Dwelling Coverage: What Is It and How Much Do You Need?


If you’re like most homeowners, your home is your most valuable asset. In order to protect that asset, you go through the process of purchasing homeowners insurance. For some customers, it can be confusing trying to sort what is and is not covered and how much coverage you have for your home and all of your personal belongings. Dwelling coverage provides coverage for your home(main house) and any structures that are attached to the home(deck, garage, etc.).

What Is Covered Under Your Dwelling Coverage?

If you have a standard homeowners policy in California, there will be a section on your policy stating “building property we cover”. It then states what is covered under your dwelling coverage. Here is an example:

Coverage A-Dwelling

We Cover:

  1. the dwelling on the residence premises shown in your Policy Declarations used principally as a private residence, including structures attached to the dwelling other than fences, driveways, or walkways;
  2. attached carpeting, built-in appliances, fixtures; and
  3. materials and supplies located on or next to the residence premises used to construct, alter or repair the dwelling or other structures on the residence premises.

Types Of Losses Covered Under Dwelling Coverage

This next section is where customers tend to get confused. They understand that they have coverage in the event their home is damaged but are not sure what types of losses they specifically have coverage for. The last thang you want to have happen is a loss occurs, you turn in a claim, and then the claim is denied because your policy does not provide coverage for that type of loss.

A standard California homeowners policy, also known as an HO-3 policy, covers your home for the following losses:

  • Fire
  • Lightning
  • Windstorm or Hail
  • Explosion
  • Civil Commotion/Riot
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism and malicious mischief
  • Theft
  • Volcanic Eruption
  • Falling objects
  • Weight of snow, ice, or sleet
  • Discharge of water or steam
  • Sudden accidental rupture
  • Freezing of plumbing
  • Artificially generated electrical current

As you may notice, earthquake and flood are not included on this list. That is because in California you have to purchase a separate earthquake or flood insurance policy to have coverage for either of those perils.

How Do You know If You Have Enough Coverage?

The most common and frustrating thing we see in our office is new customers whose previous agent significantly underinsured the customers home. California has experienced severe wildfires these past 4 years, which has caused the cost of construction to drastically surge. The price for lumber alone has tripled.

In Los Gatos, the cost to rebuild a single-family home is now starting out at around $400 a square foot and can even go up to $1,000 a square foot. It is important to understand the factors that go into the replacement cost of a home.


  • Labor, building materials, and supplies: Square footage, year of construction, type of roof, quality of construction(custom, standard, and economy), and zip code all impact your reconstruction costs. You also need to inform your agent of any special features like wet bars, tile floors, and marble countertops to make sure your home is properly insured.
  • Contractor Overhead and profit: Overhead costs involve operating expenses for equipment, administrative expenses, employee pay, rents, etc. Every contractor is also entitled to a profit, in order to make a living.
  • Permits and Architectural plans: Permits are essential to make sure all buildings meet city standards.
  • Demolition and Debris Removal: Provided as a separate coverage on your homeowners policy. Typically 5% of the reconstruction cost.


Not only is it important to talk to your contractor to get an idea of the cost to rebuild your home, but you also need to reach out to an independent agent to make sure your home has replacement cost coverage.


How Much Will An Insurance Company Pay For A Loss?

After you have spoke with your contractor and independent agent to figure out the cost to rebuild your home, it is now time to figure out how much the insurer is going to provide you with in the event of a loss. Here are the 4 different types of coverage you can purchase that will determine how much you are entitled to recover after a loss:

  • Actual cash value coverage: pays the costs to repair the damaged dwelling minus a deduction for physical depreciation. If the dwelling is completely destroyed, this coverage pays the fair market value of the dwelling at time of loss. In either case, coverage only pays for costs up to the limits specified in your policy.
  • Replacement cost coverage: is intended to provide for the cost to repair or replace the damaged or destroyed dwelling, without a deduction for physical depreciation. Coverage only pays for replacement costs up to the dwelling limits specified in your policy.
  • Extended dwelling coverage: is intended to provide for the cost to repair or replace the damaged or destroyed dwelling without a deduction for physical depreciation. Extended Replacement Cost provides additional coverage above the dwelling limits up to a stated percentage or specific dollar amount. This could be an extra 25,50,or 100%.
  • Guaranteed replacement cost coverage: covers the full cost to repair or replace the damaged or destroyed dwelling for a covered peril regardless of the dwelling limits shown on the policy declarations page.

At Don Williams & Associates, we recommend extended dwelling coverage. This way, if there is a catastrophic loss and the cost to rebuild your home is more than your dwelling coverage, you can get an additional 25-100% to rebuild the home.

For example, lets say you have $800,000 in dwelling coverage and your home burns down. It looks like $800,000 is not going to be enough to rebuild the home. With extended dwelling coverage of 150% you would now have up to $1,200,000 to rebuild the home. Guaranteed replacement cost coverage is great, but it is not offered by most companies in California.


Reach out to one of the insurance experts at Don Williams & Associates today at 408-402-3646 or fill out a form here and see how we can help you find the best value on your Homeowners Insurance.

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