What Does a Dwelling Policy Cover? A Full Breakdown

A dwelling policy is a type of property insurance designed for properties not occupied by their owner, such as rental properties, vacation homes, or vacant structures. Its primary purpose is to protect the physical building from various forms of damage. This coverage differs significantly from standard homeowner’s insurance.

Main Coverage Areas

A dwelling policy focuses on protecting the physical structure of the insured property against direct physical loss. This coverage extends to the dwelling building, including any structures attached to it, such as an integrated garage or a connected porch. Permanently installed fixtures and equipment, like built-in cabinets or central air conditioning units, are also typically covered as part of the dwelling.

Policies commonly provide coverage for specific events, often called perils. These frequently include damage caused by fire, lightning, and windstorms, which can inflict substantial harm. Other common perils include hail, explosions, and smoke damage. Coverage can also extend to damage from vehicles or aircraft, riot or civil commotion, vandalism, and malicious mischief. The specific perils covered depend on the policy form selected.

Some dwelling policies may offer limited coverage for loss of rents or fair rental value. This provision applies if the insured property becomes uninhabitable due to a covered loss, compensating the owner for the rental income they would have otherwise received. The exact scope and limits of this coverage are detailed within the policy’s terms.

Common Exclusions

Standard dwelling policies typically exclude damage from floods, requiring a separate flood insurance policy, often available through the National Flood Insurance Program (NFIP). Earthquakes are another common exclusion, necessitating a separate endorsement or policy for coverage against seismic activity.

Other typical exclusions include damage from war, nuclear hazard, or governmental action. Earth movement, such as landslides or mudslides, is also generally excluded. Problems like sewer backup or sump pump overflow are usually not covered unless a specific endorsement is added to the policy.

Policies also commonly exclude losses from neglect, intentional acts by the insured, and power failure occurring off the premises. Wear and tear, gradual deterioration, rust, mold, or inherent vice are not covered, as these relate to maintenance issues or natural aging rather than sudden, accidental events.

Understanding Dwelling Policy Forms

Dwelling policies are typically offered in different forms, which dictate the scope of coverage and how losses are valued. The most basic option is the DP-1, or Basic Form, which provides named perils coverage. This means it only covers losses specifically listed in the policy, such as fire, lightning, and internal explosion. Losses under a DP-1 policy are commonly settled on an Actual Cash Value (ACV) basis, meaning depreciation is deducted from the replacement cost.

A broader option is the DP-2, or Broad Form, which also operates on a named perils basis but includes a more extensive list of covered events than the DP-1. Beyond the basic perils, DP-2 policies often cover damage from falling objects, the weight of ice, snow, or sleet, and sudden and accidental tearing apart, cracking, burning, or bulging of a heating or cooling system. Freezing of pipes and accidental discharge or overflow of water or steam are also frequently included. Losses to the dwelling under a DP-2 policy are often settled on a Replacement Cost (RC) basis, meaning the cost to repair or replace the damaged property without deduction for depreciation.

The most comprehensive dwelling policy is the DP-3, or Special Form. This form provides “open perils” or “all-risk” coverage for the dwelling structure. This means it covers all direct physical losses unless a peril is specifically excluded in the policy language. This shifts the burden of proof, as the insurer must demonstrate that an exclusion applies for a claim to be denied. Like the DP-2, losses to the dwelling under a DP-3 policy are typically settled on a Replacement Cost (RC) basis.

Coverage for Other Structures and Personal Property

Dwelling policies typically extend limited coverage to other structures located on the insured premises. These are structures that are separated from the main dwelling by a clear space, such as detached garages, sheds, or fences. Swimming pools, if permanently installed, may also fall under this category. This coverage is usually a percentage of the dwelling coverage, often around 10% of the amount insured for the main building.

Coverage for personal property under a dwelling policy is generally very limited or entirely absent, as these policies are designed primarily for the landlord’s interest in the physical structure. A landlord’s dwelling policy typically does not cover a tenant’s personal belongings. Tenants are responsible for insuring their own possessions, usually through a separate renters insurance policy.

However, some dwelling policies might include minimal coverage for certain landlord-owned items. This could apply to appliances like refrigerators or stoves, or basic furnishings that are provided for tenant use within the rental unit. If a dwelling owner requires more extensive coverage for their personal property on the premises, such as tools or specific landlord-owned contents, an endorsement can often be added to the policy to increase these limits.