3.2 Dwelling Coverages A-E and Other Coverages
Key Takeaways
- Coverage A is Dwelling, B is Other Structures, C is Personal Property, D is Fair Rental Value, and E is Additional Living Expense.
- On the DP forms, Coverage B is automatically 10% of Coverage A and Coverage C is a percentage of A that varies by form, each as an additional amount of insurance.
- Fair Rental Value (D) reimburses a landlord's lost rent; Additional Living Expense (E) reimburses an owner-occupant's extra living costs.
- DP forms historically pay D and E only for the time reasonably required to repair, with a combined limit often expressed as a percentage of Coverage A.
- Coinsurance applies to building coverage; failing to insure to at least 80% of replacement cost triggers a penalty on partial losses.
The Five Dwelling Coverages
The Dwelling Property forms use a lettered structure that mirrors, but is not identical to, the homeowners forms.
| Coverage | Name | What It Insures |
|---|---|---|
| A | Dwelling | The house, attached structures, and built-in appliances |
| B | Other Structures | Detached garages, sheds, fences |
| C | Personal Property | Contents usual to a dwelling |
| D | Fair Rental Value | Lost rent when the dwelling is untenantable |
| E | Additional Living Expense | Extra living costs for an occupant |
Coverage A — Dwelling insures the structure and materials on the premises used to build it. Coverage B — Other Structures is automatically provided as 10% of Coverage A on an additional amount of insurance basis, meaning it does not erode the dwelling limit.
Coverage C and the Automatic Percentages
Coverage C — Personal Property can be a stated amount, or on some endorsements a percentage of Coverage A. A landlord who rents an unfurnished house may carry little or no Coverage C; a furnished rental needs more. Off-premises personal property is covered at a sublimit (commonly 10% of Coverage C).
- Coverage B = 10% of A (additional)
- Off-premises C = 10% of C
- Coinsurance test compares the carried limit to 80% of replacement cost
Coverage D vs Coverage E — The Classic Trap
The most heavily tested distinction: Coverage D — Fair Rental Value pays the landlord the rent lost while the dwelling cannot be rented after a covered loss. Coverage E — Additional Living Expense pays the owner-occupant the extra costs (hotel, restaurant meals) of maintaining the household elsewhere.
- A landlord renting to a tenant collects under D.
- An owner living in the home collects under E.
- DP forms pay D and E for the time reasonably required to repair or replace, often capped at a combined percentage of Coverage A (for example 20% on a DP-3).
Other Coverages
The forms also bundle several additional coverages within the policy limits, including:
- Other Structures (the 10% of A noted above)
- Debris Removal following a covered loss
- Reasonable Repairs to protect property from further damage
- Property Removed while endangered, typically for up to 5 days
- Fire Department Service Charge (commonly $500) where the insured is liable
- Worldwide coverage options for personal property by endorsement
Worked Example: Coinsurance and Coverage B
A landlord insures a rental dwelling. The home's replacement cost is $300,000. The coinsurance requirement is 80%, so the insured should carry at least $240,000 of Coverage A. The owner instead carries only $180,000.
A windstorm causes a $40,000 partial loss to the dwelling. The coinsurance penalty applies:
- Required amount = 80% x $300,000 = $240,000
- Did/Should ratio = $180,000 / $240,000 = 0.75
- Recovery = 0.75 x $40,000 = $30,000, less any deductible
The insured absorbs the $10,000 shortfall as a penalty for underinsurance. Note that Coverage B (Other Structures) is a separate additional 10% of Coverage A = $18,000 here, so a detached garage loss draws on its own limit rather than reducing the dwelling amount.
How the Coverages Interact in a Claim
When a covered loss happens, the lettered coverages respond in parallel, each from its own limit:
- Coverage A pays to repair or rebuild the structure.
- Coverage B (the additional 10% of A) handles a detached garage or fence without reducing A.
- Coverage C pays for damaged contents, subject to the off-premises 10% sublimit.
- Coverage D or E pays the income or expense loss during the repair period.
Because D and E reimburse only the time reasonably required to repair, an insured who delays repairs cannot extend the loss-of-use payout indefinitely.
Worked Example: Combined Loss-of-Use Limit
A DP-3 carries Coverage A of $250,000 with a combined 20% limit for Fair Rental Value and Additional Living Expense, giving a $50,000 pool for Coverages D and E together.
A fire makes an owner-occupied home unlivable for four months at $3,200/month of extra living expense:
- 4 months x $3,200 = $12,800 paid under Coverage E
- Remaining D/E pool = $50,000 - $12,800 = $37,200
Because the owner lived in the home, the claim falls under E; had it been rented, the same pool would instead pay lost rent under D.
Other Coverages — Sublimit Quick Reference
The additional coverages each carry their own conditions and, in several cases, their own dollar caps:
| Additional Coverage | Typical Treatment |
|---|---|
| Other Structures | 10% of Coverage A (additional) |
| Property Removed | Covered up to 5 days while endangered |
| Fire Department Service Charge | Commonly $500, no deductible |
| Debris Removal | Within the Coverage A limit |
| Reasonable Repairs | Cost to protect property after a loss |
Exam trap: candidates confuse the off-premises personal property sublimit (10% of C) with the Other Structures amount (10% of A) — different percentages applied to different coverages.
Dwelling Policy Coverages A-E and Other Coverages
The Dwelling Policy organizes property coverage into lettered parts that the exam tests by relationship. Coverage A – Dwelling insures the house; Coverage B – Other Structures; Coverage C – Personal Property; Coverage D – Fair Rental Value; and Coverage E – Additional Living Expense. Unlike homeowners, the Dwelling form is built for non-owner-occupied or basic-needs risks, so Coverage C may be optional and there is no Section II liability without an endorsement.
| Coverage | Insures | DP note |
|---|---|---|
| A – Dwelling | The structure | Primary coverage |
| B – Other Structures | Detached structures | ~10% of A |
| C – Personal Property | Contents | Often optional; can be primary for tenant content |
| D – Fair Rental Value | Lost rent when uninhabitable | Landlord's income protection |
| E – Additional Living Expense | Extra living costs | Often DP-2/DP-3 |
A landlord-oriented difference: Coverage D (Fair Rental Value) protects the owner's rental income when a covered loss makes the unit unrentable, paying the lost rent for the time reasonably required to repair — capped by limit and time.
Worked scenario: A landlord's two-unit rental (insured DP-3, $250,000 Coverage A) suffers a fire that makes both units uninhabitable for five months. Coverage A rebuilds the structure; Coverage D Fair Rental Value replaces the $2,000/month rent (≈$10,000 over five months, within the limit). Because the tenants' belongings are the tenants' responsibility, the landlord's Coverage C does not pay for them — a frequent exam trap distinguishing owner vs. tenant insurable interests under a Dwelling Policy.
A landlord's rental house is damaged by a covered fire and cannot be rented for three months. Which coverage reimburses the landlord for the rent that would have been collected?
On a DP form, Coverage B (Other Structures) is automatically provided at what amount?