Chapter 4 Dwelling Flashcards
Dwelling Program Eligibility
Dwellings must be used principally for residential dwelling purposes and cannot have more than 4 dwelling units or more than five roomers or boarders. Mobile homes are eligible if they are permanently affixed to a foundation, but only on the Basic Form of coverage (DP–1).
Incidental business occupancies, such as schools, studios, and offices, are permitted if the primary use of the dwelling is as a personal residence. Dwellings located on farms are not eligible.
Which of the following is not eligible for the Dwelling Program?
Dwelling is located on farm property
DP–1 (Basic Form)
The perils insured against are fire, lightning, and internal explosion. If an additional premium is paid for Extended Coverage (EC), the following perils are also included: Wind storm or hail Explosion Riot or civil commotion Aircraft, vehicles Smoke Volcanic eruption
The peril of vandalism or malicious mischief (VMM) may also be included with the payment of an additional premium. EC and VMM coverages, if purchased, must appear on the declarations. If VMM is purchased, it excludes loss for vandalism in vacant buildings.
Losses to the dwelling, other structures, and contents are paid on an actual cash value basis.
Which of the following Dwelling forms pays for losses to the dwelling on an actual cash value basis?
DP-1
DP-2 (Broad Form)
The perils insured against are the DP–1 perils, the EC perils, VMM and the following:
Damage by Burglars – This does not include theft coverage nor does it apply if the dwelling was vacant 60 or more consecutive days immediately before a loss.
Falling objects – Damage to the exterior of the building must take place for coverage to apply to contents inside the building.
Weight of ice, snow, or sleet – This doesn’t apply to awnings, patios, pavements, pools, etc.
Accidental discharge or overflow of water or steam – Must occur from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or household appliance. This doesn’t apply to constant or repeated seepage or leakage over a period of time or if the dwelling was vacant 60 or more consecutive days immediately before a loss.
Sudden and accidental tearing apart, cracking, burning, or bulging – Must occur to a steam or hot water heating system, air conditioning system, or automatic fire protective system, or household appliance.
Freezing – Must occur to a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or household appliance. Applies only if the insured used reasonable care to maintain heat in the building OR shut off the water supply and drained all systems of water.
Sudden and accidental damage from artificially generated electrical current – This peril is caused by man-made electricity or power surge and does NOT apply to damage to tubes, transistors, electronic components, or circuitry contained in appliances, fixtures, computers, etc.
The Damage by Burglars peril includes damage to the covered property caused by the burglar, but not theft of property. The Vehicle peril does not include loss to a fence, driveway, or walkway caused by a vehicle owned or operated by the insured. The Smoke peril does not include loss caused by smoke from agricultural smudging or industrial operations.
Losses to the dwelling and other structures are paid on a replacement cost basis, and losses to personal property are paid on an actual cash value basis.
DP–3 (Special Form)
Coverage for the dwelling and other structures is provided on an open perils basis, meaning coverage is provided for all causes of loss except for those perils specifically excluded.
In addition to the policy’s General Exclusions, the DP–3 specifically excludes the following losses under Coverages A and B:
Collapse, except for coverage provided by Other Coverages.
Freezing, thawing, or weight of water or ice on patios, fences, swimming pools, foundations, piers, docks, retaining walls, etc.
Theft of property not part of a covered building or structure.
Theft in or to a dwelling or structure under construction.
Wind, hail, ice, snow, or sleet to outdoor radio and TV antennas and aerials, trees, shrubs, plants, and lawns.
Vandalism and malicious mischief, theft or attempted theft, and any ensuing loss if the dwelling has been vacant for more than 60 consecutive days immediately before a loss.
Constant or repeated seepage or leakage of water or steam over a period of time from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or household appliance – these systems and appliances do NOT include sumps, sump pumps, mold, fungus, or wet rot unless resulting from accidental discharge or overflow of water or steam and is hidden from view.
