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

The ISO Dwelling Program

The Dwelling Policy is a property-only contract that ISO publishes for one-to-four-family residences not eligible for, or not chosen for, the Homeowners program. Unlike a Homeowners policy, no Dwelling form includes built-in personal liability or medical payments — those are added by endorsement (the Personal Liability Supplement). Dwellings rented to others, secondary homes, and structures that fail Homeowners underwriting (older wiring, vacancy, course-of-construction) commonly land here.

There are three forms. Coverage breadth and premium both rise across the series, and the exam loves the perils-versus-settlement distinctions among them.

The Three Forms at a Glance

Memory hook: basic = ACV named, broad = RC named, special = RC open on the building but still named on contents. A frequent trap is assuming the DP-3 gives open-perils on personal property — it does not; Coverage C stays on the broad named-perils list even under the Special Form.

DP-1 Basic Form (DP 00 01)

The narrowest, cheapest form. In its core state it covers only fire, lightning, and internal explosion. The rest of the standard perils are added by attaching:

• Extended Coverage (EC): windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, and volcanic eruption
• Vandalism & Malicious Mischief (V&MM): added separately; suspended after the dwelling is vacant more than 60 consecutive days

Critical DP-1 facts the exam tests:

• Settles dwelling losses on Actual Cash Value (ACV) = replacement cost minus depreciation
• Provides no theft coverage, even with EC and V&MM attached
• Windstorm/hail excludes interior water damage unless the wind first creates an opening in the roof or wall

DP-2 Broad Form (DP 00 02)

A broad named-perils form covering everything in EC plus additional broad perils: falling objects; weight of ice, snow, or sleet; accidental discharge of water or steam; freezing of plumbing; sudden tearing/cracking of a heating or AC system; and damage from artificially generated electrical current. Theft is added at this tier, and the dwelling settles on Replacement Cost rather than ACV. Three Coverage C-related additional coverages (debris removal expansion, etc.) appear here.

DP-3 Special Form (DP 00 03)

The broadest and most common. Coverage A (Dwelling) and Coverage B (Other Structures) are written on an open-perils / special basis — covered unless excluded — while Coverage C (Personal Property) remains on the DP-2 broad named-perils list. The burden of proof shifts: under open perils the insurer must prove an exclusion applies; under named perils the insured must prove a listed peril caused the loss.

Eligibility and Why a DP Instead of a Homeowners

The Dwelling program exists for risks the Homeowners program will not or should not write. Typical candidates include:

• Non-owner-occupied (rental) dwellings — the landlord has little personal property on site and needs rental-income protection more than a full HO contents form
• Seasonal or secondary homes left unoccupied for long stretches
• Older or substandard dwellings with knob-and-tube wiring, an aging roof, or prior losses
• Lower-value or rural dwellings where a full HO form is uneconomical
• Incidental occupancies such as a small home office or studio

Because the DP forms strip out the automatic liability, theft, and broad contents coverage of a Homeowners policy, they let the producer assemble exactly the perils and limits a particular risk needs while keeping the premium proportional.

Named Perils vs. Open Perils — the Tested Mechanic

The single most tested concept across the dwelling forms is how perils are written, because it controls who must prove what at claim time.

• Named (specified) perils — DP-1 and DP-2, plus Coverage C on every form. The policy lists each covered cause of loss; if the cause is not on the list there is no coverage, and the insured carries the burden to show a listed peril caused the damage.
• Open (special / all-risk) perils — DP-3 Coverage A and B only. Every direct physical loss is covered unless specifically excluded, so the insurer carries the burden to invoke an exclusion.

This is why moving from DP-2 to DP-3 is valuable even though both settle the dwelling on replacement cost: the DP-3 covers unusual or hard-to-categorize losses a named list would simply omit.

Common Form-Selection Pitfalls

Producers and exam-takers stumble on the same handful of points:

• Adding perils never changes the settlement basis. A DP-1 with Extended Coverage and V&MM is still an ACV form — perils and loss settlement are separate decisions.
• Open perils is not 'everything.' The DP-3 still excludes flood, earth movement, ordinance or law, wear and tear, and intentional acts; open perils only removes the named-list requirement, not the exclusions.
• Contents lag the building. Because Coverage C stays named-perils on every form, an insured with a DP-3 can have a fully covered roof but an uncovered contents loss if the cause is not on the broad list.
• No liability anywhere. None of the three forms gives Coverage L or M; a landlord who skips the Personal Liability Supplement has zero protection for a tenant's slip-and-fall.