Improvements and betterments insurance as written for commercial risks is the subject of a separate discussion; seeImprovements and Betterments Coverage. It should be noted that most residential forms do not include the adjustment procedure spelled out in commercial forms governing recovery when improvements are damaged but not repaired or replaced.

The subject of this discussion is the improvements and betterments insuring agreement in forms covering residential risks. This supplementary coverage is sometimes also known as Building Additions and Alterations or Improvements, Alterations and Additions.

Topics covered:
Residential risks
Coverage under dwelling forms
Cooperative apartments
Condominium unit owners

Residential Risks

Insurance Services Office (ISO) form HO 00 04 10 00 (previously form HO-4) of the current homeowners program offers building additions and alterations insurance as an additional coverage. The form provides that building improvements or installations made or acquired at the expense of the insured to that part of the residence premises used exclusively by the insured are covered. The 1982 ISO form provision covered building additions, alterations, fixtures, improvements or installations made (not acquired) by the insured. In situations where improvements are sold to a new tenant by a departing tenant (cooperative apartments or rental apartments under rent control in a tight housing market), inclusion of improvements acquired becomes significant. This was recognized by the drafters of the American Association of Insurance Services (AAIS) readable personal lines policies, and coverage for acquired improvements and betterments was first included in the AAIS form in 1978. Under both the ISO and AAIS forms, the limit of liability for tenants is 10 percent of the limit for unscheduled personal property (coverage C). In both forms it is an additional amount of insurance. For improvements and installations values in excess of this limit, additional coverage for tenants can be purchased by endorsement (ISO's endorsement HO 04 51 10 00).

Some insureds under homeowners policies covering owned dwellings also need improvements and betterments coverage. The usual case involves a second residence rented to the insured where improvements have been made at the insured's expense.

Under the AAIS policies, if a secondary location is endorsed onto the policy (endorsement ML-67), the tenant's improvements coverage (10 percent of coverage C) applies to that residence. With ISO homeowners forms, building additions and alterations endorsement HO 04 49 10 00 is used to provide this coverage, with the location of the rented premises and the applicable limit of liability indicated on the endorsement.