Enders Explainer: Extended Dwelling Coverage

Have you ever noticed a line somewhere on your homeowners declarations that indicates Extended Dwelling Coverage? Do you think it’s just an easy way for the insurance carrier to make an up-charge? It’s definitely not. Instead, it’s perhaps the best way to ensure that you have adequate coverage for your home in the event of a significant loss that calls for reconstruction.

Let’s paint the picture of strong winter storm that rolls through South Central PA. Think of it in terms of wet, heavy snow and significant wind. In our experience, that could cause some serious claims.

While it’s been a few years since the last storm like this in our area, we all know that our region is susceptible to this sort of weather. Imagine many homes sustain serious damage a  result of the weather. What should you be concerned about on your policy?

First, you need to make sure that you home is Insured to Value at 100% Replacement Cost. So long as your home is fully insured (as required by the homeowners insurance contract), you should be in pretty good shape. But in the example of our strong winter storm, or any major event, reconstruction costs could be increased after the event. If this happens, it is vital that you have Extended Dwelling Coverage (or similarly named coverage that works the same way).

Typically, homeowners insurance carriers will offer Extended Dwelling Coverage in the form of a percentage of Coverage A (Dwelling).  It’s quite common to see this percentage set at either 25% or 50%. An example that takes place just after the strong winter storm will put it in perspective:

Your home is insured to value at $100,000. After that strong winter storm rolls through (causing numerous claims throughout the community), your home suffers from a devastating fire and must be rebuilt. Due to the storm, reconstruction costs are increased and the contractor estimates the total rebuild at $120,000. Suddenly, your homeowners policy does not provide enough coverage. However, if your policy is endorsed with 25% Extended Dwelling Coverage, your total Coverage A (Dwelling) limit is $125,000. This total amount will provide enough coverage to cover the entire loss.

Adding the Extended Dwelling Coverage by endorsement is an additional premium investment. Typically, this coverage is well under 10% of the total policy premium, but each case is unique. It’s vital that you review your policy with an insurance professional that can provide guidance on your policy. At the end of the day, this endorsement is a “must” for any homeowner that wants to make sure there is enough coverage on their policy.

A special thanks to Safeco Insurance for reminding us that this coverage can be confusing!