3.2 Dwelling Coverages A-E and Other Coverages

The Five Coverages

Every Dwelling Policy organizes property limits into five lettered coverages. Coverages A and B are property; C is contents; D and E replace lost rental income or extra living costs after a covered loss.

How the Limits Stack

Coverage B is additive, not a sublimit: on a $200,000 Coverage A, the 10% Other Structures limit gives an extra $20,000, for $220,000 total available. Coverage C in the DP forms is not automatically a fixed percentage the way it is in Homeowners — the insured selects a dollar amount, and a landlord may carry little or no Coverage C at all.

Loss of Use splits differently by form. In the DP-1, Coverages D and E together are limited to 20% of Coverage A and shared. In the DP-2 and DP-3, Fair Rental Value (D) is 20% of A and Additional Living Expense (E) is a separate 20% of A, so a broad/special form gives meaningfully more time-element protection than the basic form.

Coinsurance and a Worked Loss Settlement

Dwelling property is subject to an 80% coinsurance condition for replacement-cost settlement: the insured must carry at least 80% of the replacement cost at the time of loss. The penalty formula is:

Payment = (Limit Carried ÷ Limit Required) × Loss − Deductible

Worked example. A home costs $300,000 to replace. Required limit at 80% = $240,000. The owner insured only $180,000 and has a $1,000 deductible. A covered partial loss is $60,000.

• Coinsurance ratio = 180,000 ÷ 240,000 = 0.75
• 0.75 × 60,000 = $45,000
• Less the $1,000 deductible = $44,000 paid

The $15,000 shortfall is the coinsurance penalty for underinsuring. Note that a total loss is capped at the policy limit regardless of coinsurance, and dwellings insured below the threshold drop to ACV settlement on partial losses.

Other Coverages (Additional Coverages)

Dwelling forms add several built-in extras that broaden the lettered limits:

• Debris removal — included within the limit, with an extra 5% if the limit is exhausted
• Reasonable repairs, trees/shrubs/plants (typically 5% of A, with a per-item cap such as $500 and a named-peril list that excludes wind for plants)
• Property removed from premises endangered by a covered peril — covered 30 days against direct loss from any cause
• Fire department service charge (commonly $500, no deductible)
• Collapse, glass or safety glazing, and (DP-2/DP-3) lawns/landscaping expansions

What Coverage A Does and Does Not Include

Coverage A insures the dwelling on the described location, structures attached to it, materials and supplies on or next to the premises intended for construction, and building equipment and outdoor appliances. It specifically excludes the land, including the land on which the dwelling sits — so excavation, grading, and filling are not part of a Coverage A loss settlement.

A recurring distinction: a structure connected to the dwelling only by a fence, utility line, or similar connection is treated as an other structure (Coverage B), not part of the dwelling. Likewise, structures used wholly or partly for business or rented to a non-tenant lose Coverage B protection unless used only for private garage purposes. These edge cases are favorite multiple-choice traps.

ACV vs. Replacement Cost at Settlement

Loss-settlement basis determines how much the insured collects on a partial loss:

• Replacement Cost (RC) — the cost to repair or replace with like kind and quality, no deduction for depreciation, available on the DP-2/DP-3 dwelling when the insured meets the 80% coinsurance test and actually repairs or rebuilds.
• Actual Cash Value (ACV) — replacement cost minus depreciation, the basis for the DP-1, for personal property, and for any dwelling that falls below the 80% threshold on a partial loss.

Worked contrast: a 15-year-old roof costs $12,000 to replace and is 50% depreciated. RC settlement pays the full $12,000 (less deductible); ACV settlement pays only $6,000. The difference is exactly why producers steer owner-occupants toward the DP-3 and adequate limits.

Coverage D vs. Coverage E — Two Different Triggers

Loss-of-use coverage confuses candidates because D and E protect different parties:

• Coverage D — Fair Rental Value pays the landlord the rent lost while a rented portion of the premises is uninhabitable after a covered loss, minus expenses that do not continue (utilities, for example).
• Coverage E — Additional Living Expense pays the owner-occupant the extra costs of maintaining a normal standard of living elsewhere while their own home is being repaired — the increase above ordinary expenses, not the entire hotel bill.

Both are time-element coverages: they respond to the period reasonably required to repair or replace, not a fixed schedule. A pure rental dwelling relies on D; an owner-occupied dwelling relies on E; a duplex where the owner lives in one half and rents the other can trigger both. Watch for questions that try to pay an owner under D or a landlord under E — the trigger is who suffers the loss of use.