3.2 Dwelling Coverages A-E and Other Coverages
Key Takeaways
- DP coverages are A Dwelling, B Other Structures, C Personal Property, D Fair Rental Value, E Additional Living Expense — no Coverage F.
- Coverage B is 10% of Coverage A; combined D+E is 20% on DP-2/DP-3 (10% on DP-1).
- On DP-2/DP-3 the percentage coverages are additional amounts; on DP-1 Coverage B is included within Coverage A.
- Coverage D pays a landlord's lost rent (tenant-occupied); Coverage E pays an owner-occupant's extra living costs.
The Five Dwelling Coverages
The dwelling forms organize insured property and loss-of-use into five lettered coverages. Note how the letters differ from a Homeowners policy: there is no Coverage F medical payments on a DP, and Coverages D and E address loss-of-use rather than liability.
| Cov | Name | Insures |
|---|---|---|
| A | Dwelling | The described residence + attached structures + materials/supplies on premises for construction |
| B | Other Structures | Detached garages, sheds, fences — structures set apart from the dwelling |
| C | Personal Property | Contents — optional and often dropped on tenant-occupied rentals |
| D | Fair Rental Value | Lost rental income while the dwelling is untenantable from a covered loss |
| E | Additional Living Expense | Extra costs for the owner-occupant to maintain normal living standards |
Automatic Percentage Limits (Worked)
Coverages B, C, D, and E are expressed as percentages of Coverage A on the dwelling forms. The exam loves the arithmetic:
- Coverage B (Other Structures): 10% of Coverage A.
- Coverages D + E combined: 20% of Coverage A (DP-2/DP-3). On the DP-1 the combined D+E limit is 10%.
Worked example. A DP-3 carries $300,000 Coverage A.
- Coverage B = 10% × $300,000 = $30,000.
- Combined Coverage D + E = 20% × $300,000 = $60,000 — these share a single pool, so dollars used for fair rental value reduce what remains for ALE.
These are additional amounts of insurance on DP-2/DP-3 (they do not erode Coverage A); on the DP-1 the Coverage B amount is included within the Coverage A limit, not additional.
D vs. E — The Occupancy Test
Whether a loss-of-use claim is paid under Coverage D (Fair Rental Value) or Coverage E (Additional Living Expense) turns on who occupied the dwelling:
- Tenant-occupied / rented out → the landlord's lost rent is Coverage D, Fair Rental Value.
- Owner-occupied → the owner's hotel, restaurant, and laundry costs above normal are Coverage E, ALE.
Both respond only when the property is rendered not fit to live in by a peril insured under the policy, and only for the time reasonably required to repair or relocate. Coverage C (contents) is frequently deleted on a pure rental, since the tenant insures their own belongings under an HO-4.
Other Coverages and Sublimits
Beyond A–E, the dwelling forms add several Other Coverages, each with its own sublimit the exam tests:
| Other Coverage | Typical Treatment |
|---|---|
| Debris Removal | Included; if it plus the loss exceeds the limit, an extra 5% is available |
| Reasonable Repairs | Cost to protect property from further damage |
| Property Removed | Covered 30 days at a new location while removed to protect it |
| Trees, Shrubs, Plants | 5% of Coverage A, max $500 per item, named perils only (no wind/ice) |
| Fire Department Service Charge | $500, no deductible |
| Collapse | Covered if caused by a specified peril (DP-2/DP-3) |
Worked example. On $300,000 Coverage A, the trees/shrubs/plants pool is 5% = $15,000, but no single tree pays more than $500, and only for named perils — a tree felled by wind is not covered.
Coverage C Special Limits and ACV vs. RC
When Coverage C is purchased on an owner-occupied DP, the carrier applies special dollar limits on theft-prone categories — money, jewelry, firearms, silverware — mirroring the HO sublimits. Personal property is settled at ACV on all three dwelling forms unless a replacement-cost endorsement is added.
ACV worked example. A 6-year-old appliance cost $1,200 new, has a 12-year useful life, and is destroyed. Straight-line depreciation = $1,200 × (6 ÷ 12) = $600 depreciation, so ACV = $1,200 − $600 = $600. A replacement-cost endorsement would instead pay the full cost to replace with like kind and quality, subject to the limit.
Coverage A Inclusions and the Materials Allowance
Coverage A insures more than the four walls and roof. It extends to structures attached to the dwelling, materials and supplies on or next to the described location intended to build, alter, or repair the dwelling, and building equipment and outdoor fixtures (such as a permanently installed water heater or central AC). Wall-to-wall carpet, built-in cabinetry, and attached appliances follow Coverage A, not Coverage C.
Owner vs. tenant limit selection is tested here. When the owner buys the DP, Coverage A is the lead limit and B/D/E flow from it. When a tenant buys a DP for contents only, Coverage A may be zero and Coverage C becomes the controlling limit; the tenant's improvements and betterments to the rented dwelling are then covered as part of Coverage C, commonly up to 10% of the Coverage C limit as an additional amount. Trap: a tenant cannot collect under Coverage A for the landlord's building — only the owner has an insurable interest in the structure.
Fair Rental Value vs. Additional Living Expense
Coverage D in the dwelling program splits by who is displaced. Fair Rental Value reimburses the landlord for lost rent when a tenant-occupied portion becomes uninhabitable after a covered loss. Additional Living Expense reimburses the owner-occupant for the extra cost of living elsewhere. Both are payable only for the shortest time required to repair or relocate and are capped as a percentage of Coverage A (commonly 20% on DP-2/DP-3, lower or by separate limit on DP-1).
On a DP-3 with $300,000 of Coverage A, what is the automatic Coverage B (Other Structures) limit?
A landlord's tenant-occupied house becomes uninhabitable after a covered fire and the landlord loses three months of rent. Which dwelling coverage responds?