What Is a Dwelling Policy and What Does It Cover?

A dwelling policy is a type of property insurance specifically designed to protect a building that the owner does not occupy. It primarily focuses on covering the physical structure of the property against various perils. Its fundamental purpose is to provide property-only coverage, making it suitable for situations where the homeowner does not reside in the insured dwelling.

Understanding Core Coverage

A dwelling policy typically includes coverage for the physical structure of the home, often referred to as “dwelling” or Coverage A. This encompasses the main building, including its foundation, walls, roof, and permanently installed fixtures like plumbing and electrical wiring. This coverage extends to attached structures, such as an attached garage or a deck.

The policy also covers “other structures” on the property, which are buildings not physically attached to the main dwelling. Examples include detached garages, sheds, gazebos, or fences.

While a dwelling policy’s primary focus is on the physical property, it may include limited coverage for personal property. This personal property coverage is often minimal and typically applies to items owned by the landlord or property owner, such as appliances or furnishings provided for a tenant’s use. Unlike homeowners policies, it does not typically cover the personal belongings of tenants. Common perils covered by dwelling policies often include fire, lightning, windstorm, and hail.

Dwelling Policy Forms

Dwelling policies come in different forms, each offering varying levels of coverage. The DP-1, or Basic Form, is the most limited and provides coverage on a “named perils” basis, covering only specific listed perils. These typically include fire, lightning, and internal explosions. Claims under a DP-1 policy are settled at Actual Cash Value (ACV), which accounts for depreciation.

The DP-2, or Broad Form, expands upon the DP-1 by covering a wider range of named perils. Additional perils typically include falling objects, weight of ice, snow, or sleet, accidental discharge of water or steam, and freezing of plumbing. Unlike the DP-1, the DP-2 usually provides replacement cost coverage for the dwelling and other structures. Personal property, however, is often still covered on an ACV basis.

The DP-3, or Special Form, offers the most comprehensive coverage among dwelling policies. It provides “open perils” or “all-risk” coverage for the dwelling and other structures, covering all causes of loss unless specifically excluded. This broad coverage typically includes perils like vandalism and theft, which are not standard in the DP-1. Personal property, if covered, generally remains on a named perils basis and is settled at ACV.

Scenarios for a Dwelling Policy

Dwelling policies are primarily designed for properties not occupied by the owner. Their most common application is for rental properties, where a landlord seeks to protect the structure. A standard homeowners insurance policy is unsuitable for such properties because it requires owner occupancy. Dwelling policies, often referred to as landlord insurance, address the specific risks associated with non-owner-occupied homes.

These policies are also appropriate for vacant homes, which pose a higher risk due to lack of constant oversight. Most standard homeowners policies limit or exclude coverage if a home is vacant for an extended period. A dwelling policy, or a specific vacant home insurance policy, provides necessary protection against perils like vandalism or undetected damage.

Properties undergoing extensive renovation, if unoccupied, may also require a dwelling policy. Standard insurance might not provide adequate coverage during significant construction. Similarly, homes being sold on contract or seasonal homes that are not owner-occupied for much of the year can benefit from this type of specialized coverage.

Dwelling Policy vs. Homeowners Insurance

A dwelling policy differs significantly from a standard homeowners insurance policy, catering to distinct insurance needs. The fundamental distinction lies in occupancy; homeowners policies are for owner-occupied residences, while dwelling policies are for non-owner-occupied properties.

Another key difference is in liability coverage. Homeowners policies generally include comprehensive personal liability coverage, protecting the homeowner against claims for bodily injury or property damage to others. Dwelling policies, however, offer limited or no personal liability coverage, usually only premises liability, which can often be added as an endorsement.

Personal property coverage also varies substantially. Homeowners policies typically offer robust coverage for the homeowner’s personal belongings, often a percentage of the dwelling coverage. In contrast, dwelling policies provide very limited or optional personal property coverage, primarily for items owned by the landlord.

Finally, Additional Living Expenses (ALE) coverage is a standard feature in homeowners policies. This coverage helps with increased living costs if the home becomes uninhabitable due to a covered loss. Dwelling policies, particularly for rental properties, often include “loss of rent” coverage instead, which reimburses the landlord for lost rental income.