Answers for Arizona investors
What's the difference between DP-1, DP-2, and DP-3 policies?
DP-1, DP-2, and DP-3 are the three common dwelling policy forms for insuring a home you rent out. A DP-1 is the most basic and often pays actual cash value for a short list of causes of loss. A DP-2 covers a broader named list and often pays replacement cost. A DP-3 covers the building against every cause of loss it doesn't exclude, and is usually the broadest of the three.
Side by side
| Feature | DP-1 | DP-2 | DP-3 |
|---|---|---|---|
| Also called | Basic form | Broad form | Special form |
| Causes of loss on the building | A short named list, such as fire, lightning, and internal explosion, with others often added by endorsement | A broader named list, which can include causes like falling objects and some sudden water damage | Every cause of loss the policy doesn't exclude, often called open perils |
| Claim payment on the building | Often actual cash value | Often replacement cost | Often replacement cost |
| Loss of rents | Often optional | Often included or available | Often included or available |
| A common fit | A lower value or vacant home, or one where price matters most | A middle option | Many long term rentals |
Details vary by carrier, so the declarations page and the policy itself are what count.
Named perils and open perils
A named perils policy covers only the causes of loss it lists. An open perils policy covers every cause except the ones it excludes, which shifts the question from whether a cause is listed to whether it's excluded. That's why a DP-3 is often the broadest of the three.
Which form fits your rental
It depends on the property, its value and condition, and how much risk you want to keep. Many investors choose a DP-3 for a long term rental, while a DP-1 can fit a home waiting on a rehab or a sale. Carriers decide which forms they'll offer for each home, often based on the roof, the age of the home, and who lives there.
What the form doesn't change
None of the three forms covers flood, and most exclude wear and tear and damage that happens slowly over time. Liability and loss of rents depend on the limits you choose. Read the exclusions and the declarations page, not just the form name.
Quotes and coverage are subject to underwriting and carrier approval. Everhold Insurance is a licensed insurance agency in the State of Arizona. License # 3004512575.
Questions investors ask
Straight answers.
Is a DP-3 the same as an HO-3?
No. Both are broad special forms, but an HO-3 is written for a home the owner lives in, and a DP-3 is written for a home you rent out.
Does a DP-3 cover a vacant home?
Not fully. Like most dwelling policies, a DP-3 usually limits some coverages once the home has been vacant for a set period. If the home will sit empty, ask about vacant property coverage.
Can I get a DP-3 on an older home?
Sometimes. Carriers look at the roof, the age of the plumbing and electrical, and the home's condition, and some offer only a DP-1 on an older home. An independent agent can check several carriers.
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