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

The ISO Dwelling Program

The Dwelling Property program insures residential buildings of one to four families, plus mobile homes and certain seasonal or rental dwellings that do not qualify for a Homeowners policy. The current ISO editions are DP 00 01 (DP-1 Basic Form), DP 00 02 (DP-2 Broad Form), and DP 00 03 (DP-3 Special Form). They are commonly written for landlords, secondary residences, dwellings under renovation, and risks that fail Homeowners underwriting (older wiring, prior losses, low owner-occupancy).

A recurring exam theme: dwelling forms do not automatically include personal liability or medical payments to others. Coverage is property-only unless liability is added by endorsement. By contrast, every Homeowners form bundles Section II liability automatically. Memorize that distinction.

Eligibility also differs from Homeowners. A dwelling form can insure a residence even when it is not owner-occupied (a pure rental), when occupancy is seasonal, or when the structure houses up to four families or has limited incidental business use. Homeowners forms generally require owner-occupancy and primary residence. That is why the DP program is the go-to product for landlords, investors, and secondary homes — it trades the convenience of a packaged liability section for flexibility on occupancy.

Perils and Valuation by Form

As you move up the series, both the breadth of perils and the dwelling valuation improve.

The single most-tested fact: DP-3 is open-peril on the building (Coverages A and B) but only broad named-peril on contents (Coverage C). Theft is excluded on all dwelling forms and must be endorsed on.

DP-1 Specifics and the Extended Coverage Trap

The DP-1 base form covers only fire, lightning, and internal explosion. Other familiar perils — windstorm, hail, smoke, riot, aircraft, vehicles, volcanic eruption — are added only when the insured buys the Extended Coverage (EC) option, and Vandalism & Malicious Mischief (V&MM) is a separate option on top of EC. Examiners love the trap that DP-1 does not cover windstorm 'out of the box.'

DP-1 also has a unique loss-settlement quirk. Most DP-1 losses settle at ACV, but losses caused by fire or lightning to the dwelling may be settled at ACV, with replacement cost available only if the RC option is selected. The other forms (DP-2, DP-3) settle the dwelling at replacement cost subject to the 80% coinsurance condition.

DP-2 Broad Form Perils

The DP-2 Broad Form upgrades the named-peril list to roughly a dozen perils on both the dwelling and contents. In addition to the EC perils, it typically adds:

• Falling objects;
• Weight of ice, snow, or sleet;
• Accidental discharge or overflow of water or steam from plumbing, heating, or appliances;
• Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water system;
• Freezing of plumbing and household systems;
• Sudden and accidental damage from artificially generated electrical current.

DP-2 settles the dwelling at replacement cost (subject to the 80% test) and is the natural step up when a landlord wants the broad water and ice perils but does not need open-peril breadth. Theft, however, is still excluded on the DP-2 — only an endorsement adds it. Remember: the jump from DP-2 to DP-3 changes the dwelling from named-peril to open-peril, but does not by itself add theft.

DP-3 Special Form and the Burden of Proof

The DP-3 is the workhorse of the program. It insures the dwelling and other structures on an open-peril (special) basis — covered for any cause of loss except those specifically excluded — while Coverage C personal property remains named-peril (the broad-form list). This split is a favorite exam point: on a DP-3, a falling-object claim to the building is covered unless excluded, but the same peril against contents is covered only if "falling objects" appears on the named list.

The open-peril grant shifts the burden of proof. On a named-peril form (DP-1, DP-2), the insured must prove the loss came from a listed peril. On the DP-3's open-peril building coverage, the insurer must prove an exclusion applies to deny the claim. Examiners reward candidates who connect open-peril coverage to this reversal of proof.

Eligibility, Standard Fire Policy Roots, and Forms 7-8

A dwelling policy covers a one-to-four-family residence that is not eligible for, or not desired on, a homeowners policy — rental houses, seasonal dwellings, homes under renovation, or owners who want property-only coverage without the HO liability package. Up to five boarders are permitted, and incidental occupancies (a small office or studio) can be endorsed.

The dwelling program descends from the Standard Fire Policy (SFP), the 165-line statutory fire contract whose insuring agreement, conditions (concealment/fraud, suspension, cancellation), and the 60-day proof-of-loss requirement carry into modern forms. The exam may reference the SFP's pro-rata liability, subrogation, and appraisal clauses as the ancestor of today's dwelling conditions. ISO also publishes the DP 00 07 / DP 00 08 mobile-home dwelling editions for manufactured housing.