FL Adjuster Claim Professional Exam: Dwelling Policy

Introduction to Dwelling Policy

A dwelling policy is used when a homeowners policy is unsuitable, covering only property risks (not liability). It insures:

  • Dwellings
  • Other structures
  • Personal property
  • Fair rental value
  • Additional living expenses

Theft and liability coverage can be added via endorsements.

Characteristics and Purpose

Dwelling policies are often purchased for residences ineligible for homeowners policies, such as:

  • Rental properties (e.g., single-family home rented to a tenant)
  • Homes housing more than the allowed number of families
  • Homes below the insurer’s minimum insurable value
  • Homes under construction

Some choose dwelling policies for lower cost, as they offer less coverage than homeowners policies but allow customization through endorsements.

Who Is an Insured?

The insured is the person or entity with an insurable interest:

  • Building owners: Insured for Coverages A (Dwelling), B (Other Structures), or D (Fair Rental Value).
  • Tenants: Insured for Coverages C (Personal Property) or E (Additional Living Expenses), often called renters insurance.

Tenants cannot include Coverages A, B, or D, as they lack insurable interest in the building.

Coverage Forms

The ISO dwelling program offers three forms:

Form Description Perils Covered
DP 1 (Basic) Limited coverage Fire, lightning, internal explosion; optional extended coverage (windstorm, hail, etc.)
DP 2 (Broad) Broader coverage DP 1 perils plus burglary, falling objects, water damage, etc.
DP 3 (Special) Most comprehensive Open perils for dwelling/structures; named perils for personal property
Property Coverages
  • Coverage A—Dwelling: Covers the dwelling and attached structures (e.g., garage, carpeting).
  • Coverage B—Other Structures: Covers detached structures (10–20% of Coverage A).
  • Coverage C—Personal Property: Covers items like furniture, clothing (50–70% of Coverage A).
  • Coverage D—Fair Rental Value: Covers lost rental income if premises are uninhabitable (20% of Coverage A).
  • Coverage E—Additional Living Expense: Covers extra living costs if premises are uninhabitable (20% of Coverage A).

DP 1 includes A, B, C, D; DP 2 and DP 3 include all five coverages.

Perils Insured Against

DP 1 (Basic)

  • Mandatory: Fire, lightning, internal explosion
  • Optional: Windstorm, hail, explosion, riot, aircraft, vehicles, smoke, volcanic eruption, vandalism

DP 2 (Broad)

  • All DP 1 perils plus:
  • Burglary damage, falling objects, weight of ice/snow, water discharge, system failures, freezing, electrical damage

DP 3 (Special)

  • Open perils for dwelling/structures; DP 2 perils for personal property

Valuation: DP 1 uses actual cash value (ACV) for all property; DP 2 and DP 3 use replacement cost for buildings, ACV for personal property.

General Exclusions (DP 3)

Exclusions for all property:

  • Ordinance or law (limited coverage)
  • Earth movement (e.g., earthquake, landslide)
  • Water damage (e.g., flood, sewer backup)
  • Power failure (off-premises)
  • Neglect
  • War
  • Nuclear hazard
  • Intentional loss
  • Governmental action

Exclusions for dwelling/structures:

  • Weather conditions contributing to excluded perils
  • Acts or decisions (failure to act)
  • Faulty processes, materials, or maintenance

Ensuing losses (e.g., fire from excluded peril) may be covered.

Selected Endorsements
  • Personal Liability (DL 24 01): Covers medical payments, similar to homeowners liability.
  • Broad Theft Coverage (DP 04 83): Covers theft, attempted theft, related vandalism.
  • Automatic Increase in Insurance (DP 04 11): Increases coverage limit annually (inflation guard).
  • Dwelling Under Construction (DP 11 43): Adjusts coverage for homes under construction based on completion percentage.
Key Review Points
  • Homeowners policies cover property and liability; dwelling policies cover only property.
  • Dwelling policies are used for ineligible residences or for cost savings.
  • DP 1: Limited named perils; DP 2: Broader named perils; DP 3: Open perils for buildings, named for personal property.
  • Coverages: A (Dwelling), B (Other Structures), C (Personal Property), D (Fair Rental Value), E (Additional Living Expenses).
  • Common endorsements: Personal Liability, Broad Theft, Automatic Increase, Dwelling Under Construction.