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

Dwelling Policy Forms

The ISO Dwelling Policy (DP) program insures one-to-four-family residential dwellings that do not qualify for a Homeowners policy. Typical DP risks are non-owner-occupied rentals, seasonal or secondary homes, dwellings under construction, and owner-occupants who cannot meet HO eligibility (e.g., a home with a small commercial use, or an applicant with prior losses). Unlike the Homeowners program, the DP program does not bundle liability — Section II coverages are added only by endorsement. The current ISO edition tested on most state exams is the DP 00 0X 07 14 series.

The three forms differ chiefly in how property is covered (named-peril vs. open-peril) and in the valuation method (ACV vs. replacement cost). Memorize the form-to-peril mapping; it is the single most-tested fact in this chapter.

The three dwelling forms

DP-1 Basic Form

The DP-1 insures a short list of named perils. As issued, the only peril automatically included is Fire, Lightning, and Internal Explosion. Extended Coverage (EC) perils — Windstorm, Hail, Explosion, Riot, Aircraft, Vehicles, Smoke, and Volcanic Eruption (remember WHARVES + smoke) — and Vandalism & Malicious Mischief (V&MM) are added for an additional premium. DP-1 settles building losses at actual cash value (ACV) unless replacement cost is endorsed.

DP-2 Broad Form

The DP-2 is a named-peril form covering the DP-1 perils plus broad perils such as: falling objects; weight of ice, snow, or sleet; accidental discharge of water or steam; freezing of plumbing; sudden tearing or bulging of a steam/heating system; and damage from artificially generated electrical current. DP-2 provides replacement cost settlement on the dwelling (subject to the 80% coinsurance condition) and adds extra Other Coverages not found in DP-1.

DP-3 Special Form

The DP-3 is the broadest and most commonly sold. Coverages A (Dwelling) and B (Other Structures) are written on an open-peril (all-risk) basis — covered unless specifically excluded. Coverage C (Personal Property) remains named-peril, using the DP-2 broad list. DP-3 settles building losses at replacement cost. The trap: candidates often assume DP-3 makes everything open-peril — it does not; contents stay named-peril.

Burden of proof and a worked comparison

The peril basis controls who must prove the cause of loss. On a named-peril form (DP-1, DP-2, all DP-3 contents), the insured must prove the loss was caused by a listed peril. On an open-peril form (DP-3 building), the insurer must prove an exclusion applies. This shifts the advantage to the policyholder on open-peril forms.

Example: A rental dwelling suffers a roof collapse from accumulated weight of ice and snow. Under a DP-1, weight of ice/snow is not a listed peril — no coverage. Under a DP-2 (named broad), weight of ice, snow, or sleet is listed — covered. Under a DP-3, the building is open-peril and the cause is not excluded — covered, and the insurer bears the proof burden.

Eligibility, term, and a common trap

A dwelling is eligible for the DP program if it is a 1-to-4 family residence and not used primarily for business (incidental occupancies such as a home office or a small studio are permitted within limits). Seasonal dwellings, dwellings rented to others, and dwellings in course of construction are squarely DP risks. A building used more than the permitted incidental amount for business, or a true commercial structure, must instead go on a commercial property form or BOP.

DP policies are typically written for a one-year term and may carry a flat $250 or $500 deductible applied per occurrence to most property losses.

The biggest single trap on this topic: the DP-3 is not a fully open-peril policy. The building (A and B) is open-peril, but personal property (C) is named-peril and the policy contains no liability at all unless Section II is endorsed. Candidates who memorize "DP-3 = all-risk" miss questions that hinge on contents or liability.

Dwelling Eligibility and the Homeowners Boundary

The Dwelling Policy (DP) program insures residential property that does not qualify for, or does not need, a Homeowners policy: non-owner-occupied rentals, dwellings with up to four families (or four roomers/boarders), seasonal homes, and homes in higher-risk or hard-to-place situations. Unlike Homeowners, the unendorsed DP includes no liability and no theft coverage — both must be added by endorsement — and no automatic Coverage C on the DP-1 unless purchased. This is why the exam often steers a landlord or a vacant/seasonal property to a DP rather than an HO form.

Perils by Form and the Anti-Concurrent Trap

DP-1 covers fire, lightning, and internal explosion as the base, with Extended Coverage (EC) perils (windstorm, hail, riot, aircraft, vehicles, smoke, volcanic eruption) and VMM (vandalism) addable. DP-2 (Broad) is a longer named-peril list including falling objects, weight of ice/snow, accidental water discharge, and freezing. DP-3 (Special) insures the dwelling and other structures on an open-peril basis but keeps personal property on named perils.

DP-1 settles many losses at ACV (notably under EC), while DP-2 and DP-3 provide replacement cost on the structure when the insurance-to-value test is met — a frequently tested distinction.