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

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

The ISO Dwelling Property program insures the structure and personal property of residential risks that do not qualify for, or do not want, a Homeowners policy. Typical insureds are landlords renting to others, owners of secondary or seasonal dwellings, mobile homes, and risks with up to four families. Unlike a Homeowners form, a Dwelling policy contains no liability and no medical payments in the base form — those are added by endorsement. The current edition is the DP 00 01/02/03 (12 11) series.

The three forms at a glance

The forms differ by scope of perils and valuation basis. Memorize the perils ladder — it is the single most tested Dwelling concept.

DP-1 Basic Form

DP-1 in its unendorsed state covers only fire, lightning, and internal explosion. The agent adds Extended Coverage (EC) — windstorm/hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, and volcanic eruption — and Vandalism & Malicious Mischief (V&MM) for separate premium. A frequent trap: under EC, smoke caused by agricultural smudging or industrial operations is excluded, and windstorm to the interior is covered only if wind first creates an opening. DP-1 settles dwelling losses on an Actual Cash Value basis (replacement cost minus depreciation).

DP-2 Broad Form

DP-2 expands to a longer named-perils list that adds (over EC) burglar damage, falling objects, weight of ice/snow/sleet, accidental discharge of water or steam, freezing, sudden tearing/cracking of a heating system, and damage from artificially generated electrical current. DP-2 pays the dwelling on a replacement cost basis subject to the 80% coinsurance condition.

DP-3 Special Form

DP-3 is the broadest and most common form. It insures the dwelling and other structures on an open-peril ("special") basis — all direct physical loss is covered unless specifically excluded — while personal property remains on the DP-2 named-perils list. Open-peril coverage shifts the burden of proof: the insurer must show an exclusion applies, rather than the insured proving the cause is a listed peril. Standard exclusions include flood, earth movement, war, nuclear hazard, ordinance or law, neglect, wear and tear, and intentional loss.

Exam memory hook: "1-Basic-ACV, 2-Broad-RC, 3-Special-Open-peril." Only DP-3 gives open-peril, and even then only on the building, never on contents.

Who buys a Dwelling policy?

The Dwelling program exists because the Homeowners (HO) program imposes occupancy and eligibility limits. A Homeowners policy generally requires the named insured to be an owner-occupant of a one-to-four-family dwelling. Risks that fall outside that box land in the Dwelling program:

• Landlords/rental dwellings — owner does not live there; tenants occupy the unit.
• Seasonal or secondary homes — vacation cabins, lake houses, occupied only part of the year.
• Older or sub-standard dwellings — risks that cannot meet HO underwriting (older wiring, deferred maintenance).
• Mobile/manufactured homes — insured by endorsement to the DP form.
• Tenants/renters who only need contents on a named-peril basis can use a DP with Coverage C, though renters more commonly buy an HO-4.

The Extended Coverage (EC) and V&MM build-up

Because the unendorsed DP-1 is so narrow (fire, lightning, internal explosion), nearly every real DP-1 in the field adds Extended Coverage and V&MM to reach a workable named-peril base. Memorize the EC perils with the mnemonic "WC SHAVERR" loosely — Windstorm/hail, Civil commotion/Riot, Smoke, Hail, Aircraft, Vehicles, Explosion, Riot, volcanic eRuption. The key carve-outs to remember: smoke from agricultural or industrial operations is excluded; vehicle damage caused by the insured (or a resident) to the dwelling is excluded; and windstorm interior damage requires a wind-created opening first.

Internal vs external explosion

A subtle DP-1 distinction: the bare form covers internal explosion (e.g., a furnace or boiler bursting inside the dwelling) as part of the basic three perils, while external explosion is brought in only through the EC "explosion" peril. Steam-boiler explosion is excluded under the property form entirely and belongs in equipment breakdown (boiler & machinery) coverage.

Eligibility limits and editions

The DP forms accept dwellings of up to four families and permit a limited amount of incidental business or office occupancy. A risk with five or more families, or substantial commercial use, moves to a commercial property form (such as the Building and Personal Property Coverage Form) instead. Always confirm you are testing on the current ISO edition — the DP 00 01/02/03 (12 11) series — because older editions phrased the perils and the windstorm interior trigger differently, and exam writers expect the current wording.

Open peril is not 'all loss'

Students over-read DP-3's open-peril promise. Open peril means all causes of loss are covered unless excluded, but the exclusion list is long and consequential: ordinance or law, earth movement, water damage (flood, surface water, sewer backup absent endorsement), power failure, neglect, war, nuclear hazard, and intentional loss.

There are also internal limitations — for example, loss to a system from freezing is excluded when the dwelling is vacant or unoccupied unless the insured maintained heat or shut off and drained the system. Knowing that open peril still has teeth is exactly what separates a passing answer from a tempting wrong one.