Dwelling Eligibility and Form Choices

Eligibility and Core Policy Characteristics

Dwelling policies insure eligible residential properties, including rental properties and some owner-occupied homes. A property does not have to be ineligible for a homeowners policy to be covered by a dwelling policy. Standard forms published by the Insurance Services Office (ISO) serve as a national reference for dwelling coverage, though individual insurance companies may use their own forms and endorsements, subject to state insurance regulation.

To qualify for coverage, a dwelling can insure residential structures with up to four family units. Across the entire structure, the policy permits up to five roomers or boarders. Townhouses and row houses are also eligible if they satisfy these unit occupancy limits. A dwelling under construction may qualify, subject to the underwriting requirements of the insurer and any needed endorsement. Additionally, a permanently situated mobile home may be eligible for DP-1 coverage if the insurer accepts it, although a separate mobile home policy is another option. Working farms and farming operations generally require farm coverage rather than a standard dwelling policy.

An incidental business occupancy, such as a beauty parlor or professional studio operated by the insured, may be eligible for a dwelling policy. To qualify, it must provide professional or personal services rather than retail sales and must satisfy the insurer's underwriting rules. For example, if you rent out a single-family house and use an attached room as a small accounting office, ask the insurer whether it will accept that incidental business use; providing a service does not by itself establish eligibility.

A key feature of a dwelling policy is that it does not require the named insured to reside in the property, which makes it particularly suitable for landlords renting out residential units. However, you must note two major coverage gaps in basic dwelling forms: they do not automatically include personal liability coverage, and they do not automatically include theft coverage for personal property. If you need personal liability and medical payments coverage for a dwelling, you may be able to add it by endorsement or purchase separate liability coverage. If you need theft coverage for personal property under a dwelling policy, you may be able to add it by endorsement.

DP-1 Basic Form Perils and Conditions

The DP-1 form is officially known as the Basic Form. It is a named peril policy for both structures and personal property. When issued without endorsements, the unendorsed DP-1 covers only three causes of loss: fire, lightning, and internal explosion. Internal explosion coverage applies to explosions that happen inside a covered building, but it excludes certain explosions of steam boilers or steam pipes owned, leased, or controlled by the insured.

An insured can broaden the DP-1 by purchasing Extended Coverage (EC) perils for an additional premium. The DP-1 Extended Coverage perils include windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, and volcanic eruption. Explosion is also included as an Extended Coverage peril on the DP-1, which broadens the basic internal explosion coverage to include external explosions. Several Extended Coverage perils have specific exclusions. For instance, the smoke peril excludes loss caused by smoke from agricultural smudging or industrial operations. The vehicle peril excludes damage caused by a vehicle owned or operated by the insured or by any resident of the described location.

Specific limitations apply to weather-related damage under Extended Coverage. For interior property damaged by rain, snow, sleet, sand, or dust during a windstorm or hailstorm, coverage generally requires the wind or hail to first create an opening in the roof or wall. If high winds break a window and rain damages the hardwood floor inside, the damage is covered. If a window was left open before the storm and rain entered, the interior loss is excluded.

Vandalism and malicious mischief (VMM) coverage can be added to the DP-1 form for an additional premium, but only if the Extended Coverage perils are also purchased. Even when purchased, vandalism and malicious mischief coverage is suspended if the dwelling has been vacant for more than 60 consecutive days immediately before the loss.

DP-2 Broad Form and Peril Expansion

The DP-2 form is officially known as the Broad Form. Like the DP-1, it is a named peril policy for both dwelling structures and personal property. However, the DP-2 automatically includes all basic perils, all Extended Coverage perils, and vandalism and malicious mischief, while also expanding on those perils and adding several new ones.

Perils carried over from Extended Coverage receive broader treatment under the DP-2. The DP-2 covers sudden and accidental smoke damage, although it still excludes smoke from agricultural smudging or industrial operations. The vehicle peril on the DP-2 is expanded to cover damage caused by an insured's own vehicle. However, it excludes damage to a fence, driveway, or walk caused by a vehicle owned or operated by the insured or by a resident of the described location.

The DP-2 adds several important named perils for both structures and personal belongings. It covers the weight of ice, snow, or sleet that causes damage to the building or contents inside, but it excludes damage from ice, snow, or sleet to outdoor property such as awnings, fences, patios, and swimming pools. It covers falling objects, but contents inside a building are covered only if the falling object first damages the exterior roof or walls.

Water-related and mechanical perils are also introduced in the DP-2. It covers accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system. Note that this accidental discharge coverage pays for the resulting water damage, but it does not pay for the repair or replacement of the appliance or system from which the water escaped. The DP-2 also covers sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water. Under the standard ISO DP-2, freezing losses while the dwelling is vacant, unoccupied, or being constructed generally require reasonable care to maintain heat or to shut off and drain the water systems; if an automatic fire protective sprinkler system protects the building, the insured must use reasonable care to maintain heat and continue its water supply. Finally, the DP-2 covers sudden and accidental damage from artificially generated electrical currents, excluding loss to tubes, transistors, or electronic components.

DP-3 Special Form and Exclusions

The DP-3 form is officially known as the Special Form. Its structure differs significantly from the DP-1 and DP-2 because it provides open perils coverage on the dwelling and other structures. Under DP-3 open perils coverage, all direct physical losses to structures are covered unless specifically excluded in the policy. Because of this open perils approach, the insurer generally must show that an exclusion applies when denying an otherwise covered direct physical loss to a structure. For personal property, however, the DP-3 does not provide open perils coverage; it covers personal property against listed named perils that are generally similar to the personal property perils in the DP-2.

While the DP-3 offers the broadest structural protection of the three dwelling forms, it contains specific structural exclusions. The DP-3 excludes damage to structures resulting from wear and tear, deterioration, rust, dry rot, industrial smoke, and mechanical breakdown. It also excludes damage to structures caused by constant or repeated seepage or leakage of water over a period of weeks, months, or years.

The standard ISO DP-3 addresses freezing through an exclusion with a reasonable-care exception; the DP-2 states its freezing limitation as part of a named peril and ties that limitation to a dwelling that is vacant, unoccupied, or being constructed. The standard ISO DP-3 generally excludes freezing damage to covered systems and appliances, and resulting discharge, unless the insured used reasonable care to maintain heat or to shut off the water supply and drain the systems and appliances; a building protected by an automatic fire protective sprinkler system also requires reasonable care to maintain heat and continue its water supply. If an owner fails to use reasonable care to maintain heat or shut off and drain the water systems, the standard ISO DP-3 generally excludes damage to those systems from freezing and water damage caused by the resulting discharge, subject to the policy's terms.