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5.2 Dwelling Coverages

The Dwelling Program includes three policy forms, each offering a different level of property coverage:

  • the Basic Form (DP–1)
  • the Broad Form (DP–2)
  • the Special Form (DP–3)

Under all Dwelling policy forms, the term insured includes the named insured and the named insured's spouse, provided the spouse resides in the same household. The Dwelling Program offers the following five property coverages:

  • Coverage A – Dwelling
  • Coverage B – Other Structures
  • Coverage C – Personal Property
  • Coverage D – Fair Rental Value
  • Coverage E – Additional Living Expense

Dwelling policy forms do not automatically include liability coverage. However, the insured may add liability protection by endorsement for an additional premium.

Coverage A – Dwelling​

Coverage A – Dwelling applies to the residential structure identified in the Declarations. It also covers structures attached to the dwelling, such as an attached garage, carport, breezeway, or deck. Coverage extends to building materials and supplies located on or next to the insured premises when they are intended for the construction, alteration, or repair of the dwelling or other covered structures. Building equipment and outdoor equipment used to service the premises are also considered part of the dwelling when located at the described location, unless the policy provides coverage for those items elsewhere.

Coverage A does not insure land, including the land on which the covered dwelling and other structures are located.

Note

The insured may select the Coverage A limit, subject to the insurer's minimum requirements. This limit generally reflects the estimated cost to replace the dwelling. The standard minimum Coverage A limit is $12,000 under the Broad Form (DP–2) and $15,000 under the Special Form (DP–3).

Coverage B – Other Structures​

Coverage B – Other Structures applies to structures located at the described premises that are separated from the dwelling by a clear space. A structure may still qualify as detached when it is connected to the dwelling only by a fence, utility line, or similar connection. Covered structures may include buildings, such as detached garages and tool sheds, as well as nonbuilding structures, such as swimming pools and gazebos.

Like Coverage A, Coverage B – Other Structures does not insure land or grave markers. It also excludes structures rented or held for rental to anyone who is not a tenant of the covered dwelling. However, this exclusion does not apply when the structure is rented or held for rental exclusively as a private garage.

Coverage B – Other Structures generally excludes structures used wholly or partially for commercial, manufacturing, or farming purposes. However, coverage may apply when a structure is used only to store property associated with those activities and the property is owned exclusively by the insured or a tenant of the dwelling. Any gaseous or liquid fuel must be stored in the fuel tank of a vehicle.

Example

A shed used to store a farm tractor owned by the insured owner-occupant may qualify for coverage under Coverage B. However, coverage would not apply if the shed also contained a filled external fuel container. Coverage would also be excluded if the shed stored property owned by a commercial business rather than property owned solely by the insured or a tenant of the dwelling.

Coverage B Limit of Insurance​

The Coverage B limit for other structures is equal to 10% of the Coverage A limit. Under the Basic Form (DP–1), this amount is included within the Coverage A limit. Under the Broad Form (DP–2) and Special Form (DP–3), the Coverage B limit is provided in addition to the Coverage A limit.

Example

Assume an insured dwelling has a Coverage A limit of $100,000. Under the Basic Form (DP–1), a detached garage may be covered for up to $10,000. However, because the Coverage B limit is included within the Coverage A limit, the policy would pay no more than $100,000 for combined damage to the dwelling and garage arising from the same occurrence. Under the Broad Form (DP–2) and Special Form (DP–3), the detached garage may also be covered for up to $10,000. In these forms, however, the Coverage B limit is additional insurance, so the full $100,000 Coverage A limit remains available for damage to the dwelling.

Coverage C – Personal Property​

Coverage C – Personal Property applies to household and personal property commonly associated with the occupancy of a dwelling. This property, sometimes referred to as contents, generally includes items owned or used by the insured and resident family members, unless the policy specifically excludes them.

