000	$2,057
Oregon	$600,000	$2,860
Pennsylvania	$200,000	$1,104
Pennsylvania	$300,000	$1,434
Pennsylvania	$400,000	$1,755
Pennsylvania	$600,000	$2,424
Rhode Island	$200,000	$1,768
Rhode Island	$300,000	$2,379
Rhode Island	$400,000	$2,934
Rhode Island	$600,000	$4,102
South Carolina	$200,000	$2,032
South Carolina	$300,000	$2,870
South Carolina	$400,000	$3,690
South Carolina	$600,000	$5,208
South Dakota	$200,000	$2,732
South Dakota	$300,000	$3,740
South Dakota	$400,000	$4,606
South Dakota	$600,000	$6,127
Tennessee	$200,000	$2,409
Tennessee	$300,000	$3,198
Tennessee	$400,000	$3,970
Tennessee	$600,000	$5,489
Texas	$200,000	$3,294
Texas	$300,000	$4,582
Texas	$400,000	$5,733
Texas	$600,000	$7,858
Utah	$200,000	$1,352
Utah	$300,000	$1,771
Utah	$400,000	$2,179
Utah	$600,000	$2,951
Virginia	$200,000	$1,579
Virginia	$300,000	$1,939
Virginia	$400,000	$2,379
Virginia	$600,000	$3,336
Vermont	$200,000	$782
Vermont	$300,000	$1,017
Vermont	$400,000	$1,247
Vermont	$600,000	$1,663
Washington	$200,000	$1,375
Washington	$300,000	$1,766
Washington	$400,000	$2,174
Washington	$600,000	$3,027
Wisconsin	$200,000	$1,420
Wisconsin	$300,000	$1,836
Wisconsin	$400,000	$2,227
Wisconsin	$600,000	$2,948
West Virginia	$200,000	$1,572
West Virginia	$300,000	$1,961
West Virginia	$400,000	$2,333
West Virginia	$600,000	$3,037
Wyoming	$200,000	$1,470
Wyoming	$300,000	$2,075
Wyoming	$400,000	$2,730
Wyoming	$600,000	$4,051

Your premiums may seem high but you don’t want to skimp on coverage

The cost of dwelling coverage may seem high but remember that this insurance coverage is designed to completely rebuild your home from the ground up.

“Dwelling coverage is the largest component of an insurance policy in terms of how your premium is determined,” Friedlander says. “It’s important for homeowners to make sure they have adequate dwelling coverage to ensure they are protected from all perils included in their policy.”

Actual cash value coverage costs less because it pays less. It subtracts depreciation for age and wear, so a 20-year-old roof is paid at a 20-year-old-roof value while the contractor charges you for a new one. The savings on the premium come back as a bill after a fire.

What the expert says:

“We strongly recommend anyone looking at making an offer on a home to look into insurance early in the process. It can be as simple as giving their agent an address to look into,” O’Keefe explains. “Of course, a mortgage company will need [to] confirm coverage is in place before giving a loan, but [it is] better to know earlier than later if there will be any issues getting insurance.”

Frequently asked questions

Does dwelling coverage include the land my house sits on?

No, your dwelling coverage only covers your home and any attached structures. It does not cover the land.

What’s the difference between dwelling coverage and personal property coverage?

Dwelling coverage protects the structure of your home — things like the walls, roof, built-in appliances and attached garage. Personal property coverage, on the other hand, protects your belongings inside the home, such as furniture, clothing, electronics and décor.

Is dwelling coverage based on market value or replacement cost?

Your dwelling coverage should equal your home’s full replacement cost — the amount it would take to rebuild it from the ground up using today’s materials and labor, not its market value or what you paid for it. If you select its market value, or actual cash value, you could find yourself underinsured.

Maryalene LaPonsie

Staff Writer

Maryalene LaPonsie is a staff writer for Insure.com. She has 25 years of professional writing experience. She specializes in personal finance — insurance, investing and retirement.