3.2 Dwelling Coverages A-E and Other Coverages
Key Takeaways
- Coverage A is the dwelling; B (10% of A, additional) is other structures; C is personal property; D is fair rental value; E is additional living expense
- Coverage B is additional insurance and does not reduce Coverage A
- Coverages D and E together usually equal 20% of Coverage A and apply only for the shortest time to repair or relocate
- Trees/shrubs are 5% of A for named perils only; coinsurance recovery = (Carried ÷ Required) × Loss with an 80% requirement
The Five Dwelling Coverages
Every dwelling form organizes property protection into lettered coverages. Knowing each letter, what it insures, and how its limit is derived is heavily tested. The insured selects the Coverage A limit, and several other limits are then expressed as a percentage of Coverage A. This dependence on Coverage A is why setting it accurately is the foundation of correctly insuring a dwelling.
| Coverage | Insures | Limit Relationship |
|---|---|---|
| A — Dwelling | House, attached structures, on-premises materials | Selected by insured |
| B — Other Structures | Detached garages, fences, sheds | 10% of Coverage A (additional) |
| C — Personal Property | Insured's household contents | Selected; may be added on rentals |
| D — Fair Rental Value | Lost rent when premises untenantable | Part of 20% of Coverage A |
| E — Additional Living Expense | Extra living costs when home unusable | Part of 20% of Coverage A |
Coverage B — The 10% Rule
Coverage B equals 10% of Coverage A and is additional insurance — it does not reduce the Coverage A limit. Example: a dwelling insured at $300,000 (Coverage A) automatically carries $30,000 on detached structures.
If a detached garage worth $45,000 burns, the insured recovers only $30,000 unless Coverage B was increased by endorsement. Structures used for business, or rented to anyone other than a tenant of the described dwelling, are excluded under Coverage B.
Coverages D and E — Loss of Use
Coverage D (Fair Rental Value) reimburses a landlord for lost rental income; Coverage E (Additional Living Expense) reimburses an owner-occupant for the extra cost of living elsewhere. Both apply only when a covered peril makes the dwelling unfit to occupy, and only for the shortest time reasonably required to repair, rebuild, or relocate.
In the DP forms the combined D-and-E limit is commonly 20% of Coverage A. Note the trap: loss of use triggered by a peril the policy does not insure (such as flood) produces no D or E payment.
Other Coverages
Dwelling forms add several "Other Coverages" that function as additional or extension limits beyond Coverages A through E. These appear frequently as "how much / what peril" detail questions:
- Debris Removal pays to clear debris of covered property after a covered loss.
- Reasonable Repairs pays the cost to protect property from further damage.
- Property Removed covers property for 5 days at a new location while being moved from endangered premises.
- Trees, Shrubs, and Other Plants are limited to 5% of Coverage A with a per-item cap (e.g., $500), and ONLY for named perils such as fire, lightning, explosion, riot, aircraft, vehicles not owned by the insured, or vandalism — NOT wind or weight of ice.
- Fire Department Service Charge pays up to a stated amount (e.g., $500) for a fire department response; it is an additional amount of insurance with no deductible.
- Collapse (DP-2 and DP-3) covers abrupt collapse from specified causes such as hidden decay, insect/vermin damage, or weight of contents.
Worked Coinsurance Calculation
Dwelling Coverage A on the broad and special forms carries an 80% coinsurance requirement. If a home has a replacement cost of $250,000, the insured must carry at least $200,000 (80%) to collect replacement cost on a partial loss.
Suppose the insured carries only $150,000 and suffers a $40,000 partial loss. Apply the formula (Carried ÷ Required) × Loss = Recovery: ($150,000 ÷ $200,000) × $40,000 = 0.75 × $40,000 = $30,000. The insured absorbs the $10,000 difference as a coinsurance penalty before any deductible. Carrying to value avoids the penalty entirely.
Coverages A and C Percentage Relationships
The dwelling form ties the secondary limits to Coverage A as percentages, and the exam tests the exact figures. Coverage B (Other Structures) is 10% of Coverage A as an additional amount of insurance (it does not erode Coverage A). Coverage C (Personal Property) is a separately selected limit; for a rental dwelling the owner often carries little or none because the tenant owns the contents.
Coverage D (Fair Rental Value) and Coverage E (Additional Living Expense) together are commonly capped at 20% of Coverage A under DP-2/DP-3 (DP-1 is more restrictive), and they pay only for the time reasonably required to repair or replace, or until the household resumes normal living, whichever is less.
Reading a Loss Across Multiple Coverages
A single windstorm can trigger several coverages at once: the roof (A), a detached garage (B), the landlord's appliances (C), and lost rent while the unit is uninhabitable (D). The exam wants you to allocate the loss to the right coverage and apply each limit independently, remembering that Coverage B is an additional 10% and that loss-of-use coverages are time-limited, not capped only by dollars. Trees, shrubs, and plants are limited to 5% of Coverage A with a per-item cap and only for specified perils — never windstorm or weight of ice.
Coverage C Portability and the Rental Owner's Choice
Coverage C on a dwelling form follows the insured's personal property and, like homeowners, applies a reduced limit to property usually off the premises. On a tenant-occupied dwelling, the owner typically carries little or no Coverage C because the tenant owns the contents and should buy an HO-4 renters policy; the owner may schedule appliances or landlord-furnished items instead. This division of insurable interest — owner insures the structure, tenant insures the contents — is a recurring exam point and explains why a landlord's dwelling policy will not pay for a tenant's stolen television.
A dwelling is insured with $400,000 Coverage A on a DP-3. A detached storage building valued at $55,000 is destroyed by a covered fire. With no endorsements, what is the maximum the insurer pays for the detached building?
A home has a replacement cost of $300,000 and an 80% coinsurance clause. The insured carries $180,000 and has a $30,000 covered partial loss. Ignoring the deductible, how much does the insurer pay?