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

What the Dwelling Program Covers

The ISO Dwelling Property program insures residential property that does not qualify for, or does not need, a Homeowners policy. Typical accounts include rental (non-owner-occupied) dwellings, seasonal homes, dwellings under renovation, and homes that fail Homeowners eligibility. An eligible dwelling is a one-to-four family structure with no more than five roomers or boarders per family. Incidental occupancies — a permitted home office or studio — do not by themselves disqualify the risk.

The dwelling program also accepts risks a Homeowners policy will not: a tenant-occupied (landlord) home, a home where the owner wants only property coverage, a dwelling whose owner cannot meet HO replacement-cost or protection-class standards, and mobile homes (via endorsement). Knowing why a client lands in the DP program rather than an HO program is a recurring exam theme.

The program is modular: you select a form (DP-1, DP-2, or DP-3) that determines the perils and loss settlement, then add Coverages and endorsements. No DP form ever includes liability — that must be endorsed on separately.

The Three Forms at a Glance

Coverage breadth and premium rise across the series. Memorize this table cold; nearly every dwelling question turns on one row of it.

DP-1: Basic Form

The DP-1 is the narrowest and cheapest form. In its core state it insures only fire, lightning, and internal explosion. The familiar perils most clients expect are added by attaching the Extended Coverage (EC) group and Vandalism & Malicious Mischief (V&MM).

• EC perils: windstorm/hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, and volcanic eruption
• V&MM must be added as a separate option

Three DP-1 facts dominate the exam:

• Pays on Actual Cash Value (ACV) = replacement cost minus depreciation
• No theft coverage, even after adding EC and V&MM
• Windstorm covers exterior damage; interior damage is covered only if wind first creates an opening in roof or wall

Exam trap: "DP-1 = no theft" and "DP-1 = ACV" are the two single most-tested facts about the Basic Form. Theft is never available on DP-1.

DP-2: Broad Form

The DP-2 is an expanded named-perils form. It includes the DP-1/EC perils PLUS broad perils such as falling objects; weight of ice, snow, or sleet; accidental discharge or overflow of water or steam; sudden/accidental tearing apart of a heating or AC system; freezing; and damage from artificially generated electrical current. Theft becomes available, and the dwelling is settled at Replacement Cost (subject to the 80% coinsurance condition).

DP-3: Special Form

The DP-3 is the broadest dwelling form and the one most often sold to landlords. The dwelling and other structures are written on an open-perils ("all-risk") basis — every cause of loss is covered unless specifically excluded. Personal property (Coverage C) remains on broad named perils, not open perils. This split — open on the building, named on contents — is the exact parallel to the HO-3 Homeowners form and is heavily tested.

Reading the ISO Edition Date

Each form number ends with an edition date (for example, DP 00 03 09 02 is the September 2002 edition of the Special Form). The first six digits identify the form (line 00, form 01/02/03); the last four are the month and year of the edition. On the exam you are not asked to memorize edition dates, but you must recognize that DP 00 01 / 02 / 03 map to Basic / Broad / Special respectively. Mixing those numbers is a common distractor.

Burden of Proof: Named vs. Open Perils

The named-perils vs. open-perils distinction changes who must prove what at claim time:

• Named perils (DP-1, DP-2, all DP contents): the insured must prove the loss was caused by a listed peril.
• Open perils (DP-3 building): coverage is presumed; the insurer must prove an exclusion applies to deny.

This shift in burden is exactly why DP-3 commands a higher premium and why agents recommend it for valuable dwellings. A loss with an unknown cause is far more likely to be paid under DP-3 than under DP-1 or DP-2.

Choosing the Right Form

Match the form to the client's need and budget. A bare-bones rental in a soft market may take DP-1 for price; a mid-tier landlord who wants theft and broad water perils chooses DP-2; an owner of a higher-value rental who wants the widest protection and ACV-free building settlement chooses DP-3. Remember that loss settlement and perils move together up the series — you cannot, for instance, buy DP-1 pricing with DP-3 open-perils breadth.

Dwelling vs. Homeowners and What the DP Program Omits

The Dwelling Property program is not a homeowners policy and the exam tests the differences directly. The DP program is used for risks that do not qualify for homeowners coverage — non-owner-occupied rentals, secondary/seasonal dwellings, dwellings with up to four families, and homes that fail homeowners underwriting.

Because the base DP form has no liability and no theft, an investor renting a house typically adds a liability endorsement and, on DP-2/DP-3, a theft endorsement. The three forms parallel the causes-of-loss structure: DP-1 = basic named perils + ACV; DP-2 = broad named perils + replacement cost; DP-3 = open peril on the dwelling + replacement cost.

Exam tip: the most common DP trap is assuming liability or theft is automatic — neither is included in the unendorsed dwelling form.