Homeowner’s Insurance Coverage Options


You would assume all real estate is created equal, alas it is not. Did you know the type of property you purchase dictates the type of homeowners insurance and coverage you will need? In an effort to provide easy to understand mortgage-related information, Guaranteed Rate offers tips on homeowner’s insurance coverage options.

Singled Family Residence

There are two types of coverage you should have when you own a single family home:

Dwelling Replacement

Dwelling coverage covers the cost to rebuild a home (e.g., current market cost of materials and labor) in cases of catastrophic damage such as:

  • Fire and Lighting
  • Smoke (due to fire)
  • Wind
  • Hail
  • Frozen Plumbing
  • Theft
  • Explosion
  • Weight of ice and snow

When determining the cost to rebuild, insurance companies use a proprietary system to determine the current market costs of materials and labor. If you’re concerned about having enough coverage, an additional 20 percent in dwelling coverage can be purchased.

Replacing Personal Property

Personal property coverage ensures your personal belongings are protected in case of catastrophic events such as those listed above. When replacing personal belongings, insurance companies will typically cover 70 percent of the value of your home (i.e., this is 70 percent of your dwelling coverage).

With regard to personal belongings, it is advised to keep track of your possessions with digital pictures and receipts. If the replacement of your belongings exceeds your coverage amount, photos and receipts will help the insurance company properly manage the claim.


When purchasing a condo some states will require the purchase of HO6 insurance; this type of insurance covers the internal portion of the condo unit. This part is tricky, where a unit begins (along with the coverage) varies from state to state. In some states the walls begin with the paint and in other states it begins with the drywall. It’s best to speak with an insurance professional to confirm where your unit coverage begins.

Replacing Personal Property

Determining the appropriate replacement cost coverage for condominium owners is truly subjective and it’s best to speak with an insurance representative regarding suitable coverage.

Condo insurance tip: When purchasing a ground floor unit, it’s advisable to ask about water backup coverage – this covers sewer or sub-pump backup.

It’s best you speak with your insurance professional regarding all of your insurance options.

Multi-Family Units

There are two types of policies for multi-family unit buildings; whether or not you plan to occupy the property will determine the type of coverage.

Dwelling Replacement

When occupying a multi-family home, dwelling replacement coverage is appropriate. As stated for single family homes, dwelling replacement covers the cost to rebuild the home (i.e., current market cost of materials and labor) in cases of catastrophic damage.

Landlord Protection

When renting out units in a multi-family home a landlord protection policy will be needed. A landlord policy will cover the replacement of the home, sudden and accidental damage and covered loss such as water, fire and theft. Normal wear and tear or lack of care of rental units will not be covered.

Finally as a landlord:

Fair rental income coverage will cover your lost rents up to one year.

You can require your tenants to buy renters insurance. The additional layer of protection puts more liability on the renter.

Additional Coverage

If you are interested in either of the following coverage you should speak with your insurance professional for more information:

  • Roof Replacement
  • Flood Insurance

Lenders take insurance coverage seriously and you must keep your insurance policy up to date and paid on time, at all times.

Most types of coverage will vary from state to state so be sure to speak with an insurance professional about state laws and requirements.

Continue to visit Guaranteed Rate for more educational, jargon-free mortgage-related topics.

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All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.