The Dwelling Program provides property insurance for residential dwellings that may not qualify for a standard Homeowners policy because of factors such as age, value, condition, or location. An eligible dwelling may contain up to four residential units and may house no more than five roomers or boarders. Limited incidental business activities may be permitted when the property remains primarily residential. Examples include a professional office or a studio used to provide music lessons. Mobile homes that meet specific requirements, such as being permanently attached to a foundation, may qualify for coverage under the Basic Form (DP–1). Farm dwellings are not eligible for coverage under the Dwelling Program and require a policy designed for agricultural exposures.
Dwelling policies are available in three coverage forms and may include five principal property coverages. Coverage A—Dwelling insures the residence described in the policy, including structures attached to it. Coverage B—Other Structures covers structures located on the insured premises that are separated from the dwelling by a clear space, such as a detached garage or shed. Coverage C—Personal Property covers eligible personal belongings owned or used by the insured. Certain types of property are excluded, including currency, animals, aircraft, motor vehicles, computers, credit cards, and property belonging to tenants, roomers, or boarders. Coverage D—Fair Rental Value reimburses the insured for lost rental income when a covered direct loss makes the rented or rentable portion of the dwelling unfit for normal use. Coverage E—Additional Living Expense pays the necessary increase in living expenses when a covered loss makes the insured residence uninhabitable. Coverage E is available under the Broad Form and Special Form but is not provided under the Basic Form.
The DP–1 Basic Form automatically provides named-perils coverage for fire, lightning, and internal explosion. For an additional premium, the insured may add Extended Coverage (EC) and vandalism and malicious mischief (V&MM) coverage. The Extended Coverage perils include windstorm or hail, aircraft, riot or civil commotion, vehicles, volcanic eruption, explosion, and smoke. These named perils apply to Coverage A—Dwelling, Coverage B—Other Structures, and Coverage C—Personal Property. Under the DP–1, covered property losses are generally settled on an actual cash value basis, meaning depreciation is deducted from the property's replacement cost when determining the claim payment.
The DP–2 Broad Form provides named-perils coverage that includes the Basic Form's standard perils, the Extended Coverage perils, and vandalism and malicious mischief. It also covers several additional perils, including damage caused by burglars, falling objects, the weight of ice, snow, or sleet, accidental discharge or overflow of water from certain systems or appliances, sudden cracking or bulging of those systems or appliances, and accidental damage caused by electrical currents. Covered losses to the dwelling and other structures under Coverages A and B are generally settled on a replacement cost basis. Covered losses to personal property under Coverage C are generally settled on an actual cash value basis.
The DP–3 Special Form provides open-perils coverage for the dwelling and other structures. This means Coverages A and B insure against all causes of direct physical loss unless the policy specifically excludes them. The coverage includes the perils insured against under the Broad Form, as well as other causes of loss that are not excluded. Examples of excluded losses include wind damage to outdoor television antennas, deterioration, smog, rust, pollutants, smoke from agricultural smudging or industrial operations, and the settling or cracking of foundations. Covered losses under Coverage A—Dwelling and Coverage B—Other Structures are generally settled on a replacement cost basis. Coverage C—Personal Property remains covered against named perils and is generally settled on an actual cash value basis.
The Loss Settlement condition establishes the requirements for receiving replacement cost coverage under the Broad Form and Special Form. To qualify for full replacement cost settlement, the Coverage A—Dwelling limit must equal at least 80% of the building's full replacement cost immediately before the loss. The insurer generally pays only the property's actual cash value until the damaged property has been repaired or replaced. Once the work is completed, the insured may submit documentation to recover the additional amount available under replacement cost coverage, subject to the policy's terms and limits.
Other Coverages are benefits automatically included in a Dwelling policy without an additional premium. All three Dwelling forms provide coverage for debris removal, reasonable repairs made to protect covered property from further damage, and fire department service charges. Personal property is also covered anywhere in the world for up to 10% of the Coverage C—Personal Property limit. In addition, covered property temporarily removed from the location described in the Declarations remains protected. The Basic Form provides this coverage for up to five days, while the Broad and Special Forms extend it for up to 30 days. The Broad and Special Forms include additional Other Coverages not provided by the Basic Form. These may provide limited protection for covered losses involving trees, shrubs, and other plants; collapse; breakage of glass or safety glazing material; and certain increased construction or demolition costs required by an ordinance or law.
All three Dwelling forms contain several common exclusions that identify losses the policy does not cover. The Ordinance or Law exclusion generally excludes losses or increased costs resulting from laws that regulate the construction, repair, renovation, or demolition of property, except when limited coverage is provided under Other Coverages. It also excludes certain losses associated with responding to or cleaning up pollutants. The Earth Movement exclusion removes coverage for losses caused by earthquakes, landslides, mudflows, mudslides, sinkholes, and similar ground movement. The Water exclusion applies to losses caused by flooding, subsurface water that places pressure on a foundation or other building components, and water or waterborne material released from a levee or similar structure. It also excludes damage caused by sewer or drain backup and water overflowing or being discharged from a sump, sump pump, or related equipment. The Power Failure exclusion removes coverage when a loss results from the failure of an off-premises utility service. Other common exclusions include war, nuclear hazards, and intentional losses caused by or at the direction of an insured.
The insured selects the limits for Coverage A—Dwelling and Coverage C—Personal Property. The limit for Coverage B—Other Structures is generally equal to 10% of the Coverage A limit. Under the DP–1 Basic Form, the limit for Coverage D—Fair Rental Value is generally 20% of the Coverage A limit. Under the DP–2 Broad Form and DP–3 Special Form, a combined limit equal to 20% of Coverage A generally applies to Coverage D—Fair Rental Value and Coverage E—Additional Living Expense.
Endorsements may be added to a Dwelling policy when the insured wants to purchase additional coverage or modify the policy's existing protection. The Automatic Increase in Insurance Endorsement, also known as the Inflation Guard Endorsement, gradually increases the limits for Coverage A—Dwelling and Coverage B—Other Structures by a specified annual percentage. The increase is applied on a daily basis throughout the policy period to help the coverage limits keep pace with rising construction costs. The Dwelling Under Construction Endorsement provides coverage for a residential structure while it is being built. The amount of insurance available generally increases as construction progresses and the value of the completed portions of the dwelling rises.
Theft of personal property is not automatically covered under any of the Dwelling forms. However, theft coverage may be added to the policy by endorsement. The Broad Theft Coverage Endorsement is designed for owner-occupied dwellings and covers eligible personal property both on and away from the insured premises. Similar to Coverage C, it does not cover the theft of aircraft, motor vehicles, business property, animals, or credit cards. The Limited Theft Coverage Endorsement is designed for tenant-occupied dwellings. Unlike the Broad Theft Coverage Endorsement, it provides coverage only for eligible property stolen from the insured premises.
Because the Dwelling forms do not automatically include liability coverage, the insured may add a Personal Liability Supplement. This supplement provides Coverage L—Personal Liability, which protects the insured against covered claims for bodily injury or property damage for which the insured is legally responsible. The standard Coverage L limit is $100,000 per occurrence. The supplement also includes Coverage M—Medical Payments to Others. Coverage M pays up to $1,000 per person for necessary medical expenses incurred within three years of an accident, regardless of whether the insured is legally liable. Additional Coverages are also provided for certain claim-related expenses, first-aid expenses paid by the insured, and limited damage to the property of others.