3.1 Dwelling Policy Forms DP-1, DP-2, DP-3
Key Takeaways
- ISO publishes three dwelling forms — DP-1 Basic (DP 00 01), DP-2 Broad (DP 00 02), and DP-3 Special (DP 00 03) — with perils and premium rising across the series.
- DP-1 is named-perils and settles dwelling losses on Actual Cash Value; DP-2 and DP-3 settle the dwelling on Replacement Cost when the 80% coinsurance test is met.
- DP-3 alone insures the dwelling and other structures on an open-perils (all-risk-except-excluded) basis; its Coverage C contents stay on the broad named-perils list.
- No dwelling form includes liability or theft in its base form — theft is built into DP-2/DP-3 but liability is always added by endorsement.
- The dwelling program covers 1–4 family rentals, owner-occupied homes that do not qualify for a homeowners policy, and seasonal/secondary residences.
When Dwelling Coverage Applies
The Dwelling Property program insures residential property that does not fit a Homeowners policy. Typical risks are rental dwellings of one-to-four families, tenant-occupied homes, owner-occupied homes that fail HO underwriting because they are older, in poor condition, or higher-hazard, and seasonal or secondary residences. Mobile homes and condominium units are handled by separate forms or endorsements covered later in this unit.
The dwelling forms grew out of the older Standard Fire Policy and remain a stripped-down, modular contract. The insured buys exactly the perils and coverages needed, which makes the DP cheaper and far more flexible than a packaged HO policy. That modular design is also why so many exam questions hinge on what is and is not included by default.
A DP differs from an HO policy in two structural ways the exam tests constantly. First, it is a monoline property form — liability is never built in and must be added by endorsement (the Personal Liability Supplement). Second, it has no automatic theft coverage in the base contract; theft is only added through endorsement on the DP-1 and is built into the DP-2 and DP-3.
The Three Forms at a Glance
ISO publishes three dwelling forms. Coverage breadth and premium rise across the series; none includes liability.
| Form | ISO Number | Dwelling Perils | Contents Perils | Loss Settlement |
|---|---|---|---|---|
| DP-1 Basic | DP 00 01 | Named: fire, lightning, internal explosion (+ optional EC, V&MM) | Same named perils | Actual Cash Value |
| DP-2 Broad | DP 00 02 | Broad named perils (EC + V&MM built in, theft, falling objects, weight of ice/snow, water discharge, etc.) | Broad named perils | Replacement Cost (80% test) |
| DP-3 Special | DP 00 03 | Open perils — covered unless excluded | Broad named perils (DP-2 list) | Replacement Cost (80% test) |
DP-3 is the closest dwelling parallel to the HO-3: the building is open-perils, but the contents remain on the broad named-perils list. A common trap asks how Coverage C is written on the DP-3 — the answer is broad named perils, NOT open perils.
Think of the series as a coverage staircase. The DP-1 is the floor: cheapest premium, fewest perils, depreciated (ACV) payouts. The DP-2 climbs to broad named perils with replacement-cost settlement. The DP-3 reaches the top with open perils on the structure. Premium rises at each step because the insurer takes on more uncertainty, and the burden of proof shifts: on named-perils forms the insured must prove a listed peril caused the loss, while on the open-perils DP-3 the insurer must prove an exclusion applies to deny.
Peril Layering: Basic, Extended Coverage, V&MM
Understand how perils stack:
- Basic perils on a bare DP-1 are only fire, lightning, and internal explosion.
- Extended Coverage (EC) adds the classic windstorm/hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, and volcanic eruption group. EC is optional on DP-1 and built into DP-2/DP-3.
- Vandalism & Malicious Mischief (V&MM) is a separate optional add-on on DP-1 (built into DP-2/DP-3). V&MM is suspended if the dwelling has been vacant beyond 60 consecutive days before the loss — a frequently tested vacancy trap.
- Theft is never on DP-1's base form; it is an endorsement on DP-1 and built into DP-2/DP-3, with reduced limits for off-premises theft.
The practical takeaway is that the same physical loss can be covered or excluded depending on the form and the add-ons purchased. A wind-blown tree that crushes a roof is paid on a DP-2 or DP-3 (wind is included) but only on a DP-1 if Extended Coverage was added. Vandalism to a vacant rental is paid only if V&MM is in force and the unit has not been vacant beyond 60 consecutive days. Exam writers build entire questions around these layering and vacancy gaps, so map each scenario to the specific form and endorsement before choosing an answer.
A landlord wants coverage for ANY cause of loss to a rental building unless the cause is specifically excluded. Which form delivers that?
On a DP-2 Broad Form, the dwelling (Coverage A) is settled on what basis when the insured carries at least 80% of replacement cost?
What the Dwelling Program Covers — and Who Buys It
The ISO Dwelling Policy (DP) program insures 1-4 family residences and is the go-to form when the homeowners program does not fit: rental (non-owner-occupied) dwellings, seasonal or secondary homes, dwellings under renovation, or tenants who need only contents and liability is bought separately. Unlike the homeowners program, the DP contains no automatic liability — liability and medical payments are added by endorsement. This is the single most-tested distinction between the DP and HO programs.
| Need | DP fits because |
|---|---|
| Landlord renting a house | No owner-occupancy requirement; Coverage C optional |
| Seasonal cabin | HO eligibility often excludes it |
| Older/low-value home | DP-1 can be written at ACV |
| Dwelling in poor condition | HO underwriting may decline it |
Peril Layering and the Coverage A/B/C/D/E Map
The three forms stack perils. DP-1 (Basic) insures fire, lightning, and internal explosion, with Extended Coverage (EC) — windstorm, hail, explosion, riot, aircraft, vehicles, smoke, volcanic eruption — and V&MM (vandalism) available for extra premium. DP-2 (Broad) is named-peril with a longer list (adding falling objects, weight of ice/snow, accidental water discharge, freezing, and certain collapse) and settles the dwelling at replacement cost. DP-3 (Special) insures the dwelling and other structures on an open-peril basis (covered unless excluded), while contents remain named-peril.
| Coverage | Dwelling program label |
|---|---|
| A | Dwelling |
| B | Other Structures |
| C | Personal Property (optional, often ACV) |
| D | Fair Rental Value |
| E | Additional Living Expense |
Trap: DP-1 typically settles even the dwelling at ACV, while DP-2 and DP-3 offer replacement cost on the structure. Loss of use under DP-1 is limited and may be a percentage of Coverage A; DP-2/DP-3 broaden it.