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

The Dwelling Property Program

The ISO Dwelling Property program insures one- to four-family residences and is the workhorse for risks that cannot qualify for a Homeowners (HO) policy: rental dwellings (the landlord owns, a tenant occupies), seasonal homes, dwellings in poor condition, mobile homes, and owner-occupants who want narrower, cheaper coverage. The current edition exam writers test is the DP 00 01 (DP-1 Basic Form), DP 00 02 (DP-2 Broad Form), and DP 00 03 (DP-3 Special Form), ISO edition 07 02 in most states. Remember the distinction: Dwelling forms do not automatically include liability or theft, while Homeowners forms do.

DP-1 Basic Form

DP-1 is a named-peril form covering, at minimum, fire, lightning, and internal explosion. The Extended Coverage (EC) group can be added for an extra premium: windstorm/hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, and volcanic eruption (remember the mnemonic WC SHAVERR is for HO; for DP-1 EC think the EC perils). Vandalism and malicious mischief (V&MM) is a separate optional add-on. The exam trap: DP-1 settles most losses on actual cash value (ACV), not replacement cost, because there is no coinsurance-based RC clause in the Basic Form.

DP-2 Broad Form and DP-3 Special Form

DP-2 (Broad Form) is named-peril but broader — it adds perils such as weight of ice/snow/sleet, accidental discharge of water/steam, freezing, falling objects, sudden tearing/cracking of a heating system, and damage from artificially generated electrical current. DP-2 includes replacement cost on the dwelling when the 80% coinsurance condition is met.

DP-3 (Special Form) is the broadest: open-peril ("all-risk") on Coverage A (Dwelling) and Coverage B (Other Structures), but named-peril (DP-2 list) on Coverage C (Personal Property). DP-3 is the most commonly sold dwelling form for owner-occupied risks.

Neither DP-2 nor DP-3 automatically covers theft or liability — both must be endorsed. The broad-form water peril is sudden and accidental discharge; gradual seepage and flood are still excluded. Knowing the exact DP-2 peril list (it carries into DP-3 Coverage C) is worth memorizing: fire, lightning, windstorm, hail, explosion, riot, aircraft, vehicles, smoke, vandalism, theft (when endorsed), volcanic eruption, falling objects, weight of ice/snow/sleet, accidental water discharge, freezing, electrical current, and sudden tearing/bulging of a heating or AC system.

Comparison Table

Trap: On DP-3, Coverage C reverts to named peril even though A and B are open peril. Memorize that asymmetry — it is one of the most frequently tested points on the national dwelling questions.

Named-Peril vs. Open-Peril Burden of Proof

The practical difference between the forms is who must prove what. Under a named-peril form (DP-1, DP-2, and DP-3 Coverage C), the insured must prove the loss was caused by a peril listed in the policy. Under an open-peril form (DP-3 Coverages A and B), coverage applies to any direct physical loss except those specifically excluded — so the insurer must prove an exclusion applies to deny the claim. This shift in burden is why DP-3 commands a higher premium and why exam questions about "which party must demonstrate the cause of loss" hinge on the form type.

Editions, Terminology, and the DP/HO Bridge

The exam may reference older editions (DP 00 01 07 88 vs 07 02); the structure tested is essentially stable. Note the vocabulary bridge to Homeowners: DP-1 ≈ the perils of an HO-8 modified form, DP-2 broad named peril parallels HO-2, and DP-3 open peril on the building parallels HO-3. The single biggest conceptual takeaway is that dwelling forms are property-only by default — liability, theft, and even basic Extended Coverage on DP-1 are options the producer must affirmatively add. A producer who assumes a dwelling policy "works like a homeowners" will mis-sell coverage, and the exam tests exactly that misconception.

Eligibility and Underwriting Notes

Dwelling forms accept risks a Homeowners policy will not. Common DP candidates include non-owner-occupied (rental) dwellings, dwellings under construction, seasonal homes, homes with prior losses or deferred maintenance, and incidental occupancies such as a home office or a small studio.

A structure may contain up to four families and have an incidental business occupancy (for example, one beautician or a single boarder), and the maximum boarders/roomers is typically two. If the risk exceeds these limits — five or more units, or a substantial commercial occupancy — it must be written on a commercial property form instead. Whether the insured is an owner-occupant or a landlord drives which coverages are purchased: a landlord usually buys A, B, D plus liability, while a tenant insures only Coverage C contents.

Extended Coverage (EC) and the V&MM History

The Dwelling program's peril structure is rooted in historical fire-policy practice that the exam still tests. The base DP-1 covers only fire, lightning, and internal explosion. Adding the Extended Coverage (EC) group brings in WC SHAVE perils — Windstorm/hail, Civil commotion/riot, Smoke, Hail (part of windstorm), Aircraft, Vehicles, and Explosion. Adding Vandalism & Malicious Mischief (V&MM) is a separate election on DP-1.

• Windstorm/hail on DP-1 excludes interior damage unless the wind first makes an opening in the building — a frequently tested limitation.
• Vehicle damage caused by a vehicle owned or driven by an insured is excluded.
• Smoke must be sudden and accidental; smoke from agricultural smudging or industrial operations is excluded.

On DP-2 and DP-3 these limitations are broadened, and DP-3 covers the dwelling on an open-peril basis, shifting the burden of proving an exclusion onto the insurer.