TGS Insurance » Landlord Insurance » DP-3 Policy
Key Takeaways
- A DP3 policy is the most popular and comprehensive form of landlord insurance.
- A DP3 policy is an open peril policy, meaning your insurance carrier will cover all perils unless expressly excluded in your policy.
- A DP3 policy will payout with replacement cash value (RCV), which means your policy will cover any losses at the current replacement cost with no depreciation accounting.
Table of Contents
- What is A DP3 Policy?
- What Do DP3 Policies Cover?
- When Do I Need A DP3 Policy?
- How Does A DP3 Policy Payout?
- How To Buy A DP3 Policy
What is A DP3 Policy?
A DP3 policy is a dwelling-fire policy for rented residential properties. These policies are intended for landlords or homeowners renting out homes and not for commercial properties. A DP3 policy covers the property structure and any furnishing or appliances owned by the landlord.
What Do DP3 Policies Cover?
A DP3 policy offers landlords three essential areas of coverage:
- Dwelling and other structures
- Loss-of-rent also referred to as loss-of-use
- Liability
A DP3 policy is an open peril policy, meaning your insurance carrier will cover all perils unless expressly excluded in your policy. While more expensive, a DP3 offers coverage for just about anything, making it one of the most comprehensive policies available! DP1 and DP2 policies are typically named peril policies, which means the carrier will only cover events named explicitly in the policy.
Standard open peril policy exclusions include:
- Earthquakes
- Floods
- Governmental action
- Intentional loss
- Mold
- Neglect or general wear and tear
- Nuclear hazards or acts of war
- Ordinance or law
- Power failure
When Do I Need A DP3 Policy?
If you plan on renting your property without it being your primary residence, you will need a DP3 policy. A robust DP3 policy will provide you with dwelling, loss-of-rent, and personal liability coverage. In contrast, if you opted for an HO-3 homeowners policy, you would have zero coverage. Without a DP3, you would you on the hook financially for any damages due to peril because your homeowners policy would offer zero coverage since the property isn’t your primary home.
Common scenarios in which you need a DP3 policy are:
- A home where the roof is older than 10+ years
- Getting full replacement cost if landlord is unable to afford damage repairs
- High-risk properties where a DP1 or DP2 would offer little to no coverage
- Rental income protection
A DP3 policy can sometimes be used for seasonal homes, vacation homes, or short-term rentals like Airbnb or VRBO. Your insurance agent can help you determine the best policy for your needs.
How Does A DP3 Policy Payout?
An alluring component of a DP3 policy is how a claim is paid out. With DP1 and DP2s, you’ll typically be compensated for a claim with actual cash value (ACV), meaning the value of something minus any depreciation. A DP3 policy will payout with replacement cash value (RCV), which means your policy will cover any losses at the current replacement cost with no depreciation accounting.
RCV can be more expensive upfront in any premiums than ACV. Still, assessing your current financial situation is crucial because it may behoove you to have a more well-rounded DP3 policy.
How To Buy A DP3 Policy
The best way to buy a DP3 policy is to shop around, obtain quotes from different carriers, and compare coverage options. You’ll also want to look at your financials to understand where your risks are so you know what type of dwelling-fire policy you need to protect both you and your investments.
Using a brokerage agency, like TGS Insurance, is an easy way to shop and maintain dwelling-fire coverage. At TGSI, we shop your policy across our bank of 40+ carriers to find the best market offers. With our vast expertise, we will provide you with a perfectly crafted policy for your needs and budget. Furthermore, we’ll shop your policy at renewal every year to ensure you always get the best. Click to get your hassle-free quote now– it’s free and only takes a few seconds.
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Explore Other Landlord Insurance Policies:
DP-1 Policy
DP-2 Policy
Learn More About Landlord Insurance:
Landlord Insurance vs Homeowners Insurance
Landlord Insurance vs Renters Insurance
FAQs
When Do I Need A DP3 Policy? If you plan on renting your property without it being your primary residence, you will need a DP3 policy. A robust DP3 policy will provide you with dwelling, loss-of-rent, and personal liability coverage. In contrast, if you opted for an HO-3 homeowners policy, you would have zero coverage.
What does a DP3 insurance policy cover? ›
DP3 policies can protect the structure of your home, fair rental value, and usually personal liability- subject to your agreement. Although the policies cover your home's main structure, just like the other insurance policies- DP1 and DP2- it will not cover the contents of your home.
What is typically excluded from the DP 3 coverage? ›
Some of the most commonly excluded perils are: Ordinance or law. Earth movement. Water damage.
What is a DP 3 C insurance policy? ›
DP3 policies provide replacement cost coverage for the property and other structures. Owners can opt for Actual Cash Value (ACV) coverage if they choose. For personal property (Coverage C) in a DP3 policy, the compensation provided is ACV.
What is the difference between an HO3 and a DP3 policy? ›
The biggest difference between DP3 and HO3 is the type of risk each covers. DP3 policies are most commonly for properties the owner rents to others. An HO3 policy is for owner-occupied homes. Notice, too, that some coverages are added by default, while others are optional.
Which of the following may be covered under a DP-3? ›
The DP-3 insurance policy typically covers perils such as theft and fire, but not natural disasters like floods and earthquakes. Those typically require additional coverage.
What is the coverage provided on a DP-3 dwelling property special form policy? ›
DP-3: Special Form
The DP-3 form is the most comprehensive dwelling fire coverage available. It is an “open perils” or “all risk” policy, which means real property (dwelling and other structures) will be covered for all types of damage, except exclusions named in the policy.
Does DP3 cover water damage? ›
Unlike the named peril DP1 which only covers listed events, a DP3 policy covers all risks except those specifically excluded in the policy documents. This open peril approach means your rental property is protected against a wide range of perils like water damage, theft, falling objects, ice and snow, and more.
What is the difference between DP3 and commercial insurance? ›
Higher liability limits are usually available on a commercial lines form than a personal lines form (DP-1 or DP-3). Higher Property limits are also usually available on a commercial form over a personal lines form. Most carriers limit their exposures on dwelling fire forms (both from a minimum and maximum basis).
What is the difference between DP 2 and DP-3? ›
A DP3 policy generally covers everything a DP2 policy does, plus extra coverage. However, there are some perils that a DP3 policy typically does not cover, including: Ordinance or Law (aka upgrades to repairs required because building codes and other laws have changed since your property was built)
A DP3 policy is an open peril policy, meaning your insurance carrier will cover all perils unless expressly excluded in your policy. While more expensive, a DP3 offers coverage for just about anything, making it one of the most comprehensive policies available!
Is a DP3 open peril? ›
For starters, the DP3 is described as having more robust coverage than a DP1 because the DP3 is an open perils policy. That means it protects your home against all sources of loss except those the policy names as exclusions. A DP1 only protects against nine specified perils.
Which is better DP1 or DP3? ›
DP1 insurance provides the least coverage and is cheaper. DP3 insurance provides comprehensive coverage with the option to add additional coverage. However, DP3 premiums tend to be higher.
What is included in Coverage D of the dwelling policy? ›
Loss of use coverage, also known as additional living expenses (ALE) insurance, or Coverage D, can help pay for the additional costs you might incur for reasonable housing and living expenses if a covered event makes your house temporarily uninhabitable while it's being repaired or rebuilt.
What is the difference between DP 2 and DP 3? ›
A DP3 policy generally covers everything a DP2 policy does, plus extra coverage. However, there are some perils that a DP3 policy typically does not cover, including: Ordinance or Law (aka upgrades to repairs required because building codes and other laws have changed since your property was built)
