Dwelling policy forms are monoline policies used to insure residential property. Dwelling property forms are used 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

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:

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

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

Extended coverages

Extended coverages are a group of eight additional perils:

• 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 included automatically in the DP1, DP2, and DP3 policy forms. A common acronym used to remember them is WHARVVES.

Basic coverage (DP1)

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

DP1 covers:

• Hostile fire
• Lightning
• Internal Explosion

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

A friendly fire is a fire burning where it should be (such as inside the stove). Damage caused by a friendly fire is not covered.

Dwelling Property Broad Form (DP2)

A DP2 policy includes all perils covered in DP1, plus additional named perils (the perils appearing under Coverage C for personal property).

• Weight of ice, snow, and sleet, which causes damage to property contained in the building.
• Loss or vandalism to covered property caused by burglars
• 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 named perils above, 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.

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 the dwelling fire policies.

DP3 is identical to DP2 except for the perils insured against (open-risk vs. named peril). An all-risk policy covers all types of direct physical loss except those specifically excluded.

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

Dwelling policy coverages

DP1, DP2, and DP3 policies all provide four divisions of coverage (sometimes called “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

Coverage A insures the dwelling principally used for residential purposes (owner-occupied or non-owner-occupied). It also includes structures attached to the dwelling, such as an attached garage or carport.

Coverage A also protects:

• 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.)

Coverage B Other Structures

Coverage B applies to structures on the residence premises that are detached from the dwelling by a clear space. The limit is 10% of Coverage A.

“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.

Coverage C Personal Property

Coverage C protects personal property owned or used by the named insured or resident family members while on the insured premises, up to the coverage amount selected by the insured.

Key limits to remember:

• The default amount of coverage is 50% of Coverage A.
• A limited amount (10% of the contents limit) applies to personal property away from the premises.
• This coverage is worldwide.

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 coverage amount is selected by the named insured and may be up to 10% of Coverage A.

Coverage E Additional Living Expense

Coverage E is sometimes called Loss of Use. It pays the increased expenses incurred by the insured if a residence becomes uninhabitable due to a covered loss and the insured must move out while it is 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.).

Lesson summary

Dwelling policies are monoline policies used to insure residential properties. Key points to remember:

• Most dwelling properties are eligible for coverage, except farms and structures with more than four units or used mainly for commercial purposes.
• The Dwelling '02 program is utilized in most states and includes three policy forms: Dwelling Property Basic Form (DP1), Dwelling Property Broad Form (DP2), and Dwelling Property Special Form (DP3).

Extended coverages included automatically in DP1, DP2, and DP3 are:

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

Basic Coverage (DP1) includes:

• Hostile fire
• Lightning
• Internal Explosion

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. It covers all types of direct physical loss except for specific exclusions.

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.

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

A workers comp benefit accommodating an employee who becomes disabled from a cause rising out of their employment. 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.