3.3 Dwelling Property Coverages

Property & Casualty Insurance Exam

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1 Introduction

0.1 About the Property & Casualty Exam 0.2 How to Use This Course

2 Chapter 1: Insurance Fundamentals

1.1 Risk and Risk Management 1.2 Types of Risk 1.3 Principles of Insurance 1.4 The Insurance Contract 1.5 Policy Structure and Components

3 Chapter 2: Property Insurance Concepts

2.1 Property Coverage Basics 2.2 Perils, Hazards, and Exclusions 2.3 Valuation Methods 2.4 Coinsurance and Insurance to Value 2.5 Deductibles and Policy Limits

4 Chapter 3: Dwelling Policies

3.1 Dwelling Policy Overview 3.2 Dwelling Policy Forms (DP-1, DP-2, DP-3) 3.3 Dwelling Property Coverages 3.4 Dwelling Exclusions and Conditions

5 Chapter 4: Homeowners Policies

4.1 Homeowners Policy Overview 4.2 Homeowners Policy Forms (HO-2 through HO-8) 4.3 Section I: Property Coverages 4.4 Section II: Liability Coverages 4.5 Homeowners Exclusions 4.6 Homeowners Conditions 4.7 Common Homeowners Endorsements

6 Chapter 5: Personal Auto Policy

5.1 Personal Auto Policy Overview 5.2 Part A: Liability Coverage 5.3 Part B: Medical Payments Coverage 5.4 Part C: Uninsured/Underinsured Motorists 5.5 Part D: Physical Damage Coverage 5.6 PAP Exclusions 5.7 No-Fault Insurance and PIP

7 Chapter 6: Liability Insurance Concepts

6.1 Liability Insurance Basics 6.2 Negligence and Tort Law 6.3 Types of Legal Liability 6.4 Personal Umbrella Policies

8 Chapter 7: Commercial Property Insurance

7.1 Commercial Package Policy (CPP) 7.2 Building and Personal Property Coverage Form 7.3 Causes of Loss Forms 7.4 Business Income Coverage 7.5 Businessowners Policy (BOP)

9 Chapter 8: Commercial General Liability

8.1 CGL Policy Overview 8.2 Coverage A: Bodily Injury and Property Damage 8.3 Coverage B: Personal and Advertising Injury 8.4 Coverage C: Medical Payments 8.5 CGL Exclusions 8.6 CGL Limits and Conditions

10 Chapter 9: Commercial Auto Insurance

9.1 Business Auto Policy Overview 9.2 Covered Auto Designation Symbols 9.3 BAP Liability Coverage 9.4 BAP Physical Damage Coverage 9.5 Garage and Truckers Coverage Forms

11 Chapter 10: Workers Compensation

10.1 Workers Compensation Overview 10.2 Part One: Workers Compensation Insurance 10.3 Part Two: Employers Liability 10.4 Workers Compensation Exclusions 10.5 Other States and USL&H Coverage

12 Chapter 11: Other Commercial Lines

11.1 Inland Marine Insurance 11.2 Ocean Marine Insurance 11.3 Commercial Crime Insurance 11.4 Surety Bonds 11.5 National Flood Insurance Program 11.6 Professional Liability Insurance 11.7 Commercial Umbrella and Excess Liability 11.8 Boatowners and Personal Watercraft Insurance 11.9 Farm and Ranch Insurance 11.10 Mobile Home and Manufactured Housing Insurance 11.11 Title Insurance

13 Chapter 12: Insurance Regulations and Ethics

12.1 Producer Licensing 12.2 Producer Authority and Responsibilities 12.3 Unfair Trade Practices 12.4 Claims Settlement Practices 12.5 State Insurance Department 12.6 Penalties and Disciplinary Actions

3.3 Dwelling Property Coverages

Key Takeaways Explain This Topic AI

Coverage A insures the dwelling and attached structures, built-in appliances, fixtures, and on-premises building materials — never the land

Coverage B (Other Structures) is automatically 10% of Coverage A; on DP-2/DP-3 it is an ADDITIONAL amount, while on DP-1 it is part of the Coverage A limit

Coverage C (Personal Property) is optional and covers only the named insured's property, never the tenant's belongings, and is subject to dollar sublimits

Coverages D and E together carry a limit of 20% of Coverage A on the ISO forms; on DP-2/DP-3 this is additional insurance, on DP-1 it is part of the Coverage A limit

Fair Rental Value (D) serves landlords for lost rent; Additional Living Expense (E) serves owner-occupants for extra living costs

Last updated: June 2026

Coverage A: Dwelling

Coverage A insures the described residential structure plus property that is part of it:

The building itself and structures attached to it (attached garage, deck, porch)
Built-in appliances and fixtures — furnace, central air, water heater, built-in dishwasher, cabinets, flooring
Materials and supplies on or next to the premises used to build, alter, or repair the dwelling
Outdoor equipment permanently installed and used to service the premises

Coverage A never insures the land , the value of the land, or the cost to excavate/regrade it. Detached structures move to Coverage B, and tenant property is the tenant's responsibility.

