3.3 Dwelling Property Coverages

Coverage A: Dwelling

Coverage A insures the described residential structure plus property that is part of it:

• The building itself and structures attached to it (attached garage, deck, porch)
• Built-in appliances and fixtures — furnace, central air, water heater, built-in dishwasher, cabinets, flooring
• Materials and supplies on or next to the premises used to build, alter, or repair the dwelling
• Outdoor equipment permanently installed and used to service the premises

Coverage A never insures the land, the value of the land, or the cost to excavate/regrade it. Detached structures move to Coverage B, and tenant property is the tenant's responsibility.

Valuation

Coverage B: Other Structures

Coverage B insures structures separated from the dwelling by clear space (or connected only by a fence/utility line): detached garages, sheds, fences, in-ground pools, gazebos, detached workshops.

• Automatic limit = 10% of Coverage A
• On DP-2 and DP-3 this 10% is an additional amount of insurance
• On DP-1 the 10% is part of (not added to) the Coverage A limit
• Structures rented to a non-tenant or used for business are excluded

Example: Coverage A $300,000 → Coverage B is $30,000.

Coverage C: Personal Property

Coverage C is optional and insures only property owned/used by the named insured at the location — a landlord's appliances, laundry equipment, lawn tools, or furnishings in a furnished rental.

Critical: Coverage C does NOT insure tenant property. Tenants must buy their own HO-4 renters policy.

When Coverage C is purchased, dollar sublimits cap certain items even when the loss is covered:

Coverage D: Fair Rental Value

Coverage D pays the landlord the fair rental value of the part of the premises rented or held for rental when a covered loss makes it uninhabitable, minus expenses that do not continue (e.g., utilities the landlord no longer pays).

• Pays only for the time reasonably required to repair or replace
• Does not extend simply because a tenant moves out voluntarily

Coverage E: Additional Living Expense

Coverage E pays an owner-occupant the necessary increase in living expenses (hotel, meals above normal, extra transportation) to maintain the household's normal standard of living while the dwelling is uninhabitable due to a covered loss. For a pure landlord, Coverage D — not E — is the relevant loss-of-use coverage.

The 20% Rule for D + E (Exam-Critical)

On the ISO dwelling forms, Coverages D and E share a combined limit of 20% of Coverage A. The catch is whether that 20% is additional insurance:

Common test-prep error: Some materials say "10% for DP-1/DP-2 and 20% for DP-3." The ISO standard is 20% across all three forms — the real difference is additional vs. part of the limit, not the percentage.

Worked Example

Property: Rental home; Coverage A = $300,000 on a DP-3.

If a kitchen fire makes the home unrentable for five months at $3,000/month, the landlord collects $15,000 under Fair Rental Value (Coverage D), well within the $60,000 loss-of-use pool, and the repair cost is paid separately under Coverage A.

Additional Coverages Built Into the Forms

Beyond Coverages A–E, the dwelling forms include several additional coverages that do not reduce the main limits (subject to their own sublimits). Candidates should recognize these:

These mirror the homeowners additional coverages but, importantly, do not include the loss-assessment or credit-card coverages that are tied to the liability side of an HO policy.

Deductibles and How They Apply

The dwelling deductible applies per occurrence to most property losses. Many coastal and Midwest states layer a separate, percentage-based wind/hail or hurricane deductible (e.g., 2% of Coverage A) that is larger than the flat deductible and applies only to those named perils. On a $300,000 dwelling, a 2% wind deductible is $6,000 — a number a candidate should be able to compute. The deductible is subtracted after any coinsurance penalty is applied, not before.

Putting the Percentages Together

For a fast mental model on the DP-2/DP-3, anchor every limit to Coverage A:

On the DP-1, the same B and D+E percentages apply but they are carved out of the Coverage A limit rather than added to it — the single most common dwelling-coverage trap on the exam.