Dwelling Property Insurance

Dwelling Property Insurance

Overview

• Dwelling property (DP) insurance is for residential properties ineligible for standard homeowners insurance.
• Reasons for ineligibility:
  • Not owner-occupied (e.g., vacation home).
  • Rental property (DP policies are essential for landlords).
  • Property value below minimum for homeowners policy (>$25,000).
  • High-risk conditions.
  • Under construction.

Keywords

• All Risk Policy: Insurance protecting the insured from loss arising from any peril other than those specifically limited or excluded by name. This contrasts with named peril insurance, which names the peril. Sometimes called open peril.
• Additional Living Expenses: Coverage designed to reimburse the insured for increased living expenses necessitated by loss to the dwelling. This indirect loss must be the result of direct loss by a covered peril.
• Appurtenant Structure: A permanent yard fixture separate and detached from the dwelling. An example is a detached garage or perhaps a tool shed. This coverage is often referred to as other structures.
• Automatic Increase in Insurance: DP zero four eleven. Dwelling policy endorsement that provides an annual increase in the coverage a. Property. Amount of 4%, six %, or 8%.
• Concealment or Fraud: This includes making false statements, intentionally concealing material facts, engaging in fraudulent conduct.
• Dwelling Fire Contracts: Monoline personal lines insurance policies that indemnify loss to a house, contents within the home, and the pertinent other structures. They are the DP one basic form, the DP two broad form, and the DP three special form.
• Dwelling Insurance: Personal insurance for ensuring buildings occupied for dwelling purposes having not more than four apartments or family units.
• Dwelling Policy One, Basic Form: The dwelling policy, DP. Forms are allied lines policies that provide coverage for individuals and families dwellings and personal property against fire and other perils.
• Dwelling Policy Two, Broad Form: The broad form is named perils coverage on both the dwelling and the contents. The DP two form includes all of the DP one basic form perils, including all of the extended coverage perils, plus vandalism and malicious mischief.
• Dwelling Policy Three, Special Form: DP three is open perils coverage on the dwelling and structures but offers named perils coverage on contents. The special form or DP three is the most comprehensive coverage available under the dwelling program.
• Dwelling Under Construction Endorsement: DP eleven forty three. This endorsement may be added when a dwelling is under construction, and the occupant will be the named insured. Coverage amount varies as a percent of the limit as construction progresses. The insured must inform the company when construction is complete, and occupancy is allowed for up to thirty days upon completion of the structure.
• Debris Removal: This includes the removal of volcanic ash plus any debris, which is the result of the covered peril.
• Earth Movement: Direct loss due to earthquake, including mudslides, landslides, and mine subsidence. An earthquake coverage endorsement is available.
• Intentional Loss: Intentional loss by the insurer or the direction of the insured and any loss resulting from intent to cause the loss. It is against public policy for the insured to be paid on an intentional loss cost by the insured.
• Liberalization Clause: If an insurer broadens coverage to an existing policy edition, all insureds having that original edition located within a state within sixty days of the broadening are entitled to this better coverage at no extra cost.
• Mortgage Clause: The mortgagee lender will be paid under coverage a and coverage b as their interest appears. If required to do so and with notice by the company, the mortgagee has sixty days to file a proof of loss. The mortgagee also will receive ten days notice prior to any cancellation or nonrenewal. The insurable interest of the mortgagee is limited to the principal balance remaining on the mortgage at the time.
• Nuclear Hazards: Nuclear hazards lost due to radiation or radioactive contamination due to any cause.
• Ordinance and Law: This is an additional coverage where the insured may use up to 10% of the dwelling amount to pay for the cost to bring the building up to code after a covered loss.

DP Policy Forms

• Three standard DP policy forms exist, maintained by the Insurance Services Office (ISO):
  • Basic Form (DP 01): Most limited coverage.
  • Broad Form (DP 02): Broader coverage than DP 01.
  • Special Form (DP 03): Most comprehensive coverage.

DP Policy Characteristics

• Provide coverage for dwellings with up to four residential units.
• Property-only contracts (no liability coverage unless endorsed).
• Options to cover:
  • Dwelling only.
  • Contents only.
  • Both dwelling and contents.
• Theft is not automatically covered.

