3/B - Dwelling Flashcards
Dwelling Policy Eligibility
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
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
Popular endorsements:
- Vandalism and Malicious Mischief (VMM):
a. Intentional injury or destruction of covered property
b. Does not include: pilferage, theft, burglary, larceny - Extended Coverage:
1. Windstorm
2. Civil Commotion
3. Smoke
4. Hail
5. Aircraft
6. Vehicles
7. Volcanic eruption
8. External explosion
9. Riot
DP-2 “Broad Form”
Similar to 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.
Covers:
- Fire
- Lightning
- Explosion
- W.C. SHAVER
- Vandalism and Malicious Mischief
- Damage by burglars
- Breakage of glass
- Falling objects
- Weight of ice, snow, or sleet
- Collapse of buildings
- Sudden and accidental tearing apart
- Accidental discharge or overflow of water or steam
- Freezing
- Artificially generated electrical currents
- Volcano
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
DP-3 Exclusions
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, or 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
a. different than “wear & tear,” which is deterioration caused by an external source - Smoke from agricultural or industrial operations
Dwelling Policy Sections
- Coverage A
- Coverage B
- Coverage C
- Coverage D
- Coverage E
- Additional Coverages
- Exclusions
- Conditions
- Endorsements, if any
Coverage A
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 B
Coverage B-Other Structures:
- Appurtenant Physical Structures (APS): structures that are not attached to dwelling
a. 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
Excluded from Coverage B:
- 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
Coverage C Exclusions
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 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
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 E
Coverage E: Additional Living Expense (ALE):
- For the increase in the insured’s living expenses when a covered peril makes the dwelling uninhabitable
- Maintains insured’s normal standard of living
- Does NOT include any normal, ongoing expenses the insured would be paying anyway (mortgage, etc.)
- Automatically included in DP-2 and DP-3
- Not included in DP-1 unless added by endorsement
Limits to Coverages D & E
Time-based Limits
- Apply to Coverage D (FRV) and Coverage E (ALE)
- Policy covers these expenses for the shortest time required for the insured to:
a. repair or replace the property, or
b. settle elsewhere
Note: limit may be different for ALE in the DP-1
Civil Authority Coverage
- Applies when a civil authority prohibits access to dwelling because of damages at a nearby property
- Damages must have been caused by a covered peril
- Provides FRV and ALE for up to 2 weeks
Additional Coverages and Conditions
Additional Coverages
Some are included as part of the policy limit:
- Debris Removal
- Reasonable Repairs
Others are paid on top of any policy limit:
- Ordinance or Law
- Fire Department Service Charge
- Trees, Shrubs, Plants
Debris Removal
Pays to clean up debris that is:
- Made up of covered property
- Damaged by a covered peril
Limit: the limit for the type of property involved
- Debris from dwelling: Coverage A limit
- Debris from other structures: Coverage B limit
- Debris from personal property: Coverage C limit
Additional insurance: Debris Removal can pay an additional 5% of its applicable limit over and above the policy limit, when needed
Reasonable Repairs
- Pays for materials and labor to prevent further damage to covered property after a loss
- Insured is required to protect damaged property
- Coverage is included within Coverage A limit
Ordinance or Law
- Pays for increased repair costs due to laws or building codes
- Available only on DP-2 and DP-3
- Provides additional 10% on top of Coverage A
Excluded:
- Any change that decreases value of property
- Any change that requires monitoring or testing
- Remediation of pollutants
- Confiscation, seizure, demolition, condemnation of property by government
Fire Department Service Charge
- Applies when the fire department charges to respond to covered peril
- Limit: $500
- Pays in addition to Coverage A limit
Trees, Shrubs, Other Plants
- Covers plant damage caused by covered perils, except wind and hail
- Limit: 5% of Coverage A
- Individual limit: $500 for any one tree, shrub, or plant
- Pays in addition to Coverage A limit
Property Removal
- Provides coverage for items that the insured removes from danger if a covered peril is imminent
- Property remains covered under the original peril for:
a. up to 5 days under DP-1
b. up to 30 days under DP-2 and DP-3 - No matter what damages the property during this time, it will still be covered under the peril that the insured was trying to protect it from
Conditions
Dwelling Policy Conditions
- Insurable Interest
- Duties of Insured Party
- Other Insurance
- Mortgagee Clause
- Liberalization Clause
- Recoverable Depreciation and Claims Settlement basis
- Suit against the Insurer
- Abandonment
- Intentional Acts
Liberalization and Claim Settlement
Liberalization
Applies to changes made during or up to 60 days before the policy period.
Valuation
- DP-1 policies settle Coverages A and B at ACV.
- DP-2 and DP-3: settle coverages A and B at replacement cost if property is insured to at least 80% of value (Loss Settlement provision is just like HO policy)
Personal Liability Endorsement
- Almost identical to Section II - Liability in a HO policy
- Coverage L - Personal Liability
a. Covers bodily injury and property damage to 3rd party
b. Pays for legal defense
c. Minimum limit = $100,000 - Coverage M - Medical Payment to Others
a. No-fault coverage
b. Pays for necessary, reasonable medical expenses for 3rd party injured on insured’s premises
c. Minimum limit = $1,000 - No coverage for loss assessment
Other Popular DP Endorsements
Theft:
- Limited covers theft from premises
- Broad covers property anywhere
Automatic increase: raises coverage annually 4, 6, or 8%
Dwelling Under Construction: covers structure while being built
General Exclusions
Perils excluded from coverage:
- Water back-up from sewers or drains
- Water and water-borne materials or pollutants
- Off-premises power failure (but power failure on the property is covered)
- War and Nuclear Hazard
- Flood
- Earthquake, landslide, sinkhole, or any earth movement
- Neglect and intentional acts