Valuation

Method Description Where Used
Actual Cash Value (ACV) Replacement cost − depreciation DP-1 default
Replacement Cost Full repair/replace, no depreciation DP-2, DP-3 (subject to 80% coinsurance)
Coverage B: Other Structures

Coverage B insures structures separated from the dwelling by clear space (or connected only by a fence/utility line): detached garages, sheds, fences, in-ground pools, gazebos, detached workshops.

Automatic limit = 10% of Coverage A
On DP-2 and DP-3 this 10% is an additional amount of insurance
On DP-1 the 10% is part of (not added to) the Coverage A limit
Structures rented to a non-tenant or used for business are excluded

Example: Coverage A $300,000 → Coverage B is $30,000.

Coverage C: Personal Property

Coverage C is optional and insures only property owned/used by the named insured at the location — a landlord's appliances, laundry equipment, lawn tools, or furnishings in a furnished rental.

Critical: Coverage C does NOT insure tenant property. Tenants must buy their own HO-4 renters policy.

When Coverage C is purchased, dollar sublimits cap certain items even when the loss is covered:

Property Type Typical Sublimit
Money, bank notes, coins $200
Securities, deeds, manuscripts $1,500
Watercraft, trailers $1,500
Jewelry/watches (theft) $1,500
Firearms (theft) $2,500
Silverware (theft) $2,500
Coverage D: Fair Rental Value

Coverage D pays the landlord the fair rental value of the part of the premises rented or held for rental when a covered loss makes it uninhabitable, minus expenses that do not continue (e.g., utilities the landlord no longer pays).

Pays only for the time reasonably required to repair or replace
Does not extend simply because a tenant moves out voluntarily
Coverage E: Additional Living Expense

Coverage E pays an owner-occupant the necessary increase in living expenses (hotel, meals above normal, extra transportation) to maintain the household's normal standard of living while the dwelling is uninhabitable due to a covered loss. For a pure landlord, Coverage D — not E — is the relevant loss-of-use coverage.

The 20% Rule for D + E (Exam-Critical)

On the ISO dwelling forms, Coverages D and E share a combined limit of 20% of Coverage A . The catch is whether that 20% is additional insurance:

Form D + E Limit Additional or Part of A?

DP-1 20% of A Part of Coverage A (reduces it)
DP-2 20% of A Additional amount
DP-3 20% of A Additional amount

Common test-prep error: Some materials say "10% for DP-1/DP-2 and 20% for DP-3." The ISO standard is 20% across all three forms — the real difference is additional vs. part of the limit , not the percentage.

Worked Example

Property: Rental home; Coverage A = $300,000 on a DP-3.

Coverage Limit Notes
A – Dwelling $300,000 Open perils
B – Other Structures $30,000 10%, additional
C – Personal Property $15,000 Landlord's appliances only
D + E – Loss of Use $60,000 20% of A, additional
Liability $0 Requires endorsement

If a kitchen fire makes the home unrentable for five months at $3,000/month, the landlord collects $15,000 under Fair Rental Value (Coverage D), well within the $60,000 loss-of-use pool, and the repair cost is paid separately under Coverage A.

Additional Coverages Built Into the Forms

Beyond Coverages A–E, the dwelling forms include several additional coverages that do not reduce the main limits (subject to their own sublimits). Candidates should recognize these:

Additional Coverage What It Does
Other structures Already discussed; additional 10% on DP-2/DP-3
Debris removal Pays to clear debris of covered property after a covered loss
Improvements/alterations (tenant) For a tenant insured, covers betterments they installed
Reasonable repairs Pays the cost of temporary repairs to protect from further loss
Property removed Covers property for a limited time while removed to protect it from loss
Trees, shrubs, plants Limited coverage, named perils only, capped per item and in total

These mirror the homeowners additional coverages but, importantly, do not include the loss-assessment or credit-card coverages that are tied to the liability side of an HO policy.

Deductibles and How They Apply

The dwelling deductible applies per occurrence to most property losses. Many coastal and Midwest states layer a separate, percentage-based wind/hail or hurricane deductible (e.g., 2% of Coverage A) that is larger than the flat deductible and applies only to those named perils. On a $300,000 dwelling, a 2% wind deductible is $6,000 — a number a candidate should be able to compute. The deductible is subtracted after any coinsurance penalty is applied, not before.

Putting the Percentages Together

For a fast mental model on the DP-2/DP-3, anchor every limit to Coverage A:

Coverage Percentage of A Additional?

A – Dwelling 100% (base) —
B – Other Structures 10% Yes (DP-2/DP-3)
C – Personal Property Optional, buyer-selected Buyer's limit
D + E – Loss of Use 20% combined Yes (DP-2/DP-3)

On the DP-1 , the same B and D+E percentages apply but they are carved out of the Coverage A limit rather than added to it — the single most common dwelling-coverage trap on the exam.