Policy Structure

• Declarations Page: Includes insured's information, property details, policy term, coverage limits, deductibles, premium, and discounts/surcharges.
• Policy Form: Includes insuring agreement, definitions, coverages, perils insured against, general exclusions, and conditions.

Eligibility

• Maximum of 1-4 residential units per dwelling.
• Maximum of 5 boarders.
• Not owner-occupied or seasonally occupied (e.g., vacation homes).
• Structures valued under $25,000.
• Structures with high loss exposure.
• Dwellings under construction.
• Permanently installed mobile homes (DP 01 only).
• Vacant property (as of 02/2014 ISO forms).
• Incidental business activities are allowed under specific conditions:
  • Conducted by the insured.
  • Service-based, not goods.
  • No retail sales.
  • Maximum of two employees.

Definitions

• "You" and "Your": Named insured and spouse (if residing in the same household).
• "We," "Us," and "Our": The insurance company.
• Only a named insured or designated insured can collect under the policy.
• Insurable interest is required to insure property and collect claim payments.

Coverage Forms and Perils Insured Against

• Significant differences between DP forms are the perils insured against.
• Basic Form (DP 01): Limited coverage for named perils.
• Broad Form (DP 02): Broader coverage for named perils.
• Special Form (DP 03): Open peril coverage (unless excluded) for dwelling and named perils for personal property.
• Standard deductible: 500. Can be adjusted.

DP 01 Basic Form

• Named perils policy covering:
  • Coverage A: Dwelling.
  • Coverage B: Other Structures.
  • Coverage C: Personal Property.
  • Coverage D: Fair Rental Value.
• Loss settlements are Actual Cash Value (ACV) for all coverages.
• No minimum coverage requirement.
• Insures against:
  • Fire
  • Lightning
  • Internal explosion
• Extended Coverage (EC) Perils (additional premium):
  • Riot
  • Explosion
  • Vehicles (not yours)
  • Volcanic eruption
  • Civil commotion
  • Smoke
  • Hail
  • Aircraft
  • Windstorm
• Acronym: REV VVC SHA
• Optional Vandalism and Malicious Mischief (VMM) coverage (additional premium).
• Extended coverages exclude:
  • Fences, driveways, sidewalks damaged by vehicles.
  • Exterior awnings, signs, antennas damaged by wind/hail.
  • Theft.
  • Glass breakage.
  • Damage to vacant buildings (60+ days).
• Definitions of Basic Perils:
  • Fire: Combustion producing a spark, flame, or glow. Hostile fire (escaped confines) is covered, friendly fire (contained) is not.
  • Lightning: Natural discharge of electricity.
  • Internal Explosion: Explosion occurring within the described property.
• Definitions of Extended Coverage Perils:
  • Riot: Violence by a group.
  • Explosion: Internal or external explosions of any kind.
  • Vehicles: Physical damage caused by vehicles (doesn't cover the vehicle itself).
  • Volcanic Eruption: Damage from lava flow and airborne particles.
  • Civil Commotion: Disturbance causing collateral damage.
  • Smoke: Sudden, accidental damage from smoke (excludes agricultural/industrial operations).
  • Hail: Damage caused by direct action of hail.
  • Aircraft: Damage from aircraft.
  • Windstorm: Damage from wind. In some areas, a separate windstorm policy is needed.
  • Vandalism and Malicious Mischief (VMM): Willful, intentional actions (excludes theft, burglary). Not covered if vacant for 60+ days. A Dwelling under construction is not considered vacant.

