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

Quick Answer: The ISO Dwelling Property program uses three forms: DP-1 Basic (DP 00 01), DP-2 Broad (DP 00 02), and DP-3 Special (DP 00 03). They insure residential dwellings that do NOT qualify for a Homeowners policy — rental houses, seasonal/secondary homes, dwellings under renovation, and 1-to-4-family structures. DP-1 is named-peril and pays Actual Cash Value; DP-2 is broad named-peril at Replacement Cost; DP-3 insures the dwelling on an open-peril (special) basis at Replacement Cost.

Why a Dwelling Policy Instead of Homeowners

The Homeowners (HO) program assumes the insured occupies the home and wants a bundled package including liability and theft. When those assumptions fail, the Dwelling Property program steps in. Tested eligibility situations include:

• Non-owner-occupied rentals (a landlord insuring a house rented to tenants)
• Seasonal or secondary residences occupied only part of the year
• Dwellings under construction or renovation
• Older homes that cannot meet HO replacement-cost requirements
• Buildings with incidental occupancies or up to four families/units

Unlike Homeowners, a Dwelling policy is modular: it covers property only by default, and liability, theft, and other coverages are bolted on by endorsement.

The Three Forms at a Glance

The single most-tested chart in this chapter is how peril basis and valuation change across the three forms:

Memory anchor: as you move DP-1 → DP-2 → DP-3, both the peril breadth and the valuation generosity increase. DP-3 is the closest Dwelling analog to the HO-3 Homeowners form.

Named-Peril vs. Open-Peril (the core distinction)

• Named-peril (DP-1, DP-2): the policy lists the covered perils. If the cause of loss is not on the list, there is no coverage, and the burden of proof is on the INSURED to show the loss came from a listed peril.
• Open-peril / special (DP-3 dwelling and other structures): all direct physical losses are covered except those specifically excluded. The burden of proof shifts to the INSURER to prove an exclusion applies.

DP-1 Basic Form — What Is Automatic vs. Optional

DP-1 is the bare-bones form, and the exam loves to test exactly which perils are included from day one versus which must be added:

• Automatically covered: Fire, Lightning, and Internal Explosion only.
• Extended Coverage (EC) — optional add-on: Windstorm or hail, Explosion (external), Riot or civil commotion, Aircraft, Vehicles, Smoke, and Volcanic eruption — the classic WCSHARVES/EC group.
• Vandalism & Malicious Mischief (V&MM): a separate optional add-on, generally requiring the dwelling NOT be vacant beyond 60 consecutive days.

DP-1 settles dwelling losses at Actual Cash Value (ACV) — replacement cost minus depreciation. Many DP-1 forms apply a proportional/limited replacement-cost clause for the EC perils but the default exam answer for DP-1 is ACV.

DP-2 and DP-3 Peril Breadth

DP-2 Broad adds the EC and V&MM perils automatically plus broad perils: falling objects; weight of ice, snow, or sleet; accidental discharge or overflow of water/steam; sudden/accidental tearing or bulging of a heating/AC system; freezing; and sudden accidental damage from artificially generated electrical current.

DP-3 Special flips the logic: the dwelling (Coverage A) and other structures (Coverage B) are insured against all risks of direct physical loss except excluded causes. Coverage C (personal property), however, remains named-peril (the broad list) even on DP-3 — a frequently missed nuance.

Editions, Form Numbers, and the State Modifier

Expect the exam to use ISO form numbers as answer choices. Lock these in: DP 00 01 = Basic, DP 00 02 = Broad, DP 00 03 = Special. A state Special Provisions endorsement is attached to conform the national form to local law, but it does not change the underlying form letter.

How the Forms Compare to Homeowners

Candidates who already studied the HO program should map the Dwelling forms onto their HO cousins, but with two permanent differences:

• No theft and no liability are built into ANY DP form (HO bundles both).
• A DP policy can insure a non-owner-occupied risk, which the HO program generally cannot.

Choosing the Right Form (underwriting logic)

A producer selects the form by matching the client's risk and budget. A budget landlord of an older rental may accept DP-1 for fire/EC only. A client wanting replacement cost but comfortable with a peril list chooses DP-2. A client wanting the broadest protection — open-peril on the structure plus replacement cost — chooses DP-3. Because DP-3's open-peril basis shifts the burden of proving an exclusion onto the insurer, it is the strongest position for the insured and the most common recommendation when affordable.