3.2 Dwelling Coverages A-E and Other Coverages

The Five Lettered Coverages

Every ISO dwelling form organizes its insuring agreement into the same lettered coverages. The exam expects you to know what each covers and the default percentage relationship to Coverage A.

Key distinction from Homeowners: in the DP, Coverage D (Fair Rental Value) and Coverage E (Additional Living Expense) share a combined limit equal to 20% of Coverage A. ALE applies only when the insured actually lives in the dwelling; for a pure rental, the loss-of-use recovery is Fair Rental Value.

Coverage A and the 10%/20% Allocations

Coverage B (Other Structures) in the DP is included within, not added to, the policy structure, and defaults to 10% of Coverage A. A detached garage on a dwelling insured for $250,000 therefore has $25,000 of automatic Coverage B unless a higher specific limit is endorsed. Structures used for business or rented to a non-tenant are generally excluded from B.

Coverage C (Personal Property) is optional in the DP. An investor renting an unfurnished house often carries no Coverage C at all; a landlord renting a furnished unit elects a Coverage C limit for the appliances and furniture they own. A 10% of Coverage C limit extends to personal property usually located at the residence but temporarily away from the premises (worldwide, with off-premises sublimits).

Coverage D (Fair Rental Value) pays the rent the insured would have collected, less non-continuing expenses, for the time reasonably required to repair. Coverage E (Additional Living Expense) pays the increase in living costs for an owner-occupant. Together they cap at 20% of Coverage A.

Other Coverages (Additional Coverages)

Beyond the lettered coverages, each form grants a list of Other Coverages that pay in addition to or as part of the policy limits. The breadth grows from DP-1 to DP-3:

• Other Structures (when not a separate lettered limit), Debris Removal, and Improvements/Alterations for tenants.
• Worldwide Coverage on personal property (10% of Coverage C as additional insurance).
• Reasonable Repairs, Property Removed (covered against direct loss from any cause for up to 5 days while removed to protect from a covered peril), and Fire Department Service Charge (commonly $500, no deductible).
• Trees, Shrubs, and Other Plants — typically 5% of Coverage A, with a per-item cap (often $500), covered only for listed perils (fire, lightning, explosion, riot, aircraft, vehicles not owned by an occupant, vandalism, theft) — NOT wind or ice.
• Collapse (added in DP-2 and DP-3), Glass or Safety Glazing, and Ordinance or Law (commonly 10% of Coverage A when included).

Debris removal usually shares the Coverage A limit but adds an additional 5% if the limit is exhausted by the direct loss plus debris.

Worked Example: Allocating a Single Limit

A landlord insures a rental dwelling on a DP-3 with Coverage A = $400,000 and elects Coverage C = $40,000. A covered fire damages the dwelling, a detached shed, and the landlord-owned appliances, and the tenant must move out for four months at $2,000/month rent.

Because the tenant — not the insured — lives there, loss of use is paid under Coverage D (Fair Rental Value), not Coverage E (ALE). Expect the exam to test whether you pick D or E based on who occupies the dwelling.

The Dwelling Coverage Structure

The dwelling forms organize coverage into lettered parts that parallel - but are not identical to - homeowners:

A key DP-vs-HO distinction: in the dwelling program, Coverage B (Other Structures) and Coverage C (Personal Property) can be used as additional amounts or to increase Coverage A, and the percentages differ from homeowners. Loss of use splits into Fair Rental Value (for landlords) and Additional Living Expense (for owner-occupants).

Other Coverages and Worked Settlement

The forms add Other Coverages such as Other Structures, Debris Removal, Improvements/Alterations (for tenants), Reasonable Repairs, Property Removed, and (DP-2/3) Collapse and Glass. Debris removal is usually included within the limit, with an extra 5% available if the limit is exhausted.

Worked example: a DP-3 insures the dwelling for $300,000 with Coverage B at 10% additional ($30,000) and Coverage D Fair Rental Value at 20% ($60,000). A covered fire destroys a detached garage ($25,000) and makes the rental house uninhabitable for three months at $1,800/month rent. The insurer pays $25,000 for the garage (within the separate $30,000 Coverage B) plus $5,400 lost rent under Coverage D - none of which erodes the $300,000 dwelling limit.