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

Why the Dwelling Program Exists

The ISO Dwelling Property (DP) Program insures one- to four-family residential buildings that do not qualify for a Homeowners (HO) policy. Use the DP program when the named insured does not occupy the dwelling (rental/landlord risk), when the property is seasonal or secondary, when the structure is older or lower-value (actual cash value risk), or when the applicant cannot meet HO eligibility for occupancy. Unlike a Homeowners policy, the basic DP forms contain no liability or medical payments coverage and no theft coverage built in — those are added by endorsement.

The current ISO edition in most states is the 2002 program (DP 00 01, DP 00 02, DP 00 03), frequently shown as edition DP 00 03 09 14 on dec pages. Examiners expect you to know the three forms by name, the perils each covers, and the valuation basis.

The Three Forms at a Glance

Memory trap: DP-1 is named-peril and pays ACV; DP-3 is open-peril on the dwelling but reverts to named perils for personal property. Many candidates wrongly say DP-3 is open-peril for everything — it is not. Open peril (sometimes called "all risk") means covered unless excluded; named peril means the loss is only covered if the peril is listed.

DP-1 Basic Form Details

DP-1 in its base state covers only Fire, Lightning, and Internal Explosion. The Extended Coverage (EC) perils — Windstorm or Hail, Explosion, Riot or Civil Commotion, Aircraft, Vehicles, Smoke, and Volcanic Eruption — are added for an additional premium, commonly remembered as WC SHAVVER or the classic "EC" group. Vandalism and Malicious Mischief (V&MM) is a separate, third optional layer requiring the dwelling not be vacant beyond 60 days.

DP-1 settles building losses on ACV (replacement cost minus depreciation) and does not include the replacement-cost loss settlement of DP-2/DP-3. DP-1 also limits or excludes certain Other Coverages (e.g., no Collapse, narrower Debris Removal).

DP-2 Broad Form and DP-3 Special Form

DP-2 is a named-peril form on both building and contents but with a longer peril list that adds, beyond EC, perils such as Burglary damage, Falling Objects, Weight of Ice/Snow/Sleet, Accidental Discharge of Water or Steam, Freezing of plumbing, and Sudden & Accidental Tearing/Cracking/Bulging of a heating or water system. DP-2 includes Collapse as an Other Coverage and settles on Replacement Cost when the 80% coinsurance condition is met.

DP-3 is the most popular landlord form. The building (Coverage A and B) is written open-peril — covered for direct physical loss unless excluded (excludes flood, earth movement, war, wear and tear, ordinance or law, etc.). Personal property (Coverage C) remains named-peril, using the DP-2 broad peril list. DP-3 building losses settle on Replacement Cost subject to the 80% coinsurance condition.

Eligibility and Program Mechanics

The DP program accepts dwellings of no more than four families with no more than five roomers or boarders per family. A dwelling under construction, a seasonal or secondary home, a tenant-occupied (rental) house, and an owner-occupied home that fails HO underwriting all fit the DP program. Farm dwellings, mobile homes (insured separately, see Section 3.4), and commercial occupancies do not belong here.

Because the basic forms carry no liability, an agent almost always pairs a DP form with a Personal Liability Supplement for owner-occupants or a separate liability policy for investors. Build the habit of asking three questions for every dwelling risk: who occupies it, what perils apply, and how should a loss be valued — those answers select the form (DP-1/2/3) and the endorsements. Selecting DP-1 to save premium on an older rental, then writing it to value at ACV, is a common, defensible underwriting choice the exam expects you to recognize.

DP-1, DP-2, DP-3 — How the Forms Differ in One Table

The single most tested dwelling concept is the progression from named-peril to open-peril as you move up the forms. Lock in this comparison:

Note the asymmetry on DP-3: the building is open-peril but personal property remains named-peril — a favorite trap. Only the contents form (or a homeowners HO-5) makes personal property open-peril.

The Standard Fire Policy Roots

The dwelling program descends from the 165-line Standard Fire Policy (SFP), the historic baseline many states still require as minimum statutory wording. The SFP introduced the pro-rata liability, mortgagee, appraisal, and vacancy clauses now embedded in modern forms. The exam may reference the SFP as the source of the 60-day vacancy suspension of certain perils and of the standard mortgage clause.

Eligibility Boundaries

The DP program covers 1–4 family dwellings, including those with limited business or rental occupancy, seasonal homes, and dwellings ineligible for homeowners (older, lower-value, or tenant-occupied rentals). A dwelling under construction or held for rental investment fits the DP program well because the owner may not need the broad personal-liability and theft package built into homeowners. Theft and liability are not automatic in the dwelling program — they are added by endorsement, unlike homeowners where they are bundled.

When a stem describes a landlord insuring a rented house with no need for the tenant's contents, the DP program is the answer.