3.2 Dwelling Coverages A-E and Other Coverages
Key Takeaways
- Coverage A = Dwelling, B = Other Structures, C = Personal Property, D = Fair Rental Value, E = Additional Living Expense — note D and E are split (unlike Homeowners).
- Coverage B is automatically 10% of Coverage A — additional insurance in DP-2/DP-3 but part-of the limit in DP-1.
- Combined Coverage D + E equals 10% of Coverage A in DP-1 and 20% in DP-2/DP-3, payable only for the time required to repair or replace.
- Other Coverages include Trees/Shrubs/Plants (5% of A, named perils only), Fire Department Service Charge ($500, no deductible), Debris Removal, and Collapse (DP-2/DP-3 only).
- Coverage C is selected by the insured and carries off-premises limits; it stays named-peril even on DP-3.
The Five Property Coverages
Every DP form organizes property limits into lettered coverages. Examiners test the letter-to-coverage match and the automatic percentage extensions between them.
| Coverage | Name | What it insures |
|---|---|---|
| A | Dwelling | The dwelling building and attached structures (built-in appliances, materials on premises to repair it) |
| B | Other Structures | Detached garages, sheds, fences — structures set apart by clear space |
| C | Personal Property | Household contents usual to a dwelling; named-peril even on DP-3 |
| D | Fair Rental Value | Lost rent (less non-continuing expenses) when a covered loss makes the rented part untenantable |
| E | Additional Living Expense | Extra costs for the insured's own household to maintain its normal standard of living |
Trap: In a Homeowners policy, Coverage D is "Loss of Use" combining ALE and fair rental value. In the Dwelling program these are split: D = Fair Rental Value and E = Additional Living Expense. Mixing up the lettering is a frequent exam miss.
Automatic Percentage Relationships
The DP forms set internal limits as percentages of Coverage A:
- Coverage B (Other Structures): an automatic amount equal to 10% of Coverage A. This 10% is additional insurance in DP-2/DP-3 but is a part-of (not additional) limit in DP-1 — a tested distinction.
- Coverage C (Personal Property): no automatic amount; the insured selects a limit. Off-premises personal property is limited (often 10% of Coverage C, $1,000 minimum).
- Coverage D + E combined: DP-1 provides up to 10% of Coverage A (D and E share that pool). DP-2 and DP-3 each provide up to 20% of Coverage A.
Worked example – Coverage B: A DP-3 has Coverage A = $300,000. The automatic Other Structures limit is 10% × $300,000 = $30,000, and because it is additional insurance, a total structure loss could pay $300,000 (A) plus $30,000 (B) = $330,000 before considering D/E.
Worked Example – Fair Rental Value and ALE
An investor's DP-3 dwelling (Coverage A = $250,000) is split into two rented units, each renting for $1,500/month. A covered fire makes one unit untenantable for 4 months; the landlord also temporarily occupies the second unit, displacing that tenant's normal use.
- Coverage D (Fair Rental Value) pays the lost rent on the untenantable unit: 4 × $1,500 = $6,000, less any non-continuing expenses (e.g., utilities the landlord no longer pays).
- The combined D + E ceiling is 20% × $250,000 = $50,000, so the $6,000 is well within the pool.
- Coverage D/E pays only for the time reasonably required to repair or replace, not the policy period.
Other Coverages (Additional Coverages)
Beyond A–E, the DP forms grant Other Coverages that pay in addition to, or as a sublimit within, the policy limits:
- Debris Removal — included in the limit; an extra 5% available if the limit is exhausted.
- Reasonable Repairs, Property Removed (covered against all perils for 5 days while being moved from endangered premises).
- Trees, Shrubs, Plants — up to 5% of Coverage A, with a per-item cap (often $500), only for listed perils (fire, lightning, explosion, riot, aircraft, vehicles not owned by occupant, vandalism, theft).
- Fire Department Service Charge — up to $500, no deductible.
- Collapse — in DP-2/DP-3 only (not DP-1).
- Worldwide coverage applies to personal property off-premises, and Loss Assessment terms vary by edition.
These Other Coverages are not extra dollars of building insurance; most are sublimits that draw from named perils only. The classic trap is the homeowner who plants a $4,000 specimen tree and expects full reimbursement after a windstorm — but windstorm is not a covered peril for trees/shrubs, so the loss is denied entirely regardless of the 5% pool.
Reading the Declarations Page
On an exam fact pattern, work the declarations top to bottom. Confirm the form number (DP 00 01/02/03) to know perils and valuation, read the Coverage A limit to derive B, D, and E percentages, then check for endorsement schedules (theft, liability, earthquake, inflation guard).
| Dec entry | What it controls |
|---|---|
| Form/edition | Named vs open peril; ACV vs RC |
| Coverage A limit | Basis for B (10%), D+E (10% or 20%) |
| Coinsurance % | RC vs penalty math on DP-2/DP-3 |
| Deductible | Subtracted after coinsurance is applied |
| Endorsement list | Theft, liability, EQ, ordinance/law |
Always apply the coinsurance penalty before subtracting the deductible — reversing that order is a frequent calculation error. The deductible reduces the net payment, never the coinsurance ratio.
Theft and Liability Are Add-Ons, Not Built In
The dwelling form's defining limitation versus homeowners is that theft coverage and personal liability are optional endorsements, not part of the base package. The Broad Theft Coverage endorsement (on-premises and off-premises options) adds theft for an owner-occupant; the Theft Coverage for tenant version serves rented dwellings. Personal liability and medical payments are added with a Personal Liability Supplement or a separate liability form. A stem describing a burglary loss under an unendorsed DP policy correctly pays nothing for the stolen property.
Other Coverages Worth Memorizing
Beyond Coverages A–E, the dwelling forms grant several Other Coverages that mirror homeowners but at lower automatic amounts:
- Other Structures — typically 10% of Coverage A as an additional amount on broad/special forms.
- Debris Removal — included within the limit; an additional 5% may apply if the loss plus removal exceeds the limit.
- Reasonable Repairs, Property Removed (covered 5 days against all perils while being protected from a covered loss), Trees/Shrubs/Plants (5% of A, sub-limited per item, named perils only — not wind or hail on the plants), and Fire Department Service Charge (commonly $500).
- Worldwide coverage on personal property is limited; the dwelling form is far more premises-focused than homeowners.
Coverage E — Additional Living Expense vs. Fair Rental Value
The dwelling forms split time-element coverage by who occupies the home. Fair Rental Value reimburses a landlord for lost rent when a covered loss makes a rented portion uninhabitable. Additional Living Expense (ALE) reimburses an owner-occupant for the extra cost of living elsewhere. Both run only for the shortest time to repair or replace (or for the household to settle elsewhere) and both require a covered direct loss first. DP-2 and DP-3 provide a combined Coverage E (often 20% of Coverage A); DP-1 provides Fair Rental Value only and at a lower automatic percentage. Matching the occupant (owner vs.
landlord) to the correct time-element coverage is a tested skill.
A DP-3 dwelling has Coverage A of $400,000. No Coverage B limit is shown separately on the declarations. How much Other Structures coverage is automatically provided, and how does it apply?
In the ISO Dwelling program, how do Coverages D and E differ from a Homeowners policy's loss-of-use coverage?