What the form is
The DP 04 14, titled "Additional Living Expense - Form DP 00 01 Only," is an endorsement designed to add a crucial coverage to the Dwelling Property 1 - Basic Form (DP 00 01). The primary purpose of this endorsement is to provide financial assistance for the increase in living expenses an insured incurs if their dwelling becomes uninhabitable due to a loss covered by the policy. These expenses could include costs for temporary accommodation, meals, laundry, and other essential services that exceed the insured's normal household expenses.
Classes of business it applies to
This endorsement is specifically for personal lines insurance, attached to the DP 00 01 policy. The DP 00 01 form is typically used for owner-occupied or tenant-occupied dwellings that may not meet the eligibility requirements for broader homeowners policies. Examples include:
- Rental properties where the owner wants to provide ALE for themselves if they occupy a portion of the dwelling (though typically Fair Rental Value applies to loss of rents, and tenants would have their own coverage). More commonly, it's for an owner-occupant of a basic dwelling.
- Older homes or homes with lower market values.
- Dwellings occupied seasonally.
For instance, if an individual owns and lives in a home insured under a DP 00 01 policy and a fire makes the home unlivable, the DP 04 14 endorsement would help cover the additional costs of staying in a hotel and other necessary increased living expenses during the repair period. It's important because the standard DP 00 01 form does not automatically include Additional Living Expense coverage, unlike the DP 00 02 (Broad Form) and DP 00 03 (Special Form).
Special considerations
A key consideration is that the DP 00 01 Basic Form, without this endorsement, typically only offers Fair Rental Value (Coverage D), which compensates the owner for lost rental income if the property is rented out, not the increased living costs for an owner-occupant. The DP 04 14 endorsement fills this gap for owner-occupants or for situations where the insured needs coverage for their own additional living expenses. The limit of liability for Additional Living Expense is usually stated on the Declarations page and may be a percentage of the Coverage A (Dwelling) limit. Some versions or state-specific rules may impose a monthly cap on the amount payable. For example, a North Carolina advisory mentions a revision to limit ALE coverage to no more than 25% per month of the total ALE limit. Coverage applies for the reasonable time required to repair or replace the damaged property, or for the insured to permanently relocate.
Key information for agents and underwriters
For Agents: It is crucial for agents to explain the absence of automatic ALE coverage in a standard DP 00 01 policy and to recommend the DP 04 14 endorsement, particularly for owner-occupied dwellings. This helps avoid significant out-of-pocket expenses for clients if they are displaced from their homes due to a covered loss. Clearly explaining the benefits and how the coverage works (i.e., covering expenses *above* normal living costs) is essential.
For Underwriters: When this endorsement is requested, underwriters should assess the overall risk profile and ensure the Coverage A limit is appropriate, as the ALE limit is often derived from it. They should be aware of any specific state regulations or company guidelines that might affect this coverage, such as mandated minimum limits or specific monthly payout restrictions. The premium for this endorsement will be influenced by the selected limit of ALE coverage. While it adds to the premium, it provides substantial protection and peace of mind for the insured.