Dwelling coverage (Also referred to as Coverage A or Structure coverage depending on the policy or company) is easily the thing we discuss the most with our insureds. Mainly because determining the replacement value of the dwelling is one of the most important components of properly insuring your home.
Replacement cost often differs from Market value and appraised values so it is something we tend to get a lot of questions on. A common one is:
“My house was appraised for $200,000 yet you are insuring it for $290,000. This doesn’t make any sense to me and I feel as if I am overpaying.”
We get it, this can be so confusing. But there is a big difference between appraised value of the home and actual replacement cost. Appraised value is what the home is worth according to the housing market. This is how your property taxes are developed. It often sometimes will even include depreciation into the calculation.
Replacement cost is the value placed on your home should it need to be rebuilt from scratch with brand new materials. Plus it helps to have a little money in there for debris removal and clean up in the event something happens.
Trust us, you want to insure your home for the replacement cost and not the appraised value or the market value. It's the best way to make sure that should the unexpected happen to your home you will have the proper amount to rebuild.
What is considered the dwelling? The dwelling is the building in which you sleep in. The main building of the home. Now this does include any attached structures such as a porch, deck or garage. However, it will not include any structures that are not attached such as a detached garage or shed.
So in short: Dwelling Coverage is the part of your homeowners’ policy that will help with the rebuilding or repair of your home (the structure you reside in) should it be damaged by a covered hazard.
It's critical to make sure you have the right value so it makes a lot of sense to work closely with your Agent to dial that number in. Don't settle for the quick and easy path of using the home sales price!
In two weeks, we will be covering what "other structures" includes on your policy. In the meantime, if you have any questions... click the link below!