Unit 7: Dwelling Insurance Practice Flashcards

A complete set of vocabulary flashcards covering the types of dwelling insurance forms, coverages, perils, and endorsements based on the License Exam Manual.

Dwelling Policy

A policy providing protection for individuals and families against loss to their dwelling and personal property, which generally provides more limited property coverage than a homeowners policy.

Coverage A—Dwelling

Covers the dwelling, structures attached to the dwelling, materials for construction or repair, and building or outdoor equipment used to service the premises.

Coverage B—Other Structures

Insures buildings on the premises separated from the dwelling by a clear space, limited to up to $10\%$ of the Coverage A limit.

Coverage C—Personal Property

Covers the insured’s personal property at the described location that is usual to the dwelling occupancy.

Coverage D—Fair Rental Value

Coverage available if a covered property loss makes the building uninhabitable, providing up to $20\%$ of the insurance on the dwelling.

Coverage E—Additional Living Expense

Included in DP-2 and DP-3 to pay for reasonable motel, dining, laundry, and transportation expenses while the dwelling is being repaired.

DP-1 (Basic Form)

A named peril dwelling policy that automatically covers fire, lightning, and internal explosion.

Internal Explosion

An explosion occurring in a covered building or in a building containing covered personal property, such as the explosion of a furnace, stove, or hot water heater.

Extended Coverage (EC) Perils

A list of additional perils including Riot, Explosion, Vehicles, Smoke, Hail, Civil Commotion, Aircraft, Windstorm, and Volcanic Eruption.

Vandalism and Malicious Mischief (V&MM)

An optional coverage that excludes damage to glass, losses by theft, or buildings vacant for more than $60$ consecutive days.

Automatic Removal

A provision allowing personal property to be covered for the proportion belonging to each location when moved to another residence of the insured within the same state.

Fire Department Service Charge

A coverage providing up to $500$ for charges incurred when the fire department is called to save or protect covered property; no deductible applies.

Worldwide Coverage

Provides $10\%$ of the Coverage C limit for personal property while it is located anywhere in the world.

Loss Settlement Condition (DP-1)

States that covered property losses are valued at actual cash value, not to exceed the amount necessary to repair or replace.

Replacement Cost Coverage

Applied in DP-2 and DP-3 for dwellings if the insured carries insurance equal to $80\%$ or more of the full replacement cost.

Proportional Replacement Cost Formula

$$\frac{\text{Insurance carried}}{\text{Insurance required}} \times \text{amount of loss} = \text{amount of reimbursement}$$

DP-2 (Broad Form)

A named peril policy covering all DP-1 perils, EC perils, V&MM, and additional perils like falling objects, weight of ice/snow, and accidental discharge of water.

DP-3 (Special Form)

Provides open peril coverage on the dwelling and other structures, while personal property is covered on a named peril basis similar to the DP-2.

Broad Theft Coverage Endorsement

Adds coverage for theft, attempted theft, and V&MM resulting from theft for owner-occupied dwellings or tenant-occupied apartments.

Coverage L—Personal Liability

Provides a limit of $100,000$ for damages the insured is legally obligated to pay due to bodily injury or property damage.

Coverage M—Medical Payments to Others

Pays necessary medical expenses incurred within three years of an accident, with a limit of $1,000$ per person.

Automatic Increase in Insurance Endorsement

Provides an annual increase in the Coverage A amount of $4\%$, $6\%$, or $8\%$.

Dwelling Under Construction Endorsement

An endorsement where the limit of liability is a percentage of the policy limit based on the value of the partially completed home as construction progresses.

Puffback

The release of soot, smoke, vapor, or fumes from a furnace, boiler, or similar equipment, covered under the smoke peril.