3.2 Dwelling Coverages A-E and Other Coverages

The Five Primary Coverages

Dwelling policies organize protection into lettered coverages. The first five carry the substance of the policy; everything else is built around them.

Coverage A – Dwelling

Coverage A insures the dwelling on the described location plus structures attached to it, materials and supplies on or adjacent to the premises used to build or repair the dwelling, and (unless covered elsewhere) building equipment and outdoor appliances used to service the location. The Coverage A limit is the figure used to rate the policy and to drive the 80% coinsurance test on the building forms.

Coverage B – Other Structures

Coverage B insures structures separated from the dwelling by clear space — a detached garage, shed, or fence. On the dwelling forms it is provided automatically as 10% of Coverage A as an ADDITIONAL amount of insurance, not as part of the Coverage A limit. Structures used for business or rented to a non-tenant are excluded.

Worked example: A DP-3 carries Coverage A of $300,000. Coverage B is automatically $30,000 (10%) on top of — not inside — the $300,000. A detached garage destroyed by a covered peril is paid up to $30,000 without eroding the dwelling limit.

Coverage C – Personal Property

Coverage C insures the insured's household contents. For a landlord (non-owner-occupied) risk, Coverage C is frequently set to $0 because the building owner has little personal property at the location — a key reason the dwelling program suits rentals. Personal property is covered on a named-perils basis under all three forms, including DP-3.

Coverages D and E – Indirect Losses

The two indirect (time-element) coverages are routinely confused:

• Coverage D – Fair Rental Value reimburses the owner for rent lost when a rented portion becomes uninhabitable after a covered loss. It is the landlord's loss-of-income coverage.
• Coverage E – Additional Living Expense pays the owner-occupant's increased cost of living (hotel, meals) while the home is unlivable.

Both pay only for the shortest time reasonably required to repair or replace, and both are limited to the loss arising from a covered peril.

Other Coverages

Beyond A–E, dwelling forms grant small Other Coverages sublimits, including:

• Debris removal – part of the limit, with an additional amount if the limit is exhausted
• Reasonable repairs to protect property from further damage
• Trees, shrubs, and plants – commonly 5% of Coverage A, capped (e.g., $500) per item, for specified perils only (fire, lightning, explosion, vehicles not owned by the insured, etc.)
• Property removed from premises endangered by a covered peril – covered against direct loss from any cause for up to 5 days
• Fire department service charge – a fixed additional amount (e.g., $500)

How the Coverages Interact at a Loss

A single event often touches several coverages at once. Suppose a covered fire damages a two-family rental: the structure repair falls under Coverage A; the detached garage under Coverage B; any owner-supplied appliances under Coverage C; the rent the owner loses while the unit is repaired under Coverage D; and the debris-hauling cost under the Debris Removal Other Coverage. Each coverage has its own limit, and the per-event deductible is applied once to the combined direct-damage payment, not separately to each lettered coverage.

Coverage A as the Rating Driver

Every percentage-based limit in the policy keys off Coverage A. Coverage B at 10%, Coverage D often at 20%, and Trees/Shrubs at 5% all flex automatically when Coverage A is increased. This is why correctly valuing the dwelling at issue is critical: an undervalued Coverage A simultaneously shrinks Coverage B, D, and the Other Coverage sublimits, and it can drop the policy below the 80% coinsurance threshold covered in the next section.

Exam trap: Coverage B is an ADDITIONAL 10% (it does not erode Coverage A), but if the insured elects to write a separate, higher Coverage B limit, that elected limit replaces the automatic grant. Read whether the question gives a stated Coverage B or relies on the 10% default.

ACV vs. Replacement Cost on Contents

No matter which form is selected, personal property (Coverage C) is settled at Actual Cash Value unless a Replacement Cost on Contents endorsement is added. So a five-year-old sofa destroyed by a covered fire is paid at its depreciated value, not the cost of a new one. This is a frequent test point because students assume DP-3's broad treatment of the building extends to contents settlement — it does not.