Dwelling policy forms are monoline policies used to insure residential property. You’ll typically use a dwelling property form to insure most dwelling property, including dwellings under construction. The dwelling may be owner-occupied or non-owner-occupied (rental property).

Most dwellings used for residential purposes are eligible for coverage under a dwelling form, except:

• farms
• structures with more than four units
• structures used principally for commercial or business purposes

Mobile homes may also be eligible if they’re permanently affixed to a foundation and endorsed.

Currently, the Dwelling '02 program is used in almost every state. This program incorporated language and policy provisions from the Standard Fire Policy into a dwelling policy to cover residential property.

The Dwelling '02 program consists of three policy forms, including the:

1. Dwelling Property Basic Form (DP1 form)
2. Dwelling Property Broad Form (DP2 form)
3. Dwelling Property Special Form (DP3 form)

The difference between these forms is the causes of loss (perils) each policy covers.

Extended coverages

Extended coverages are a group of eight additional perils, including:

• Windstorm
• Hail
• Aircraft damage
• Riot or civil commotion
• Vehicle damage
• Volcanic eruption (lava and ash only, not shock waves)
• Explosion (does not have to be internal)
• Smoke damage

Sidenote

Know this...

Any Volcanic activity in a 72-hour period is considered 1 event.

These extended coverages are automatically included in the DP2 and DP3 forms and may be added to the DP1 by endorsement.

A common acronym used to remember these eight extended coverages is WHARVVES.

Basic coverage (DP1)

The DP1 provides the most limited coverage for dwellings and their contents compared to the DP2 and DP3 policies. DP1 covers:

• Hostile fire
• Lightning
• Internal Explosion

A hostile fire is burning in an area where it shouldn’t be burning. For example, if fire escapes from a wood-burning stove and damages other property, that damage would be covered.

A friendly fire is burning where it’s intended to burn (such as the fire contained within the wood-burning stove). Damage caused by a friendly fire is not covered.

Extended Coverage and Vandalism or Malicious Mischief (V&MM) may be added to the DP1 by endorsement.

Dwelling Property Broad Form (DP2)

The perils insured against in a DP2 policy include:

• all perils covered in a DP1 policy, and
• the perils appearing under Coverage C (named perils covering personal property)

Those additional named perils include:

• Weight of ice, snow, and sleet, which causes damage to property contained in the building.
• Loss or vandalism to covered property caused by burglars (burglary damage only, not theft itself).
• Loss caused by falling objects but not damage to fences, awnings, outdoor equipment, or outdoor radio and television antennas and aerials. Damage to the object that “falls” is not covered.
• Loss caused by accidental discharge or overflow (i.e., bursting pipes) of water or steam from plumbing, heating, air conditioning (A/C), or a fire-protective sprinkler system.
• Damage caused by the sudden and accidental tearing, cracking, burning, or bulging of a steam or hot water heating (i.e., bursting pipes), air conditioning, or protective sprinkler system.
• Loss due to the freezing of a plumbing, heating, A/C or, sprinkler system, or household appliance.
• Loss caused by artificially generated electrical current that results in sudden and accidental damage. Tubes, transistors, and similar components are not covered.
• Volcanic eruption (other than loss caused by shock waves or tremors.)

An acronym that can help you remember these is BIG AFFECT, as displayed below.

In addition to the above named perils, DP2 also provides coverage for Collapse and “Glass or Safety Glazing Material.”

The insurer will cover the breakage of glass or safety glazing material that is part of a covered dwelling, storm door, or storm window.

The DP-2 form also includes coverage for the breakage of glass or safety glazing material that is part of a covered building, such as windows or storm doors. There is no dollar or per-pane limit under the ISO Dwelling '02 form.

Collapse

The insurer will pay for direct physical loss to covered property involving the collapse of a dwelling (or any part of it) as a result of:

• A covered peril
• Hidden decay
• Hidden insect or vermin damage
• Weight of contents, equipment, animals or people
• Weight of rain which collects on a roof
• Use of defective materials

Sidenote

Know this...

Collapse does not include settling, cracking, shrinking, bulging, or expansion.

Special form (DP3)

The DP3 is an all-risk policy and provides the broadest protection of all the dwelling fire policies. The DP3 is similar in structure to the DP2, but it differs in an important way:

• Coverage A (dwelling) and Coverage B (other structures) are covered on an open-peril (all-risk) basis.
• Coverage C (personal property) remains named peril.

