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

What the Dwelling Program Covers

The Dwelling Policy (DP) is the ISO property program for one- to four-family residential buildings that do not qualify for, or do not need, the broader Homeowners (HO) program. It is the workhorse for rental dwellings, seasonal/secondary homes, dwellings under renovation, older homes that fail to meet HO underwriting rules, and any owner-occupant who simply wants property coverage without the packaged liability of an HO form.

The dwelling forms in current use carry the ISO 2002 edition (DP 00 01, DP 00 02, DP 00 03). A key fact the exam tests repeatedly: the dwelling program is a monoline property policy. It provides no liability and no medical payments in its base form — those are added only by endorsement.

The Three Forms Compared

Coverage breadth and premium both rise across the series. The dividing line tested most often is named perils vs. open perils and whether the building is settled on ACV or replacement cost.

Trap: On the DP-3 the building is open-perils but contents (Coverage C) remain on the named broad-list basis — it is not "all-risk" on personal property. Candidates frequently miss this asymmetry.

DP-1 Basic Perils and the EC/V&MM Add-Ons

The DP-1's true base perils are only Fire, Lightning, and Internal Explosion. Everything else commonly thought of as "basic" must be purchased:

• Extended Coverage (EC) — the classic group: Windstorm and hail, Civil commotion/Riot, Smoke, Aircraft, Vehicles, Explosion, and Volcanic eruption. (Mnemonics vary; the point is EC is optional on DP-1.)
• Vandalism & Malicious Mischief (V&MM) — a separate add-on, often restricted when the dwelling has been vacant beyond 60 days.

Because DP-1 settles building losses at ACV, it is the cheapest form and the one used for low-value or hard-to-place risks. The DP-2 and DP-3 include EC and V&MM automatically within their broader named-peril lists.

How Underwriters Choose the Form

Form selection follows the risk and the insured's tolerance for self-funding depreciation:

• Rental house, owner wants the cheapest acceptable cover → DP-1 (ACV) with EC and V&MM added. The landlord accepts ACV settlement because the building is an income asset, not a home.
• Older owner-occupied home that fails HO underwriting (knob-and-tube wiring, prior losses) → DP-2 or DP-3 to get replacement cost while avoiding the HO program's stricter rules.
• Seasonal or vacant property → typically DP-1; broader forms restrict water and vandalism on long-vacant risks anyway.

Eligibility traps: the DP covers 1–4 family dwellings. A building with 5+ units is commercial (CPP/BOP). Incidental occupancies — a permitted home office or small studio — are allowed; a full retail store is not. Farm dwellings need a farmowners form, not a DP.

Named-Peril vs. Open-Peril Burden of Proof

The form type also dictates who must prove the cause of loss — a heavily tested concept:

• On a named-peril form (DP-1, DP-2), the insured must prove the loss was caused by a listed peril. If the cause is unknown, the claim fails.
• On an open-peril form (DP-3 building), coverage is presumed and the insurer must prove an exclusion applies to deny.

This shifting burden is why the DP-3 commands a higher premium even when the listed broad perils overlap heavily with DP-2: open-perils captures the unusual and the unprovable losses that a named list cannot anticipate.

The Broad-Form Peril List (DP-2/DP-3 Contents)

Both DP-2 and DP-3 use the same broad named-peril list for personal property, so memorizing it pays off twice. Beyond the EC group it adds:

• Falling objects (damage to the interior only if the exterior is first breached)
• Weight of ice, snow, or sleet on the building
• Accidental discharge or overflow of water or steam from plumbing, heating, or AC
• Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot-water system
• Freezing of plumbing (only if the insured maintained heat or shut off and drained the system)
• Sudden and accidental damage from artificially generated electrical current

Trap: the broad form covers resulting water damage from a burst pipe but still excludes the cost to repair the defective pipe or appliance that caused it — and continuous, long-term seepage is excluded as a maintenance issue, not a sudden event. Distinguishing a sudden accidental discharge from gradual seepage is a recurring exam scenario.

Eligibility, Occupancy, and the DP vs. HO Choice

The Dwelling Program insures one- to four-family residential buildings and is the go-to form when a Homeowners policy will not fit: rental (non-owner-occupied) dwellings, seasonal/secondary homes, dwellings under renovation, or owners who want only property (no liability) coverage. Dwelling forms contain no automatic liability or theft coverage — both must be added by endorsement, whereas a Homeowners policy bundles them in.

Trap: A landlord renting a single-family house to tenants is a classic DP risk, not an HO risk, because the owner does not occupy it.