3.2 Dwelling Coverages A-E and Other Coverages
Key Takeaways
- Coverage A=Dwelling, B=Other Structures, C=Personal Property, D=Fair Rental Value, E=Additional Living Expense.
- Coverage B is automatically 10% of Coverage A as an additional amount of insurance.
- Coverage C off-premises coverage is limited to 10% of the Coverage C limit.
- Loss of use is split: Coverage D for rented dwellings, Coverage E when the owner occupies.
- Other Coverages include Debris Removal, Reasonable Repairs, Trees/Shrubs, and a property removal provision.
The Five Lettered Coverages
Every dwelling form is built around five coverages, lettered A through E. The insured selects the Coverage A limit, and several other coverages are stated as a percentage of Coverage A or C.
| Coverage | Insures | Standard Default |
|---|---|---|
| A — Dwelling | The structure, attached fixtures, materials on premises | Selected limit |
| B — Other Structures | Detached garages, sheds, fences | 10% of A (additional) |
| C — Personal Property | Contents of insured/family | Selected limit |
| D — Fair Rental Value | Lost rent when home is rented | 20% of A (DP-2/DP-3) |
| E — Additional Living Expense | Extra cost when owner displaced | 20% of A (DP-2/DP-3) |
Coverage A — Dwelling
Coverage A insures the dwelling on the described location, including structures attached to it, plus materials and supplies on or next to the premises used to build, alter, or repair the dwelling. It does not cover land. On DP-2 and DP-3 it settles at Replacement Cost subject to coinsurance; on DP-1 it settles at ACV.
Coverage B — Other Structures
Coverage B insures detached structures such as a separate garage, tool shed, or fence. It is provided as an additional amount of insurance equal to 10% of Coverage A — so a $300,000 Coverage A gives $30,000 of Coverage B above the dwelling limit. Structures rented to a non-tenant or used for business are excluded unless endorsed.
Coverage C — Personal Property
Coverage C is optional on DP forms and insures household contents at ACV. Property usually located at the described premises is covered there, while off-premises personal property is limited to 10% of the Coverage C limit (subject to a minimum, often $1,000). Coverage C uses the named-peril list even under DP-3.
Coverages D and E — Loss of Use
Loss of use is split by occupancy. Coverage D — Fair Rental Value pays the lost rental income (less non-continuing expenses) when a rented portion becomes uninhabitable from a covered loss. Coverage E — Additional Living Expense (ALE) pays the extra cost an owner-occupant incurs to maintain their normal standard of living while displaced. Both apply for the shortest time to repair or replace the damaged premises.
Worked Example — Coverage Percentages
A DP-3 carries Coverage A = $250,000. Without endorsement:
- Coverage B = 10% × $250,000 = $30,000 (additional)
- Coverage D + E combined = 20% × $250,000 = $50,000
- Off-premises Coverage C, if C = $100,000, = 10% × $100,000 = $10,000
Exam trap: Coverage B is additional to A, but Coverage D/E typically share the same percentage pool and reduce the available loss-of-use amount as drawn.
Other Coverages
Dwelling forms include several Other Coverages that add small, targeted amounts:
- Debris Removal — cost to remove debris of covered property
- Improvements/Betterments — for tenant-installed alterations
- Reasonable Repairs — emergency measures to protect property
- Property Removed — covered against direct loss for up to 5 days while removed to protect it
- Trees, Shrubs, and Other Plants — limited to 5% of Coverage A, max $500 per item, for specified perils
Coverage B Trap: Additional vs. Within Limits
Under ISO dwelling forms, Coverage B is an additional 10% of Coverage A — it sits on top of the dwelling limit, not inside it. So a $250,000 dwelling has $30,000 of detached-structure coverage available even after a total dwelling loss exhausts Coverage A. Contrast this with some Homeowners writings where Coverage B can be drawn from within A. A frequent distractor states Coverage B "reduces the amount available for the dwelling" — that is false on the standard DP form.
Loss of Use Is Occupancy-Driven
The most-missed Coverage D/E point is who lives there:
| Situation | Coverage that responds |
|---|---|
| Owner-occupant displaced by a covered loss | Coverage E — Additional Living Expense |
| Landlord loses rent because tenant's unit is uninhabitable | Coverage D — Fair Rental Value |
| Owner rents out one room and is also displaced | Both D (lost room rent) and E (their own extra costs) |
Fair Rental Value pays only the lost rent minus expenses that do not continue (e.g., utilities the landlord no longer pays). ALE pays the increase over normal living cost — not the entire hotel bill, only the amount above what the family normally spends. Both are capped by the "shortest time required to repair or replace" the premises, and if the insured does not actually move out, ALE pays nothing.
Worked Example — Fair Rental Value
A landlord normally collects $1,800/month rent. A covered fire makes the unit uninhabitable for 3 months. While vacant, the landlord saves $200/month in utilities and trash service that previously came out of the rent. Fair Rental Value pays ($1,800 − $200) × 3 = $4,800, not the gross $5,400 — the non-continuing expense is deducted. With Coverage A of $250,000 the 20% D/E pool of $50,000 easily covers this.
Coverage C Off-Premises and Special Limits
When Coverage C is purchased, up to 10% of the Coverage C limit follows the insured's property worldwide (off-premises). Certain categories carry special internal sub-limits — money, securities, jewelry, firearms, and silverware are capped at low dollar amounts and require scheduling (the Scheduled Property endorsement) for full value. Because DP contents are ACV by default, a five-year-old laptop pays its depreciated value, not the cost of a new one, unless a replacement-cost-on-contents endorsement is added.
An owner-occupied home insured under a DP-3 with Coverage A of $400,000 is uninhabitable after a covered fire. Which coverage pays the extra hotel and meal costs the owner incurs, and what is the combined D/E limit?