1. Forms
2. DP
3. DP-00-01

Dwelling Property 1 - Basic Form (DP 00 01)

The Dwelling Property 1 - Basic Form (DP 00 01), often referred to as DP-1, is a foundational insurance policy that provides named perils coverage for dwellings, other structures, and personal property. This means the policy only covers losses caused by perils specifically listed in the policy. It is generally considered the most limited of the dwelling property forms. The DP-1 is typically used for properties that may not qualify for broader coverage under a standard Homeowners policy, such as rental properties, vacant homes, seasonal or secondary homes, and older homes. Unlike most homeowners policies, dwelling policies like the DP-1 typically do not automatically include liability coverage, though it can sometimes be added by endorsement. Claims under a DP-1 are usually settled on an Actual Cash Value (ACV) basis, meaning depreciation is factored into the payout, though Replacement Cost Value (RCV) may be available for an additional premium.

Classes of Business and Coverage Scenarios

The DP 00 01 is versatile and applies to several specific scenarios:

• Rental Properties: This is a primary use for the DP-1, covering dwellings rented to others where the owner does not reside. For example, a landlord owning a single-family home or a duplex rented out to tenants.
• Vacant Properties: Homes that are unoccupied for an extended period (e.g., more than 30 or 60 days) often require a DP-1 policy, as standard homeowners policies may restrict or deny coverage for vacant dwellings. An example would be a house that is for sale and empty, or a property undergoing a lengthy renovation where no one is living.
• Seasonal or Secondary Homes: Dwellings used periodically, such as vacation homes, may be insured under a DP-1.
• Older Homes or Properties with Higher Risk: Dwellings that don't meet the underwriting criteria for broader homeowners forms due to age, condition, location, or lower value might be eligible for a DP-1. This could include a well-maintained older home with outdated systems or a property with some un-repaired maintenance issues.
• Mobile or Trailer Homes: In some cases, permanently placed mobile or trailer homes may only be eligible for a DP-1 policy, often with specific restrictions like a one-year policy period and a permanent location described in the policy.
• Dwellings Under Construction: Properties in the course of construction can sometimes be covered by a DP-1.
• Properties Ineligible for Homeowners Policies: This form can be used when a property doesn't meet the eligibility for a Homeowners policy due to factors like occupancy (e.g., more than five roomers or boarders per unit), or when coverage is desired for limits lower than the minimums for homeowners policies.

Special Considerations

There are several important factors to keep in mind when considering the DP 00 01:

