Navigating through the different types of rental property coverage can be challenging. Let’s simplify. Landlord insurance policies can be divided into three main types: DP-1 (basic), DP-2 (upgraded), and DP-3 (comprehensive). Each type offers a varying degree of protection, designed to suit different needs and circ*mstances.
Let’s delve into each of these types to shed some light on the specifics.
Basic Coverage (DP-1)
Starting with the most basic, the DP-1 landlord insurance policy is designed for landlords seeking coverage for specifically named perils. The coverages under a DP-1 policy typically include:
Fire
Wind
Hail
Lightning
Aircraft
Internal and external explosions
Riots
Smoke
Vehicles
Volcanic explosions
Windstorms
One important thing to note is that the DP-1 policy pays out based on the actual cash value of damaged properties, factoring in depreciation to determine reimbursem*nt amounts. If you have properties that remain vacant for a prolonged period, require only basic coverage, or are in between tenants, the DP-1 policy may be an advantageous option for you.
Upgraded Coverage (DP-2)
Taking a step up, the DP-2 policy provides an upgraded level of coverage. Unlike DP-1, it pays out on a replacement cost basis, covering the cost to repair or replace damaged property without accounting for depreciation. The DP-2 policy typically covers 17 named perils such as:
vandalism
explosions
fire
windstorm
hail
burglary damage
snow
ice damage
water damage
collapses
And others.
An added advantage of DP-2 is that it covers not only the primary structure but also connected structures like fences, sheds, or detached garages. However, it’s important to remember that the policy excludes coverage for theft, damage from improper maintenance, earthquakes, floods, and general water damage. If you rent out your properties primarily as a source of income or while awaiting a property’s sale, the DP-2 policy could be well-suited for you.
Comprehensive Coverage (DP-3)
The DP-3 landlord insurance policy, also known as Dwelling Fire Form 3, is the most comprehensive and expensive policy. Operated as an open peril policy, it covers all risks unless specifically excluded within the agreement and typically reimburses the landlord on a replacement cost basis.
Common exclusions in DP-3 policies can include ordinance or law changes, earth movement, power failure, war, neglect, nuclear hazard, governmental action, mold, and intentional loss.
Additional benefits of DP-3 coverage include:
Protection for the structure of the home
Fair rental value
Potential inclusion of personal liability coverage, securing the landlord if the property becomes uninhabitable, or if legal issues arise on the premises.
