3.2 Dwelling Coverages A-E and Other Coverages

The Five Property Coverages

Every ISO Dwelling form organizes insurance into lettered coverages. Knowing what each letter pays — and the automatic percentage relationships between them — is core exam material, because test questions convert those percentages into dollar answers.

Coverage A — Dwelling

Coverage A is the backbone. It pays for the dwelling, structures attached to it, and building materials and supplies used to construct, alter, or repair it while on or next to the premises. It does not cover land, which is why a foundation-only valuation never includes the lot. On the DP-1 the Coverage B extension is included within the Coverage A limit; on DP-2/DP-3 the 10% Coverage B is additional insurance that does not erode Coverage A.

Coverage B — Other Structures

Coverage B insures structures separated from the dwelling by clear space, such as a detached garage, tool shed, or fence. The automatic limit is 10% of Coverage A. A structure rented to others (except a private garage rented to a tenant) or used for business is excluded unless specifically endorsed. The insured cannot simply assume the backyard rental cottage is covered.

Coverage C — Personal Property

Coverage C is optional on the Dwelling program; the insured selects a limit (or none for a bare rental). It covers household contents usual to the occupancy of a dwelling, anywhere in the world on broad forms. Property located off-premises is limited to 10% of the Coverage C limit (with a minimum on broad forms). The personal property of tenants, roomers, and boarders who are not related to the insured is not covered.

Coverages D and E — Indirect (Time-Element) Losses

These are consequential losses, payable only when a covered peril causes the underlying direct damage; there is no payment for a non-covered cause.

• Coverage D, Fair Rental Value: pays the landlord the rental income lost while the unit is repaired, limited to the shortest time reasonably required to restore the premises.
• Coverage E, Additional Living Expense (ALE): reimburses an owner-occupant for extra costs (hotel, meals, laundry) to maintain a normal standard of living. It pays only the increase over normal expenses.

On DP-2 and DP-3, D and E together share up to 20% of Coverage A. On the DP-1, the combined time-element limit is only 10% of Coverage A and the form labels the coverage as a single allowance.

Other Coverages (Additional Coverages)

The Dwelling forms layer on several Additional Coverages that sit on top of the lettered limits and broaden the contract without using up Coverage A:

• Debris Removal — pays to clear debris of covered property after a covered loss.
• Reasonable Repairs — emergency repairs to protect property from further damage.
• Trees, Shrubs, and Other Plants — up to 5% of Coverage A, capped at $500 per item, for named perils only (windstorm and hail are excluded).
• Property Removed — covers property being moved to protect it from loss, for 5 days.
• Worldwide Coverage (DP-2/DP-3) — extends Coverage C globally.
• Collapse (DP-2/DP-3) — sudden, entire collapse from specified causes.
• Fire Department Service Charge — typically up to $500 for a fire-department call.

Worked Example

A DP-3 has Coverage A = $300,000. The detached garage burns. The automatic Coverage B limit is 10% × $300,000 = $30,000 of additional insurance. If the same fire makes the rented unit untenantable, the combined D/E pool offers up to 20% × $300,000 = $60,000 for lost rent and any owner ALE. If the insured selected Coverage C = $40,000, property stored at a relative's house is covered up to 10% × $40,000 = $4,000 off-premises.

Special Limits Inside Coverage C

Even when Coverage C is purchased, certain categories carry sub-limits to control catastrophic theft or loss exposure. Producers must warn insureds that a single overall limit does not fully protect high-value items:

• Money, bank notes, coins, and precious metals — a low dollar cap (often $200).
• Securities, deeds, manuscripts, and evidence of debt — a separate cap.
• Watercraft, trailers, and their equipment — limited.
• Jewelry, watches, and furs against theft — capped, motivating a Scheduled Personal Property endorsement for valuables.

Coverage A vs Coverage C: The Land and Fixture Line

A recurring exam distinction is what counts as the building (Coverage A) versus contents (Coverage C). Built-in items — wall-to-wall carpet glued down, a furnace, central air, attached cabinets — are Coverage A. Free-standing items — area rugs, a portable air conditioner, furniture — are Coverage C. Land, lawn, and the cost of excavation are never covered under either. When a question describes outdoor radio or TV antennas, signs, or pools, check whether the form lists them as building property or excludes them, because answers hinge on that classification.