3-B DWELLING Flashcards
Who can get a Dwelling Policy?
● Persons not eligible for homeowners insurance
● Corporations not eligible for homeowners insurance
● Persons or corporations who do not need HO options
● Property only, not liability (unless an endorsement is added)
Eligible Structures
What types of property can it cover?
● Single-family homes
● 1-4 unit dwellings (duplexes, four-plexes, etc.)
● Dwellings with no more than 5 occupants
● Mobile homes, if permanently installed
● Incidental business risks, if insurer allows
examples: ● A duplex rented to others ● A low-value home ● A home with a low-balance mortgage ● A hunting cabin
Example
A company that wants to insure a dwelling for use by its out-of-town visitors would not be eligible for a homeowner’s policy, and would instead require a Dwelling policy.
Dwelling Forms
Dwelling coverage varies depending on the form
Three forms:
- DP-1 “Basic Form”
- DP-2 “Broad Form”
- DP-3 “Special Form”
DP-1 Basic Form
● Named-peril coverage
● Covers only fire, lightning, internal explosion
DP-1 Basic Form
Popular endorsements:
● Vandalism and Malicious Mischief (VMM):
○ Intentional injury or destruction of covered property
○ Does not include: pilferage, theft, burglary, larceny
● Extended Coverage:
- Windstorm
- Civil Commotion
- Smoke
- Hail
- Aircraft
- Vehicles
- Volcanic eruption
- External explosion
- Riot
DP-2 “Broad Form”
Similar to the DP-1, the DP-2 is a named peril policy, but instead of covering just the 9 Extended Form perils, it includes all of the Broad Form perils.
Vandalism and Malicious Mischief
Damage by burglars Glass breakage in occupied dwellings Falling objects that damage the exterior Weight of precipitation Sudden tearing apart, cracking, burning, bulging Accidental discharge Collapse
Freezing
DP-3 “Special Form” Coverage
Open-peril coverage to structures:
● If a peril is not excluded, it is covered
Named-peril coverage to personal property
● Includes all the perils that the DP-2 “Broad Form” covers
Exclusions to DP-3 coverage:
● General Exclusions listed in the policy
● Settling, cracking, shrinking, bulging of patios, foundations, etc.
● Damage from birds, insects, vermin, domestic animals
● Wind or hail damage to antennas, lawns, trees.
● Ice or snow damage to awnings, fences, outdoor structures, foundations
● Theft of anything not part of structure
● Pollutant damage
● Gradual or expected loss from wear & tear, marring, or deterioration
● Mechanical breakdown
● Inherent vice: a characteristic of an item that causes it to damage or destroy
itself
○ different than “wear & tear,” which is deterioration caused by an external source
● Smoke from agricultural or industrial operations
10 Dwelling Policy Sections
● Coverage A ● Coverage B ● Coverage C ● Coverage D ● Coverage E ● Additional Coverages ● Exclusions ● Conditions ● Endorsements, if any
Coverage A - Dwelling:
● Principal dwelling
● Attached structures: garages, apartments, etc.
● Service machinery: furnace, A/C compressor, etc.
● Building materials on or next to the dwelling (if they will become part of the
dwelling eventually)
Not Included under Coverage A:
● Construction tools
● Damage to the land itself
Coverage A - Dwelling Example
Say Tim uses his detached garage to store some reclaimed baseboard that he intends to install in his family room someday. The baseboard is Coverage A property. But, if he intends to use the baseboard at his lake house in the next county, it would not fall under this coverage.
Coverage B
Coverage B - Other Structures:
● Appurtenant Physical Structures (APS): structures that are not attached to dwelling
○ Detached garage, guest house, shed, gazebo, fence, mailbox, lamp post
Limit: 10% of Coverage A limit (per claim)
● Under DP-1, the 10% is included as part of Coverage A limit ● In DP-2 and DP-3, the 10% is added to the Coverage A limit
Coverage B Exclusions
● Buildings used for business or farming (unless used only for storing equipment)
● Buildings rented to someone who is not a tenant of principal dwelling (unless
rented as private garage only)
● Gravestones, plots, mausoleums
Coverage C - Personal Property:
Any personal property located on the insured premises
Coverage for property off-premises:
● Limit: 10% of Coverage C limit
● Not additional insurance
Typical Coverage C exclusions:
● Animals ● Vehicles ● Aircraft, hovercraft ● Boats ● Paper and electronic data ● Credit and debit cards ● Money ● Grave markers ● Water or steam
Direct vs. Indirect Loss
Coverage A, B, & C cover direct losses.
● Direct loss: loss to tangible property, such as to building or personal property
Coverage D, E cover indirect losses.
● Indirect loss: economic loss that results from a direct loss
Coverage D - Fair Rental Value (FRV):
● Pays for rental income lost due to damage by an insured peril, such as fire.
● Accounts for net loss, not for discontinued utilities
● Applies for the shortest time it takes repairs to be completed
Coverage D - Fair Rental Value (FRV) Example
Bill has to move out because Jill’s building has been damaged by fire. It takes Jill three months to repair the apartment, but Bill has meanwhile found another place to live. Another tenant does not move in for an additional two months.
Although Jill lost five months’ income, her insurer will only pay for three months’ rental because this is how long it took for repairs to be completed.