Any of the following: wear and tear; deterioration; mechanical breakdown; smog, rust, or corrosion; smoke from agricultural smudging or industrial operations; pollution; settling, cracking, bulging, or expansion of foundation, walls, floors, pavement, or patios; and birds, vermin, rodents, insects, or domestic animals. Theft of property that is part of the dwelling or other structures is covered as long as the dwelling or other structures have not been vacant for more than 60 days. Theft of contents is still excluded unless coverage has been added by an endorsement.
Personal property is covered for the Broad Form (DP–2) named perils.
Losses to the dwelling and other structures are paid on a replacement cost basis, and losses to personal property contents are paid on an actual cash value basis to the insured.
Which of the following dwelling program forms covers the building on an open peril basis?
DP-3
The DP-3 Special form covers the dwelling and other structures on an open peril basis, which covers all perils except the perils specifically excluded.
Match the occurrence with the best Dwelling Policy form to cover the loss
DP–1 (Basic Form)
A fire breaks out in the kitchen of the insured property. After proof of loss, the insurer pays the actual cash value for damages to the dwelling.
DP–2 (Broad Form)
While the insured property was unoccupied, it was burglarized. The insurer pays to replace the broken window the burglar used for entry, but not for the personal property stolen.
DP–3 (Special Form)
After an ice storm, the pool on the insured property was damaged. The insurer pays the claim on a replacement cost basis.
DP–1 (Basic Form) with Extended Coverage
The insured property was damaged when someone drove into the garage. After proof of loss, the insurer pays the actual cash value for damages to the dwelling.
What are the dwelling coverages?
Dwelling Coverages
Coverage A
Dwelling
Coverage B
Other Structures
Coverage C
Personal Property
Coverage D
Fair Rental Value
Coverage E
Additional Living Expenses
Coverage A – Dwelling
Coverage applies to the dwelling described in the declarations, used principally for residential purposes, including structures attached to the dwelling, such as an attached garage, carport, breezeway or deck. Coverage also includes materials and supplies on or next to the described location used to construct, alter, or repair the dwelling or other structures at the described location.
Unless otherwise covered in the policy, building equipment and outdoor equipment used to service the described location is considered part of the dwelling IF such property is located on the described location. No coverage applies to land, including land on which the dwelling is located.
The Coverage A limit of insurance appears on the declarations as a specific limit. It is chosen by the named insured at the time coverage is applied for and should represent the dwelling’s replacement value.
An attached carport is covered under which of the following coverages?
Coverage A
Dwelling includes structures attached to the dwelling, such as a carport, attached garage, breezeway, or deck.
Coverage B – Other Structures
Coverage B applies to other structures on the described location if they are separated or detached from the dwelling by clear space, a fence, or a utility line. Examples include a detached garage, shed, pool, and an outdoor storage building.
No coverage is provided for structures rented to others who were not a tenant of the dwelling before residing in the other structure. An exception applies if the structure is rented solely as a private garage. As with Coverage A, coverage is NOT provided for land.
No coverage is provided for other structures used in whole or in part for commercial, manufacturing, or farming purposes. However, if other structures used for such purposes only store property owned solely by the named insured or a tenant of the dwelling, coverage will apply provided the property doesn’t include any gaseous or liquid fuel located other than in a vehicle’s fuel tank.
The Coverage B limit of insurance is up to 10% of the Coverage A limit and is automatically provided under each of the dwelling forms. In the case of a DP–1, this limit does not increase the amount of insurance provided by Coverage A. The DP–2 and DP–3 forms provide additional insurance.
Example
The Coverage A limit on an insured dwelling is $100,000. In a DP–1, a detached garage would be covered for up to $10,000; however, the most the policy would pay for loss to both the dwelling and garage is $100,000. Under the DP–2 and DP–3 forms, the garage would be covered for up to $10,000 and this would be in addition to the $100,000 of coverage provided for the dwelling.
Neither Coverage A nor B insure damage caused by wind, hail, ice, snow, or sleet damage to outdoor radio and television antennas and aerials, including their lead-in-wiring.
All of the following is covered under Coverage B – Other Structures, except:
Construction materials
Construction materials used for repairs or renovation of the dwelling or other structures are covered under Coverage A – Dwelling.
