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27 Cards in this Set
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- Back
- 3rd side (hint)
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SUMMARY |
This chapter discusses the dwelling policy used to insure residential buildings with up to four units and five roomers or boarders. Including property with incidental business such as an office or music lessons in one of the rooms. Mobil homes only on the Basic Form DP-1. Note: Dwellings on Farms are NOT eligible. Typically, these properties are occupied by renters, also called tenants. However, these properties can be owner occupied as well as on a seasonal basis. |
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Types of Dwelling Policies |
DP-1 Basic Form
DP-2 Broad Form
DP-3 Special Form |
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DP-1 Basic Form |
The Basic Form provides named peril coverage against: FLIE Fire Lightning Internal Explosion
2. The Extended Coverage Endorsement allows additional named perils to be purchased: a) Windstorm and hail b) Explosion c) Riot or civil commotion d) Aircraft or vehicles e) Smoke (1) Does not include smoke damage from industrial operations or agricultural smudging. 3. The Vandalism and Malicious Mischief Endorsement allows the purchase for those stated perils; however, it excludes losses sustained to vacant properties after 60 days of vacancy. |
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C. DP-2 Broad Form |
The Broad Form is simply a broader list of named perils including the Basic Form, Extended Coverage Endorsement, Vandalism and Malicious Mischief Endorsement and the following: a) Damage by Burglars (1) Covers damage a burglar causes to break into the property but not theft of any personal property. (a) Remember, these are typically rental properties and the insured does not usually own the contents within the home. b) Falling Objects c) Weight of Ice, Snow, Sleet d) Freezing e) Accidental Discharge or Overflow of Water or Steam (1) From plumbing, heating, air conditioning, or fire protective sprinkler system suddenly and accidentally tearing, cracking, burning, bulging, or freezing. f) Sudden and Accidental Damage from an Artificially Generated Electrical Current |
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DP-3 Special Form |
The DP-3 Special form provides coverage to the dwelling on an open peril basis, covering all perils except those specifically excluded. a) Any time you see Special that means the policy is open peril. b) However, any personal property owned by the insured on the location is still covered under the Broad Form named perils. 2. In addition to the general exclusions for property policies, the DP-3 Special Form has additional exclusions: a) Collapse b) Weight of water on patios, fences, swimming pools, foundations c) Theft of property not covered d) Theft from a structure under construction e) Wind, hail, ice or snow damage to outside radio or TV antennas, trees, shrubs, plants, and lawns. f) Vandalism or malicious mischief if the property was vacant for 60 or more consecutive days. g) Wear and tear, deterioration, mechanical breakdown, rust or corrosion (1) These are maintenance issues or inherent vice and are typically excluded on all types of property insurance. h) Smoke from industrial operations or agricultural smudging i) Expansion or cracking of foundations, walls, floors, or pavement j) Birds, vermin, rodents, insects, and domestic animals |
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Dwelling Policy Coverages |
The following coverages can appear on any of the coverage forms: |
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Coverage A - Dwelling |
The coverage applies to: a) The dwelling on the described location shown in the Declarations used principally for residential purposes. (1) This is including structures attached to the dwelling, such as an attached garage. b) Materials and supplies located on or next to the described location used to construct, alter or repair the dwelling or other structures on the described location. (1) For example, the property owner decides to replace the windows in the home and leaves the windows in the gated backyard. These windows, although not yet attached to the dwelling, will be considered part of the dwelling in the event of a covered loss. c) If not otherwise covered in this policy, building equipment and outdoor equipment used to aid in the service of and located on the described location. (1) For example, if the property owner leaves a lawn mower behind for the tenant to use to maintain the lawn then the lawn mower would be considered part of the dwelling as it aids in servicing the location. d) The insurer does not cover land, including land on which the dwelling is located. (1) This means the insurer will not pay for dirt. 2. To help remember what is covered under Coverage A – Dwelling, think of the 3 A’s: a) If it’s Attached, Altering, or Aiding, it’s covered. 3. The Coverage A limit is a specific limit on the Declarations page. a) For our example purposes going forward, the Coverage A limit will be set at $150,000. |
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Coverage B - Other Structures |
Coverage B covers other structures on the described location, set apart from the dwelling by a clear space. a) A detached garage, shed, and swimming pool would all be considered Other Structures. 2. The Coverage B limit is automatically issued at 10% of the Coverage A limit in each of the coverage forms. a) 10% of our Coverage A limit would be up to $15,000 for Other Structures. |
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Coverage C - Personal Property |
This section provides coverage for personal property, usual to the occupancy as a dwelling and owned or used by the insured or family members living with the insured. a) NOT the renter’s property. 2. Coverage C is optional to the insured because the property may be rental property meaning that the property owner/insured may not have any contents inside the dwelling to insure. a) For the state exam, the automatic limit is $0. 3. Coverage C does not cover: a) Animals, accounts and anything that has its own policy – autos as an example. |
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Coverage D - Fair Rental Value – (Indirect Loss) |
