3.2 Dwelling Coverages A-E and Other Coverages
Key Takeaways
- The five dwelling coverages are A Dwelling, B Other Structures, C Personal Property, D Fair Rental Value, and E Additional Living Expense.
- Coverage B is automatically 10% of Coverage A as additional insurance; Coverage C is a default 5% of A in the DP-1 but is selected by the insured.
- Coverages D and E together are commonly limited to a percentage of Coverage A (often 20%) and require a covered peril to trigger.
- Replacement cost on the dwelling is paid in full only when insurance equals at least 80% of replacement cost at the time of loss.
- Coverage C in a dwelling form is on-premises only unless worldwide/off-premises coverage is endorsed; this differs from Homeowners.
The Five Lettered Coverages
All three dwelling forms share the same Coverage A through E framework. The insured selects a Coverage A limit; several other coverages are expressed as a percentage of A.
| Coverage | Insures | Typical default relationship to A |
|---|---|---|
| A - Dwelling | The residence and attached structures | Selected by insured |
| B - Other Structures | Detached garages, sheds, fences | 10% of A (additional insurance) |
| C - Personal Property | Household contents | 5% of A on DP-1; selected, on-premises |
| D - Fair Rental Value | Lost rent when premises unfit | Part of 20% of A (D + E shared) |
| E - Additional Living Expense | Extra cost to maintain household | Part of 20% of A (D + E shared) |
Note that Coverage B is additional insurance — paying a Coverage B loss does not reduce the Coverage A limit. Examiners contrast this with how some sublimits erode the main limit.
Coverage D vs. Coverage E
Both Coverage D (Fair Rental Value) and Coverage E (Additional Living Expense) respond when a covered peril makes the residence uninhabitable, but they apply to different parties.
- Coverage D - Fair Rental Value pays the landlord the lost rental income for the part of the premises rented or held for rental to others, less expenses that do not continue.
- Coverage E - Additional Living Expense pays the owner-occupant the increase in living costs to maintain the household's normal standard of living elsewhere.
A frequent trap: the loss must be caused by a peril insured against. Damage from an excluded peril (e.g., flood) that displaces the occupant does not trigger D or E. Both coverages are limited to the shortest time reasonably required to repair or replace, or for the household to settle elsewhere.
Coverage C in a dwelling form differs sharply from Homeowners. Dwelling Coverage C is on-premises only unless off-premises or worldwide coverage is endorsed, and on the DP-1 the default Coverage C amount is often 5% of Coverage A as additional insurance at the described location.
Because many DP policies are written for landlords who own the building but not the tenant's belongings, Coverage C is frequently selected at a low limit or excluded entirely. When the insured does own contents (appliances furnished to tenants, a furnished seasonal home), an adequate Coverage C limit must be requested — it is not automatically scaled to the dwelling value the way Coverage B is.
Replacement Cost and the 80% Test
DP-2 and DP-3 settle dwelling (Coverage A) losses on a replacement cost basis, but full replacement cost is paid only if the insured carries at least 80% of the dwelling's replacement cost at the time of loss. If underinsured, the insurer pays the larger of ACV or the amount produced by the coinsurance-style formula:
Payment = (Carried / (0.80 x Replacement Cost)) x Loss (capped at the policy limit, less the deductible).
Worked example: A dwelling has a replacement cost of $300,000. The required minimum is 0.80 x 300,000 = $240,000. The insured carries only $180,000 and suffers a $40,000 partial loss with a $500 deductible.
- Ratio = 180,000 / 240,000 = 0.75
- Indicated RC payment = 0.75 x 40,000 = $30,000
- Less $500 deductible = $29,500 (because this exceeds ACV, RC settlement applies).
Other Coverages Bundled Into Every DP
Beyond Coverages A–E, the dwelling forms grant a set of other coverages that examiners pull single facts from:
- Other Structures away from the dwelling are covered under Coverage B (additional 10% of A) but rented structures used for business are limited.
- Debris removal pays the cost to clear covered debris, included within the limit (with a small additional amount if the limit is exhausted).
- Reasonable repairs, trees/shrubs/plants (typically 5% of A, capped at $500 per item on broader forms), fire-department service charge (often $500), and property removed from endangered premises for up to 5 days are all standard.
- Collapse (on DP-2/DP-3) covers abrupt collapse from specified causes such as hidden decay or the weight of contents.
These small sublimits generate quick recall questions; memorize the dollar caps because the exam asks them directly.
Standard Amount of Insurance and the 80% Threshold
Two numbers anchor dwelling settlement questions. First, the 80% coinsurance-style threshold must be met at the time of loss, not at policy inception — a home that appreciates can fall below 80% even though it qualified when written, which is why an inflation-guard endorsement that raises Coverage A automatically is a common recommendation.
Second, when a dwelling is insured for less than 80% of replacement cost, the insurer pays the greater of the actual cash value of the damaged part or the coinsurance-formula amount. When it is insured for 80% or more, the insurer pays full replacement cost up to the limit. A frequent multi-step item gives a replacement cost, a carried limit, and a partial loss and asks you to compute both the ACV and the formula result, then report the larger figure minus the deductible.
Coverage B (Other Structures) on an unendorsed dwelling form is automatically provided as:
A DP-3 insures a dwelling for $160,000 when its replacement cost is $250,000. A covered fire causes a $50,000 partial loss; the deductible is $1,000. Using the 80% replacement-cost condition, the recovery is approximately: