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

Why the Dwelling Program Exists

ISO's Dwelling Policy Program (DP) insures one- to four-family residential property that does not qualify for a Homeowners (HO) policy. Use a DP form when the structure is a non-owner-occupied rental, a seasonal/secondary residence, a dwelling with up to four units, a home under renovation, or a risk that fails HO eligibility (older homes, poor condition, owner does not live there). Unlike HO forms, no DP form bundles personal liability or medical payments — those must be added by endorsement or written on a separate Comprehensive Personal Liability (CPL) policy.

The current ISO editions in wide use are the DP 00 01 (DP-1 Basic Form), DP 00 02 (DP-2 Broad Form), and DP 00 03 (DP-3 Special Form), generally cited as the 07 02 or later editions on the exam.

The Three Forms at a Glance

Coverage breadth and premium both climb as you move up the series. The dwelling and other-structures coverage trigger changes from named peril to open peril only at DP-3.

The Open-Peril Asymmetry Trap

DP-3 is open peril on the building but only named peril on Coverage C (personal property). Candidates routinely miss that DP-3 contents are still named-peril. This mirrors HO-3, which is open peril on dwelling and named peril on contents.

DP-1 Basic Form Specifics

DP-1 is the bare-bones form. Its base perils are fire, lightning, and internal explosion. The Extended Coverage (EC) perils — windstorm, hail, explosion (external), riot/civil commotion, aircraft, vehicles, smoke, and volcanic eruption — are added only when the EC premium is shown on the Declarations. Vandalism and Malicious Mischief (V&MM) is a separate optional add-on and is not part of EC.

• DP-1 settles dwelling losses at Actual Cash Value (ACV) = replacement cost minus depreciation.
• DP-1 is the only DP form that pays losses on an ACV basis by default.
• Several DP-1 EC perils (windstorm, hail, etc.) settle at ACV regardless.

DP-2 and DP-3 Specifics

DP-2 (Broad) expands to a named-peril list of roughly 18 perils (adds burglary damage, falling objects, weight of ice/snow/sleet, accidental discharge of water, freezing, electrical surge, and collapse provisions). DP-2 and DP-3 both settle building losses at Replacement Cost when the insured carries at least 80% of replacement value (coinsurance condition).

DP-3 (Special) flips Coverage A and B to open peril: covered unless specifically excluded (e.g., flood, earth movement, war, wear and tear, ordinance or law). Because the burden of proving an exclusion applies shifts to the insurer, DP-3 is the broadest and most commonly sold dwelling form for owner-occupants who cannot get an HO policy.

Named Peril vs. Open Peril: The Burden of Proof

The single most tested concept in this section is the difference between named-peril and open-peril coverage, and who must prove what.

• Named peril (DP-1, DP-2, and Coverage C on all forms): 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. The burden of proof rests on the insured.
• Open peril / special form (DP-3 Coverage A and B): all direct physical loss is covered unless the cause is specifically excluded. The burden shifts to the insurer to prove an exclusion applies in order to deny the claim.

This is why DP-3 commands a higher premium: a mysterious or unusual loss (a meteorite, an unexplained structural failure) is presumptively covered on the building unless the carrier can point to an exclusion.

Editions and Citing Forms on the Exam

Questions may reference forms by ISO number and edition date (e.g., DP 00 03 07 02). The two-digit suffix is the edition month/year; newer filings refine wording but the DP-1/DP-2/DP-3 coverage hierarchy is stable. When a question gives only "DP-3," assume the current Special Form with open-peril building and named-peril contents. Do not confuse the dwelling DP 00 series with the Homeowners HO 00 series; both use the A-E coverage letters but HO forms bundle Section II liability while DP forms never do.

Eligibility and Common Misconceptions

DP eligibility centers on residential occupancy. A dwelling can be owner-occupied, tenant-occupied (rental), or unoccupied/seasonal and still qualify; the program is not limited to landlords. Up to four families plus up to five roomers or boarders per family can be insured. Incidental occupancies such as a home office or a small studio are permitted by endorsement.

What disqualifies a risk from the DP program: structures that are primarily commercial, farm dwellings (use a Farmowners form), and units of five or more families (commercial property). A frequent trap: candidates assume a vacant home automatically loses all coverage. In fact a DP form still applies, but vacancy beyond 60 days suspends vandalism, glass breakage, and water-related perils and may reduce other recoveries by a stated percentage.