3.2 Dwelling Coverages A-E and Other Coverages

The Five Dwelling Coverages

Every DP form organizes limits into lettered coverages. Memorize the letters and what each insures—the exam frequently asks which coverage responds to a given loss.

• Coverage A - Dwelling: the house itself plus attached structures and building materials on site.
• Coverage B - Other Structures: detached garages, sheds, fences. The automatic limit is 10% of Coverage A and it is an additional amount of insurance (it does not erode Coverage A).
• Coverage C - Personal Property: household contents. Often not included at all on a tenant-occupied DP; the landlord buys A and B only.
• Coverage D - Fair Rental Value: lost rent when a covered peril makes the premises unfit to rent.
• Coverage E - Additional Living Expense (ALE): extra costs an owner-occupant incurs to maintain the household elsewhere.

How Coverage D and E Differ by Occupancy

This is a classic trap. Coverage D (Fair Rental Value) pays the landlord for lost rental income; Coverage E (ALE) pays the owner-occupant for the extra cost of living away from home. On the DP-1, the combined D + E limit is typically 20% of Coverage A and is paid only for the time reasonably required to repair or replace. On DP-2 and DP-3 the percentage and provisions are broader (DP-2/3 ALE is commonly 20% of Coverage A as an additional amount).

Mnemonic: D = Dollars to the landlord (rent), E = Expenses to the resident (living elsewhere).

Percentage Relationships (Memorize)

Worked example: A DP-3 has Coverage A = $300,000. A covered fire destroys the detached garage. Coverage B provides an automatic additional limit of 10% x $300,000 = $30,000 for the garage—separate from and on top of the $300,000 dwelling limit.

Other Coverages (Additional Coverages)

DP forms grant several Other Coverages that apply without reducing the main limits unless stated:

• Debris Removal - cost of removing covered debris after a loss.
• Improvements, Alterations and Additions - up to 10% of Coverage C for a tenant's betterments (broad/special forms).
• Reasonable Repairs - temporary repairs to protect property.
• Property Removed - covers property for 5 days while removed to protect it from loss.
• Trees, Shrubs and Other Plants - up to 5% of Coverage A (DP-2/3), with a per-item cap (commonly $500), only for named perils such as fire, lightning, explosion, riot, aircraft, vehicles not owned by the insured, and vandalism.
• Fire Department Service Charge - up to $500, no deductible applies.
• Collapse (DP-2/3) - sudden collapse from specified causes.

Coverage A and B in Practice

Coverage A insures the dwelling on the described location, including structures attached to the dwelling, materials and supplies on or next to the premises used to build/alter the dwelling, and building equipment and outdoor fixtures. It does not insure land. Coverage B insures structures set apart from the dwelling by clear space, or connected only by a fence, utility line, or similar connection. A detached garage, tool shed, or gazebo is Coverage B; an attached garage is part of Coverage A.

If a structure is rented to anyone other than a tenant of the dwelling, or used for business, Coverage B is restricted—an exam favorite. A shed used to store a renter's business inventory may fall outside Coverage B.

Coverage C and Worked Allocation

Coverage C - Personal Property covers household contents usual to a dwelling, owned or used by the insured, anywhere in the world (with a percentage limit—often 10% of Coverage C—applying to property usually located at another residence). On a tenant-occupied rental, the landlord typically buys A and B only; the tenant insures their own contents under a separate tenant DP or HO-4.

Worked allocation: a DP-3 lists A = $200,000, B is automatic at 10% ($20,000), and C is selected at $80,000. A fire destroys the dwelling ($150,000), the detached shed ($8,000), and contents ($30,000). The shed loss draws on the separate $20,000 Coverage B limit, not the $200,000 dwelling limit, so all three losses are paid in full (less deductible) because each stays within its own coverage limit.

Fair Rental Value vs. Additional Living Expense

The DP program splits time-element coverage differently from a homeowners policy, and the exam tests the distinction:

• Coverage D — Fair Rental Value pays the lost rental income the insured would have collected from a tenant when a covered loss makes the rented part of the dwelling uninhabitable.
• Coverage E — Additional Living Expense pays the extra cost the owner-occupant incurs to maintain their normal standard of living elsewhere.

Because many dwelling policies cover rental property, Fair Rental Value is often the relevant time-element coverage — a landlord loses rent, not living expenses. Both are limited to the shortest time required to repair or replace.

Other Coverages and Standard Percentages

DP "Other Coverages" parallel homeowners and include debris removal, reasonable repairs, property removed (for up to 5 days while protected from a covered peril), and trees/shrubs/plants (typically limited to 5% of Coverage A, with a per-item cap). The DP also provides worldwide coverage on certain personal property at a reduced percentage.

Standard limit relationships on a DP-3 commonly run Coverage B at 10% of A and Coverage C contents at an amount the insured selects. Unlike a homeowners policy, contents coverage on a landlord's DP may be minimal or excluded because the tenant owns the contents — a fact the exam uses to test whether you understand who occupies the dwelling.