Dwelling Policies

Dwelling Policies Coverage

  • Covered Property: Property used for residential purposes.

Types of Property Covered

  • Owner-occupied housing

  • Tenant-occupied housing

  • Rental properties with up to five roomers or borders

  • Up to four residential units

  • Mobile homes (if permanently located on a private lot)

  • No more than one apartment

  • Properties under construction or renovation

  • Seasonal dwellings (unoccupied for 3+ months in a 12-month period)

Key Definitions

  • Owner or Tenant Occupied: Either the owner lives on the premises, or they rent it to tenants.

  • Up to Five Roomers or Borders and Four Units: Refers to a property having a maximum of five individual renters or borders and no more than four apartments or property units.

  • Permanently Located Mobile Homes: A mobile home that is affixed, tied down, or with the wheels/tongue removed, making it non-mobile.

  • Properties Under Construction: Coverage extends to properties being built or renovated.

  • Seasonal Dwelling: A property, such as a vacation home, covered under a dwelling policy if vacant for at least three months annually, even if used as an Airbnb.

Land Coverage

  • Land is never covered under a dwelling policy.

Important Part of Property Covered

  • The structure itself is the most important part covered by a dwelling policy.

Policy Ownership

  • Typically owned by landlords.

Incidental Business

  • Small service businesses are allowed to cover their properties with dwelling policies.

  • Examples: Pet grooming, hair/nail salons, auto detailing (businesses not primarily engaged in retail).

Key Takeaways

  • Owner-occupied or tenant-rented (up to five roomers/borders, four units).

  • Mobile homes must be permanently located.

  • Under construction: Being built or renovated.

  • Seasonal dwellings: Unoccupied for 3+ months a year.

  • Never cover farm property, equipment, or land.

  • The structure is the most important part of the policy.

  • Landlords or small business owners typically purchase these policies.

Dwelling Policy Coverages (A-E)

  • Mnemonic: A (A-frame house) equals dwelling, B (Barn/Backyard) equals other structures, C (Contents) equals contents, D (Rent) equals rent, E (Extra) equals extra living expenses

Coverage A - Dwelling

  • Main structure (like an A-frame house)

  • Attached structures

  • Construction materials or supplies for building/repairing the property

  • Building and outdoor equipment used to maintain the premises

  • Limit of liability equals replacement cost.

  • Land is never covered.

Coverage B - Other Structures

  • Structures not attached to the dwelling (detached garages, barns, sheds, fences).

  • Limit of liability: Up to 10% of Coverage A.

  • Example: If the house is insured for 150,000150,000, the coverage for other structures is 15,00015,000.
    (Coverage B Limit=0.10×Coverage A)(\text{Coverage B Limit} = 0.10 \times \text{Coverage A})

Coverage C - Personal Property

  • Contents normally at the residence belonging to the insured, family, guests, or servants; covered while on the premises.

  • Not included:

    • Accounts, banknotes, bullion, coins, currency, evidences of debt, passports, securities

    • Animals, birds, fish

    • Aircraft, hovercraft, watercraft (except rowboats and canoes)

    • Motor vehicles (except those servicing the location or assisting disabled persons)

    • Electrical equipment permanently installed in a vehicle

    • Data (stored in books, accounts, drawings, records, or computers), credit cards, funds transfer cards

    • Water or steam

    • Grave markers (covered under homeowner's policy, not dwelling).

  • Rowboats and canoes are covered due to low cost and common use on properties with ponds.

Coverage D - Fair Rental Value

  • Covers landlord's loss of rental income if the rented space cannot be occupied due to a covered peril.

  • Example: If a fire damages units B, C, and D, the insurance company pays the rent for those units until they are operational.

  • If a tenant breaks their lease, this coverage does not apply.

  • Policy expiration does not end payment of an existing claim.

Coverage E - Extra Living Expenses

  • Requires the landlord to live on the rental property to qualify.

  • Covers the increase in normal living expenses if units are uninhabitable.

  • Example: If normal weekly grocery expenses are 100100, and the hotel stay increases it to 150150, the policy covers the difference (5050).

  • Limit of liability is 20% of Coverage A.

  • Not included in DP-1 unless added as an endorsement.

Review Question: Coverage on DP-1

  • Extra living expense is not provided on a DP-1; it must be added as an endorsement.