DP 02 Broad Form

• Named perils policy covering:
  • Coverage A: Dwelling.
  • Coverage B: Other Structures.
  • Coverage C: Personal Property.
  • Coverage D: Fair Rental Value.
  • Coverage E: Additional Living Expenses.
• Loss settlements:
  • Coverage A & B: Replacement Cost (subject to 80% coinsurance).
  • Coverage C: ACV.
• Includes all DP 01 perils (including EC perils and VMM).
• Additional Broad Form Perils:
  • Burglar Damage
  • Ice, Snow, or Sleet Weight
  • Glass Breakage
  • Accidental Discharge or Overflow of Water or Steam
  • Falling Objects
  • Freezing
  • Electrical Damage
  • Collapse
  • Tearing Apart, Cracking, Burning, or Bulging
  • Acronym: BIG EFFECT
• Definitions of Broad Form Perils:
  • Burglar Damage: Damage caused by burglars to the dwelling (not stolen property).
  • Ice, Snow, or Sleet Weight: Damage to interior building/contents (excludes awnings, fences, pools, etc.).
  • Glass Breakage: Covers all glass in the building (excludes vacancy for 60+ days).
  • Accidental Discharge or Overflow of Water or Steam: Covers accidental discharge of water. Excludes gradual seepage, vacancy of 60+ days, and off-premises occurrences.
  • Falling Objects: Damage to the exterior of the building and contents caused by falling objects (excludes awnings, fences, outdoor equipment).
  • Freezing of Pipes: Covers damage to plumbing/appliances due to freezing (excludes vacancy for 60+ days unless precautions are taken).
  • Electrical Damage: Electrical damage caused by artificially generated current (excludes electronic component damage).
  • Collapse: Abrupt collapse of a wall or structure (excludes bulging, expansion, settling, cracking, and shrinking. Not covered if the building is in danger of falling down.
  • Tearing Apart: Sudden and accidental tearing apart, cracking, burning, or bulging of a steam/hot water system, AC, or appliance.

DP 03 Special Form

• Most comprehensive DP policy.
• Coverage:
  • Coverage A: Dwelling - Open Perils.
  • Coverage B: Other Structures - Open Perils.
  • Coverage C: Personal Property - Named Perils (same as DP 02).
• Loss settlement:
  • Coverage A & B: Replacement Cost (subject to 80% coinsurance).
  • Coverage C: ACV.
• Exclusions for Coverage A & B:
  • Birds, vermin, rodents, insects, domestic animals.
  • Wear and tear, marring, rust, mold, rot, contamination.
  • Smoke from agricultural smudging/industrial operations.
  • Mechanical breakdown.
  • Smog.
  • Settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundations, walls, floors, roofs, or ceilings.
  • Wind/hail to antennas, trees, plants, shrubs, lawns.
  • Theft of non-dwelling property under construction
  • Freezing/thawing damage to awnings, fences, pavements, patios, swimming pools, foundations retaining walls, etc.
  • Inherent vice/latent defect.
  • Vandalism/malicious mischief when vacant for 60+ days.

Dwelling Policy Property Coverages

• Five coverage parts:
  • Coverage A: Dwelling (direct loss).
  • Coverage B: Other Structures (direct loss).
  • Coverage C: Personal Property (direct loss).
  • Coverage D: Fair Rental Value (indirect loss).
  • Coverage E: Additional Living Expenses (indirect loss - not in DP 01).
• Coverages A, B, and C protect against direct loss.
• Coverages D and E protect against indirect loss (time element insurance).
• Limits for coverages A, B, and C are calculated as follows:
  • Coverage A: Dwelling limit based on dwelling value.
  • Coverage B: Other structures limit, which is 10\% of the dwelling limit or coverage A.
  • Coverage C: Personal property limit, which is chosen by the insured. Insurance companies might apply minimum or maximum coverage limits.
• Coverage A: Dwelling
  • Covers the dwelling at the described location from the declarations page.
  • Covers structures attached to the dwelling.
  • Covers materials and supplies located on or next to the described location used for construction, alteration, or repair of the dwelling as well as building equipment.
  • Covers outdoor equipment that is used for the service of and is located on the described location.
  • Land is not covered under a dwelling policy form, even the land that the dwelling is located on.
• Coverage B: Other Structures
  • Covers other structures that are set apart from the insured dwelling by a clear space (e.g., detached garage, tool shed).
  • Structures connected to the dwelling by only a fence, utility line, or similar connection are covered.
  • Land is not covered, including land on which the other structures are located.
  • Other structures rented or intended to rented to any person who is not a resident of the dwelling are not covered. However, coverage is still provided if the structure is only used as a private garage.
  • Grave markers including mausoleums and all other structures used for commercial, manufacturing, or farming purposes are also not covered.
  • If another structure is being used for the above mentioned purpose of commercial, manufacturing, or farming purpose. Coverage B will pay up to 10,000 and coverage A and B combined will pay a maximum amount of 110,000. However different forms have different effects on the coverage A limit.
  • The limit of liability for coverage B is 10% of the limit of liability for coverage A.
• Coverage C: Personal Property
  • Covers personal property owned and used by the insured (or family members residing with the insured).
  • Insurance must be of a type that is usual to the dwelling occupancy.
  • The insured may request to cover the personal property of others located on the insured premises as well as that of guests and resident employees.
  • Coverage amount is the stated agreed value from the dclarations page.
  • The covered property must be of a type that is usual to the dwelling occupancy, even if the insured often lives somewhere else.
  • The property may be stored at the new dwelling for up to 30 days.
  • Exclusions:
    • Accounts, bank notes, bills, bullion, coins, currency, deeds, evidence of debt, gold (other than goldware), letters of credit, manuscripts, metals, money, notes (other than bank notes), passports, personal records, platinum (other than platinumware), securities, silver (other than silverware), tickets, stamps, script, stored value cards and smart cards
    • Animals, birds, or fish.
    • Aircraft meaning any contrivance used for flight. Model or hobby aircraft not used to carry people or cargo are covered however.
    • Hovercraft and parts.
    • Motor Vehicles.
    • Watercraft of all types, other than rowboats and canoes.
    • Data, including data stored in books of account, drawings, paper records, or computers and related equipment.
    • Credit cards, electronic find transfer cards, or access devices used solely for deposit, withdrawal, or transfer of finds.
    • Water/steam.
    • Grave markers. including mausoleums
• Coverage D: Fair Rental Value
  • Coverage for loss of rental payments if the dwelling becomes uninhabitable due to a covered peril.
  • The amount the insured can recover is the reasonably expexted rent for the premises less any expenses which are not expected.
  • Coverage d under a DP zero one reduces coverage A's limit of liabiliity by the amount paid for the same loss. It is not paid in addition.
• Coverage E: Additional Living Expense
  • Covers increase in living expenses incurred for the household can maintain its normal standard of living due to a covered loss. The coverage E can use up to 20% of the coverage A limit of liablility.

