Insurance Exam: Dwelling Policy Explained

• Dwelling policies


  Typically purchased by landlords, but can be purchased by anyone if it fits their needs
• Dwelling policies


  • Do not automatically come with liability coverage
  • Do not come with contents coverage
• Liability coverage


  Protection if anyone gets hurt in the home
• Contents coverage


  Coverage for the policyholder's personal belongings
• Landlords do not need liability or contents coverage in a dwelling policy</b>
• Tenants would need to get a homeowner's policy for liability and contents coverage
• Dwelling policies


  • The owner of the house is not required to live at the residence
• Tree coverage


  Replaces the value of a tree up to $500 per tree, limited to 5-10% of the policy
• Dwelling policy types


  • DP1 (basic)
  • DP2 (broad)
  • DP3 (special)
• Perils


  The causes of loss that determine what a dwelling policy will cover
• DP1 (basic)


  • Covers only fire, lightning, and internal explosion
  • Can add extended coverage perils (ECP) for additional perils like wind and hail
  • Can then add vandalism and malicious mischief (VMM)
• Actual cash value


  The used value of the walls and roof, not enough to fully rebuild the house
• DP1 policies use actual cash value for the walls and roof, unlike other dwelling policies which use replacement cost
• DP1 policies do not provide tree coverage
• DP1


  Actual cash value policy for walls and roof, no tree coverage
• DP2


  Broad policy that automatically includes fire, lightning, internal explosion, extended coverage perils (wind, hail, aircraft, riot, vehicle, explosion, smoke), vandalism and malicious mischief, and additional perils like ice, weight of snow/sleet, collapse, glass, falling objects, freezing
• DP3


  Open perils policy that covers everything not excluded, including theft
• Coverage A


  Dwelling coverage for walls, roof, and any materials/supplies used to service or become part of the property
• Coverage B


  Other structures coverage for detached buildings/structures on the property (e.g. shed)
• Freezing is only covered if the insured took steps to maintain heat in the building
• Fire is always covered, but earthquake is always excluded (though the fire caused by an earthquake would be covered)
• Earthquake coverage can be added by endorsement, with a 72-hour window for one claim
• Coverage B is automatically 10% of Coverage A
• Coverage A


  The house, walls and roof
• Coverage B


  Other structures like the shed
• If both Coverage A and B are destroyed, the total payout is A + B
• For all other policies, Coverage B is in addition to Coverage A
• Coverage C


  Contents/Personal property
• Coverage C is optional, must be activated and have a premium charge
• If activated, Coverage C is automatically 50% of Coverage A
• Coverage D (Dwelling)


  Fair rental value for landlords if property is uninhabitable
• Coverage D is automatically 20% of Coverage A
• Coverage E (Dwelling)


  Additional living expenses if property is uninhabitable
• Coverage E shares the 20% with Coverage D
• DP1 only covers fire, lightning and internal explosion
• DP2 covers a broader range of perils including weight of ice/snow
• DP3 covers the broadest range of perils including theft
• DP2 and DP3 have $500 per tree coverage, DP1 does not