What Is a DP Policy? An Overview of Dwelling Insurance

A dwelling policy, often referred to as a DP policy, represents a specific type of property insurance designed to protect residential structures. It serves as a financial safeguard for property owners against various perils that could cause damage to their buildings. This insurance is distinct from standard homeowner’s policies and caters to particular property ownership scenarios.

What is a Dwelling Policy

A dwelling policy is property insurance for residences not occupied by their owners, such as rental homes, vacation homes, or vacant structures. Its core purpose is to protect the physical building from financial losses due to covered events.

Individuals who typically need a dwelling policy include landlords, real estate investors, or anyone owning a property they do not personally reside in. For instance, a landlord renting out a single-family home or a multi-unit property (up to four units) would secure a DP policy to cover the building. Similarly, if a property is unoccupied for an extended period, such as an inherited home or a house between tenants, a dwelling policy provides necessary coverage. This policy focuses on the structure and landlord-owned items, addressing unique risks where the owner is not present.

Types of Dwelling Policies and Perils Covered

Dwelling policies come in three main forms: DP-1 (Basic Form), DP-2 (Broad Form), and DP-3 (Special Form). Each offers different levels of protection based on the “perils” or causes of loss they cover. Understanding these distinctions helps property owners select appropriate coverage.

The DP-1 policy, or Basic Form, provides the most limited coverage and is a “named perils” policy. It only covers damages caused by specific events listed in the policy. Common perils include fire, lightning, explosions, windstorm, hail, riot, aircraft, vehicles, smoke, and volcanic eruption.

The DP-2 policy, or Broad Form, also operates on a “named perils” basis but extends coverage beyond DP-1. It typically includes vandalism, falling objects, weight of ice or snow, freezing plumbing, accidental water discharge, electrical current damage, and collapse. Unlike DP-1, DP-2 policies often settle claims for the dwelling and other structures on a replacement cost basis, meaning depreciation is not deducted.

The DP-3 policy, or Special Form, offers the most comprehensive protection for the dwelling and other structures. This is an “open perils” or “all-risk” policy, covering all direct physical losses unless specifically excluded. Common exclusions might include flood, earthquake, or neglect. While the dwelling is covered on an open perils basis, personal property coverage under a DP-3 policy is generally still on a named-perils basis.

Key Coverage Components

Dwelling policies typically include several core components designed to protect different aspects of the property and its associated financial interests. These components are standardized across most dwelling policy forms.

Dwelling Coverage (Coverage A)

This is the primary component, protecting the main physical structure of the insured property. It includes the foundation, walls, roof, and any structures permanently attached to the home, such as an attached garage or a deck. The coverage limit for this section usually reflects the estimated cost to rebuild the home.

Other Structures Coverage (Coverage B)

This extends protection to detached structures on the property. This can include items like a separate garage, a storage shed, or a gazebo not physically connected to the main dwelling. This coverage typically provides a percentage of the dwelling coverage limit.

Personal Property Coverage (Coverage C)

This coverage is more limited in dwelling policies compared to homeowner’s policies. For a rental property, it primarily covers the landlord’s personal property on the premises, such as provided appliances. It does not cover the personal belongings of tenants, who need their own renters’ insurance.

Fair Rental Value or Loss of Use Coverage (Coverage D)

This provides financial protection for landlords if a covered peril makes the rental property uninhabitable. It reimburses the owner for lost rental income during the period the property is undergoing repairs and cannot be occupied. This coverage applies for a reasonable period necessary for repair or replacement.

Liability Coverage

This is an important addition that can be purchased as an endorsement to a dwelling policy. It covers legal expenses and damages if someone is injured on the property and the owner is found legally responsible. This helps protect the property owner from claims such as a tenant or guest sustaining an injury due to property conditions.

Distinguishing Dwelling Policies from Homeowner’s Insurance

A fundamental difference exists between a dwelling policy and a standard homeowner’s insurance policy, rooted in property occupancy. Homeowner’s insurance is designed for owner-occupied properties, where the policyholder lives in the home as their primary residence. Conversely, a dwelling policy is tailored for non-owner-occupied properties, such as rental units, vacation homes, or vacant buildings.

This distinction significantly impacts the scope of coverage, particularly concerning personal property and liability. Homeowner’s policies typically provide broad coverage for personal belongings and comprehensive personal liability protection. In contrast, dwelling policies offer very limited personal property coverage, usually only for landlord-owned items for the property’s function. Liability coverage is often an optional add-on rather than a standard inclusion.

The focus of a homeowner’s policy is protecting both the dwelling and the resident owner’s lifestyle, including possessions and potential liability exposures. A dwelling policy, however, concentrates primarily on safeguarding the physical structure and associated loss of rental income for a non-resident owner. This difference means a typical homeowner’s policy is more comprehensive in its default coverages than a dwelling policy, which is more specialized for investment or unoccupied properties.