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

What the Dwelling Program Covers

The Dwelling Property (DP) program, published by the Insurance Services Office (ISO), insures one- to four-family residential buildings that do not qualify for the owner-occupied Homeowners (HO) program. Typical DP risks include rental houses, dwellings owned by someone other than the occupant, seasonal or secondary homes, and properties whose owners want a narrower, lower-cost contract. Older texts call these "dwelling fire" policies because the line grew out of the standard fire policy.

Unlike the HO program, no DP form includes built-in personal liability or medical payments. Those must be added by endorsement or written separately. This is the single most-tested distinction between the two programs.

The Three Forms at a Glance

ISO publishes three dwelling forms. Breadth of coverage and premium rise from DP-1 to DP-3. Memorize the perils-and-settlement pattern below — exam questions almost always hinge on which form pays replacement cost and which uses open perils.

Named Perils vs. Open Perils — the Burden of Proof

The peril structure determines who must prove the cause of loss:

• Named-perils forms (DP-1, DP-2): the insured must show the loss was caused by a peril listed in the policy. If the peril is not named, there is no coverage.
• Open-perils form (DP-3): all direct physical loss is covered except what the policy excludes, so the insurer must prove an exclusion applies to deny the claim.

Note the split inside the DP-3: the dwelling and other structures are open-perils, but Coverage C (personal property), when written, remains broad named-perils even on the DP-3. Candidates frequently miss this — the DP-3 is not "open perils on everything." The practical effect is that for a building claim the insurer must point to an exclusion to deny, but for a contents claim the insured must still match the loss to a listed peril.

Extended Coverage (EC) and V&MM Options

The DP-1 is intentionally bare. Two optional groups are added for a premium charge:

• Extended Coverage (EC): windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, and volcanic eruption. On the DP-1 these perils are NOT automatic — the producer must add them.
• Vandalism & Malicious Mischief (V&MM): can be added once EC is in place. V&MM is typically suspended after the dwelling is vacant beyond 60 consecutive days, a frequent trap on rental risks.

On DP-2 and DP-3, EC perils are already built into the broad/open coverage, so there is no separate EC option to buy.

Eligibility and Why a Risk Lands in the DP Program

The DP program exists because the HO program is reserved for owner-occupied one- to four-family dwellings. A risk is steered to a dwelling form when one or more HO eligibility rules fail:

• The owner does not occupy the dwelling (a landlord renting to tenants).
• The structure is a seasonal or secondary residence occupied only part of the year.
• The building is older, of lower value, or in poorer condition than HO underwriting will accept.
• The applicant wants only basic, low-cost protection and does not need the full HO contents-and-liability package.

Because the DP program serves these harder-to-place risks, underwriters lean on conditions such as vacancy provisions and protective-safeguard requirements more heavily than on the HO side.

The Broad-Form (DP-2) Perils Added Over Basic

The jump from DP-1 to DP-2 is the addition of the broad named perils. Beyond the basic fire, lightning, internal explosion, and the optional EC/V&MM group, the DP-2 automatically adds perils such as:

• Falling objects and weight of ice, snow, or sleet on the structure.
• Accidental discharge or overflow of water or steam from plumbing, heating, or appliances.
• Freezing of plumbing systems (subject to a heat-maintenance requirement).
• Sudden and accidental tearing apart, cracking, or burning of a heating or water system.
• Damage from artificially generated electrical current to appliances.

The DP-3 then converts the dwelling and other structures to open perils, covering any direct physical loss not specifically excluded, while leaving these broad named perils as the standard for personal property.

Comparing the DP and HO Programs

Because exam questions often pit the two programs against each other, fix the contrasts in mind:

The takeaway: when a question describes a landlord, a rental, a seasonal home, or a request for fire-only coverage, the answer is almost always a dwelling form — and you must remember liability is not automatic.