Dwelling and Homeowners Policies
Choose the right form
The Dwelling Policy (DP-1, DP-2, DP-3) insures a dwelling and its contents but has no liability coverage; it is used for rental dwellings, dwellings under construction, and higher-risk risks. Homeowners forms combine property and liability: HO-2 (broad named peril), HO-3 (open peril on the dwelling, named peril on personal property - the most common), HO-5 (open peril on both), HO-4 (renters - contents and liability, no Coverage A), HO-6 (condo unit-owners), and HO-8 (modified, for older homes).
Internal limits
On a standard HO-3: Coverage B other structures 10% of A, Coverage C personal property 50% of A, Coverage D loss of use 30% of A, Coverage E personal liability $100,000, Coverage F medical payments to others $1,000–$5,000. Coverage C also extends 10% off premises. Special limits cap categories such as money, securities, theft of jewelry or furs, theft of firearms, theft of silverware, and business property - these limits apply to the category overall, not per item.
Exclusions that decide questions
Earth movement, flood/surface water, ordinance or law, neglect, intentional loss, governmental action, power failure (if the failure originates off premises), faulty workmanship, and business pursuits are excluded. Water damage from a burst plumbing pipe is covered; water escaping a swimming pool or seeping through a foundation is not.
Loss settlement trap
Replacement cost on the dwelling usually requires insurance to at least 80% of full replacement cost; fall short and the loss settles on ACV.
Rule of thumb
Add the special limit to the category, not to the item - a stolen $5,000 ring recovers the jewelry-theft special limit, not $5,000.