Homeowners insurance and property or dwelling insurance sound similar, but cover different situations for different reasons. Homeowners insurance will likely be the insurance you use for your main home. Homeowners insurance consists of three crucial parts: structure, liability, and personal coverage. Dwelling insurance largely just covers the structure itself and protects it from natural perils, aside from floods and earthquakes, which you generally have to buy separate policies for.
Structure, Personal Property, and Liability
Homeowners and dwelling insurance both cover the structure of the main house, including elements attached to the main house like garages. Homeowners insurance also has the benefit of covering other identified detached structures on the property, such as sheds and pools.
Personal property is covered in homeowners insurance but not in dwelling insurance. Dwelling insurance is meant to be basic coverage and does not include any personal belongings or appliances inside the home. If you have dwelling insurance and want to also protect your belongings then you will need to purchase a separate policy to insure your personal property.
The third element of homeowners insurance is coverage for liability. This covers you in the case that someone gets hurt while on your property. Dwelling insurance does not include liability insurance, and it would need to be purchased separately. Most situations, like rental properties and vacation homes, still require you to carry liability coverage, but this coverage can be added on to your dwelling insurance fairly easily and cheaply.
It is also important to note that homeowners insurance and dwelling insurance may be covered for different perils. Homeowners insurance often covers “open perils” while dwelling insurance covers “named perils” that will need to be specified.
Another feature of homeowners insurance that dwelling insurance does not have is the coverage of temporary living expenses when your home is damaged by a covered peril. So, if you are dealing with a peril that makes your home unlivable, the insurance company will pay for your expenses to be able to maintain a “normal standard of living”. In an emergency, this can be a valuable resource and another reason why homeowners insurance makes the most sense for your primary residence.
The Purpose of Dwelling Insurance
Dwelling insurance is a basic policy that is not meant to be used for your primary residence. Your primary residence will be the house you live in for most of the year and keep your personal belongings in. If you cannot get insurance due to bad insurance history or bad credit then dwelling insurance can be used instead, but you would have to purchase separate coverage for liability and personal property to get the same effect as homeowners insurance. So, homeowners insurance is what you will buy for your primary residence, which is often defined as a house that you live in for at least six months and a day of every year.
Dwelling insurance is mostly used for rental properties and vacation homes. With a rental property, you will be concerned about the structure and liability while the renter will purchase renters insurance to protect their own belongings. Often times, dwelling and liability insurance will be available together as a landlord’s insurance package, so if the structure burns down or a peril that you have added or specified happens, you will be covered. The tenant’s property will not be covered, so it is often nice to remind the tenant that renters insurance is a good thing to have.
Dwelling insurance is also used for vacation homes and sometimes vacation rentals. This often depends on how much time you spend at the property in a year and whether you have personal belongings or appliances there or not. For vacation homes with personal belongings, you may just want to buy homeowners insurance if it is not required that you live there full time.
If you have a vacant building that is not in use, whether you are trying to sell a property with no belongings in it, or you are renovating it and do not plan on living in it, that will be considered a “vacant property” and will not be the same as a dwelling. When there is no one living in it, the property may be more difficult to insure, and you may want to speak with an agent for your options.