An all-risk policy covers all types of direct physical loss EXCEPT those specifically excluded.

This means that under a DP-3 policy, the dwelling and other structures are covered against all perils unless specifically excluded. To determine whether a peril is covered, you reference the Exclusions section - if it isn’t listed there, it’s covered.

All policy forms exclude losses from:

• Ordinances or laws (Require more expensive reconstruction than was used in the original structure i.e., safety glass in place of regular glass in a building)
• Earth movement (Except for direct loss by fire or explosion resulting from earth movement)
• Airborne shockwaves (Typically from volcanic eruption)
• Water damage
• Flooding
• Water back up into a building
• Water leaking or seeping from below ground
• Tidal surge
• Rapid run-off
• Mudslide
• Power interruption (Occurring away from the insured location)
• Insured’s neglect (To save and preserve property following a loss)
• Inherent vice (A characteristic of property causing it to depreciate, spoil, break, or disintegrate)
• War and nuclear hazard
• Insured or someone else at the insured direction destroys property
• Mold and dry rot (unless resulting from a covered peril)

Dwelling policy coverages

DP1, DP2 and DP3 policies all provide four divisions of coverage, sometimes referred to as “insuring agreements.”

1. Coverage A Dwelling
2. Coverage B Other Structures
3. Coverage C Personal Property
4. Coverage D Rental Value

Sidenote

Know this...

The DP2 and DP3 forms automatically include Coverage E (Additional Living Expenses), which may also be added to the DP1 by endorsement.

Coverage A Dwelling

This insuring agreement provides coverage for the dwelling principally used for residential purposes (owner- or non-owner-occupied).

Coverage A also includes:

• structures attached to the dwelling (such as an attached garage or carport)
• loss of materials and supplies on the residence premises used in the construction or repair of the dwelling
• outdoor or building equipment used to service the premises (power tools, riding lawnmowers, etc.)

Note: Materials and supplies located on or next to the residence premises that are used for the construction or repair of the dwelling are included under Coverage A. However, structures used for commercial, farming, or manufacturing purposes are not covered.

Coverage B Other Structures

10% of Coverage A applies to structures on the residence premises detached from the dwelling by a clear space. “Other Structures” include:

• Garage not attached to the dwelling
• Swimming pool
• Cabana
• Any other structures on the premises connected to the dwelling by only a fence, utility line, or similar connection

Exclusions:

• Property used for commercial purposes, farming, and manufacturing; or rented to someone other than a tenant for residential use or as a private garage
• Damage to land

Sidenote

Know this...

Coverage B is not an additional amount on DP1. The insured may use up to 10% of the Coverage A limit for “Other Structures.” If a loss is paid by this section of coverage, the remaining insurance on the dwelling is reduced by the amount of the paid loss. In DP2 and DP3, this 10% is an additional amount of insurance.

Coverage C Personal Property

Coverage C provides protection for the insured’s personal property owned or used by the named insured or resident family members.

• The default Coverage C limit is 50% of the Coverage A (Dwelling) limit for property on the residence premises.

• Property away from the premises is covered anywhere in the world, but only up to 10% of the Coverage C limit (or $1,000, whichever is greater).

• When personal property is moved to a new principal residence, full Coverage C limits apply at both locations for 30 days

If personal property is moved to a newly acquired principal residence, the property is covered at both locations for thirty days.

Personal property not covered includes:

• Accounts
• Bills
• Currency, coins, bullion, gold, silver
• Deeds
• Securities
• Evidence of debt
• Manuscripts
• Passports
• Tickets
• Stamps
• Animals, birds, and fish
• Aircraft and its parts
• Motor vehicles (except those used to maintain or service the premises or assist the handicapped)
• Watercraft (row boats and canoes under 26 feet long are covered)
• Electronic data and discs
• Credit card or fund transfer cards
• Property of roomer, renter, or boarder

Coverage D Loss of rent

If part of the covered residence that is held for rental (or actually rented) to others becomes uninhabitable due to a covered loss under Coverage A, B, or C, the contract will pay the fair rental value.

The limit is typically 10% of Coverage A by default but may be increased by endorsement at the insured’s request.

Coverage E Additional living expense

Sometimes referred to as “Loss of Use,” this coverage section pays the insured’s necessary increased living expenses if a residence becomes uninhabitable due to a covered loss and the insured must move out while it’s being repaired, replaced, or rebuilt.

