All dwelling policy forms include a section titled “Other Coverage.” This section lists coverage extensions built into the dwelling policy.

• All policies are subject to a deductible.
• Coverage provided under the other coverage section pays in addition to the other coverage limits shown in the policy.

There are eight other coverage extensions, including:

1) Other structures

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

2) Debris removal

The insurer will pay the cost of removing debris when insured property is damaged or destroyed by an insured peril. This other coverage does not increase the policy coverage limit; it is included within the limit of liability that applies to the damaged property.

For example, if a DP-1 policy provides $100,000 of coverage on the dwelling and the 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).

3) Alterations and improvements

If the insured is a tenant and makes improvements to the dwelling at their own expense, 10% of the amount of coverage the tenant carries on contents may be applied to cover those improvements.

4) World wide coverage

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

5) Reasonable repairs

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

6) Removal

The insurer will cover property against direct loss from any cause while it is being removed from premises endangered by a covered peril. The policy provides 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.

7) 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.
• 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.

8) 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 that identifies the obligations and duties of the insured and the insurer in the event of a loss. These policy provisions include:

1) Appraisal

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

2) 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.

3) 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.

4) Deductible clause

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

5) Pair or set condition

States that if there is 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:

• 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.

6) Liberalization clause

This provision in property insurance policies states 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.

7) Suit against insurer

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

8) Death of the insured

Policy will transfer to the legal representative.

9) Assignment

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

10) Loss payment

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

11) Other insurance

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

12) Abandonment

This provision states that an insurer may refuse to pay a claim if an insured abandons or “walks away from” their property following a loss.

13. 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:

1. Keep the money and return the recovered property to the insurance company
2. 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 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 provides a premium discount for dwellings with approved and properly maintained installations of alarms or fire protection systems. The system used 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.