3/B - Dwelling

Question 1

Dwelling Policy Eligibility

Answer 1

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)

Question 2

Eligible Structures

Answer 2

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

Question 3

Dwelling Forms

Answer 3

Dwelling coverage varies depending on the form

Three forms:

1. DP-1 “Basic Form”
2. DP-2 “Broad Form”
3. DP-3 “Special Form”

Question 4

DP-1 Basic Form

Answer 4

• 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

Question 5

DP-2 “Broad Form”

Answer 5

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

Question 6

DP-3 “Special Form” Coverage

Answer 6

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

Question 7

DP-3 Exclusions

Answer 7

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

Question 8

Dwelling Policy Sections

Answer 8

• Coverage A
• Coverage B
• Coverage C
• Coverage D
• Coverage E
• Additional Coverages
• Exclusions
• Conditions
• Endorsements, if any

Question 9

Coverage A

Answer 9

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

Question 10

Coverage B

Answer 10

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

Question 11

Coverage B Exclusions

Answer 11

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

Question 12

Coverage C - Personal Property

Answer 12

Any personal property located on the insured premises.

Coverage for property off-premises:

• Limit: 10% of Coverage C limit
• Not additional insurance

Question 13

Coverage C Exclusions

Answer 13

Typical Coverage C Exclusions:

• Animals
• Vehicles
• Aircraft, hovercraft
• Boats
• Paper and electronic data
• Credit and debit cards
• Money
• Grave markers
• Water or steam

Question 14

Direct vs. Indirect Loss

Answer 14

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

Question 15

Coverage D

Answer 15

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

Question 16

Coverage E

Answer 16

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

Question 17

Limits to Coverages D & E

Answer 17

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

Question 18

Civil Authority Coverage

Answer 18

• 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

Question 19

Additional Coverages and Conditions

Answer 19

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

Question 20

Debris Removal

Answer 20

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

Question 21

Reasonable Repairs

Answer 21

• 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

Question 22

Ordinance or Law

Answer 22

• 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

Question 23

Fire Department Service Charge

Answer 23

• Applies when the fire department charges to respond to covered peril
• Limit: $500
• Pays in addition to Coverage A limit

Question 24

Trees, Shrubs, Other Plants

Answer 24

• 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

Question 25

Property Removal

Answer 25

- 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

Question 26

Conditions

Answer 26

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

Question 27

Liberalization and Claim Settlement

Answer 27

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)

Question 28

Personal Liability Endorsement

Answer 28

- 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

Question 29

Other Popular DP Endorsements

Answer 29

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

Question 30

General Exclusions

Answer 30

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