Coverage C does not cover the following types of property:

  • Accounts, bank notes, bullion, coins, currency, evidence of debt, passports, and securities
  • Animals, birds, and fish
  • Aircraft, hovercraft, and watercraft
    • Exception: Rowboats and canoes are covered.
  • Motor vehicles, including permanently installed electronic equipment
    • Exceptions: Coverage may apply to vehicles used to service the described premises, assist individuals with disabilities, or vehicles that are not required to be registered.
  • Data, including information stored in accounting books, drawings, paper records, computers, or related equipment
  • Credit cards, electronic fund transfer cards, and other access devices
  • Water or steam
  • Grave markers

Coverage C generally applies only while the insured personal property is located at the premises described in the policy. However, limited exceptions apply. When the insured moves personal property to a newly acquired principal residence, coverage applies at both the former and new residences for up to 30 days or until the policy expires, whichever occurs first.

At the insured's request, Coverage C may be extended to include personal property owned by a guest or domestic employee while that property is located at the described premises. However, the personal property of tenants and boarders is not covered because they are expected to obtain separate insurance for their belongings.

Coverage D – Fair Rental Value​

Coverage D – Fair Rental Value applies when part of the described premises is rented or held for rental to others. It covers the insured's indirect loss of rental income when a covered direct loss to property insured under Coverage A, B, or C makes the rented portion unfit for its normal use. Coverage D reimburses the insured for the rental income that would have been collected from the affected portion of the premises during the period it remains uninhabitable.

Coverage D pays for the shortest reasonable period required to repair the damaged portion of the dwelling that is normally rented or held for rental. Coverage may continue beyond the policy's expiration date when additional time is necessary to complete the repairs. The policy does not cover costs resulting from the cancellation of a lease. In addition, continuing expenses are deducted when calculating the covered loss of rental income. Continuing expenses are costs the insured must pay regardless of whether the rental unit is occupied, such as mortgage payments and certain utility expenses.

When a civil authority prohibits use of the insured dwelling because a neighboring property was directly damaged by a peril covered under the policy, Coverage D will pay the resulting loss of fair rental value for a maximum of two weeks.

An Insurance Story

A tenant leaves the stove unattended while cooking, causing a severe grease fire that destroys the kitchen and makes the dwelling unfit for occupancy. Because the covered damage prevents the Nelsons from renting the property, Coverage D reimburses them for the fair rental value they lose during the reasonable period required to complete the repairs.

Example

At a later time, the city orders the demolition of an abandoned dwelling located next to the Nelsons' rental property. The demolition temporarily prevents tenants from occupying the Nelsons' dwelling. However, Coverage D does not apply because the neighboring property was not directly damaged by a peril covered under the Nelsons' policy. Therefore, the resulting loss of rental income is not covered.

Coverage E – Additional Living Expense​

Coverage E – Additional Living Expense provides coverage for indirect losses resulting from a covered direct loss to property insured under Coverage A, B, or C. When a covered loss makes the part of the dwelling occupied by the named insured uninhabitable, Coverage E pays the necessary increase in living expenses incurred by the household. Payment is limited to the additional amount reasonably required for the household to maintain its normal standard of living while the dwelling is unfit for occupancy.

Coverage E does not pay ordinary continuing expenses, such as mortgage payments or regular electricity costs, because the insured would have incurred these expenses even if the covered loss had not occurred.

Coverage E – Additional Living Expense is automatically included in the Broad Form (DP–2) and Special Form (DP–3). It is not included in the Basic Form (DP–1) unless the insured adds the coverage by endorsement.

Example

An insured lives in a home covered under a Special Form (DP–3) policy. After a fire makes the dwelling uninhabitable, the insured temporarily stays in a hotel and boards two dogs while repairs are completed. Coverage E may pay these expenses because they were incurred as a direct result of the covered loss. The coverage may also reimburse the insured for increased meal expenses caused by dining out and additional transportation costs resulting from a longer commute. However, the policy pays only the amount by which these expenses exceed the insured's normal living costs—not the full cost of food, gasoline, or other ordinary expenses during the repair period.