What Is DP1 Insurance and What Does It Cover?

DP1 insurance, also known as Dwelling Fire Form 1, provides basic property coverage primarily for non-owner-occupied properties. It offers straightforward protection for investments or vacant properties, addressing specific risks associated with these dwellings.

Understanding DP1 Insurance

DP1 insurance is a “dwelling policy” focused on the physical structure of the property, not comprehensive homeowner coverages. It operates on a “named perils” basis, covering only damages caused by risks explicitly listed in the policy. Unlisted perils are not covered, making it a restrictive form of insurance.

DP1 policies pay out based on Actual Cash Value (ACV), meaning the payout reflects the damaged property’s replacement cost minus depreciation. For older properties, this depreciation can significantly reduce the claim payout, leaving the owner responsible for more repair costs. Landlords, owners of vacant homes, or properties undergoing renovation often choose DP1 policies because these properties may not qualify for standard homeowner insurance.

Specific Coverages of DP1

DP1 policies cover a limited set of named perils, with fire being the most notable. Common perils typically covered include:

Fire and lightning
Internal and external explosions
Windstorms
Hail
Riots
Smoke
Damage from aircraft
Damage from vehicles
Volcanic eruptions

Beyond the main dwelling structure (Coverage A), DP1 policies often cover other structures (Coverage B) like detached garages, sheds, or fences. Some policies may offer limited personal property coverage (Coverage C) for landlord-owned items on the premises, such as tenant appliances. This coverage is not for tenants’ personal belongings and often requires an additional premium.

Key Differences and Limitations

DP1 policies differ from DP2 (broad form) and DP3 (special form) policies in coverage scope and payout methods. Both DP1 and DP2 are “named perils” policies, but DP2 covers a broader list, including risks like freezing pipes, vandalism, and the weight of ice or snow. DP3 policies are “open perils” or “all-risk” for the dwelling, covering all causes of loss unless specifically excluded, offering wider protection.

Claim settlement is another distinction. While DP1 policies use Actual Cash Value (ACV), DP2 and DP3 policies generally provide Replacement Cost Value (RCV) for the dwelling, paying the cost to repair or replace without deducting for depreciation. DP1 policies also differ from standard homeowners (HO3) policies. HO3 policies are for owner-occupied residences and provide broader coverage, including personal liability and extensive personal property coverage, which are not standard in a DP1 policy. Common perils typically excluded from a basic DP1 policy unless added by endorsement include:

Theft
Vandalism
Water damage from pipes or appliances
Freezing damage
Liability