What is a DP1 policy?
A DP1 policy, also called Dwelling Fire Form 1, is a type of home insurance policy that protects a house from nine named perils – most notably fire. It’s usually used to insure vacant homes but can also be used for rental properties if landlords are on a tight budget.
Because DP1 is a named perils policy, it only covers damage to the home from those nine incidents listed in the policy. Any source of damages that’s not in the policy isn’t covered. As you can imagine, that leaves a lot of room for gaps.
For example, vandalism isn’t covered, and that’s damage vacant homes are especially prone to. If you have a DP1 policy and your home is vandalized, cleaning and repair costs will come out of pocket.
What do DP1 policies cover?
The DP1 insurance policies cover the home for damage from nine named perils:
- Fire and lightning
- Internal and external explosions
- Windstorm
- Hail
- Riots
- Smoke
- Aircrafts
- Vehicles
- Volcanic explosions
If one of these incidents occurs at your property, it’s covered. If an incident not listed happens, it’s not covered. Notably, water damage from appliances or pipes isn’t covered, and that can be a potentially big gap in your coverage.
That’s why it’s so important to read through the policy before you buy a DP1 policy. You don’t want to be stuck with enormous repairs bills that might otherwise be covered if you had a different policy, like a DP3 policy.
In addition to covering the structure of the home, DP1 also covers other structures (like garages, sheds, fences, etc.), personal property, and the fair rental value of the building. It can also cover personal liability and medical payments coverage, but neither of these usually come standard with the policy and must be added on.
DP1 is an actual cash value policy
Another limitation of the DP1 policy is in how it pays out claims. This policy is paid on an actual cash value basis. That means depreciation is deducted from your claims payout.
For example, say your roof suffers wind damage and your roof is 12 years old. The total repair cost will be $15,000.
Your insurer will figure out your roof’s replacement cost and deduct its depreciation from your payout. That calculation looks something like this: R × (E - C) / E = ACV.
- R = replacement cost of the item
- E = expected life (lifespan) of the item
- C = current life of the item
- ACV = actual cash value
So if your roof has 15 more years of life in it, your payout comes to: $15,000 x (15-12) / 15 = $3,000. You’d be paying the other $12,000 out of pocket for the roof damage.
Who needs a DP1 policy?
A DP1 policy is for property that’s not occupied by you, the owner. You might consider this policy if you:
- Own a vacant property.
- Have a strict budget for rental property.
- Bought a new house and your old house is vacant pending a sale.
- Inherited a home that sits empty until probate is complete.
- Own investment property that’s between tenants (more than 30 days).
Essentially, if a home is going to be vacant for more than 30 days, a DP1 policy might be a good option. It can cover common perils that might not be noticed immediately because there’s no one on the property to see it. While the DP1 is also used by landlords with tenants, it’s not the most robust option. A DP2 or DP3 policy is usually a better fit.
DP1 vs. DP2 vs. DP3
There are three Dwelling Fire forms: DP1, DP2, and DP3. Each form offers more protection than the last.
While the DP1 covers nine perils, the DP2 offers the same protections as DP1 but covers more perils – typically 18.
A DP2 policy usually covers the home for damage from:
- Fire or lightning
- Riot
- Smoke
- Windstorm/Hail
- Explosion
- Aircrafts
- Vehicles
- Cracking or bulging
- Freezing pipes
- Volcanic eruption
- Vandalism
- Weight of snow
- Electrical damage
- Glass breakage
- Collapse
- Water or stream
As you can see, DP2 covers more common events, like vandalism and freezing pipes. That’s important considering vacant homes are targets for vandals and at higher risk for burst pipes.
The DP3 policy makes a leap in coverage. It’s an open-perils policy, meaning can cover ALL perils except the few it lists as exclusions. So instead of naming what it covers, it names the few exclusions that it doesn’t protect against.
Instead of insuring the home for its actual cash value like DP1 and DP2, the DP3 policy insures the home for its replacement cost. That means it pays what it actually costs to repair your home with materials and labor at the current market rate. It does not subtract depreciation.
Landlord insurance guides
We offer landlord insurance in serveral states. Check out our guides for:
How to get a DP1 policy
Protecting your home is what we do. If you aren’t living in your property and want to get coverage, talk to one of our representatives today. We can get you the right coverage based on your needs. Getting a quote is always free and only takes a few minutes. Enter your address now to see how easy it is!
