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

The Dwelling Property Program

The Dwelling Property (DP) program is the Insurance Services Office (ISO) line used to insure one-to-four-family residences that are not eligible for a Homeowners (HO) policy. Typical DP risks include rental dwellings, seasonal or secondary homes, homes of below-average condition, and properties whose owners do not live on premises.

The current ISO editions are the DP 00 01 (Basic Form), DP 00 02 (Broad Form), and DP 00 03 (Special Form), commonly abbreviated DP-1, DP-2, and DP-3. All three share the same coverage labels but differ sharply in perils insured and loss valuation.

Eligibility and key distinctions

A dwelling is eligible for the DP program if it is a residence of up to four families with no more than five roomers or boarders per family. Incidental office, studio, or schoolroom occupancy is permitted.

Unlike Homeowners forms, the DP base policy includes no automatic liability coverage and no theft coverage. These gaps are the single most-tested DP fact. A landlord who needs liability must add it by endorsement; a tenant who wants theft must request it.

Comparing the three forms

The progression from DP-1 to DP-3 increases both the perils covered and the loss-settlement basis.

DP-2 and DP-3 cover personal property on a named-peril (broad) basis even when the dwelling is open-peril. This is a classic trap: DP-3 is open-peril on Coverage A and B but only broad-form on Coverage C.

Loss valuation by form

Actual Cash Value (ACV) equals replacement cost minus depreciation. Under DP-1, a 15-year-old roof destroyed by fire is paid at its depreciated value, not the cost of a new roof.

Replacement Cost under DP-2 and DP-3 pays to repair or replace without deduction for depreciation, subject to the 80% coinsurance condition on the dwelling. A producer steering a client toward full reimbursement should recommend DP-2 or DP-3, not DP-1.

Perils by form - the testable progression

The DP-1 Basic Form insures only fire, lightning, and internal explosion at base; Extended Coverage (EC) adds windstorm/hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, and volcanic eruption, while Vandalism & Malicious Mischief (V&MM) can be added separately. DP-2 Broad adds perils such as burglar damage, falling objects, weight of ice/snow/sleet, accidental discharge of water or steam, freezing, and sudden tearing/cracking of a steam or hot-water system. DP-3 Special insures the dwelling and other structures on an open-peril basis - everything is covered except what the form excludes.

Common Exclusions and Traps

All DP forms exclude flood, earth movement, war, nuclear hazard, ordinance or law, neglect, and intentional loss. Flood requires a separate NFIP or private flood policy. Vacancy beyond 60 consecutive days suspends or reduces coverage for vandalism, glass breakage, and water-related perils, and increases the deductible on others - a key landlord-policy trap. Remember that even DP-3's open-peril promise applies to the building; theft and liability are still not in the base policy. A producer placing a rental dwelling should confirm whether the owner needs the Theft Coverage endorsement and a separate Personal Liability endorsement, since the DP program assumes a non-owner-occupant who must build those protections deliberately.

Choosing the right form for the client

Producers match the DP form to the client's tolerance for depreciation and the dwelling's condition. A bare-bones rental in below-average condition, insured only against catastrophic fire, may suit a budget-priced DP-1 with EC. A landlord who wants the rebuilt property restored without a depreciation haircut needs DP-2 (broad named perils, replacement cost) or DP-3 (open perils, replacement cost). DP-3 is the most common because its open-peril dwelling grant shifts the burden of proof to the insurer and covers the widest range of unexpected events - the same reason it is the most expensive of the three.

Seasonal and secondary homes, vacant dwellings awaiting sale, and tenant-occupied homes are the program's typical risks, all of which the Homeowners forms decline because they require owner-occupancy.

A worked total-loss comparison across forms

Consider a fire that destroys a dwelling with a replacement cost of $250,000, insured to value. Under DP-1 the settlement is ACV - replacement cost minus depreciation - so a structure that is 30% depreciated pays roughly $175,000, leaving the owner $75,000 short of rebuilding. Under DP-2 or DP-3, the same total loss pays the full $250,000 replacement cost (assuming the 80% coinsurance condition is met), making the owner whole. This $75,000 swing on one loss is precisely why the valuation basis, not just the peril list, drives form selection and why it is so heavily tested.