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

Why the Dwelling Program Exists

The ISO Dwelling Property (DP) program insures residential structures that do not qualify for a Homeowners policy. The exam frames this around eligibility: the Homeowners program generally requires the named insured to be an owner-occupant of a 1-4 family dwelling. The DP program fills the gap. It covers landlord (rental) dwellings, seasonal homes, dwellings under construction, and owner-occupied homes that are otherwise ineligible (older homes, mobile homes, dwellings with up to five roomers or boarders).

The three principal forms tested are the DP-1 Basic Form, DP-2 Broad Form, and DP-3 Special Form. They differ in (1) the perils covered and (2) the loss valuation basis. Knowing those two axes lets you answer most DP form questions.

DP-1 Basic Form

The DP-1 (DP 00 01) is the only named-peril form that starts with a very short peril list and uses Actual Cash Value (ACV) as the default loss settlement basis (replacement cost is optional by endorsement). Its base perils are fire, lightning, and internal explosion.

The Extended Coverage (EC) perils—windstorm, hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, and volcanic eruption—are added only when the insured pays an additional premium (often abbreviated WCSHAVVRRE / 'EC perils'). Vandalism and malicious mischief (V&MM) is a further separate add-on on DP-1 and is excluded if the dwelling is vacant beyond 60 consecutive days.

Trap: DP-1 is the only dwelling form where windstorm and V&MM are not automatically included with the base peril of fire.

DP-2 Broad Form and DP-3 Special Form

The DP-2 (DP 00 02) Broad Form is named-peril but covers a much longer list—the basic perils plus burglary damage, falling objects, weight of ice/snow/sleet, accidental discharge of water, freezing, tearing apart/cracking of heating systems, and artificially generated electrical current. DP-2 settles building losses on a replacement cost basis (subject to coinsurance), a key upgrade over DP-1.

The DP-3 (DP 00 03) Special Form is the broadest. It insures the dwelling and other structures on an open-peril ('all-risk') basis—covered unless excluded—while personal property remains named-peril (the DP-2 broad list). DP-3 also uses replacement cost on the building. This split is the single most-tested DP-3 fact.

Comparison Table

*Theft is never a base DP peril on any form; it requires the Theft Coverage endorsement (DP 04 72) and is only available to owner-occupants.

Eligibility Details and Editions

The current ISO editions in wide use are the DP 00 01, DP 00 02, and DP 00 03 (2002 and later editions). Eligibility extends to dwellings used for no more than one apartment that may be rented to others, dwellings with up to five roomers or boarders, and a permitted incidental business occupancy (such as a home office or small studio) when properly endorsed. A dwelling that is genuinely owner-occupied and otherwise eligible may also be written Homeowners; producers choose DP when the risk is a rental, seasonal, vacant, under-construction, or substandard structure.

Unlike Homeowners, the dwelling program contains no liability or medical payments coverage in the base form. Personal Liability (comparable to HO Section II) and Medical Payments to Others must be added by endorsement when the insured wants third-party protection. This is one of the most-missed exam facts: a bare DP-3 is a property-only contract.

Choosing the Right Form

Match the form to the exposure. A landlord renting a modest single-family home who wants the cheapest fire protection takes a DP-1 (ACV, fire/lightning/explosion, EC added). A homeowner wanting solid mid-tier protection with replacement cost and a broad named-peril list takes a DP-2. An owner-occupant or a sophisticated landlord wanting the widest possible building protection takes a DP-3 for its open-peril building coverage.

Remember the valuation jump: moving from DP-1 to DP-2 buys both more perils and replacement cost on the dwelling, while moving from DP-2 to DP-3 mainly buys open-peril (all-risk) building coverage—contents stay on the same broad named-peril list under both DP-2 and DP-3.

Common Add-On Coverages and the Absence of Liability

A defining DP feature the exam stresses: the dwelling program provides no liability or medical payments coverage in the base policy. Those must be added by endorsement, most commonly Personal Liability (DL 24 01) and Medical Payments to Others (DL 24 02), or written separately. A homeowners form bundles liability automatically; the DP does not.

The DP base forms cover property only and exclude theft unless added. Theft can be endorsed back through the Broad Theft Coverage (on-premises and off-premises) endorsement, available chiefly when the insured is an owner-occupant — a tenant-occupied rental typically cannot buy on-premises theft for the owner.

Choosing Among DP-1, DP-2, DP-3

The DP-3 mirrors the HO-3 split: open-peril on the building, named-peril on contents. It is the most popular dwelling form for non-owner-occupied or seasonal homes that cannot qualify for a homeowners policy, and recognizing that open/named split on a single policy is a recurring exam point.