The Dwelling Policy

What the Dwelling Policy Covers

The Dwelling Property program is a property-only program used to insure residential buildings that do not qualify for, or do not need, a full Homeowners policy. Typical uses include rental (non-owner-occupied) dwellings, seasonal or secondary homes, older homes, dwellings under construction, and risks where the owner wants property protection without packaged liability. Because the program is property-only, it contains no built-in personal liability or medical payments coverage — that protection must be added by endorsement or written under a separate liability policy.

A dwelling policy can insure a building used predominantly for dwelling purposes that houses no more than four families and no more than five roomers or boarders. Incidental business occupancies (a small office or a permitted home business) can often be accommodated. This flexibility is exactly why the program survives alongside Homeowners forms: a landlord insuring a rented single-family house, or an investor with a vacant property awaiting renovation, cannot use an owner-occupied Homeowners form.

The Three Forms: DP-1, DP-2, DP-3

The program is sold in three escalating forms. The key distinctions are the breadth of perils and the loss settlement basis.

The DP-1 Basic Form in its unendorsed state covers only fire, lightning, and internal explosion. The well-known group of Extended Coverage (EC) perils — windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, and volcanic eruption — is added by endorsement, and Vandalism and Malicious Mischief (V&MM) can be added on top. Remember the memory aid "WC SHAVERR" is one common way agents recall the EC peril list.

The DP-2 Broad Form is a named-peril form that automatically includes the EC and V&MM perils plus additional broad-form perils such as falling objects; weight of ice, snow, or sleet; accidental discharge of water or steam; freezing; and damage from artificially generated electrical current. The DP-3 Special Form is the broadest: the dwelling and other structures are covered on an open-peril ("all-risk") basis — covered for any cause of loss unless specifically excluded — while personal property remains on a named-peril (broad) basis.

Named Peril vs. Open Peril

The single most tested distinction in property insurance is named peril vs. open peril.

• Named-peril coverage (DP-1, DP-2, and the contents of DP-3) lists the covered causes of loss. If a peril is not on the list, it is not covered. The burden of proof is on the insured to show the loss was caused by a listed peril.
• Open-peril coverage (also called "all-risk" or "special"), used for the dwelling under DP-3, covers any direct physical loss except those specifically excluded. Here the burden shifts to the insurer to prove an exclusion applies.

Open-peril coverage is broader and generally costs more, but it is not unlimited — typical exclusions include wear and tear, mechanical breakdown, settling, insect or vermin damage, flood, and earth movement.

The Coverages: A through E

Dwelling policies organize protection into five coverage parts. Note the lettering parallels — but is not identical to — Homeowners forms.

For a landlord, Coverage D (Fair Rental Value) is often the practical priority, replacing lost rent while repairs occur. For an owner who lives in the dwelling, Coverage E (Additional Living Expense) matters. The DP-1 may bundle D and E and limit the amount, while DP-2 and DP-3 provide broader additional coverages such as collapse and debris removal.

Dwelling vs. Homeowners — Who Uses Which

The decisive factor is owner-occupancy and the need for liability. A Homeowners policy packages property and personal liability for an owner who lives in the home. A Dwelling policy is property-only and is the right choice when the Homeowners eligibility rules cannot be met or when liability is handled elsewhere.

Use the Dwelling program for:

• Rental / investment properties where the insured is a landlord, not an occupant
• Seasonal or secondary residences
• Vacant or under-construction dwellings
• Older or lower-value homes that may not meet Homeowners underwriting
• Insureds who want property coverage only

A common exam trap: a landlord cannot insure a rented-out house on an owner-occupied Homeowners form, and a tenant's belongings in that rental are insured by the tenant's own HO-4, not by the landlord's dwelling policy. The landlord's dwelling policy protects the building and lost rents, not the tenant's contents.