Basic Dwelling Eligibility and DP-1 Perils

Basic Dwelling Eligibility and DP-1 Perils

The ISO Dwelling Property Program provides property insurance for residential buildings that do not qualify for standard Homeowners insurance policies, or where the policyholder does not require the comprehensive package of property, personal liability, and theft coverages bundled into Homeowners forms. Developed by the Insurance Services Office (ISO), the dwelling program serves as the primary coverage mechanism for non-owner-occupied rental properties, seasonal vacation homes, residences with modest value, and residential buildings under active construction.

Scope and Eligibility Criteria

To be eligible for an ISO Dwelling Policy, a property must satisfy program eligibility and underwriting criteria:

1. Permitted Occupancy: The dwelling must be used exclusively for residential purposes, containing no more than four family dwelling units (a single-family home, duplex, triplex, or fourplex). It may accommodate up to five roomers or boarders in total across all units.
2. Occupancy Status: Unlike Homeowners policies (HO-2, HO-3, HO-5, and HO-8), which generally require an owner-occupied residence under program rules, the Dwelling Program imposes no owner-occupancy requirement. A dwelling policy may be issued to:
   • A landlord who rents the structure to independent tenants.
   • An owner-occupant who prefers basic, economical property protection without bundled liability or contents coverage.
   • An owner of a seasonal or secondary residence (such as a vacation cabin in Lake Tahoe or a beach cottage in Monterey).
   • An owner or builder during construction (using the ISO Dwelling Under Construction Endorsement).
3. Incidental Business Occupancies: Permitted businesses are strictly restricted to incidental, non-hazardous service operations conducted by the insured or tenant, such as a professional office, beauty salon, private music instruction studio, or photographic studio, provided no more than two persons are actively employed on the premises. Commercial retail stores, manufacturing operations, or auto repair shops are strictly barred.
4. Mobile Homes: Under ISO guidelines, mobile homes are eligible only under the DP-1 Basic form, provided they are permanently situated on a fixed foundation.
5. No Bundled Liability or Theft: Standard dwelling forms are property-only contracts. Neither personal liability (premises liability) nor broad theft of personal property is automatically included. Both must be added via specific endorsements: the Personal Liability Supplement (DL 24 01) and the Broad Theft Coverage Endorsement (DP 04 72).

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Structural Comparison: DP-1, DP-2, and DP-3

The ISO dwelling program is structured into three standard forms of escalating breadth and peril sophistication:

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DP-1 Basic Form Perils and Endorsements

The base, unendorsed DP-1 form covers only three foundational perils:

1. Fire: Hostile fires occurring outside their intended confines.
2. Lightning: Natural atmospheric electrical discharges causing physical scorching or structural ignition.
3. Internal Explosion: An explosion occurring within the dwelling or other covered structure on the premises (such as a catastrophic gas furnace explosion or kitchen stove explosion). It specifically excludes steam boiler or steam pipe ruptures owned, leased, or operated by the insured.

Extended Coverage (EC) Perils: The "W.C. SHAVER" Mnemonic

By paying an additional premium, the insured can endorse the DP-1 with Extended Coverage (EC), which expands the peril slate to include eight additional named causes of loss, widely memorized for licensing exams using the acronym W.C. SHAVER:

• W — Windstorm: Direct damage caused by violent winds, hurricanes, or tornadoes. Interior damage from rain, snow, sand, or dust is covered only if the wind first damages the building's roof or exterior walls, creating an opening through which the elements enter.
• C — Civil Commotion: Damage resulting from strikes, public unrest, riots, or civil disorder.
• S — Smoke: Sudden and accidental smoke damage. The DP-1 EC endorsement strictly excludes smoke from fireplaces and smoke from agricultural smudging or industrial operations.
• H — Hail: Physical impact of hailstones. Outdoor radio/TV aerials and awnings are excluded.
• A — Aircraft: Direct physical contact with aircraft or objects falling from aircraft.
• V — Vehicles: Direct physical contact with motor vehicles. However, DP-1 EC explicitly excludes loss caused by vehicles owned or operated by an occupant or resident of the premises, as well as damage to driveways, walks, and fences.
• E — Explosion: Replaces the narrow "internal explosion" peril, covering both internal and external explosions (such as a neighbor's fuel storage tank exploding), while continuing to exclude steam pressure vessels.
• R — Volcanic Eruption: Covers direct damage from airborne volcanic blast, shock waves, ash, dust, and lava flow. It does not cover seismic tremors or earthquakes associated with volcanic activity.

Vandalism & Malicious Mischief (V&MM) and the 60-Day Vacancy Rule

Insureds who purchase Extended Coverage may also add the Vandalism & Malicious Mischief (V&MM) endorsement for an additional premium. V&MM covers willful and malicious physical destruction of covered property.

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