• Named Perils: The DP-1 only covers perils explicitly listed. The most basic coverage is typically for fire, lightning, and internal explosion. Extended Coverage (EC) perils (such as windstorm, hail, explosion, riot, aircraft, vehicles, smoke, and volcanic eruption) and Vandalism or Malicious Mischief (VMM) can often be added for an additional premium if shown on the Declarations page. It's crucial to understand that if a peril is not named, it's not covered. For example, water damage from burst pipes or theft of personal property are often not covered unless specifically added by endorsement.
• Actual Cash Value (ACV) Settlement: Losses are typically settled at ACV, which deducts for depreciation. This means the insured may receive less than the full cost to replace damaged property. Some insurers may offer an endorsement for Replacement Cost Value (RCV) for an additional premium.
• Limited Coverage for Personal Property: While Coverage C for personal property is available, it may not be automatically included or may have lower limits compared to homeowners policies. There's worldwide coverage for personal property up to 10% of the Coverage C limit, but this doesn't apply to guests' or servants' property or rowboats/canoes, and payment reduces the Coverage C limit.
• Fair Rental Value (Coverage D): The DP-1 provides Coverage D – Fair Rental Value, which covers lost rental income if a covered peril makes the rented portion of the property uninhabitable. Under some versions of the form, this coverage may be limited to 20% of the Coverage A (Dwelling) limit and may reduce the Coverage A limit by the amount paid. Older versions might limit this to 10% of Coverage A and pay 1/12th of that amount per month.
• Additional Living Expense (Coverage E): Coverage E – Additional Living Expense is typically not included in the standard DP-00-01 form but may be available by endorsement (e.g., DP 04 14).
• Other Structures (Coverage B): Coverage for other structures (like detached garages or sheds) is usually a percentage of Coverage A (often 10%). In the DP-1, using this limit may reduce the Coverage A amount available for the rest of the loss, unlike in DP-2 and DP-3 where it's typically additional insurance.
• Exclusions: Common exclusions include damage to lawns, plants, shrubs, or trees outside of buildings (though this can sometimes be added by endorsement like DP 04 17). Other standard property exclusions like ordinance or law, earth movement (except ensuing fire/explosion), water damage (flood, sewer backup, below-surface water), power failure off-premises, neglect, war, nuclear hazard, and intentional loss also apply. The Vandalism or Malicious Mischief peril, if added, often excludes damage to glass (other than glass building blocks) and loss by theft (except building damage by burglars).
• Vacancy Clause: Coverage for Vandalism or Malicious Mischief, if added, may be suspended if the dwelling has been vacant for a specified period (e.g., more than 30 or 60 consecutive days) before the loss. However, a dwelling under construction is not typically considered vacant.
• Burden of Proof: With a named perils form like the DP-1, the burden of proof is on the insured to demonstrate that the loss was caused by a covered peril.

Key Information for Agents and Underwriters

Agents and underwriters should consider the following when working with the DP 00 01:

• Pricing: The DP-1 is generally the least expensive dwelling fire policy option due to its limited coverage. This can make it an attractive option for budget-conscious clients, but the coverage gaps must be clearly explained.
• Risk Assessment: This form is often used for higher-risk properties. Underwriters will carefully assess factors like the age and condition of the dwelling, maintenance issues, occupancy (rental, vacant), location, and the applicant's loss history. For example, an older home might be acceptable for a DP-1 but not a DP-3 (Special Form). FAIR Plans in various states often utilize the DP-00-01 for properties unable to obtain coverage in the voluntary market.
• Coverage Gaps: The most significant aspect for agents is to clearly communicate the coverage limitations of a named perils, ACV policy. Clients need to understand what is not covered. Common gaps include theft of personal property and many types of water damage. Agents should discuss available endorsements to broaden coverage where possible and appropriate, such as adding Extended Coverage, Vandalism and Malicious Mischief, or potentially upgrading to a DP-2 or DP-3 if eligibility criteria are met.
• Underwriting Guidelines: Insurers will have specific underwriting guidelines for DP-1 policies. These may include maximum coverage limits, requirements for property condition (e.g., acceptable electrical systems), and rules for properties under construction or renovation. For instance, a property under rehabilitation might only be eligible for a DP-00-01. Some insurers may require a replacement cost estimator to ensure adequate coverage if broader forms (DP-2, DP-3) are considered.
• Eligibility: The DP-1 can be suitable for dwellings with up to four units. It can also be used for dwellings with no more than five roomers or boarders. Certain incidental business occupancies might be permissible by endorsement.
• Endorsements: Several endorsements can modify the DP-00-01. Besides adding perils, endorsements might address ordinance or law coverage (e.g., DP 04 74 to cover increased construction costs due to building codes), or add coverage for trees, shrubs, and plants (e.g., DP 04 17). The Modified Loss Settlement form (DP 00 08) offers the same perils as the DP-00-01 but excludes Coverage E (Additional Living Expense).
• Declarations Page (DP DS 01): The Dwelling Property Policy Declarations (DP DS 01) is a related form that specifies the named insured, location, policy period, coverages, limits, and premiums, tailoring the DP 00 01 to the specific risk.

Disclaimer: This is a general description. Policy language can vary by insurer and state. Always refer to the specific policy form and endorsements for complete details.