Coverage A – Dwelling – Homeowners Insurance
In order to properly evaluate insurance coverage you are considering for purchase, or to review your existing coverage to ensure you are adequately protected from storm damage, it’s important that you understand the different categories of coverage contained in standard homeowner’s insurance policies.
Coverage categories refer to the type of property or situation covered rather than the type coverage or the amount coverage for which that property or situation enjoys.
For example, Coverage A in a policy outlines the type and amount of coverage for your dwelling (i.e. your main house) while Coverage B outlines the type and amount of coverage you have for other structures on your property (like a detached garage for example). Each coverage category may have different types and amounts of coverage.
When discussing particular coverage, the first step you should take is to identify the category of coverage you are discussing or evaluating. After you know you are looking at Coverage A that relates to the dwelling, for example, then you can intelligently evaluate if the type and amount of coverage is adequate.
Dwelling Coverage Considerations
Should your home be damaged by a severe storm or other disaster, Coverage A in your policy will determine whether you are entitled to insurance reimbursement and, if so, how much you are paid for repair or replacement. Here are a few things you need to consider about Coverage A when purchasing new coverage or assessing existing coverage for adequacy.
- For what causes of damage is my dwelling covered? HO1 and HO2 policies cover your dwelling for damage caused by a fixed list of named perils such as hail storms or fire. If a type of peril, say flooding, is not listed as a named peril, your dwelling would not be covered. HO3 and HO5 policies, on the other hand, cover your dwelling for any cause except those perils expressly listed and excluded. Common listed exclusions include flooding, earthquakes, and war. In many cases you can add excluded coverage for your dwelling by buying additional policies or adding a rider to your main policy.
- How will the dollar amount of damage to my dwelling be calculated? In most standard home insurance policies, value for damage to your dwelling under Coverage A is calculated based on replacement value. In other words, you would be paid to repair or replace you home based on how much it would cost to complete the repairs using materials of similar quality to what was damaged. One exception to note is that Coverage A in HO8 policies, a type of policy used typically for older homes, calculates value based on actual cash value (which could be significantly less than what it might cost to repair the storm damage).
- For how much is my dwelling covered? Even if the value calculation for Coverage A is based on replacement cost, you could be left short if your Coverage A is too low. For example, if when you purchased your insurance you ensured your home for say $200,000 but due to increased construction costs or additions to your home it would cost $250,000 to replace your home in the event of a total loss, you would be paid only the $200,000 and be responsible for the difference. For this reason, and to avoid over insuring, it is important to take time to determine appropriate amounts of coverage and revisit these amounts on a yearly basis to make sure the amount your dwelling is insured for under Coverage A is adequate.
Condo owners using an HO6 insurance policy will need to insure their dwelling for less as they are not responsible for the exterior of the condo or common areas such as mailboxes or the pool. See HO6 for more info.
Also, renters using an HO4 policy do not have any need for Coverage A as the owner of the home, apartment, or townhome they are renting is responsible for damage to the dwelling.