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

Why the Dwelling Program Exists

The ISO Dwelling Property program (current edition DP 2002, with state-specific multistate revisions) insures one-to-four family residential property that does not qualify for a Homeowners policy. The exam expects you to know exactly who buys a DP instead of an HO form.

The Dwelling program is the right product when the Homeowners eligibility rules fail. Typical insureds: a landlord who rents the dwelling to tenants, the owner of a seasonal or secondary home, a property with low pride-of-ownership, or a structure that cannot meet HO minimum-value or owner-occupancy rules. A non-owner-occupied rental is the classic DP risk.

The Three Forms by Peril Trigger

The single most-tested distinction is how each form is triggered: named peril versus open peril (special form).

Memory hook: numbers climb with breadth. DP-1 is narrowest, DP-3 is broadest. Only DP-3 uses open-peril ("special") coverage on the structure, meaning all causes of loss are covered unless specifically excluded.

DP-1 Basic Form Detail

DP-1 covers a short list: fire, lightning, and internal explosion as the base. Extended Coverage (EC) is an option that adds the windstorm/hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, and volcanic eruption perils (the "WC SHAVVER"-type set), and Vandalism & Malicious Mischief (V&MM) can be added separately.

Trap: on DP-1, V&MM is not automatic even when EC is added; it is a distinct option, and coverage is typically suspended if the dwelling is vacant beyond 60 days. DP-1 also pays the dwelling on an actual cash value basis in most states rather than replacement cost.

DP-2 and DP-3 Detail

DP-2 Broad Form is still named peril but adds perils such as falling objects, weight of ice/snow/sleet, accidental discharge of water/steam, freezing of plumbing, and sudden tearing/cracking of a heating system, plus damage from artificially generated electrical current. DP-2 includes V&MM automatically and pays dwelling losses at replacement cost (subject to the 80% coinsurance condition).

DP-3 takes the structure to open peril — covered for any cause not excluded — while personal property (Coverage C, if written) stays on the DP-2 broad named-peril list. This split-trigger design is heavily tested.

Burden of Proof and Why the Trigger Matters

The peril trigger is not just academic — it shifts the burden of proof at claim time. Under a named-peril form (DP-1, DP-2, and the contents on DP-3), the insured must prove the loss was caused by a listed peril. Under an open-peril form (the DP-3 structure), the insurer must prove an exclusion applies to deny the claim.

That reversal is why DP-3 commands a higher premium and why exam questions about "who must prove what" almost always hinge on whether the coverage is named-peril or special. A loss from an unusual cause — say, a meteor or a falling crane — would likely be covered on DP-3 (not excluded) but denied on DP-1/DP-2 (not a named peril).

Eligibility and Edition Notes

The Dwelling program insures 1-to-4 family dwellings. A structure with up to five roomers or boarders can still qualify. Incidental occupancies (a permitted home office or studio) are allowed, but the dwelling cannot be primarily commercial. The current ISO edition is the DP 2002 series with multistate revisions; older guides reference the 1989 edition, so confirm the edition shown on the declarations.

Remember the product-selection logic the exam rewards: owner-occupied single family that meets value rules → Homeowners; rental, seasonal, vacant, or value-deficient → Dwelling. The form number (1/2/3) is then chosen by how much peril breadth and replacement-cost protection the insured is willing to pay for.

Reading a Dwelling Loss: Trigger Plus Valuation

The dwelling program's outcome on any claim depends on two switches: which peril trigger the form uses and which valuation basis applies.

Exam trap: DP-1 settles buildings at ACV, so depreciation is deducted; DP-2 and DP-3 settle at replacement cost if insured to value. A candidate who forgets that DP-1 is the ACV form will misprice every DP-1 loss question.

The Standard Fire Policy Roots

The dwelling program descends from the Standard Fire Policy (SFP) - the 165-line statutory fire form many states still reference. The SFP supplies the base perils of fire, lightning, and removal (property removed to protect it from fire is covered at another location for a limited time). Dwelling forms then add perils on top of that fire base.

Who Buys Dwelling vs. Homeowners

The dwelling program fits risks a homeowners policy will not: rental dwellings (landlord coverage), seasonal or secondary homes, dwellings of owners who do not qualify for HO eligibility, and homes needing only basic, lower-cost coverage. Unlike homeowners, the dwelling form does not automatically include liability - liability and theft must be added by endorsement, which is the single biggest structural difference the exam tests.