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

The Dwelling Policy Program

The ISO Dwelling Property program insures residential structures that do not qualify for, or whose owners do not want, a Homeowners policy. Typical insureds include rental dwellings (landlord exposures), seasonal or secondary homes, dwellings under construction, and homes that fail Homeowners eligibility because they exceed four families or hold excess vacancy. The current editions in most states are the DP 00 01 (Basic), DP 00 02 (Broad), and DP 00 03 (Special), commonly written on the 07 88 series with later state amendatory pages.

Unlike a Homeowners policy, the Dwelling program has no liability and no medical payments built in. Those must be added by endorsement. The Dwelling program also does not automatically include theft coverage on DP-1 or DP-2 form text the way HO forms do.

How the Three Forms Differ

The three forms differ in (a) which perils they insure and (b) how the loss is valued. The table below summarizes the core distinctions exam writers test.

Trap: Even on the DP-3, personal property is covered on a named-perils basis and valued at ACV, not replacement cost. The open-perils treatment applies only to Coverage A and Coverage B (structures).

DP-1 Basic Form Specifics

The DP-1 in its base form covers only fire, lightning, and internal explosion. The standard Extended Coverage (EC) perils — windstorm, hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, volcanic eruption — are added for an additional premium, and Vandalism and Malicious Mischief (V&MM) is a further optional add-on. A unique DP-1 wrinkle: the loss settlement on the dwelling is ACV, and several states require V&MM be excluded after 60 days of vacancy.

Another DP-1 quirk tested heavily: the fire-department service charge under DP-1 may apply differently, and the form's narrow peril list means a wind-driven rain or burst-pipe loss is not covered unless broadened by EC or moving to DP-2/DP-3.

DP-2 and DP-3 Broadenings

The DP-2 Broad Form adds perils such as burst pipes (accidental discharge of water/steam), freezing of plumbing, falling objects, weight of ice/snow/sleet, collapse (limited), and electrical surge damage to appliances. It uses replacement cost on the building subject to the 80% coinsurance requirement.

The DP-3 Special Form flips the analysis on structures: it covers all direct physical loss except those specifically excluded (earth movement, flood, war, nuclear, wear and tear, ordinance or law, neglect, intentional loss, etc.). Because the burden shifts to the insurer to prove an exclusion applies, DP-3 is the broadest and most commonly sold of the three. It is the dwelling-program analog of HO-3 logic.

Comparing DP-1, DP-2, and DP-3

The Dwelling Property program insures residential buildings that do not qualify for a homeowners policy - rental dwellings, tenant-occupied homes, secondary/seasonal dwellings, and homes that fail HO underwriting. The three ISO forms differ in breadth of perils and valuation:

The DP forms provide Coverage A (Dwelling), B (Other Structures), C (Personal Property), D (Fair Rental Value), and E (Additional Living Expense), though DP-1 limits or omits some.

Exam trap: DP-1 pays ACV; DP-2 and DP-3 pay replacement cost. DP-1's Extended Coverage (EC) perils - the "WCSHAVVER"-style list including windstorm, civil commotion, smoke, hail, aircraft, vehicles, volcanic eruption, explosion, and riot - must be added; they are not automatic on the basic form. There is no automatic liability in a dwelling policy; it must be added by endorsement, unlike a homeowners policy.

Choosing the Right Dwelling Form

Producers match the form to the occupancy and the insured's budget. A rented single-family house carries a DP-3 in the landlord's name (Coverages A, B, D; minimal C), while the tenant buys an HO-4 for contents. A low-value or hard-to-place rural home may be written DP-1 for affordability, accepting ACV settlement and the narrow basic perils.

Exam tip: When a fact pattern describes a non-owner-occupied or rental residence, the homeowners program is ineligible - reach for the dwelling (DP) program. A landlord wants Fair Rental Value (Coverage D) to replace lost rent while the dwelling is repaired; this is one of the most valuable dwelling coverages for investors and a common exam answer. Because the DP forms carry no automatic liability, the landlord must add the Personal Liability Supplement to insure slip-and-fall and premises claims by tenants and guests.