'Dwelling fire' home insurance provides slimmed-down coverage

A standard home insurance policy offers general coverage against a variety of hazards. A "dwelling fire" policy offers narrower coverage at what's typically a substantially lower price.

Despite the name, dwelling fire policies actually cover more than just fire- and smoke-related damage. You also might get protection against hazards like explosions, vandalism and even wind damage, according to insurance agency the Arizona Group. But unlike a typical home insurance policy, which covers everything except for listed exclusions, a dwelling fire policy covers nothing except listed hazards.

Depending on whether you get basic or broad dwelling fire insurance coverage, you can protect structures on your property, your personal belongings or the entire dwelling. Depending on your level of coverage, you can be reimbursed for either the cash value of your home, or for the cost of replacing it after a disaster, according to Farmers Insurance. When it comes to cash-value coverage, you'll get cash reimbursements for total losses and repair-cost repayments for partial losses, according to the Arizona Group. There's an exception to this general rule, though: If repair estimates suggest that the cost to fix a piece of property is more than what it's worth, you will be reimbursed for its cash value.

Who might be best suited for dwelling fire coverage? Here is a list of common candidates, according to Farmers Insurance

  • Landlords who need to insure the building, but not the possessions inside it.
  • Owners of properties under construction or renovation.
  • Owners of properties not occupied full time, such as seasonal homes or second homes.
  • Owners of homes that don't have much cash value, such as inexpensive manufactured homes, mobile homes or old homes.

Owners of homes that have historic and ornate structural features that would make full coverage unaffordable can turn to dwelling fire coverage as well, according to the Arizona Group.

You can customize your dwelling fire policy to meet your needs. For instance, if you're concerned about liability problems, like someone slipping and falling at your rental property and suing you, some insurers will let you tack on premises liability protection and medical payment coverage, according to the Arizona Group.

Keep in mind that your dwelling fire policy may not provide enough coverage for all your needs and risks. For example, if you own a home in a flood plain, you may need to purchase a flood insurance policy.

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