Dwelling policy Flashcards
Dwelling Program Eligibility
Dwellings that may be insured under the Dwelling Program may be owner-occupied or tenant-occupied, but they must be used principally for residential purposes, with up to 4 dwelling units and no more than 5 roomers or boarders. As long as the dwellings are used primarily as a residence, certain incidental business occupancies that do not involve retail sales are allowed, including professional offices, instructional studios, beauty shops, and schools.
Mobile homes
are eligible for coverage only under the Basic Form and only if they meet certain qualifications, such as being permanently affixed to a foundation. Farm dwellings are not eligible for coverage and would require different insurance.
Which of the following is not eligible for the Dwelling Program?
A dwelling located on farm property
Farm dwellings
are not eligible for coverage and requires different coverage
Coverage A
Dwelling
Coverage B
Other structures
Coverage C
Personal property
Coverage D
Fair rental value
Coverage E
Additional living expenses
Coverage A- Dwelling
Dwelling coverage applies to the residential dwelling described in the Declarations, including structures attached to the dwelling, such as an attached garage, carport, breezeway, or deck. Coverage is also provided for materials and supplies on or next to the described location used to construct, alter, or repair the dwelling or other structures. Unless otherwise covered in the policy, building equipment and outdoor equipment used to service the described location are considered part of the dwelling if they are located on the described location.
Coverage does not apply to land, including land on which the dwelling is located.
The forms allow the insured to select limits for Coverage A, but certain standards exist. Coverage A typically represents the dwelling’s replacement value. On the Broad Form, the standard Coverage A minimum is $12,000. On the Special Form, the standard Coverage A minimum is $15,000.
Coverage B – Other Structures
Example:A shed storing a farming tractor owned by the insured owner-occupant would be covered under Coverage B, unless the shed also contained a filled, external gas can. A shed storing property owned by a commercial business, rather than the insured specifically, would also eliminate coverage for the structure under Coverage B.
Other structures coverage applies to structures other than the dwelling that are on the described location and that are detached from the dwelling by a clear space. This includes structures connected to the dwelling only by a fence, utility line, or similar connection. Structures eligible under this coverage include buildings, such as tool sheds or detached garages, or nonbuilding structures, such as swimming pools or gazebos.
Coverage B Limit of Insurance
The limit of liability applicable to other structures is an amount equal to 10% of the Coverage A limit. On the DP–1, this amount is contained within the Coverage A limit. On the DP–2 and DP–3, this is in addition to the Coverage A limit.
All of the following are covered under Coverage B - Other Structures of a Dwelling policy, except:
Construction materials
Coverage C – Personal Property
household and personal property (sometimes called contents) usual to the occupancy of a dwelling. Personal property includes anything the insured owns or uses, and anything owned or used by the insured’s family members who live with the insured, unless the personal property is excluded by the policy. Property not covered includes:
Motor vehicles, other than those used to service the described location or to assist people with disabilities, or those that are not required to be registered. Electrical equipment that is permanently installed in the vehicle is also excluded.
Data, including data stored in books of account, drawings, paper records, or computers and related equipment
Credit cards, funds transfer cards, and other access devices
Water or steam
Grave marker
Coverage only applies while the insured property is located at the described location, with some exceptions. If personal property is moved from the described location to a newly acquired principal residence, coverage will apply at each residence for up to 30 days or until policy expiration, whichever occurs sooner.
At the insured’s request, Coverage C will cover personal property of a guest or domestic employee while the property is on the described location. However, personal property of a tenant or boarder is not covered, as tenants and boarders will have their own insurance for their personal property.
All of the following are types of property NOT covered under Coverage C - Personal Property of a Dwelling policy, except:
Canoes
Coverage D – Fair Rental Value
applies when a portion of the described location is rented to others, and it provides insurance for indirect losses that occur as a result of covered direct losses to property insured under Coverages A, B, or C. This part of the policy pays the lost rent of that portion of the described location that is rented or held for rental to others at the time of a loss if the rental unit is unfit for its normal use because of the direct loss.
Payment will be made for the shortest time necessary to repair the damaged portion of the dwelling that is normally held for rental, even if that time extends beyond policy expiration. Expenses resulting from cancelling a lease are not covered. A deduction is made for any continuing expenses, meaning expenses that would continue without regard to whether the unit can be occupied (for example, 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 a peril insured against by the insured’s policy, the fair rental value will be paid for no more than 2 weeks.
