The Dwelling policy is property-only coverage designed for homes that don't fit a standard homeowners policy — think rental houses, seasonal homes, or modest older dwellings. This guide breaks down the three main dwelling forms, the perils each one covers, and the Coverages A through E that make up the policy. The single most important takeaway for the exam: a basic Dwelling policy is property coverage only, with no built-in liability.

What the Dwelling policy is for

A Dwelling policy (often abbreviated "DP") insures a residential building and related property, but it is intentionally narrower than a homeowners policy. It is commonly used when:

• The home is a rental occupied by a tenant, not the owner.
• The dwelling is seasonal, secondary, or vacant part of the year.
• The home is older or lower-value and may not qualify for a homeowners policy.
• The owner wants to insure the structure but does not need a full homeowners package.

Because it focuses on the structure and contents, the dwelling policy can be issued where homeowners forms are unavailable, and liability or other coverages can be added by endorsement.

The three dwelling forms

There are three primary dwelling forms, and they differ mainly by how many perils they cover and how they value losses.

DP-1 (Basic Form)

• The most limited and least expensive form.
• Covers a short list of named perils, traditionally fire, lightning, and internal explosion, with Extended Coverage (EC) and Vandalism & Malicious Mischief (V&MM) available as added named perils.
• Often settles losses on an actual cash value (ACV) basis (replacement cost minus depreciation).

DP-2 (Broad Form)

• Covers a longer list of named perils than DP-1 (adding things like windstorm, certain water damage, falling objects, weight of ice/snow, and accidental discharge).
• Generally provides replacement cost coverage on the dwelling (when insured to value).
• A meaningful step up in protection from DP-1.

DP-3 (Special Form)

• The broadest dwelling form and the most common today.
• Provides open-peril ("all-risk") coverage on the dwelling and other structures — covered for all causes of loss except those excluded.
• Personal property is still covered on a named-peril (broad) basis.
• Typically settles dwelling losses on a replacement cost basis.

Covered perils by form

A quick way to remember the progression: each form adds protection.

• DP-1: starts with fire, lightning, internal explosion; the Extended Coverage perils add windstorm, hail, explosion, riot/civil commotion, aircraft, vehicles, smoke, and volcanic eruption; V&MM can be added.
• DP-2: includes the DP-1/EC perils plus broad-form perils such as falling objects; weight of ice, snow, or sleet; accidental discharge or overflow of water/steam; freezing; sudden tearing or bulging; and damage from artificially generated electrical current.
• DP-3: the dwelling and other structures are open-peril, so you look only at the exclusions to find what is not covered, while personal property remains broad named-peril.

The Dwelling coverages (A–E)

The Dwelling policy organizes protection into lettered coverages. Know what each one insures.

• Coverage A – Dwelling: the main residence structure, including attached structures (like an attached garage) and built-in components. Materials and supplies on the premises for building also fall here.
• Coverage B – Other Structures: detached structures on the premises such as a detached garage, shed, or fence. Coverage is often a set percentage of Coverage A (commonly around 10%).
• Coverage C – Personal Property: household contents and personal belongings. In a rental situation this typically covers the owner's property at the home, not the tenant's (the tenant would insure their own contents).
• Coverage D – Fair Rental Value: lost rental income if a covered loss makes the rented portion uninhabitable — it pays the rent the owner would have collected, minus expenses that don't continue.
• Coverage E – Additional Living Expense (ALE): the extra costs the owner incurs to maintain their normal standard of living elsewhere (lodging, meals) while the home is being repaired after a covered loss. Note that some dwelling forms limit ALE on the most basic form.

A helpful memory device: A = the house, B = the other buildings, C = the contents, D = lost rent, E = extra living costs.

No built-in liability — a key point

Unlike a homeowners policy, the Dwelling policy contains no liability coverage as standard. It is a property form. If the owner needs protection against bodily injury or property damage claims from others (for example, a tenant's guest who is injured), liability must be added by endorsement (such as a personal liability endorsement) or carried under a separate policy. Expect this to be tested directly.

Common endorsements

Because the base policy is narrow, endorsements are frequently added:

• Personal Liability and Medical Payments to Others — to add the missing liability protection.
• Theft coverage — basic dwelling forms may limit or exclude theft; it can be broadened by endorsement.
• Automatic Increase in Insurance — to keep the dwelling limit rising with inflation.
• Ordinance or Law — to help pay for rebuilding to current building codes after a loss.
• Dwelling Under Construction and Special Provisions — for specific situations.

Common exam traps

• No liability in the base policy: the dwelling form is property-only. Don't assume it works like homeowners.
• DP-3 personal property is NOT open-peril: only the dwelling and other structures are open-peril; personal property stays named-peril.
• Coverage C in rentals: typically the owner's property, since the tenant insures their own belongings.
• Fair Rental Value vs. Additional Living Expense: Coverage D replaces lost rent; Coverage E pays the insured's extra living costs — they are not the same.
• DP-1 valuation: often ACV, while DP-2 and DP-3 generally provide replacement cost.

Key terms at a glance

• Dwelling policy (DP) — property-only coverage for residences that don't fit homeowners.
• DP-1 / DP-2 / DP-3 — basic named-peril, broad named-peril, and special (open-peril dwelling) forms.
• Extended Coverage (EC) — a bundle of added named perils (wind, hail, smoke, vehicles, etc.).
• Coverage A–E — Dwelling, Other Structures, Personal Property, Fair Rental Value, Additional Living Expense.
• Open-peril — covered unless excluded (DP-3 dwelling).

Quick recap

• The Dwelling policy insures structures and contents for homes outside the homeowners market (rentals, seasonal, older homes).
• DP-1 covers a few named perils at ACV; DP-2 broadens perils and adds replacement cost; DP-3 makes the dwelling open-peril with broad named-peril contents.
• Coverages A–E = Dwelling, Other Structures, Personal Property, Fair Rental Value, and Additional Living Expense.
• Fair Rental Value (D) replaces lost rent; Additional Living Expense (E) pays the owner's extra living costs.
• A Dwelling policy has no built-in liability; liability and theft are commonly added by endorsement.