If a loss to property caused by a covered peril makes the location rented to others unfit for occupancy, then Coverage D pays the lost rent money less any continuing expenses, such as taxes or mortgage payments. 2. Payment will be for the shortest time required to repair or replace the damaged property. 3. If a civil authority prohibits use of the location because of damage to neighboring locations by a covered peril in this policy, Coverage D covers the loss for no more than two weeks. 4. The cancellation of a lease is not a covered peril. 5. Coverage D is issued at 20% of the Coverage A - Dwelling limit. a) For our example, 20% of Coverage A is $30,000. F. Coverage E - Additional Living Expenses – (Indirect Loss) 1. If a loss to property caused by a covered peril makes the location the insured resides in unfit for occupancy, then Coverage E pays the insured such that the insured’s household can maintain its normal standard of living while the property is under repair. 2. This is for the owner of the property if the owner lives in the dwelling or in part of the dwelling such as one side of a duplex. 3. Payment will be for the shortest time required to repair or replace the damaged property. 4. If a civil authority prohibits use of the location because of damage to neighboring locations by a covered peril in this policy, Coverage E covers the loss for no more than two weeks. 5. Coverage E is not available in the DP-1 Basic Form. 6. Coverage is issued on the DP-2 Broad Form and DP-3 Special Form at 20% of the Coverage A - Dwelling limit. a) For our example, 20% of Coverage A is $30,000. |
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Loss Settlement |
1. DP-1 Basic Form a) Coverages A, B, and C are paid actual cash value. 2. DP-2 Broad Form & DP-3 Special Form a) Coverages A and B are paid replacement cost value. b) Coverage C is paid actual cash value. |
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Summary Example Policies |
Coverage DP-1 Basic Form A - Dwelling Specific Limit DP-2 Broad Form DP-3 Special Form Example Limit ACV Named Peril B - Other Structures 10% of A RCV Named Peril RCV Open Peril $150,000 ACV Named Peril C - Personal Property (optional) RCV Named Peril RCV Open Peril $15,000 ACV Named Peril D - Fair Rental Value 20% of A ACV Named Peril ACV Named Peril $0 $30,000 E - Additional Living Expenses 20% of A (optional) N/A $30,000 |
See diagrams page 47 |
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Supplemental Coverages A. Debris Removal |
1. The insurer will pay the insured’s reasonable expense for the removal of debris of covered property if a covered peril caused the loss. 2. This expense is included in the limit of liability that applies to the damaged property. |
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Fire Department Service Charge |
The insurer will pay up to $500 for the insured’s cost to pay charges incurred when the fire department is called to protect covered property against a covered peril. 2. This only applies if the fire department is volunteer or the property is outside the city limits. 3. No deductible applies to this coverage. |
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Glass or Safety Glazing Material |
This coverage is not available in the DP-1 Basic Form. a) Under the DP-2 Broad Form and DP-3 Special form, the policy will cover the breakage of glass or safety glazing material which is part of a covered building, storm door or storm window. 2. This coverage does not include loss if the dwelling was vacant for more than 60 consecutive days before the loss. |
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Property Removed |
This coverage insures covered property against direct loss from any cause while being removed from a premise endangered by a covered peril. a) For example, if a wildfire is headed toward the insured location, any property the insured removes in an attempt to preserve it is covered completely with few or no exclusions. 2. On the DP-1 Basic Form, this coverage is provided for 5 days. 3. On the DP-2 Broad Form and DP-3 Special form, this coverage is provided for no more than 30 days. |
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Reasonable Repairs |
If covered property is damaged by a covered peril, the insurer will pay the reasonable cost incurred by the insured for necessary measures taken to protect it from further damage. a) For example, the policy would cover the cost to have a tarp placed over a hole in the roof caused by a covered hailstorm to prevent further water damage. |
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Trees, Shrubs, and Other Plants |
The insurer covers trees, shrubs, plants or lawns, on the described location for loss caused by the following covered perils: a) Fire, lightning, or explosion b) Riot or civil commotion c) Aircraft or vehicles not owned or operated by the insured or a tenant of the described location d) Vandalism or malicious mischief, including damage during a burglary or attempted burglary e) The perils of wind, hail, ice, snow and theft are not covered 2. This coverage is not available on the DP-1 Basic Form. 3. The limit of liability for this coverage on the DP-2 Broad Form and DP-3 Special Form will not be more than 5% of the Coverage A limit of liability and no more than $500 for any one tree, shrub or plant |
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General Exclusions
Earth Movement |
Includes land shock waves before, during, and after a volcanic eruption; landslide; sinkhole or subsidence; any other movement of earth including sinking rising, or shifting caused by natural, human, or animal forces; if loss by fire or explosion results then that damage is covered. |
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Government Action |
The destruction, confiscation, or seizure of property by order of the government or public authority. |
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Intentional Loss |
Any loss arising out of the actions or directions of the named insured or additional insured with the intent to cause a loss. |
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Neglect |
The failure to use all reasonable means to preserve property at and after the time of a loss. |
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Nuclear Hazard |
Any nuclear reaction, nuclear radiation, or contamination except if a fire results then the fire damage is covered. |
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Ordinance or Law |
The requirement or enforced regulation regarding construction, demolition, renovation, or repair of property. If, after a loss, the city inspector states the wiring in the house is not up to code, then the cost of bringing the property up to code is not covered. |
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Power Failure |
This exclusion applies if the failure of power or other services takes place off the premises. If the failure is a result of a covered peril and takes place on the premises only, then it is covered. |
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War |
War includes declared or undeclared war, civil war, insurrection, rebellion, or revolution; any warlike act by any military force or military personnel; destruction or seizure or used for a military purpose; nuclear weapon discharge is always warlike even if accidental. |
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Water Damage |
Water damage is flood, surface water, waves, tidal water, or the overflow of a body of water; water and water-borne material that backs up through the sewers, drains, or a sump or sump pump; exertion of water on a sidewalk, driveway, swimming pool or any other structure; rising water is excluded; falling water is not. |
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