Coverage E – Additional Living Expense
example -
An insured lives in a home protected by the DP–3. After a fire loss makes the home uninhabitable until repairs can be made, the insured stays in a hotel and has to board their two dogs. Coverage for additional living expenses will cover these costs, as they only exist because a direct physical loss affected the property. This coverage will also cover increased food costs from having to dine out and increased gas expenses if the insured has to travel farther for work. Importantly, the policy would not pay for the entirety of the food and gas costs during the repair period—only the costs that exceed what the insured would have paid if the loss had not occurred.
Like Coverage D, Coverage E provides insurance for indirect losses that occur as a result of covered direct losses to property insured under Coverages A, B, or C. 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.
Expenses like mortgage and electricity would not be paid because they are continuing expenses, meaning they would exist regardless of if a loss occurred.
Coverage E is automatically included in the DP–2 and DP–3, but it is not included in the DP–1 unless added by endorsement.
dwelling policy forms
DP1 basic-
DP2 Broad-
DP 3 Special-
DP1 basic form
As its name implies, the DP–1 provides basic insurance coverage to insure the dwelling, its contents, and other structures on the premises against three named perils: fire, lightning, and internal explosion. Internal explosion refers to explosions occurring within covered property.
Extended Coverage (EC) may be added for an additional premium, which would cover losses resulting from the following perils:
Windstorm and hail. This will cover losses to the inside of the building as long as wind or hail damaged the outside first and created an opening. For example, if the carpet is damaged because a window was left open during a hailstorm, that loss will not be covered.
Losses to awnings, outdoor radio and television antennas, and canoes and rowboats outside of the building are also not covered
Aircraft
Riot or civil commotion
Vehicles, such as losses caused by a vehicle driving into the dwelling
However, losses caused by a vehicle owned or operated by the insured or a resident are not covered, nor are losses to a fence, driveway, or walk caused by any vehicle
Volcanic eruption, not including loss caused by earthquake
Explosion, which would replace and expand internal explosion coverage originally provided in order to cover internal and external explosions
However, explosion does not include electric arcing, breakage of water pipes or pressure relief devices, or explosion of steam boilers
Smoke, not including smoke losses from agricultural smudging or industrial operations
If fire and EC perils are included, the insured may also purchase coverage against vandalism or malicious mischief (VMM) for an additional premium. If VMM is added, it excludes loss for vandalism occurring after 60 consecutive days of vacancy. The VMM peril also excludes loss by theft, larceny (theft of personal property), burglary, or pilferage. However, coverage is provided for building damage caused by burglars.
fire lightning and internal explosion basic covered perils
extended perils windreom hail aircraft volacnic reuption explosiob ad smoke
VMMM EXLCUSED BUILDING VACANT FOR 60+ DAYS
DP2 - BROAD FORM
The Broad Form covers the dwelling, its contents, and other structures against named perils, including the basic perils available for the DP–1 (fire, EC, and VMM), as well as the following:
Damage by burglars – This coverage includes property damage caused by the burglar, but does not cover theft of the property itself. Coverage will not apply to dwellings that have been vacant for more than 60 days.
Falling objects – Coverage is for loss caused by any object outside of the dwelling that falls on its exterior, such as ice falling from a plane, falling trees, or space debris. The building’s interior is covered as long as the exterior is damaged first.
However, losses to outdoor antennas, awnings, and fences are not covered
Weight of ice, snow, or sleet – This coverage will not apply to awnings, fences, patios, or swimming pools
Accidental discharge or overflow of water or steam – The discharge or overflow must occur from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or from within a household appliance. This coverage does not cover loss to the system or appliance itself, only the resulting damage.
Coverage is not provided for loss to a building caused by constant or repeated leakage over a period of time, or for loss to a building that has been vacant for more than 60 days
Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, air conditioning, automatic fire protective sprinkler system, or an appliance for heating water
Freezing of a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or of a household appliance. The insured must have used reasonable care to maintain heat in the building, or shut off the water supply and drain all necessary systems or appliances (not including fire sprinkler systems).
