Dwelling vs. Homeowners Insurance: What’s the Difference?

Dwelling and homeowners insurance are designed to provide coverage under two different circumstances. Homeowners insurance covers personal property and provides personal liability protection as standard, as well as coverage over the building itself. Dwelling insurance, sometimes called “second home insurance” or “investment property insurance,” covers only the building.

Homeowners insurance is designed for an insured’s primary home. The term “primary residence” refers to a dwelling that the insured lives in for most of the year. Separate insurance companies may define “most of the year” differently; however, this typically is quantified as at least six months and one day. For practical purposes, your primary residents contains most of your personal belongings. The homeowners policy covers those possessions, as well as damage to the structure itself.

Dwelling insurance is appropriate in a variety of circumstances other than coverage of an insured’s primary residence. Vacation homes are one of the most common circumstances, as well as rental properties. A building that the insured rents out requires only coverage for the building itself, and liability coverage. Dwelling insurance is specifically designed to provide coverage in this circumstance; this substrain of coverage is sometimes called “tenant-occupied dwelling coverage.” You can add named perils to these policies such as vandalism, broken glass, burst pipes, or water damage; the renter will buy separate coverage to insure their own belongings.

Homeowners who have trouble getting the usual homeowners insurance, owner-occupied dwelling insurance can be an option. Homeowners might have trouble getting homeowners policies for a variety of reasons, including bad credit, poor condition of the property, and a history of past claims. Homeowners can often get dwelling insurance much more easily.

The situation gets more complex when you’re considering vacation homes that the insured rents out for a portion of the year. Some companies will provide a dwelling policy for insureds who rent the property for more than three months a year. Insureds who keep belongings at the property—such as furniture and appliances—have to include liability and personal property coverage. Some insurance companies won’t have this requirement, however, and may even let insureds buy a homeowners policy for this circumstance. Usually, insureds are required to live at the home for a certain amount of time during the year.

Dwelling and homeowners insurance might sound similar, but they’re different coverage applicable to different situations. To find out more about homeowners insurance, check out our insurance CE course on homeowners insurance.

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