Other Coverages

• Additional property coverages that don't fit under the main coverage parts.
• Provided on the standard form without additional premium.
• Two groups:
  • Provided under all DP forms (DP 01, DP 02, DP 03).
  • Provided under DP 02 and DP 03 only.
• Coverage is provided under all DP forms. DP zero one, DP zero two, and DP zero three
  • Debris removal
  • Improvements, alterations, and additions
  • Reasonable repairs
  • Property removed
  • Fire department service charge
• Coverage is provided only under DP zero two and DP zero three
  • Trees, shrubs, and other plants
  • Glass or safety glazing material
  • Ordinance or law
• Debris Removal pays for expenses to remove debris of covered property if a peril insured against causes the damage.
• Improvements, Alterations, Or Additions covers up to 10% of the coverage C limit of liability when a tenant makes improvements to the part of the occupied permises to a loss caused by a covered peril. Under a d p zero one policy. This coverage will reduce coverage C's limit of liability by the amount paid for the same loss.
• Reasonable Repairs Coverage will pay for the reasonable costs incurred by the insured for necessary measures the insured takes to protect the damaged property from further damage, if the property is damages by a covered peril.
• Property Removed covers property being removed from a dwelling that is endangered by a peril. DP zero one. policies protect property removed for no more than five days after removal DP zero two and DP zero three police is protect property removed for no more than thirty thirty days after removal
• Fire Department Services pays up to 500 when the fire departmant is called to protect the covered property from any peril insured against.
• Trees, Shrubs and Other Plants coverage is provided for damaged trees, shrubs, plants, or lawns on the described location, but only for lost cost by the following perils insured against, fire or lightning, explosion, riot, or civil commotion, aircraft, vehicles not owned or operated by the insured or resident of the described location, or vandalism or malicious mischief, including damage during a burglary or attempted burglary, but not theft of property. The limit of liability for this coverage is either a maximum of up to 5\% of the coverage a limited liabilility or up to 500 for any one tree, shrub, or plant
• Glass or Safety Glazing Material A homeowner's policy covers replacemtn of glass and safety glazing material that is part of the insured residentes when damages by a covered peril or earth movement.No coverage for loss will be provided if the building has been vacant for more then 60 days
• Ordinance or Law-The ordinance or law coverage will pay the increased cost and insured incurred due to the enforcement of any ordinance or law which requires or regulators the contruction, demolition, remodeling, renovation, or repair of that part building or other structure that is necessary to complete the remodeling, repair, or replacement of that part of the covered building or other structure damabged by a peril insured against.

