What’s the Difference Between DP3 and HO3?
When it comes to choosing the right policy for your home, how you use your property matters.
If you rent out your property, you likely need a DP3 policy, or landlord insurance. If you live in the home you want to insure year round, the HO3 policy, or homeowners insurance, is usually the right choice. Let’s take a look at each option in more detail and see how they compare.
DP3 vs. HO3
At first glance, you’ll see more similarities than differences between the DP3 and HO3. Both are designed to cover homes and other structures on an open perils basis. That means the structures are protected for all sources of damage except the few the policy lists as exclusions.
Both policies also offer – or can offer – these coverages:
- Coverage A: Damage to the home.
- Coverage B: Damage to other structures on the property.
- Coverage C: Damage or loss of personal belongings.
- Coverage D: Loss of use.
- Coverage E: Personal liability for bodily injuries or property damage.
- Coverage F: Medical payments to injured guests.
But some coverages come standard with the HO3 that you’d need to add on to the DP3, and the DP3 can cover some risks an HO3 can’t.
Let’s take a look at how the policies stack up to each other.
|Occupancy||Tenant occupied or vacant||Owner-occupied|
|Rental Use||Long-term and short-term (Airbnb) rental use covered||No rental use covered|
|Coverage A (Dwelling)||Open perils||Open perils|
|Coverage B (Other Structures)||Covered||Covered|
|Coverage C (Personal Property)||Optional||Covered|
|Coverage D (Loss of Use)||Loss of rent & loss of use covered||Loss of use covered|
|Coverage E (Personal Liability)||Optional||Covered|
|Coverage F (Medical Payments)||Optional||Covered|
You’ll notice the biggest difference in DP3 vs. HO3 is in how it applies to personal property, personal liability, and medical payments coverage. In a DP3 policy, these coverages can be added on. In an HO3 policy, they’re standard. That’s because a DP3 is for rental purposes, so the house will usually not be filled with your personal belongings aside from appliances and fixtures. Your tenant would need their own rental policy – the HO4 policy – to cover their belongings in your property and their responsibility for guest injuries on the property.
Coverage D is also interesting in the case of DP3. When a covered claim keeps you from renting out your home, Coverage D offers fair rental value coverage to make up the lost rent. For an HO3 policy, this covers additional living expenses when a covered claim keeps you from living at home during repairs.
When You Need a DP3 vs. HO3
So now that you know the similarities and differences between DP3 and HO3, how do you know which is right for you?
It depends on your situation and how you intend to use the property.
The DP3 policy is also called a dwelling fire form for a reason – it can be an option for homeowners who just want enough coverage to meet their lender insurance requirements or to protect property while it sits vacant. In this case, the policy would namely cover the home and other structures for their replacement cost.
But most of the time, the DP3 is reserved for folks who rent out the property they’re insuring. These are the most common reasons for choosing a DP3 policy:
- You lease out the property.
- You inherited the property and it’s sitting vacant while you work on selling it.
- You’re selling your previous home because you bought a new one, and you need it insured in the meantime.
An HO3 policy is a good balance of coverage and affordability to protect your primary residence. You might opt for this policy if:
- You live in the property year round.
- You live in the property at least seven months out of the year.
- You want more options in how your belongings are protected (e.g., you want to schedule your property or insure it on an open-perils basis).
If you need help figuring out which policy makes sense for your needs, just give us a call!
Getting a DP3 vs. HO3 Quote
Whether you want an HO3 or DP3 policy, getting a quote is as easy as entering your address and answering a few quick questions about your property. And if you need any help along the way, our experts are standing by.
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