DP Forms

  • DP-1 (Basic Betty): Names all perils and pays cash for everything.

  • DP-2 (Broad Brad): Names all perils but replaces the dwelling and other structures; pays cash for everything else.

  • DP-3 (Special Sam): Open peril (covers everything unless excluded) on A and B, but named peril on personal property; pays cash.

DP-1 (Basic Form)

Covered Perils

  • Fire

  • Lightning

  • Internal explosion

  • Remember: FLIE

Loss Valuation Method

  • Actual cash value.

Extended Coverages (Additional Cost)

  • WC SHAVER (Windstorm, Civil Commotion, Smoke, Hail, Aircraft, Vehicle, Explosion, Riot)

Additional Perils that can be added

  • Vandalism and Malicious Mischief (VMM).

  • VMM losses are excluded if the dwelling has been vacant for more than 60 consecutive days.

DP-2 (Broad Form)

Covered Perils

  • All perils covered by DP-1, plus extended coverages (WC SHAVER).

  • Includes VMM (Vandalism and Malicious Mischief)

Additional Perils (BIG EFFECT)

  • Burglary damage (damage caused to gain entry, not theft of property)

  • Ice, snow, and sleet weight

  • Glass breakage (must be part of the covered building; includes earth movement coverage)

  • Accidental discharge of water or steam (from plumbing, heating, AC)

  • Freezing of plumbing (insured must maintain heat or shut off/drain water)

  • Falling objects (exterior damage required first)

  • Electrical current artificially generated

  • Collapse (total or partial)

  • Tearing apart, cracking, or bulging (water heaters, HVAC systems).

DP-2 Exclusions:

  • Losses to outdoor antennas, awnings, and fences.

  • Weight of snow, ice, or sleet does not apply to awnings, fences, patios, or swimming pools.

Loss Valuation Method

  • Replacement cost on dwelling and other structures.

  • Actual cash value on personal property.

Glass Breakage and Landscapes Coverage

  • Glass breakage is covered if part of the building structure unless vacant for more than sixty days.

  • Landscapes (Lawns, trees, shrubs, and plants) are covered at up to 500500 per item, to a limit of 5% of Coverage A for specific perils, wind, hail, theft, or weight of ice snow or sleet.

DP-3 (Special Form)

Peril Policy

  • Open peril on dwelling and other structures (Coverage A & B).

  • Named peril on personal property (Coverage C).

Loss Valuation Method

  • Replacement cost on dwelling and other structures.

  • Actual cash value on personal property.

General Exclusions

  • Freezing or thawing or weight of water ice on patios, fences, swimming pools, foundations, piers, docks, retaining walls, and other structures to support the building.

  • Theft of property not part of a covered building or structure, theft to a dwelling structure under construction.

  • Wind, hail, ice, snow, or sleet to trees, shrubs, plants, outdoor radio, and antennas.

  • Malicious and malicious mist of theft, attempted theft, or any ensuing loss if the dwelling has been vacant for more than sixty days.

  • Constant or repeat seepage or leakage, wear and tear, deterioration, mechanical breakdown, smog rust, coercion, mold, and wet and dry rot, pollutants, agricultural smudging, settling, cracking, bulging, or expansion of foundation walls, floors, paved patios, birds, vermin, rodents, insects, or domestic animals, including infestation by an animal.

Other Coverages Included

  • Other Structures: 10% of Coverage A.

  • Debris Removal: Reasonable cost for debris removal from a covered loss.

  • Tenant's Improvements, Alterations, and Additions: Up to 10% of Coverage C limit (tenants only).

  • Worldwide Coverage: Up to 10% of Coverage C limit for losses away from the premises.

  • Fair Rental Value Additional Living Expenses: Up to 20% of Coverage A limit of liability.

  • Reasonable Repairs: Repairs necessary to protect property from further damage are covered.

  • Property Removed: Property moved to protect from a peril. Five days for DP-1, and thirty days for DP-2 and DP-3.

  • Fire Department Service Charge: Up to 500500 with no deductible.

Common Dwelling Policy Exclusions

  • Intentional acts

  • Earth movement

  • Water damage (varies)

  • Power failure

  • Neglect

  • War

  • Nuclear hazard

  • Ordinance of law

  • Government action

Earthquakes

  • An earthquake endorsement is available.

  • An earthquake is considered to be active in that seventy-two hours