What is dwelling coverage and how much do you need?

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. 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 that costs $400,000 to rebuild needs at least $320,000 in coverage to clear that 80% mark. Insured for $240,000, it gets 75% of a $20,000 roof repair, or $15,000 before your deductible, because $240,000 is three-quarters of the $320,000 your insurer expects.

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. The calculator’s estimate is the number your Coverage A limit should match, so have it rerun after any renovation.

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, wind, vandalism and explosions, among other things. Flood and earthquake damage need a separate policy or endorsement, which includes flooding and storm surge from a hurricane.

“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 replacement cost endorsement offers protection against this risk.

Check which part of your homeowners policy pays for the damage

Dwelling coverage pays to repair or rebuild the structure of your house, including the walls, roof, floors, built-in systems and anything permanently attached. Your belongings, a hotel stay during repairs and a guest’s injury fall under other parts of the same homeowners policy. The table below shows which coverage pays for each.

Plan for damage your homeowners policy won’t pay for

Homeowners policies exclude gradual damage, which insurers treat as maintenance you’re responsible for. They also exclude catastrophes big enough to need their own policy. You can add some exclusions back with an endorsement, an add-on to your policy, and you’d pay for the rest out of pocket.

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.

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.

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.

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

Weigh a lower premium against a smaller claim payout

Dwelling coverage makes up the largest share of your homeowners premium because it pays to rebuild your home completely. Lowering your dwelling limit or switching to actual cash value reduces your premium, and it also reduces what you’d get back after a loss.

“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. Your insurer subtracts depreciation for age and wear, so a 20-year-old roof gets paid at its depreciated value while a contractor charges you for a new one. After a fire or other covered loss, you’d pay the difference between the two.

A dwelling limit set below your rebuild cost works the same way. Your insurer pays up to the limit, and you cover the rest. Before you lower your coverage to save on the premium, check whether you could pay that shortfall from savings.

Methodology 

Insure.com commissioned homeowners insurance rates from Quadrant Data Services across all 50 states and Washington, D.C. Rates are based on a policy with $300,000 in dwelling coverage, $300,000 in liability protection, a $1,000 deductible, and a good credit tier. We compared 74,227,400 insurance quotes from 134 insurance companies (73 company groups) across 34,599 ZIP codes, 3,143 counties and 29,162 cities. The national average annual premium, with no hurricane deductible, is $2,872. The rates are for comparison purposes only, your exact premium may vary.

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