Coverage C – Personal Property
Coverage applies to household and personal property usual to the occupancy as a dwelling if it is owned by the insured or by members of the insured’s family who reside with the insured. Coverage only applies while insured property is located at the described location. After a loss and at the insured’s request, Coverage C will also apply to personal property of a guest or servant while located on the described location. Personal property of a tenant or boarder is not covered.
Coverage also automatically applies to personal property the insured removes from the location to a newly acquired principal residence for 30 days or until policy expiration, whichever occurs sooner. Otherwise, coverage is not provided for personal property located off the described location.
Property not covered includes:
Accounts, bank notes, coins, and currency
Birds, animals, and fish
Aircraft and watercraft other than rowboats or canoes
Motor vehicles other than those used to service the described location or to assist the handicapped
Hovercraft
Data, including books of account, drawings, paper records, computers, and their equipment
Credit cards, funds transfer cards, and other access devices
Water or steam
Grave markers
As a coverage giveback, the insured may use up to 10% of the Coverage C limit of insurance for loss caused by an insured peril to covered property anywhere in the world.
All of the following are types of property NOT covered under Coverage C – Personal Property, except:
Canoes
excluded are accounts, bank notes, coins and currency, birds, animals, or fish, and electronic data processing tapes, wires, and records.
Coverage D – Fair Rental Value
Coverage D provides insurance for indirect losses that occur as a result of direct losses to property insured under Coverages A, B, or C that are covered by the policy. The policy pays the fair rental value of that part of the described location that is rented to others, or held for rental to others, at the time of a loss IF the rental unit is unfit for its normal use because of a direct loss covered by the policy.
Payment will be made for the shortest time necessary to repair the damaged portion of the dwelling that’s normally held for rental. A deduction is made for any continuing expenses — meaning expenses that would continue without regard to whether the unit can be occupied (e.g., electric bills or the mortgage payment).
If a civil authority prevents the insured from using the dwelling because a neighboring location was directly damaged by peril that is insured by the insured’s policy, the fair rental value will be paid for no more than 2 weeks. Cancellation of a lease is not covered.
The Coverage D limit of insurance is up to 20% of the Coverage A limit and is automatically provided under each of the dwelling forms. In the case of a DP–1, this limit does not increase the amount of insurance provided by Coverage A. The DP–2 and DP–3 forms provide additional insurance.
Which coverage pays for the loss of rents due to direct loss to the dwelling from a covered peril?
Coverage D – Fair Rental Value
The Coverage D – Fair Rental Value limit of insurance is up to 20% of the Coverage A limit.
Coverage E – Additional Living Expense
Like Coverage D, Coverage E provides insurance for indirect losses that occur as a result of direct losses to property insured under Coverages A, B, or C that are covered by the policy. Coverage E is automatically included in the DP–2 and DP–3 forms; it’s not included in the DP–1 form.
The policy pays any necessary increases in living expenses incurred by the named insured when a covered loss makes the unit in which the named insured lives uninhabitable. Payment is made only to the extent the insured’s household can maintain its normal standard of living.
The Coverage E limit of insurance is up to 20% of the Coverage A limit and is additional coverage. Examples of expenses paid by Coverage E are the costs of a motel room, boarding pets, and dining out.
DP–1
Basic Form
DP–2
Broad Form
DP–3
Special Form
Loss Settlement
Limit of Insurance
Loss Settlement
Limit of Insurance
Loss Settlement
Limit of Insurance
Coverage A
ACV
Limit of Liability
RC
Limit of Liability
RC
Limit of Liability
Coverage B
ACV
10% Cov A
(not additional insurance)
RC
10% Cov A
( additional coverage)
RC
10% Cov A (additional coverage)
Coverage C
ACV
Insured’s choice
ACV
Insured’s choice
ACV
Insured’s choice
Coverage D
20% Cov A
(not additional insurance)
20% Cov A (additional coverage)
20% Cov A (additional coverage)
Coverage E
None
20% Cov A (additional coverage)
20% Cov A (additional coverage)
Debris Removal
The policy pays the insured’s reasonable expenses for the removal of debris of covered property if the property is damaged by an insured peril. Debris removal expense is included in the limit of insurance that applies to the damaged property.
