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

What the Dwelling Program Covers

The ISO Dwelling Policy (DP) insures one-to-four-family residential buildings that do not qualify for, or do not need, a Homeowners policy. Typical accounts include rental houses, seasonal or secondary homes, dwellings under renovation, and owner-occupied homes that fail Homeowners underwriting (older wiring, low value, prior losses). The current edition family is the DP 00 01 (Basic), DP 00 02 (Broad), and DP 00 03 (Special), all carrying the 07 14 edition date you should recognize on the exam.

Unlike Homeowners, the dwelling forms are modular: liability, theft, and many other coverages are NOT built in. They must be added by endorsement. This is the single most tested distinction between DP and HO programs.

Eligibility also matters. A dwelling form may insure a building of no more than four units and may permit limited incidental business or office occupancy. Buildings with five or more units, or predominantly commercial use, move to a commercial property program instead. A farm dwelling typically requires a Farmowners form rather than a DP.

The Three Forms at a Glance

Coverage breadth and premium rise across the series. None of the base forms includes liability or theft.

• DP-1 Basic starts with Fire, Lightning, and Internal Explosion only. The standard Extended Coverage (EC) package and Vandalism & Malicious Mischief (V&MM) are added by endorsement, not automatic.
• DP-2 Broad insures the building on a named-peril list that already includes EC, V&MM, and added perils such as weight of ice/snow and accidental water discharge.
• DP-3 Special insures Coverage A (Dwelling) and Coverage B (Other Structures) on an open-peril ("all-risk") basis — covered unless excluded — while Coverage C stays on the DP-2 broad named-peril list.

The Extended Coverage (EC) and Added Perils

When EC is added to a DP-1, or built into DP-2/DP-3, candidates are expected to know the package. A common mnemonic is WC SHAVeR:

• Windstorm and hail
• Civil commotion / riot
• Smoke (sudden and accidental)
• Hail (paired with windstorm)
• Aircraft and Vehicles
• explosion
• Riot and volcanic eruption

DP-2 then layers on broad-form perils: weight of ice/snow/sleet, accidental discharge or overflow of water or steam, sudden and accidental tearing/cracking/burning of a heating or A/C system, freezing of plumbing, falling objects, building collapse from specified causes, and sudden artificial electrical-current damage. DP-3 covers Coverages A and B open-peril, so the named list matters mostly for Coverage C.

Loss Valuation and the Burden-of-Proof Trap

• DP-1 pays building losses on an Actual Cash Value (ACV) basis: replacement cost minus depreciation. It contains no replacement-cost provision and is the least expensive form.
• DP-2 and DP-3 offer replacement cost on the building if the insured carries at least 80% of full replacement cost at the time of loss (the coinsurance trigger). Falling below 80% reverts settlement to a penalized ACV-style payout.
• All three settle Coverage C (personal property) at ACV unless a replacement-cost-on-contents endorsement is added.

The exam loves the burden-of-proof flip: under named-peril DP-1/DP-2, the insured must prove the loss was caused by a listed peril. Under open-peril DP-3, the insurer must prove an exclusion applies to deny the claim. This burden shift is precisely why DP-3 carries the highest premium and is the form of choice for owner-occupants who could not buy a Homeowners policy.

The DP Program and How the Three Forms Differ

The ISO Dwelling Property program insures one-to-four-family residences that do not qualify for or do not need the broader homeowners package, including rental dwellings, secondary homes, and risks the owner does not occupy. The three core forms differ chiefly in the breadth of perils. DP-1 (Basic Form) is the narrowest, DP-2 (Broad Form) adds perils and offers replacement cost, and DP-3 (Special Form) provides open-peril coverage on the dwelling and other structures. Because dwelling forms lack the bundled liability and theft of homeowners, candidates must remember they are property-focused contracts.

DP-1 Basic Form Details

DP-1 covers fire, lightning, and internal explosion at minimum, with Extended Coverage (windstorm, hail, explosion, riot, aircraft, vehicles, smoke, volcanic eruption) and Vandalism and Malicious Mischief available, usually for an added premium. Critically, DP-1 typically settles losses on an actual cash value basis, deducting depreciation, and it does not include theft by default. DP-1 is the form an exam scenario implies when it describes the cheapest possible coverage on an older rental house, and its ACV settlement is the trap that distinguishes it from the broader forms.

DP-2 Broad and DP-3 Special

DP-2 expands to a longer named-peril list (adding burglar damage, falling objects, weight of ice and snow, accidental water discharge, freezing, and the other broad perils) and pays the dwelling on a replacement cost basis subject to the insurance-to-value condition. DP-3, the most popular today, insures the dwelling and other structures on an open-peril (all-risk) basis, covering any direct physical loss except those excluded, while personal property remains named-peril. The progression DP-1 ACV named-peril, DP-2 RC broad named-peril, DP-3 RC open-peril dwelling is the framework the exam tests.

Eligibility, Theft, and Add-Ons

Dwelling forms fit risks ineligible for homeowners: dwellings under construction, seasonal or vacant dwellings, and especially non-owner-occupied rentals where the landlord needs building and rental-income protection but not the tenant's contents. Because theft is not built in, a Theft Coverage endorsement is added when needed, and it distinguishes on-premises from off-premises theft. Other common additions include the Dwelling Under Construction endorsement, Loss of Rents/Fair Rental Value, and Automatic Increase in Insurance.

When a question describes a rental house or a vacant property, the dwelling program, not homeowners, is the correct family of forms.