3.1 Dwelling Policy Forms DP-1, DP-2, DP-3

What the Dwelling Program Is

A dwelling policy insures one- to four-family residential buildings on an Insurance Services Office (ISO) dwelling form. It is the home for risks that do not fit the owner-occupied homeowners (HO) program: landlord rentals, seasonal cabins, dwellings under renovation, and older homes that fail HO underwriting.

The forms are sometimes called dwelling fire policies because the basic form descends from the old standard fire policy. The single most tested fact is that the base dwelling form covers property only — there is no built-in personal liability (Coverage L) or medical payments (Coverage M). Those are added with the Personal Liability Supplement or a separate policy.

The Three ISO Forms

Memorize the form numbers, peril basis, and valuation. The exam loves to swap one attribute.

Exam trap: DP-3 is open-peril on the building (Coverage A and B) but named-peril on personal property (Coverage C). Many candidates assume open-peril contents — it is not.

DP-1 and the Layered Perils

DP-1 in its bare form is extremely narrow: fire, lightning, and internal explosion only. The buyer then layers on:

1. Extended Coverage (EC) — windstorm, hail, explosion (external), riot/civil commotion, aircraft, vehicles, smoke, and volcanic eruption. Memory aid: WHARVES (Wind, Hail, Aircraft, Riot, Vehicles, Explosion, Smoke).
2. Vandalism & Malicious Mischief (V&MM) — added by endorsement; excluded if the dwelling has been vacant more than 60 consecutive days before the loss.

This modular design makes DP-1 the cheapest entry point for a bare structure such as a vacant rental awaiting a tenant.

Eligibility Rules

A four-plex is eligible for a DP form; a six-unit building is not — it moves to a commercial program.

Worked Selection Example

A landlord owns a $250,000 three-unit rental and lives elsewhere. A windstorm is the chief exposure and the units are fully furnished by tenants.

• DP-1 would require adding EC to pick up wind, and would still pay losses at ACV (depreciated).
• DP-3 insures the building open-peril at replacement cost, automatically including wind. If a $40,000 roof (10-year life, 5 years old) is destroyed by wind, DP-3 pays the full $40,000 to replace, while DP-1 with EC pays roughly $20,000 ACV after 50% depreciation.

The $20,000 swing on a single claim is why most insured landlords buy DP-3 despite the higher premium.

Why the Series Costs More as You Climb

Each step up the series buys breadth: DP-1 to DP-2 adds perils and switches to replacement cost; DP-2 to DP-3 flips the building to open-peril, which shifts the burden of proof to the insurer — the carrier must show an exclusion applies rather than the insured proving a covered peril caused the loss. That single change is the largest driver of the premium difference between DP-2 and DP-3.

Reading the Declarations Page

Every dwelling exam includes at least one Declarations-reading question. The Declarations identify the named insured, the described location, the policy period (12:01 a.m. standard time at the described location), the form number and edition (e.g., DP 00 03 12 02), each coverage limit (A through E), the deductible, and any scheduled endorsements. The form number is the fastest way to identify which peril basis applies: a 00 01 suffix is Basic, 00 02 is Broad, and 00 03 is Special. Candidates who memorize these three suffixes can answer many form-identification questions in seconds.

How the DP Relates to the Standard Fire Policy

The dwelling forms incorporate the 165 lines of the Standard Fire Policy (SFP) that most states still embed by statute. The SFP supplies foundational conditions — the concealment or fraud provision, the suspension of coverage during increased hazard, and the pro rata other-insurance clause. When an exam question references concealment, misrepresentation, or the insured increasing the hazard within the insured's control, it is testing SFP-derived language that flows into every DP form.

Choosing Among the Forms in Practice

Producers match the form to the risk and the budget. A vacant structure awaiting demolition may justify a bare DP-1 because replacement cost is irrelevant. A furnished long-term rental that the owner wants protected at full value points to DP-3 with the Personal Liability Supplement and Broad Theft. A modest seasonal cabin where the owner accepts depreciated settlements might land on DP-2 as a middle ground. The exam rewards candidates who can read occupancy, value, and budget clues and select the form that fits — not simply the broadest form available.