What is a Dwelling Fire Policy?
A “Dwelling Policy” (DP) is insurance coverage typically purchased for a rental property. Landlords are ultimately concerned about the building itself and that’s exactly what’s insured under a DP.
Originally, it was referred to as a “Dwelling Fire Policy” because it only covered fire as a cause of loss. However, over the years, more and more perils (causes of loss) were added.
To better understand what’s covered under a dwelling policy, you need to familiarize yourself with how to read a homeowner’s policy (HO). Similar to a HO, you will have coverage “A” for the dwelling and coverage “B” for other structures (picture a detached garage) under a dwelling policy.
But dwelling policies differ from homeowner’s policies in a number of ways. First, they do not provide “E” liability or “F” medical payments to others. You will not need or obtain this coverage as a landlord for the property you rent. However, you’ll likely be covered for liability on your personal homeowner’s insurance policy, assuming you have one.
The second difference between a homeowner’s policy and a dwelling policy is, more often than not, rental properties do not come furnished; therefore, the DP does not automatically provide coverage “C” for the contents of the building.
Contents are anything inside the house that is not part of the structure. Ovens and stoves that are built into the walls are considered part of the property for our purposes.
But what if the rental property is furnished? In that event, coverage for contents can be added to the dwelling policy, though it needs to be specifically requested. You must list all items and pay an additional premium for them, whereas contents coverage is automatically added to a homeowner’s policy.
Dwelling polices can also be limited in what causes of loss they insure you against. While the perils insured against can be increased on almost every type of property insurance available, there are a number of standard perils you can count on being covered for, including:
- Fire
- Lightning
- Removal – this means removing your property from a building in order to protect it against any other covered cause of loss.
- Wind
- Hail
- Aircraft
- Riot and Civil Commotion
- Vehicles – This does not cover your car, but if someone else drives a car into a structure you own.
- Volcanic Eruption
- Explosion
- Smoke – smoke from your fireplace is not covered here, rather smoke from a heater.
- Vandalism and Malicious Mischief – this is not a mandatory coverage, it has to be specifically requested. This does provide coverage for broken windows.
It’s important to note that only direct causes of loss are insured against in most dwelling policies, meaning if a fire burns down your house, it’s covered as a direct loss caused by fire.
However, if you ran a small business out of the property, your lost income as a result of the fire is not covered because it’s considered an indirect loss.
As with most insurance policies, you can add coverage to the dwelling policy for indirect losses such as coverage “D” Fair Rental Value, which would reimburse you for the lost rent you wouldn’t receive while the house is unlivable.
If you aren’t sure what type of coverage you need or have, contact your insurer or independent agent to review your current policy or consult one before purchasing a new policy.
