What Is Dwelling Fire Insurance and Who Needs It?
Learn about dwelling fire insurance, a distinct property policy for rental homes, vacant properties, and other non-owner-occupied dwellings.
Dwelling fire insurance is a specialized property insurance designed to protect properties not occupied by the owner. It covers the physical structure of a home against specific perils. This policy differs from standard homeowners insurance, which is for owner-occupied residences and offers broader coverage. It helps property owners secure appropriate protection for non-owner-occupied properties.
Defining Dwelling Fire Insurance
This insurance protects properties not used as the owner’s primary residence, including rental homes, vacant dwellings, or those undergoing significant renovation. It covers the physical building and attached structures like garages, decks, or porches, against specified risks.
Coverage generally focuses on perils like fire, lightning, and internal explosions. It is a more focused policy than homeowners insurance, often excluding personal belongings or comprehensive personal liability. While named for fire, these policies can protect against other perils, varying by policy form.
Key Distinctions from Homeowners Insurance
A key difference between dwelling fire policies and standard homeowners insurance is occupancy. Homeowners policies are for owner-occupied properties, covering the structure and personal possessions. Dwelling fire insurance is for non-owner-occupied properties, such as investment properties or vacation homes. Many standard homeowners policies limit or exclude coverage if a home is vacant for over 30 to 60 days.
Homeowners insurance offers broader protection, including personal property, liability, and additional living expenses if the home becomes uninhabitable. Dwelling fire policies are more specialized, often having limited or no coverage for personal belongings and liability, though these can be added as endorsements. Homeowners policies generally cover a wider range of perils, while basic dwelling fire forms usually cover only a few named perils.
Types of Dwelling Fire Policies and Their Coverages
Dwelling fire insurance is available in three primary forms, each offering different coverage levels: DP-1, DP-2, and DP-3. The DP-1, or Basic Form, is the most limited and often least expensive. It typically covers only a few named perils, such as fire, lightning, and internal explosions. Claims under a DP-1 policy are usually settled on an actual cash value (ACV) basis, meaning depreciation is deducted from the payout.
The DP-2, or Broad Form, expands on DP-1 by including additional named perils. These often include windstorm, hail, falling objects, weight of ice and snow, vandalism, and accidental discharge of water or steam. Unlike DP-1, DP-2 policies typically settle dwelling claims on a replacement cost value (RCV) basis, covering repair or replacement without depreciation. Personal property coverage under DP-2 is usually on an ACV basis.
The DP-3, or Special Form, provides the most comprehensive coverage for the dwelling and other structures. It operates on an “open perils” or “all-risk” basis, covering all direct physical losses unless specifically excluded. Common exclusions include damage from floods, earthquakes, neglect, intentional loss, and war. Similar to DP-2, DP-3 policies typically provide replacement cost coverage for the dwelling. While the dwelling enjoys broad coverage, personal property, if covered, is usually on a named perils basis under DP-3.
Who Benefits from Dwelling Fire Insurance
Dwelling fire insurance suits specific property ownership scenarios where a standard homeowners policy would not apply or provide insufficient coverage. Landlords renting out single-family homes, duplexes, or multi-unit dwellings often require this policy to protect their investment properties. It covers the rental property’s structure and can include provisions for loss of rental income if a covered peril makes the property uninhabitable.
Owners of vacant homes also benefit, as standard homeowners policies typically cease coverage after a property has been unoccupied for 30 to 60 days. This applies to properties awaiting sale, those between tenants, or inherited homes that are currently empty. Properties undergoing extensive renovations, where a standard homeowners policy might be suspended or canceled due to increased risk, can also be covered. Individuals owning seasonal or secondary homes not occupied for significant periods, such as vacation cabins or cottages, find this insurance appropriate.