DP-1 vs DP-2 vs DP-3: Which Landlord Policy Do You Actually Need?

If you rent out a house, a duplex or a small building of up to four units, your policy is probably a dwelling fire policy, not a homeowners policy. Homeowners policies are written for people who live in the home. Once a tenant lives there, most insurers move the property to a dwelling form: DP-1, DP-2 or DP-3.

The names sound alike, but the difference shows up on the day you file a claim. Here's what each one does.

The short version

	DP-1 (Basic)	DP-2 (Broad)	DP-3 (Special)
What's covered on the building	Only the causes listed (a short list)	The causes listed (a longer list)	Everything, except what's excluded
How a claim is usually paid	Actual cash value (minus wear and age)	Replacement cost*	Replacement cost*
Lost rent after a covered loss	Often included, but check the limit	Usually included	Usually included
Typical price	Lowest	Middle	Highest, but the best value for most

*Replacement cost usually requires you to insure the building close to its full rebuild cost (often 80% or more). If you insure it for less, the claim can be cut. More on this in our coinsurance article.

Wording varies by insurer and by state, so always read your own policy's declarations page and forms.

DP-1: the basic policy

A DP-1 covers your building against a short list of causes: typically fire, lightning and internal explosion. Wind, hail, smoke and vandalism are often add-ons, not standard.

The bigger catch is how claims are paid. Most DP-1 policies pay actual cash value: what the damaged part was worth on the day it was damaged, after wear and age. A 15-year-old roof destroyed by a covered cause is paid as a 15-year-old roof, not a new one. The gap between that and the cost of a new roof comes out of your pocket.

When it makes sense: an older property you'd likely sell rather than fully rebuild, a vacant or hard-to-insure building, or a tight budget where some cover beats none.

DP-2: the broad policy

A DP-2 keeps the "listed causes" approach, but the list is much longer. Besides fire and lightning, it typically adds:

wind and hail
falling objects
the weight of ice, snow or sleet
sudden accidental water discharge from plumbing or appliances
freezing of plumbing (usually only if you kept the heat on or drained the system)
sudden damage from electrical current

Claims on the building are usually paid at replacement cost, and lost rent after a covered loss is usually included.

When it makes sense: a decent middle ground when a DP-3 isn't offered for the property, or when the price gap is large.

DP-3: the special policy

A DP-3 flips the logic. Instead of listing what is covered, it covers your building against any sudden, accidental cause unless the policy excludes it. This is called "open perils" or "special form".

That matters when something odd happens, because nobody has to find your loss on a list. The burden shifts: generally, the insurer has to show an exclusion applies.

Common exclusions still apply on almost every DP-3:

flood (needs a separate flood policy)
earth movement and earthquake (separate cover, where available)
wear and tear, rot, pests and long-term leaks
many policies limit or exclude mold
some damage while the property sits vacant (see our vacancy article)

When it makes sense: for most landlords, most of the time. When the building is your biggest asset, the extra premium is usually small compared with what it protects.

What none of them include automatically: liability

This is the one that catches landlords out. A dwelling policy's main job is the building. Many don't cover you if someone is hurt and sues. Some insurers build landlord (premises) liability into the policy. Many add it only as an extra part or endorsement, or you buy it as a separate policy. Check your declarations page for a "personal liability" or "premises liability" line. If it's not there, you probably don't have it.

Why you might not get the form you want

Insurers decide which form they'll offer based on the property. Here's what an underwriter typically looks at, and what they'll ask you for:

Who lives there. If your mailing address is the rental's address, the insurer will assume you live there and flag it. Tell them the truth up front: tenant-occupied, owner-occupied with a tenant, or vacant.
The age of the home, and when the big four were last updated: roof, heating, plumbing and electrical. Have the years ready. "Everything's been updated" isn't an answer; "roof 2016, electrical 2022" is.
Breakers or fuses. Older fuse panels are a common reason for a decline or a DP-1-only offer.
Past claims. Expect to explain each one: what happened, whether it's closed, and what you changed so it won't happen again. For a fire, they may ask for the fire department report. Keep a copy.
Vacancy and short-term rentals. An empty property, or one rented by the night, is often written differently or not at all.

