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

Why a Separate Dwelling Program Exists

The Dwelling Property program insures residential buildings that do not qualify for a Homeowners policy. Typical risks include rental houses, vacant dwellings, seasonal homes, dwellings under construction, and one-to-four family structures where the owner does not occupy the unit. Because these exposures differ from owner-occupied homes, the Insurance Services Office (ISO) publishes three standalone forms rather than the packaged Homeowners series.

The forms scale upward in breadth and premium. A candidate must be able to name each form, recall its ISO edition number, its covered perils, and its loss-settlement basis on sight.

The Three Forms at a Glance

Three facts travel together for each form: the edition number, the peril basis, and the settlement basis. Memorize them as a unit rather than separately.

DP-1: Basic Form

The DP-1 (DP 00 01) is the narrowest and cheapest form. In its core state it covers only fire, lightning, and internal explosion. The familiar additional perils are added by attaching two optional groups:

• Extended Coverage (EC) adds: windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, and volcanic eruption.
• Vandalism and Malicious Mischief (V and MM) is a separate optional add-on.

The two most-tested DP-1 facts:

• It settles losses at Actual Cash Value (ACV) = replacement cost minus depreciation.
• It provides no theft coverage, even after EC and V and MM are added.

Exam tip: When a question pairs "Basic Form" with theft or replacement cost, the correct answer almost always rejects both.

DP-2: Broad Form and DP-3: Special Form

The DP-2 (DP 00 02) is an expanded named-perils form. It includes the DP-1 and EC perils plus broad perils such as falling objects; weight of ice, snow, or sleet; accidental discharge or overflow of water or steam; sudden tearing apart or bulging of a heating or air-conditioning system; freezing; and damage from artificially generated electrical current. The DP-2 upgrades building settlement to replacement cost (subject to the 80 percent coinsurance condition) and makes theft available.

The DP-3 (DP 00 03) is the broadest form. The dwelling (Coverage A) and other structures (Coverage B) are written on an open-perils basis: every cause of loss is covered unless specifically excluded. Personal property (Coverage C) stays on broad named perils using the DP-2 list. The DP-3 is the closest dwelling parallel to the Homeowners HO-3.

Open Perils vs. Named Perils: Burden of Proof

The leap from DP-2 to DP-3 is more than a longer list; it shifts who must prove what in a claim.

• On a named-perils form (DP-1, DP-2), the insured must demonstrate the loss was caused by a listed peril. A loss from an unnamed cause is simply not covered.
• On an open-perils form (the DP-3 building), the insurer must prove the loss falls under an exclusion to deny it. Anything not excluded is covered.

That is why a landlord facing an unusual loss (a delivery truck striking a porch, accidental cosmetic damage) is far better protected on a DP-3.

DP-3 vs. HO-3

Eligibility and Occupancy

The Dwelling Property forms insure one-to-four family dwellings, including a dwelling occupied by the owner, rented to others, or held vacant. Up to a limited number of boarders or roomers and incidental occupancies (a small office or studio) are eligible. Mobile homes and farm dwellings have their own programs. Knowing the eligible occupancy matters because it drives which loss-of-use coverage (D versus E) applies and whether theft must be added by endorsement.

Forms vs. Endorsements

Do not confuse a form (DP-1, DP-2, DP-3, which sets the breadth of perils) with an endorsement (which modifies the chosen form). Theft on a DP-1, ordinance-or-law cost, and personal liability are all endorsements layered onto whichever base form is selected. When a question says coverage applies "by endorsement," it is signaling that the base form alone would not respond.

Memory Hooks

• DP-1 = one cheap form, zero theft, ACV.
• DP-2 = broad, adds theft and water and ice, replacement cost.
• DP-3 = open on the building, named on the contents.
• No DP form includes liability; it is always a separate add-on.

A Common Trap: EC Perils and Theft

Candidates frequently assume that adding Extended Coverage (EC) to a DP-1 brings theft along with windstorm and the other perils. It does not. EC adds the windstorm-hail group, smoke, aircraft, vehicles, riot, explosion, and volcanic eruption, but theft is never part of EC and must be added by its own theft endorsement. Pair this with the rule that the DP-1 always settles at ACV, and two of the program's most common distractor answers are eliminated at once.