3.2 Dwelling Coverages A-E and Other Coverages

Dwelling Coverages A–E and Other Coverages

The Dwelling policy organizes limits under lettered coverages. Knowing what each letter insures — and the automatic percentage relationships between them — lets you solve most exam math without memorizing dollar figures.

The five lettered coverages

Coverage A and the 10% Coverage B relationship

In DP-2 and DP-3, Coverage B is provided as an additional amount equal to 10% of Coverage A — it does not erode the dwelling limit. Worked example: a DP-3 with Coverage A of $300,000 automatically provides up to $30,000 for detached structures (10% × $300,000). In DP-1, by contrast, the 10% is carved out of (not added to) Coverage A.

Coverage C and off-premises sub-limits

Coverage C is optional on the DP-1/DP-2/DP-3 because many Dwelling insureds are landlords with no contents to insure. When written, 10% of the Coverage C limit extends to personal property usually located at another residence (off-premises), and only the named perils apply even on a DP-3. Example: $40,000 Coverage C provides up to $4,000 of off-premises contents protection.

Coverage D vs Coverage E — the classic confusion

• Coverage D – Fair Rental Value pays the landlord the rent lost while a tenant-occupied portion is untenantable due to a covered peril.
• Coverage E – Additional Living Expense pays the owner-occupant the increase in living costs to maintain the household's normal standard of living elsewhere.

Both are limited to the shortest time reasonably required to repair or replace, and neither is increased by the expiration of the policy during that period.

Other Coverages (additional coverages)

The forms grant several additional coverages that do not reduce the lettered limits, including: Debris Removal, Reasonable Repairs, Property Removed (covered against direct loss from any cause for up to 5 days while removed to protect it), Fire Department Service Charge (typically $500, no deductible), Collapse (DP-2/DP-3 only), and Trees, Shrubs, and Other Plants (DP-2/DP-3: up to 5% of Coverage A, max $500 per item, named perils such as fire, lightning, explosion, riot, aircraft, vandalism, and theft — not windstorm).

How the 20% of Coverage A is shared (D + E)

In DP-2 and DP-3, Coverages D and E together draw on an additional amount equal to 20% of Coverage A. They are not each 20% — they share that pool. Worked example: a DP-3 with Coverage A of $350,000 provides up to $70,000 (20% × $350,000) for the combination of fair rental value and additional living expense.

A landlord-occupied two-family could draw fair rental value for the rented half and ALE for the owner's half, but the total cannot exceed the shared $70,000. In the DP-1, Coverage D is much narrower — limited to a percentage of Coverage C and only for the time required to repair, with no separate Coverage E for ALE in the unendorsed basic form.

Coverage C valuation and the contents trap

When Coverage C is written, contents are settled at ACV under all three DP forms unless a Personal Property Replacement Cost endorsement is added — contrast this with the dwelling, which is RC on DP-2/DP-3. A common exam trap pairs a DP-3 (RC building) with the assumption that the TV and sofa are also RC; they are not. Additionally, certain property is excluded or specially limited under Coverage C: money, securities, accounts, business property beyond a small sub-limit, animals, and motor vehicles (other than those used to service the premises).

Reading a worked declarations page

Example: DP-3 with A $300,000, C $60,000. Automatic amounts available: Coverage B = 10% × $300,000 = $30,000; off-premises contents = 10% × $60,000 = $6,000; D + E combined = 20% × $300,000 = $60,000; trees/shrubs = 5% × $300,000 = $15,000 total but capped at $500 per plant. These percentage anchors let you answer most Dwelling limit questions without the declarations spelling each one out.

Building items vs personal property — the classification trap

Exam items often test whether something falls under Coverage A (building) or Coverage C (contents). Built-in items — wall-to-wall carpet, built-in appliances, cabinets, and outdoor antennas attached to the structure — are part of Coverage A. Movable items — freestanding refrigerators, window units, furniture, clothing — are Coverage C. Materials and supplies on or next to the described location intended for construction or repair of the dwelling are also part of Coverage A, even before installation. Mis-classifying a built-in dishwasher as contents (and thus subject to the contents sub-limits) is a classic distractor.

Special limits within Coverage C

When contents are insured, certain categories carry internal sub-limits regardless of the total Coverage C amount. Typical caps include modest limits on money and bank notes, securities, watercraft and trailers, and theft of jewelry/furs (when theft is endorsed). These caps are per the policy period, not per item, and apply even on a DP-3. A frequent question gives a $50,000 Coverage C limit and asks how much is available for $3,000 in stolen jewelry — the answer is governed by the special jewelry sub-limit, not the $50,000.

Why Coverage B is 'other structures'

Coverage B applies to structures separated from the dwelling by clear space (or connected only by a fence, utility line, or similar) — a detached garage, tool shed, or gazebo. Structures used for business or rented to a non-tenant are generally excluded from Coverage B unless used solely as a private garage. Recognizing the clear-space test and the business carve-out lets you place a structure under the correct coverage quickly on the exam.