If you've been offered only a DP-1, ask why. Fixing one item (often the roof or the electrical panel) can open up a DP-3.

A real example. A homeowner was heading overseas for an extended stay and planned to rent the house out. Their only cover at the time was lender-placed insurance, which the mortgage company buys when your own policy lapses. It protects the lender's loan, usually costs far more, and does little or nothing for you. Some insurers also don't count it as prior insurance, so to them the house can look uninsured. To get a proper landlord policy, the underwriter asked for the update years on the roof, heating, plumbing and electrical, confirmation of breakers, an explanation of a past smoke claim (and what had changed since), and the fire department report. Have those answers ready before you ask for a quote, and the review moves much faster.

A gap in coverage can be a hard no. Some insurers won't write a rental at all if it has gone more than 30 days without insurance. That's not a "send us more details" review; it's a flat decline, however good the house is. If you're between tenants, selling, renovating or switching insurers, don't let the old policy end before the new one starts. If you've already had a gap, say so up front: some insurers will still quote, others won't, and it's better to know on day one.

Expensive homes can hit a ceiling. Many landlord programs cap how much rebuild cost they'll insure. In one case the owner's rebuild estimate came in just under the cap, but the underwriter rated the building as higher quality because of its materials, which pushed the estimated rebuild cost over the limit. That was a decline, with only one fallback offered: a DP-1 at actual cash value. Higher-end homes often need a different program built for higher values. That's normal, not a red flag; it's just a different door.

Every claim counts, even a denied one. The same owner had filed a roof claim that was denied, then had a public adjuster file again, and that one was paid. To the underwriter, that's two claims, and it triggered an "excessive claims" review. An open claim is worse: expect to be asked for a loss run or a letter from your current insurer confirming it's closed before anyone will quote. On the plus side, mention upgrades such as an impact-resistant roof. Some insurers credit them.

Age alone isn't a deal-breaker. A house built in the 1920s went to underwriting review and was approved the next day. It had been fully renovated: a new roof (2025), electrical (2024), a furnace (2015) and a water heater (2023). Its one past claim, a tree limb through the roof, had ended in a full roof replacement, with the work finished. A documented update beats a new build date.

The underwriter's checklist: have these ready

Year built, square footage, number of stories
Basement: none, unfinished, partly or fully finished? Sump pump?
Heating type and the furnace or boiler's age
Detached garage or other buildings, and their rough size
Update years: roof, electrical, plumbing, heating (plus the water heater)
Roof material and age
Breakers or fuses
Wood stove, space heaters, pool, trampoline or dogs on the property?
Who lives there: tenant, owner, or vacant (and for how long)
Your current insurance, and any days the property went uninsured
Each past claim, including denied ones: date, cause, amount paid, whether it was repaired or replaced, and whether the work is finished
For any claim still open: a loss run or a letter from your insurer showing its status
Upgrades worth mentioning: impact-resistant roof, new panel, water-leak sensors, monitored alarms

The bottom line

DP-1: cheapest, narrow cover, claims paid after wear and age.
DP-2: a longer list of covered causes, usually replacement cost.
DP-3: covers everything not excluded. The right choice for most rentals.
Any form: check for liability, check your limits against the real rebuild cost, and read your policy for your state's wording.

Have a question about your rental's policy? Ask in the LandlordSpeak Facebook group, or get a quote and we'll compare forms for you.

Common questions

Can I use a homeowners policy on a rental?

Usually not once a tenant lives there. Most insurers require a dwelling (landlord) policy for a home you rent out. Check with your insurer.

Is DP-3 always better than DP-1?

For most rentals, yes. It covers more causes of loss and usually pays replacement cost. DP-1 can fit an older property or a tight budget.

Does a landlord policy cover my tenant's belongings?

No. Your policy covers your building and your own property. Tenants need their own renters insurance.

Does a DP policy include liability?

Not always. Some insurers include landlord liability, and many add it only as an extra part or a separate policy. Check your declarations page.