Dwelling Policy Personal Liability Supplement

• Optional supplement covering personal activities that cause bodily injury or property damage.
• Includes:
  • Coverage L: Personal Liability.
  • Coverage M: Medical Payments to Others.
• Insured definition is expanded.
• Generally excludes business or vehicle-related activities.
• Coverage L: Personal Liability
  • Covers damages for which the insured is legally liable due to bodily injury or property damage.
  • Provides defense at the insurer's expense. Limits of 100,000 to 500,000 are common.
• Coverage M: Medical Payments to Others
  • Pays necessary medical expenses incurred within three years from an accident.
  • Excludes regular residents of the insured's household (except resident employees).
  • Common limit: 1,000.
• Any payment made to another party under coverage M is not an admittion of liabililty or guilt by either the insured or the insurer

General Exclusions

• Apply to DP 01, DP 02, and DP 03 forms.
• Include:
  • Ordinance or Law.
  • Earth Movement.
  • Water Damage.
  • Power Failure.
  • Neglect.
  • War.
  • Nuclear Hazard.
  • Intentional Loss.
  • Governmental Action.
  • Ordinance or Law exclusions applies whether or not the property has been physically damaged.

Conditions

• Outline duties and rights of both insurer and insured.
• Include rules on policy term and termination.
• Conditions:
  • Policy Period - all covered losses must occur during policy period. Coverage begins at 12:01 am of dates listed on declarations page.
  • Mortgage Clause- Special protection for the interest of the mortgagee when a loan is made for the purpose of purchasing the dwelling to be insured.
  • Liberalization-If an insurer broadens coverage to an existing policy edition, all insureds having that original edition located within a state within sixty days of the broadening are entitled to this better coverage at no extra cost.
  • Concealment or Fraud - the policy can be voided if the statements were made to decieve the insurer
  • Recovered Property - the insurer or the insure must notify eacho ther of if stolen property is covered. The insured must decide to either keep recovered property or to turn over recoverd property to the insurer and keep the lost payment.
  • Duties After Loss - insured must give the insurer prompts notice.
  • Loss Settlement- Property loss is settld at actual cash value in all standard forms.Dwelling and other structures are setttles on ACV basis on the DP zero one form and replacement loss on hte zero two and zero three forms.
  • Loss Payable Clause- when an additional party has insurable interset in certain personal property as idnicates in the declarations. (called a loss payee)
  • Legal Action Against Insurer- limits the amount of time an insured is eligible to take legal action.

Cancellation and Nonrenewal

• Cancellation: Ending a policy before the end date.
  • Insured can request cancellation at any time.
  • Insurer must provide advance notice (state-specific).
  • First 60 days: underwriting discovery period (insurer can cancel for any reason with 10 days notice).
  • Material misrepresentation-An insurer can only cancel the policy if the insured did not meet premium obligations.
• Nonrenewal: Insurer decides not to renew the policy at the end date. Advanced notice needs to be given thirty days before expiration date.

Selected Endorsements

• Expand coverages for additional premium.
• Endorsements:
  • Automatic Increase in Insurance (Inflation Guard)
  • Theft Coverage (Limited and Broad).
  • Dwelling Under Construction.
  • Ordinance or Law
  • Microbial Matter
  • Special Provisions (State-Specific Requirements).
• Automatic Increase in Insurance (Inflation Guard), DP zero four eleven adds limits of liaibly for coverage A and B to increase each year by a stated percentage to be selected by the insured. Standard automatic increase is 4\% annually
• Limited Theft Coverage adds theft, including attempted theft, and premises. Coverage will not be provided if dwelling has be vacant for over 60 days before loss
• Broad Theft Coverage is the same as limited theft, but additionally covers off permises losses
• Dwelling under Construction allows the named insured coverage as they build their home. The coverage amount increases as the home builds.
• Ordinance or Law DP zero four seventy four pays for increased costs that an insured in cures that are due to the enfrocment of and ordiance of law
• Microbial Matter, DP zero four twenty two, allows an insurer to choose a dollar amount limit to help with cost of fungi and bacteria.
• This must be the result of apparel insured against
• Special Provisions - Many states require special previsions to comply with certain statutes or regulations.