Dwelling Policy Conditions

All of the dwelling forms also include another section entitled “Other Coverage.” This section identifies various extensions of coverage that appear in the dwelling policy. All policies are subject to a deductible. Anything added under the other coverage section will provide payment in addition to the other coverage limits provided by the policy. There are eight other coverage extensions, including:

Other Structures

As mentioned earlier, the insured may use up to 10% of the Dwelling Coverage amount for loss to another structure. This is available if an insured had no other or private structures when the policy was initially purchased. If a structure is later constructed and the insured did not select a Coverage B amount, protection would be provided here.

Debris Removal

The insurer will pay for the cost of removing debris when an insured property is damaged or destroyed by an insured peril. This “other coverage” does not increase the policy coverage limit and is included in the limit of liability applying to the damaged property. For example, if a DP-1 policy provides $100,000 of coverage on the dwelling and an insured suffers a $10,000 fire loss to the dwelling while also incurring debris removal charges of $1,000, the policy will pay $11,000 (less any applicable deductible).

Alterations and Improvements

If the insured is a tenant and makes improvements to the dwelling at his/her own expense, 10% of the amount of coverage carried by the tenant on contents may be applied to cover any improvements.

World Wide Coverage

Up to 10% of the contents coverage amount for loss by a covered peril may be used by the insured if the property damaged or destroyed was away from the premises. Use of this coverage reduces the Coverage C limit for the same loss.

Reasonable Repairs

In the event that covered property is damaged by a covered peril, the insurer will pay the reasonable cost incurred by the insured for necessary measures taken solely to protect the property against further damage.

Removal

The insurer will cover property against direct loss from any cause while being removed from a premises endangered by a covered peril. The policy will provide coverage under this extension for up to 5 days. This coverage does not change the limit of liability that applies to the property being removed.

Vandalism and Malicious Mischief (VMM)

A vandalism and malicious mischief (VMM) endorsement provides coverage for intentional damage or destruction to covered property. VMM does not cover glass breakage or theft, but the damage done to the premises by burglars is covered.

Sidenote

Know this...

If the dwelling has been vacant for more than 60 consecutive days immediately before the damage occurs, there is no VMM coverage.

Fire Department Service Charges

The insurer will pay for the insured’s assumed liability for fire department service charges. This extension does not pay if the property is located within city limits.

Conditions

All dwelling policies include a conditions section identifying the obligations and duties of the insured and insurer in the event of a loss. These policy provisions include:

Appraisal

Each party appoints an appraiser within 20 days of notice to either party. If appraisers cannot agree, the court appoints an umpire and requires 2 out of 3 to determine the value of the loss. Parties share the cost of umpire.

Loss settlement condition

States that covered property losses are valued at actual cash value but not to exceed the amount necessary to repair or replace.

Our option

Gives the insurer the right to repair or replace damaged property with equivalent property within 30 days of receiving the insured’s proof of loss.

Deductible clause

The insurer will pay up to policy limits after the insured has satisfied the deductible.

Pair or set condition

States that in the event of a loss to an item that is part of a pair or set, the insurance company is not obligated to pay the value of the entire set. The insurer may either repair or replace part of the set or pay the difference between the value of the property before the loss and the value of the remaining property.

Liberalization Clause

This is a provision present in property insurance policies that provides that if an insurer adopts new policy forms that broaden coverage during the policy term (or within 60 days prior to the effective date), existing policies will have the broadened coverage without an extra premium.

Suit against insurer

Must be brought within two years and only after the insured meets all conditions in the policy

Death of the insured

Policy will transfer to the legal representative

Assignment

Also known as transfer of rights and duties, this provision stipulates that the policy or its interests cannot be assigned or transferred to another party without the consent of the insurer.

Loss payment

States payment of the loss will be made within 30 days after receiving the insured’s proof of loss

Other insurance

States that if a loss is covered by other insurance, the insurance company will pay only its proportionate share of the loss

Recovered property

States that if the insured or insurer recovers lost property, the other party must be notified. Insured’s options when property is recovered:

Keep the money and return the recovered property to the insurance company
Keep the recovered property and return the amount of the claim to the insurance company

DP Endorsements

The following are additional endorsements that may be added to a dwelling property policy form. The language that follows has been derived from actual endorsements as they appear in real policies.

An automatic increase in insurance (also known as inflation protection) provides automatic percentage increases in coverage each year.

Broad form theft coverage may be added to provide a limited amount of on or off premises theft (the minimum limit available is $1,000).

Permitted Incidental Occupancies provides coverage for an insured’s personal property when the structure is “incidentally” used for a business activity, such as providing piano or other music lessons, using a room as a “satellite” type of office or refinishing or woodworking related activities. This endorsement actually deletes exclusions in the policy as they pertain to a business activity conducted on the residence premises.

Building Ordinance or Law covers losses resulting from ordinance or laws regulating construction, repair or demolition of property. Coverage is provided for the dwelling, other structures and personal property (i.e., contents).

Premises Alarm or Fire Protection Systems A premium discount is provided under this endorsement for dwellings with approved and properly maintained installations of alarms or fire protection systems. The system utilized must be identified in the endorsement.

Additional Insured Persons or organizations with insurable interests in the described location may be named as additional insureds in this endorsement.

Sinkhole Collapse provides coverage for losses arising from the sudden settlement or collapse of the earth resulting from, as the endorsement states, “subterranean voids created by the action of water on limestone or similar rock formations.”

Lesson Summary

All dwelling policies have a section titled “Other Coverage,” offering extensions of coverage beyond the policy limits and subject to a deductible. The extensions include:

Other Structures
Debris Removal
Alterations and Improvements
World Wide Coverage
Reasonable Repairs
Removal
Vandalism and Malicious Mischief
Fire Department Service Charges

These policies also have conditions, including:

Appraisal
Loss settlement conditions
Our option
Deductible clause
Pair or set condition
Liberalization Clause
Suit against insurer
Death of the insured
Assignment
Loss payment
Other insurance
Recovered property

Endorsements that may be added to dwelling policies include:

Automatic increase in insurance
Broad form theft coverage
Permitted Incidental Occupancies
Building Ordinance or Law
Premises Alarm or Fire Protection Systems
Additional Insureds
Sinkhole Collapse

Chapter Vocabulary

Definitions

Appurtenant: The term appurtenant refers to something that belongs to or goes with something else. The appurtenant thing, or “appurtenance,” is less important than the property to which it belongs or is attached. It may be used in reference to “Other Structures”
Deductible: The amount of loss or expense that must be paid by the insured before benefits become payable. The insurance company pays benefits only for the loss in excess of the amount specified in the deductible provision. There are various types of deductible provisions.
Conditions: Requirements specified in the insurance contract that must be upheld by the insured to qualify for indemnification.
Debris removal: A section of a property insurance policy that provides reimbursement for cleanup costs associated with damage to property.
Endorsement: An amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.
Ordinance or Law: Endorsement to a property policy, including homeowners, that pays for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built.
Pair or Set: This condition states that in the event of a loss to an item that is part of a pair or set, the insurance company is not obligated to pay the value of the entire set. The insurer may either repair or replace part of the set or pay the difference between the value of the property before the loss and the value of the remaining property.
Removal: The attempt to save threatened property by removing it from endangered area.
Reasonable Repairs: In the event of a loss, the insured is permitted and obligated to take action towards preventing, limiting and/or reducing the loss.
Vandalism: The malicious and often random destruction of another person’s property.