3.2 Dwelling Coverages A-E and Other Coverages

Coverage A: Dwelling

Coverage A insures the described residential structure and property that is part of it:

• The building and structures attached to it (attached garage, deck, porch)
• Built-in appliances and fixtures: furnace, central air, water heater, built-in dishwasher, cabinets, flooring
• Materials and supplies on or next to the premises used to build, alter, or repair the dwelling

Coverage A never insures the land or the cost to excavate and regrade it. Detached structures move to Coverage B; tenant property is the tenant's responsibility.

Coverage B: Other Structures

Coverage B insures structures separated from the dwelling by clear space or connected only by a fence or utility line: detached garages, sheds, fences, in-ground pools.

• Automatic limit = 10% of Coverage A.
• On DP-2 and DP-3 the 10% is an additional amount of insurance.
• On DP-1 the 10% is part of the Coverage A limit.
• Structures rented to a non-tenant or used for business are excluded.

Example: Coverage A $300,000 produces Coverage B of $30,000.

Putting the Percentages Together

For a fast mental model on DP-2/DP-3, anchor every limit to Coverage A: the building is 100%, Other Structures is 10% additional, loss of use is 20% additional, and personal property is whatever optional limit the landlord buys. On the DP-1 the same B and D+E percentages apply but are carved out of the Coverage A limit rather than added to it, which is the single most common dwelling-coverage trap on the exam.

Coverage C: Personal Property

Coverage C is optional and insures only property owned or used by the named insured at the location: a landlord's supplied appliances, laundry equipment, or furnishings in a furnished rental.

Critical: Coverage C does NOT insure tenant property. Tenants buy their own HO-4 renters policy.

When purchased, dollar sublimits cap certain categories even when the loss is covered:

Coverage D: Fair Rental Value

Coverage D pays the landlord the fair rental value of the part rented or held for rental when a covered loss makes it uninhabitable, minus expenses that do not continue. It pays only for the time reasonably required to repair or replace, and does not extend simply because a tenant moves out voluntarily.

Coverage E: Additional Living Expense

Coverage E pays an owner-occupant the necessary increase in living costs (hotel, extra meals, transportation) to maintain a normal standard of living while the dwelling is uninhabitable from a covered loss. For a pure landlord, Coverage D, not E, is the relevant loss-of-use coverage. The distinction matters when a dwelling is partly owner-occupied and partly rented: a duplex owner who lives in one unit and rents the other can draw on both Coverage D for the lost rent and Coverage E for the extra cost of living elsewhere, all within the shared 20% pool.

The 20% Rule for D + E

On the ISO dwelling forms, Coverages D and E share a combined limit of 20% of Coverage A. The catch the exam tests is whether that 20% is additional insurance:

Common prep error: Some materials claim "10% on DP-1/DP-2, 20% on DP-3." The ISO standard is 20% on all three forms; the real difference is additional versus part of the limit.

Worked Example

Rental home, Coverage A $300,000 on a DP-3:

A kitchen fire makes the home unrentable for five months at $3,000 per month. The landlord collects $15,000 under Fair Rental Value, well inside the $60,000 pool, and repairs are paid separately under Coverage A.

Additional Coverages

Beyond A through E, the forms include additional coverages that do not reduce the main limits (subject to their own caps): debris removal, reasonable repairs (temporary repairs to prevent further loss), property removed (covered briefly while moved to protect it), and limited trees, shrubs, and plants coverage. Unlike a homeowners policy, the dwelling forms do not include loss-assessment or credit-card coverage, which ride on the HO liability side.

The dwelling coverage letters and the 20% rule

The Dwelling Policy (DP) uses the same coverage letters but with key differences from homeowners. Coverage A (Dwelling) and Coverage B (Other Structures) insure the building and appurtenant structures; Coverage C (Personal Property) is optional and must be added; Coverage D (Fair Rental Value) and Coverage E (Additional Living Expense) address loss of use.

The most tested relationship is that D and E together are limited to a percentage of Coverage A (commonly 20% on the DP-2/DP-3, lower on the DP-1), and that Coverage B is typically 10% of A and is included within rather than added to the Coverage A limit when used.

Why the dwelling policy exists alongside homeowners

The DP fills the gaps the homeowners program cannot: non-owner-occupied rentals, seasonal/secondary dwellings, dwellings with more boarders than HO allows, and tenant-occupied 1-4 family rentals. Because the DP contains no liability and no theft in its base form, those must be added by endorsement - the absence of automatic liability and theft is the single most common DP exam point. A landlord insuring a rental house therefore buys a DP for the structure and fair rental value, then endorses on liability, contrasting with a homeowner who gets liability built in.