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

The Dwelling Policy Program

The ISO Dwelling Property program is a separate line of personal property insurance distinct from the Homeowners (HO) program. The exam most often tests the current ISO DP 00 01, DP 00 02, and DP 00 03 (07 14 edition) forms. A Dwelling Policy is used when a property cannot qualify for, or does not need, a Homeowners policy: rental dwellings (1-4 family), seasonal homes, dwellings under construction, older homes valued below market, and risks where the insured wants property-only coverage without a package.

Unlike the Homeowners program, the Dwelling program does not automatically include personal liability or medical payments. Those must be added by endorsement. This is the single most-tested distinction between DP and HO.

The Three Dwelling Forms

The program has three core forms, escalating from named-peril basic coverage to broad open-peril dwelling coverage. Memorize which perils attach to each form and the valuation basis.

Key trap: On the DP-3 Special form, the dwelling and other structures are covered on an open-peril (all-risk) basis, but personal property is covered only on a named-peril (Broad form) basis. Candidates frequently miss that personal property is NOT open-peril even on the DP-3.

Basic Form (DP-1) Perils and Extended Coverage

The unendorsed DP-1 covers only Fire, Lightning, and Internal Explosion. To add the standard Extended Coverage (EC) perils, the insured selects the option: Windstorm or Hail, Explosion, Riot or Civil Commotion, Aircraft, Vehicles, Smoke, and Volcanic Eruption (remember WHARVES + ER). Vandalism or Malicious Mischief (V&MM) is a separate option requiring the dwelling not be vacant beyond 60 consecutive days.

DP-1 settles dwelling losses on an Actual Cash Value (ACV) basis (replacement cost minus depreciation), which is why it is favored for older or low-value rental homes where replacement cost would exceed market value.

Broad Form (DP-2) and Special Form (DP-3)

The DP-2 Broad Form adds perils such as: weight of ice/snow/sleet, accidental discharge of water/steam, freezing of plumbing, falling objects, collapse, and sudden tearing/cracking of heating/AC systems. It provides replacement cost on the dwelling (subject to the 80% coinsurance/insurance-to-value requirement) plus broader Additional Coverages.

The DP-3 Special Form is the most comprehensive: open-peril coverage on Coverage A (Dwelling) and Coverage B (Other Structures). On open-peril forms, the burden of proof shifts to the insurer to prove an exclusion applies; on named-peril forms, the insured must prove the loss was caused by a listed peril.

Choosing the Right Form and Edition Notes

Producers select the form by matching the risk to coverage breadth and price. A landlord with several older rental houses often chooses DP-1 because ACV settlement keeps the premium low and avoids over-insuring a structure whose replacement cost far exceeds its market value. An owner of a well-maintained rental who wants replacement cost moves up to DP-2, while an owner who wants the broadest protection on the building chooses DP-3.

The 07 14 edition is the current ISO dwelling edition tested on most state exams. Earlier editions used slightly different Additional Coverage limits, so always answer using current-edition figures unless a question specifies otherwise.

Remember three recurring exam contrasts between the forms. First, only DP-1 settles the dwelling at ACV by default; DP-2 and DP-3 use replacement cost when the 80% condition is met. Second, the DP-3 is the only open-peril dwelling form. Third, none of the three forms cover theft or personal liability without an endorsement, regardless of how broad the property perils are. A candidate who anchors on these three contrasts can answer most form-comparison questions correctly.

Eligibility and Underwriting Considerations

The Dwelling program is built for one-to-four family residential structures. Owner-occupied homes used as a primary residence are usually better served by a Homeowners policy, so the DP program shines for non-owner-occupied and specialty risks. Underwriters look at occupancy, construction class, protection class (distance to fire department and hydrant), age, and prior loss history. A dwelling can be insured even if the named insured does not live there, which is the core reason landlords rely on the DP forms.

The program also permits limited incidental business occupancies in the dwelling, such as a home office or a small studio, provided the structure remains primarily residential. Up to a small number of roomers or boarders is typically acceptable. Beyond those thresholds, the risk migrates to a commercial form.

A recurring exam point is that the DP forms can cover the structure of a condominium or mobile home only in limited ways; true condo-unit-owner exposures use the HO-6 form, and qualifying mobile homes use the Mobile Home Endorsement covered later in this unit. Knowing where the DP program stops and the HO program begins is essential for eligibility questions. As a rule of thumb, if the structure is residential, one-to-four family, and the insured wants property coverage without the automatic liability of a Homeowners package, the Dwelling program is the correct answer on the exam.