Property and Casualty Insurance · Property Insurance · 7 min read
Dwelling Buildings, Belongings, and Use
- Differentiate the property protections provided under Coverage A (Dwelling) and Coverage B (Other Structures), including how policy forms treat coverage limits.
- Identify the items included, excluded, and extended under Coverage C (Personal Property).
- Explain how indirect loss protections operate under Coverage D (Fair Rental Value) and Coverage E (Additional Living Expense).
Introduction to the Dwelling Policy Program
Dwelling policies can insure eligible residential property, including landlord-owned rentals and some owner-occupied dwellings; a property need not be ineligible for homeowners insurance to use a dwelling form. While homeowners policies bundle property and personal liability coverages together, the dwelling program concentrates on insuring the physical real estate and furnishings. The Insurance Services Office (ISO) publishes standard dwelling forms and endorsements, though individual insurers may use their own forms and endorsements, subject to applicable state filing and approval rules.
The standard ISO dwelling program organizes property protections into five core categories, designated as Coverage A through Coverage E. Coverages A and B protect the physical buildings and structures on the premises. Coverage C protects household belongings and personal property. Coverages D and E protect against indirect financial losses, such as lost rent or temporary living costs resulting from direct physical damage caused by an insured peril.
Depending on the level of protection an applicant selects, the policy will be issued on a basic form (DP-1), a broad form (DP-2), or a special form (DP-3). The fundamental property categories remain consistent across these forms, but the way limits and extensions apply varies significantly between the basic form and the more comprehensive broad and special forms.
Common mistakes
- Assuming Coverage C is automatically included as a percentage of Coverage A. In a dwelling policy, personal property is covered only if a specific limit is selected and shown on the declarations page.
- Believing Coverage B is an additional amount of insurance on all forms. Under the DP-1 basic form, Coverage B is merely an extension that reduces the available Coverage A limit; it is only an additional amount of insurance on DP-2 and DP-3 forms.
- Thinking Coverage E is automatically included in the DP-1 basic form. Coverage E is not part of an unendorsed DP-1 and must be added by endorsement.
- Applying the property deductible to Coverage D or Coverage E payments. Indirect loss settlements under fair rental value and additional living expense are not subject to the policy deductible.
Key points
- Dwelling policies can insure eligible residential properties, including rentals and some owner-occupied dwellings, whether or not the property could qualify for homeowners coverage; insurers may use standard ISO forms or their own forms and endorsements.
- Coverage A covers the described dwelling, attached structures, construction materials on site, and servicing equipment, but expressly excludes all land.
- Coverage B covers detached outbuildings separated by clear space, providing an additional 10 percent of Coverage A on DP-2 and DP-3 forms, but acting as a limit-reducing extension on DP-1.
- Coverage C applies when a limit is shown, provides limited coverage for the insured's property away from the described location and during a move, and excludes cash and deeds; vehicle and tenant-property exclusions have specific exceptions.
- Coverage D pays fair rental value minus expenses that do not continue when rented space is made unfit for normal use by a covered loss; Coverage E pays necessary additional living expenses when a covered loss makes the part of the described location where the insured resides unfit to live in.
- Coverage D and Coverage E provide up to two weeks of coverage for civil authority prohibitions, share a combined 20 percent limit on DP-2 and DP-3 forms, and are never subject to the property deductible.
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