If civil authority orders the house to be vacated due to an impending insured peril, the insurer will pay additional living expenses for up to two weeks (e.g., if the insured is required to leave home due to a flood, fire, infectious disease, etc.).

Liability Coverage

Dwelling policies (DP-1, DP-2, and DP-3) do not include personal liability or medical payments coverage.

If the insured wants this protection, it can be added by endorsement through the Personal Liability Supplement (Coverage L) or by purchasing a separate Comprehensive Personal Liability (CPL) policy.

Lesson summary

Dwelling policies are monoline policies used to insure residential properties. Here are some key points about dwelling policies:

• Most dwelling properties are eligible for coverage, except farms and structures with more than four units or used mainly for commercial purposes. Mobile homes may qualify if permanently affixed and endorsed.

• The Dwelling '02 program is utilized in most states, featuring three policy forms: Dwelling Property Basic Form (DP1), Dwelling Property Broad Form (DP2), and Dwelling Property Special Form (DP3).

Extended coverages included in DP2 and DP3 automatically (optional endorsement for DP1) are:

• Windstorm
• Hail
• Aircraft damage
• Riot or civil commotion
• Vehicle damage
• Volcanic eruption
• Explosion
• Smoke damage

Basic Coverage (DP1) includes coverage for:

• Hostile fire
• Lightning
• Internal Explosion

Extended Coverage and Vandalism or Malicious Mischief (V&MM) can be added by endorsement.

Dwelling Property Broad Form (DP2) covers more perils than DP1, including all DP1 perils and additional ones like loss due to the weight of ice, snow, and sleet, vandalism by burglars, and accidental discharge or overflow of water or steam.

The Special Form (DP3) is an all-risk policy providing broad protection, covering all types of direct physical loss except for specific exclusions.

DP3 provides open-peril coverage for the dwelling (Coverage A) and other structures (Coverage B), but Coverage C remains named peril.

Dwelling policy coverages include:

• Coverage A: Dwelling
• Coverage B: Other Structures
• Coverage C: Personal Property
• Coverage D: Loss of Rent

Exclusions from dwelling policies often include losses from ordinances or laws, water damage, power interruption away from the insured location, and inherent vice.

Also excluded are earth movement, neglect, war, nuclear hazard, intentional loss, and mold or dry rot unless caused by a covered peril.

Coverage B’s 10 percent limit is not additional insurance under DP-1 but is additional under DP-2 and DP-3

Chapter vocabulary

Definitions

Additional Living Expenses

Extra charges covered by homeowners policies over and above the policyholder’s customary living expenses. They may be paid when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.

All-Risk

Also known as open peril, this type of policy covers a broad range of losses. The policy covers risks not explicitly excluded in the policy contract.

Coverage Forms

“Types” of insurance. The main forms are Standard Form (provides named peril coverage) and Special Form (coverage on an open perils basis).

Dwelling Policy

A basic, broad, or special form of monoline coverage composed of dwelling fire and/or allied lines with no personal liability insurance.

Earthquake

Property coverages for losses resulting from a sudden trembling or shaking of the earth, including that caused by a volcanic eruption. Excluded are losses resulting from fire, explosion, flood, or tidal wave following the covered event.

Exclusions

Provisions in the policy that eliminate coverage for specified losses or causes of loss.

Extended Coverages

Windstorm, Hail, Aircraft damage, Riot or civil commotion, Vehicle damage, Volcanic eruption (but not earthquake), Explosion (does not have to be internal), Smoke damage

Fire

Coverage protecting the insured against the loss of real or personal property from damage caused by the peril of fire or lightning, including business interruption, loss of rent, etc.

Loss of Income

Compensation for lost rental income when covered property becomes uninhabitable due to a covered peril under a dwelling or homeowners policy. Weekly cash benefits will be paid for loss of income beginning after a waiting period has been satisfied.

Loss of Use Insurance

Policy providing protection against loss of use due to damage or destruction of property.

Named Peril Coverage

Insurance for losses explicitly defined in the policy contract.

Property

Coverage protecting the insured against loss or damage to real or personal property from a variety of perils, including but not limited to fire, lightening, business interruption, loss of rent, glass breakage, tornado, windstorm, hail, water damage, explosion, riot, civil commotion, rain, or damage from aircraft or vehicles.

Specified Perils (Named Peril Policy)

An insurance policy that provides coverage only against perils specifically noted in the contract.