The dwelling policy insures a residential building and its contents without the liability package that comes with a homeowners policy. It fits one- to four-family dwellings that a homeowners form will not cover or that the owner does not live in: a house rented to tenants, a seasonal home, a home that does not meet homeowners underwriting. The figures below come from the ISO 2014 dwelling program (DP 00 01 basic, DP 00 02 broad, DP 00 03 special, all 07 14 editions) and ISO's Personal Liability Supplement (DL 24 01). Insurers may use their own forms, and state amendatory endorsements change some conditions, especially cancellation.

The big picture

• Property only. No dwelling form includes personal liability or medical payments to others. Add them with the Personal Liability Supplement (DL 24 01), which provides Coverage L Personal Liability and Coverage M Medical Payments to Others, or with a separate policy.
• Theft is not covered by any of the three base forms. ISO's broad and limited theft endorsements (such as DP 04 72) add it.
• An investor who rents a single-family house to a tenant insures the building on a dwelling form such as the DP-3; the tenant insures its own belongings on an HO-4.

The three forms

DP-1 perils

• Always: fire or lightning and internal explosion.
• Extended Coverage (EC), for added premium: windstorm or hail, explosion (replacing internal explosion), riot or civil commotion, aircraft, vehicles, smoke and volcanic eruption. The vehicles peril excludes vehicles owned or operated by the insured or a resident, and vehicle damage to fences, driveways and walks.
• Vandalism or malicious mischief (V&MM), a separate option. It excludes pilferage, theft, burglary and larceny and does not apply after the dwelling has been vacant more than 60 consecutive days.

DP-2 broad perils

The DP-1 perils plus: damage by burglars (but not theft itself), falling objects, weight of ice, snow or sleet, accidental discharge or overflow of water or steam, sudden and accidental tearing apart of heating, cooling or water systems, freezing, and sudden damage from artificially generated electrical current. These same broad perils apply to Coverage C in the DP-3.

DP-3 open perils on A and B

The DP-3 covers direct physical loss to the dwelling and other structures except what is excluded. Excluded among others: theft of property that is not part of a covered building; theft in a dwelling under construction; vandalism, malicious mischief and theft after more than 60 consecutive days of vacancy; freezing in a vacant or unoccupied dwelling unless heat was maintained or the water shut off and drained; constant or repeated leakage over weeks or months; wear and tear, mechanical breakdown, rust, mold, settling, and birds, rodents and insects.

Peril details tested often: windstorm covers interior rain, snow or dust damage only if wind or hail first makes an opening in the roof or a wall; smoke does not include agricultural smudging or industrial operations; volcanic eruption is a peril while earthquake stays excluded.

Coverages A through E

• Coverage A Dwelling: the dwelling on the described location used principally for dwelling purposes, attached structures, materials and supplies on or next to the location for building or repair, and (if not covered elsewhere) building and outdoor equipment that services the location. Land is never covered.
• Coverage B Other Structures: structures set apart by clear space (detached garage, fence). Not covered: structures used for commercial, manufacturing or farming purposes (with a limited storage exception), structures rented to someone other than a tenant of the dwelling unless used only as a private garage, and gravemarkers.
• Coverage C Personal Property: optional, at a limit the insured chooses. Covers property usual to a dwelling occupancy owned or used by the named insured and resident family members, on the described location; at the insured's request, property of guests or servants there. Not covered: money, bank notes, securities, deeds and similar papers (no sublimit as in homeowners; simply not covered), animals, motor vehicles, aircraft, and watercraft other than rowboats and canoes. For 30 days after the insured starts moving to a new principal residence the limit applies at each location in proportion to value.
• Coverage D Fair Rental Value: the rent lost when a covered loss makes a rented part unfit for use, less expenses that stop. A $1,200-a-month unit unusable for 3 months: $3,600 before noncontinuing expenses.
• Coverage E Additional Living Expense: the increase in living costs when a covered loss makes the part where the insured lives unfit to live in. The DP-1 includes fair rental value but not ALE; the DP-2 and DP-3 include both.
• Civil authority: if authorities bar use because an insured peril damaged a neighboring location, fair rental value or ALE is paid for no more than 2 weeks.

Other coverages

The dwelling forms also include debris removal, reasonable repairs to protect property after a loss, improvements, alterations and additions (a tenant may use up to 10% of Coverage C) and worldwide coverage for personal property up to 10% of Coverage C (which reduces Coverage C).

General exclusions

Ordinance or law (beyond the other coverage), earth movement (ensuing fire or explosion covered), water damage (flood, sewer and drain backup, sump overflow, subsurface water), power failure off premises, neglect, war, nuclear hazard, intentional loss (no coverage for any named insured or additional insured, even one who took no part) and governmental action. The DP-1 also excludes lawns, plants, shrubs and trees outside buildings.

Loss settlement and conditions

• DP-1: actual cash value.
• DP-2 and DP-3 buildings: replacement cost if the limit is at least 80% of full replacement cost at the time of loss; otherwise the greater of ACV or (limit ÷ 80% of replacement cost) × the replacement cost of the damage. Example: $300,000 replacement cost, $210,000 limit, $40,000 loss: $210,000 ÷ $240,000 × $40,000 = $35,000, or ACV if higher. Only ACV is paid until repairs are done, unless the loss is under 5% of the limit and under $2,500. The insured may take ACV and claim the replacement cost difference by notifying the insurer within 180 days.
• Personal property, awnings, appliances and non-building structures: ACV.
• The deductible applies per loss. Other insurance is pro rata with other fire insurance, and the policy is excess over service agreements.
• The mortgage clause protects the lender despite the insured's acts if the lender meets its own duties; at least 10 days' notice to the mortgagee of cancellation or nonrenewal.
• Recovered property: the insured may keep it and return the payment, or let the insurer have it.
• Cancellation (base form): 10 days' notice for nonpayment or during the first 60 days of a new policy; afterward only for nonpayment, material misrepresentation or substantial change in risk, with 30 days' notice for the last two. Nonrenewal: 30 days. State amendatory endorsements commonly change these.

Common endorsements

• Personal Liability Supplement (DL 24 01): Coverage L and Coverage M.
• Broad theft / limited theft coverage (DP 04 72 and companion forms).
• Automatic Increase in Insurance (DP 04 11): raises Coverage A by a selected annual percentage, prorated through the term.
• Dwelling Under Construction (DP 11 43): for a dwelling still being built.
• Water backup, ordinance or law increases and similar options where offered.

Common traps

• No liability and no theft in any base dwelling form.
• DP-3: open perils on A and B only; personal property is broad named perils.
• DP-1 pays ACV; DP-2 and DP-3 pay replacement cost under the 80% rule.
• DP-1 has fair rental value but not ALE; DP-1's 10% other structures coverage reduces Coverage A.
• Damage by burglars is covered in the broad perils; the property they steal is not.
• Money and securities are not covered at all under dwelling Coverage C.