Sudden and accidental damage from artificially generated electrical current – This covers loss resulting from man-made electricity or power surges
However, it does not apply to damage to tubes, transistors, electronic components, or circuitry contained in appliances, fixtures, computers, home entertainment units, or similar equipment
The Vehicle peril on the Broad Form is slightly more expansive than that which is provided by the Basic Form. Under the DP–2, the Vehicle peril only excludes loss to a fence, driveway, or walk caused by a vehicle owned or operated by the named insured or a resident.
DP–3 (Special Form)
The Special Form offers the broadest coverage in the Dwelling Program. Unlike the DP–2, coverage for the dwelling and other structures is provided on an open perils basis, meaning the form insures against all direct physical loss to property and does not cover losses resulting from perils specifically excluded. Excluded perils include:
The exclusions listed in the General Exclusions section of the form
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, and other structures that support a building
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 trees, shrubs, plants, lawns, and outdoor radio and TV antennas and aerials
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 from within a household appliance
Wear and tear, deterioration, or mechanical breakdown
Smog, rust, corrosion, mold, and wet or dry rot
Pollutants, unless the discharge is caused by a named peril applying to contents coverage
Smoke from agricultural smudging or industrial operations
Settling, cracking, bulging, or expansion of foundation, walls, floors, pavement, or patios
Birds, vermin, rodents, insects, or domestic animals, including infestation by any animal
Which of the following Dwelling forms covers buildings on an open perils basis?
DP-3 Special Form
Debris Removal
Debris Removal
The policy pays for 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, they 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 occupied only by the named insured. An example would be built-in cabinets installed by the tenant.
Under the DP–1, coverage is included in the limit of insurance. Under the DP–2 and DP–3, it is additional insurance.
Under the Dwelling Program, what limit is provided for worldwide coverage?
10% of the Coverage C limit, included in the Coverage C limit
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 is located anywhere in the world. This coverage does not apply to rowboats or canoes. Under the Basic Form, this coverage also excludes property of guests or domestic employees.
This coverage is included in the Coverage C limit of liability.
Rental Value and Additional Living Expenses
The insured may use up to 20% of the Coverage A limit of liability for a covered fair rental value loss. This amount is included in the Coverage A limit of insurance, meaning payments made under Coverage D will reduce the Coverage A limit.
For DP–1 policies, some insurers may limit how this Coverage D limit applies on a month-to-month basis. In this case, the insurer will pay only 1/12 of the Coverage D limit for each month the rented part of the described location is unfit for normal use.
Broad and Special Form policies offer coverage for loss in fair rental value under Coverage D and coverage for additional living expenses under Coverage E. The insured may use up to 20% of the Coverage A limit for losses covered under Coverage D and Coverage E. This amount is additional insurance, meaning it does not reduce the Coverage A limit.
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 solely to protect covered property from further damage. An example would be temporarily tarping a hole in the roof damaged by hail.
Property Removed
If property is being removed from the described location because it is endangered by a covered peril, coverage is provided for direct loss by any peril while removed.
Which of the following is NOT true about the Dwelling Program’s Property Removed Other Coverage?
Property coverage applies under the DP-1 policy for 30 days while the property is removed
Fire Department Service Charge
Under all 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 another city or district’s 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 included for services provided by an assisting fire department.
Applicable to the Broad and Special Forms Only
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 or operated by the named insured or by a resident of the described location
Vandalism or malicious mischief, including damage during a burglary, but not property 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 insurance.
The limit of insurance for the Trees, Shrubs, and Other Plants Other Coverage is provided at what percentage of the Coverage A limit of a Dwelling policy?
5%
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 intended purpose. If a building, or any portion of a building, is only in danger of falling down or caving in, or if it is still standing, it is not in a state of collapse. Collapse also does not include settling, cracking, shrinking, bulging, or expansion
Under the DP–2 and DP–3, 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 Broad Form named perils
Hidden and unknown decay, or hidden and unknown insect or vermin damage
Weight of contents, equipment, animals, or people, or the weight of rain that collects on the roof
Use of defective materials or methods in construction, remodeling, or renovation if the collapse occurs during the course of the construction, remodeling, or renovation
This coverage does not increase the limit of insurance applicable to the damaged property.