Improvements, Alterations, and Additions
If the insured is a tenant, he or she may use up to 10% of the Coverage C limit of insurance for a covered loss to improvements, alterations, and additions made or acquired at the insured’s expense to that part of the described location only occupied by the named insured.
In the DP–1 form, coverage is included in the limit of insurance; in the DP–2 and DP–3 forms, it’s additional insurance.
Worldwide Coverage
The insured may use up to 10% of the Coverage C limit of liability for a covered loss to property insured under Coverage C while it’s located anywhere in the world. This coverage does NOT apply to rowboats, canoes, or property owned by guests or servants. It is included in the Coverage C limit of liability.
Reasonable Repairs
If covered property is damaged by an insured peril, the policy will pay the reasonable costs incurred by the named insured for necessary measures taken to protect covered property from further damage. This is not additional insurance and coverage does not increase the limit of insurance that applies to the covered property.
Property Removed
If property is being removed from the described location to protect it because it is endangered by a covered peril, coverage is provided for direct loss by any peril while removed. Under the DP–1 form, coverage is provided for 5 days while removed; under the DP–2 and DP–3 forms, coverage is provided for 30 days while removed.
This coverage does not increase the limit of insurance that applies to the property being removed.
Which of the following is NOT true about coverage for Property Removed?
Property coverage applies under the DP–1 policy for 30 days while the property is removed
The DP-1 policy only provides 5 days of coverage while the property is removed from the dwelling to avoid a covered loss.
Trees, Shrubs, and Other Plants
Under the DP–2 and DP–3 forms, coverage is provided for trees, shrubs, plants or lawns on the described location for loss caused by the following perils: fire or lightning; explosion; riot or civil commotion; aircraft; vehicles not owned by the named insured or by a resident of the described location; vandalism or malicious mischief; and damage caused during a burglary or an attempted burglary. This coverage is not included in the DP–1 form.
Damage to trees, shrubs, plants, or lawns caused by the following perils are not covered: wind; hail; weight of snow, ice or sleet; and loss by theft. The limit of insurance for this coverage is up to 5% of the Coverage A limit, with a maximum of $500 applying to any one tree, shrub, or plant.
This is additional coverage.
The limit of insurance for the Other Coverage Trees, Shrubs, and Other Plants is provided at which percentage of the Coverage A limit?
5%
This coverage is also in addition to the Coverage A limit.
Fire Department Service Charge
Under each of the dwelling forms, the policy will pay up to $500 for the named insured’s liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from an insured peril. Coverage does not apply if the property is located within the limits of the city, municipality, or protection district furnishing the fire department response. Essentially, coverage is provided for services provided by an assisting fire department.
This is additional insurance and the policy deductible does not apply.
Collapse
“Collapse” is defined as the abrupt falling down or caving in of a building, or any portion of a building, but only if it cannot be occupied for its current intended purpose. If a building, or any portion of a building, is in danger of falling down or caving in — or if it’s standing, it is NOT in a state of collapse.
Under the DP–2 and DP–3 forms, coverage is provided for direct physical loss to covered property involving collapse of a building, or any part of a building, but only if the cause of loss is: any of the Coverage C named perils; hidden decay; hidden insect or vermin damage; weight of contents, equipment, animals or people; weight of rain which collects on the roof; and use of defective materials or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling, or renovation.
Collapse does not include settling, cracking, shrinking, bulging, or expansion. This coverage does not increase the limit of insurance and is NOT provided by the DP–1.
Glass or Safety Glazing Material
Under the DP–2 and DP–3 forms, coverage is provided for the breakage of glass or safety glazing material if it is part of a covered building, storm door, or storm window. Coverage is provided for direct loss caused by earth movement and the pieces, fragments, or splinters of broken glass from the glass or safety glazing material.
No coverage applies if the dwelling was vacant for 60 consecutive days immediately before the loss. The vacancy provision doesn’t apply to losses caused by earthquake. Loss for damage to glass will be settled on the basis of replacement with safety glazing materials when required by ordinance or law.
Coverage doesn’t increase the limit of liability and is NOT provided by the DP–1 form.
