Need to Know – The difference between a DP1 and DP3 home insurance policy?

DP-1 Versus Dp-3

The DP1 and DP3 are two different types of dwelling fire policies. The DP1 insurance policy is typically used for vacant property and offers the minimum coverage amount. The DP3 is a landlord type insurance policy where the property owner rents out the home and does not live there.

What is the difference in coverage between a DP1 and DP3 policy?

DP-1: Vacant DP-3: Landlord
Building Covered Actual Cash Value Replacement Cost
Perils Covered Named Perils Open Perils
Loss of Rents Not Included Optional
Liability Coverage Optional Optional
Water Damage Not Included Optional

In the DP1 policy, the dwelling structure is insured at actual cash value, not replacement cost. Actual cash value means that if your home sustains damage to a covered loss, you will not have the needed coverage or RCV coverage to get the home back to its original condition before the loss occurred. It only pays you for the depreciated value of the house at the time of the loss.
RCV (replacement cost value) provides coverage for restoration to like kind and quality.

The DP1 also only covers named perils – meaning only the perils or risks explicitly listed in the policy are covered. This typically includes :

  • Fire, Smoke
  • Wind, Hail “This is the 1st most common home insurance claim”
  • Lightning
  • Explosion
  • Aircraft, Vehicles (hitting the house)
  • Volcanoes
  • Vandalism, Riot

What is the DP-1 missing that you would want coverage for?

  • Water damage “This is the 2nd most common home insurance claim”
  • Theft
  • Weight of ice, sleet, or snow (Collapse)
  • Freezing pipes
  • Appliance-related damage
  • Falling objects (e.g., trees)
  • Power Surge

The DP3 is usually an open perils policy. Meaning everything above would typically be covered unless your policy documents say they are excluded. An open peril policy typically means it covers everything EXCEPT what is explicitly stated as not included in the policy documents. You should always read your policy documents to understand what specific coverage you have.  The most common exclusions in an open peril policy are:

  • Pollutants
  • War
  • Cracking
  • Animal or insect damage
  • Power Interruption
  • Normal Wear and Tear
  • Vandalism of vacant property
  • Freezing if vacant
  • Snow damage on outdoor property
  • Intentional damage or loss
  • Nuclear
  • Damage by Government

There are optional coverage options that can be purchased for extra premium.  These typically include:

  • Flood Coverage (This will be separate policy available through the National Flood Program)
  • Mold
  • Sewage Backup
  • Loss of rent
  • Personal Property (Belonging to the Landlord not the renter)
  • Other options depending on the insurance company offerings

If the home is occupied with someone is living in the home full time and you are renting or leasing it out in a landlord type arrangement, you should insure your property with a DP-3 type policy.

If the home is vacant and will remain empty for the next 30 days, you need a DP-1 policy. The dwelling fire policies do not usually include coverage for the contents of the home, which is why they make more sense for vacant or rental homes.

Please feel free to contact us if you have any additional questions or would like a quote for your rental property.

806-783-0290