Glass or Safety Glazing Material
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. This coverage includes direct loss to glass or safety glazing material caused by earth movement, which is normally an excluded peril, as well as coverage for direct loss to covered property caused by the pieces, fragments, or splinters of broken glass or glazing material.
Coverage does not apply if the dwelling was vacant for 60 consecutive days immediately before the loss. This Vacancy provision does not apply to losses caused by earthquake.
Coverage does not increase the limit of liability applicable to the damaged property.
Ordinance or Law
Ordinance or law coverage applies to increased costs incurred by the named insured due to the enforcement of any ordinance or law that requires or regulates the construction, demolition, remodeling, renovation, or repair of a covered building or structure damaged by a covered peril.
If the named insured is the owner of the described location, they may use up to 10% of the Coverage A limit for these costs. If the named insured is a tenant of the described location, they may use up to 10% of the limit that applies to the Improvements, Alterations, and Additions Other Coverage. Whichever limit applies is additional insurance.
Coverage is not provided for any loss in value of a building or structure, or due to costs incurred by ordinances that require pollution clean up, removal, or treatment
General Exclusions
The Dwelling forms do not insure for any loss caused directly or indirectly by the following perils, regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
Ordinance or Law
The insurer will not pay for losses caused by the enforcement of any ordinance or law requiring or regulating:
The construction, repair, remodeling, renovation, or demolition of property, including removal of any resulting debris
Testing for, cleaning up, removing, treating, or otherwise responding to pollutants
Pollutants include any solid, liquid, gaseous, or thermal irritant, including smoke, vapor, soot, acids, chemicals, and waste.
This exclusion does not apply to the coverage provided by the Ordinance or Law Other Coverage provided by the Broad and Special forms.
Earth Movement
The insurer will not pay for losses caused by earth movement, which includes:
Earthquake, including land shock waves and tremors before, during, or after a volcanic eruption
Landslide, mudflow, and mudslide
Subsidence or sinkhole
Earth sinking, rising, or shifting
If a direct loss by fire, explosion, or breakage of glass or safety glazing material results from earth movement, the policy would then pay only for the ensuing loss.
The Earth Movement exclusion contains all of the following perils, except:
Explosion
Water
Flood, surface water, waves, tidal water, or overflow of a body of water, including any waterborne material carried by these water sources, regardless of whether or not it is driven by wind or storm surge
Water that backs up through sewers or drains, or that overflows from a sump pump
Water below the surface of the ground that exerts pressure on or seeps through a building, sidewalk, driveway, patio, foundation, swimming pool, or other structure
Water or waterborne material escaping or overflowing from a dam, levee, or similar system
This exclusion applies even if an act of nature is what causes the water to damage the property. If a direct loss by fire or explosion results from water damage, the ensuing damage would be covered.
Dwelling forms do not cover loss by
ordinance or law
earth movement
water
power failure
neglect
war
nuclear hazard
war
intentional loss
government action
Earth movement exclusion
earth movement includes
fire
explosion
breakage of glass or safety glazing materials
earthquake
land shock
landlide mudflow mudslide
subsidence or sinkhole
earth sinking rising and shifting
water exclusion
flood
waves tidal water
water that backs up through the sewer
water sump pump u
underground water
water escaping from a dam
Under the Water exclusion on a Dwelling policy, losses resulting from all of the following are excluded from coverage, except:
Water overflowing from a dishwasher
Power Failure
The insurer will not pay for losses caused by the failure of power or other utility service if the failure takes place off the described location. Power failure occurring on the described location is covered. If an insured peril ensues on the described location as a result of the power failure, the ensuing loss would be covered
Neglect-The insurer will not pay for losses caused by the insured’s neglect to use all reasonable means to save and preserve property at and after the time of a loss.
What type of power failure is excluded under all of the Dwelling forms?
Power failure that occurs off the insured premises
War
The insurer will not pay for losses caused by war, including the following and any consequence of the following:
Undeclared war, civil war, insurrection, rebellion, or revolution
Any warlike act by a military force
Destruction or seizure or use for a military purpose
The discharge of a nuclear weapon, even if accidental
Nuclear Hazard
The insurer will not pay for losses caused by any nuclear reaction, radiation, or radioactive contamination, whether controlled or uncontrolled. Any fire resulting from the nuclear hazard is covered.
