Dwelling fire policies: DP-1, DP-2 and DP-3

A dwelling fire policy insures a building and, usually, the owner's belongings in it, without the household package that a homeowners policy adds. ISO publishes it in three versions: the DP-1 (basic form, DP 00 01) covers a short list of named perils, the DP-2 (broad form, DP 00 02) a longer list, and the DP-3 (special form, DP 00 03) covers the dwelling against any direct physical loss that is not excluded. None of the three includes personal liability coverage unless you add it.

The name misleads. Despite "fire" in the title, a DP-3 is a broad property policy; the label survives because fire is the one peril every form in the series covers. A basic version is built up by adding perils one at a time, which is why two quotes for the same house can differ so much.

Who uses a dwelling policy

Dwelling policies are written for properties that do not fit a homeowners form because of how they are used. The North Carolina Department of Insurance says a dwelling fire policy "may be beneficial for" vacation homes, vacant homes, seasonal homes, secondary homes, rental properties and older homes, and describes the coverage as very similar to a homeowners policy, with the difference being how the property is used (NCDOI). The common cases:

• A house you rent to a tenant for a year or longer. A homeowners form assumes you live there. landlord insurance: what a rental property policy covers covers the options, and a DP form with a liability supplement is one of them.
• A vacant or nearly vacant house. Many homeowners forms restrict coverage after a stretch of vacancy. See vacant home insurance: when you need it and what it covers for how vacancy clauses work.
• A seasonal or secondary home that does not meet a carrier's primary-residence rules. The related second-home guide covers the alternatives.
• A home the standard market will not write as a homeowners policy, including some older properties, and homes insured through a state plan.

Florida's Citizens Property Insurance Corporation describes its DP-3 as the policy for tenant-occupied properties and for properties that may not qualify for its HO-3 or HO-8, and says liability is available to add rather than included (Citizens, read October 2026). A tenant's own belongings are generally not covered by your policy; the tenant needs an HO-4.

DP-1, DP-2 and DP-3 side by side

The table follows the NCDOI summary of the forms and the IRMI definition of the ISO dwelling forms, which says they "do not insure liability or medical payments exposures" (IRMI). Carriers file their own versions, and the declarations page lists which coverages you have. Read your form number against the table before you rely on it.

What the perils mean in practice

The DP-1 covers fire, lightning and internal explosion. Windstorm, hail, smoke and similar events come back only if a premium for extended coverage appears on the declarations, and vandalism is a further option. A burst pipe, an overflowing appliance or a tree limb through the roof may fall outside a bare DP-1.

The DP-2 keeps the named-peril approach but lists more. The NCDOI notes it covers the DP-1 perils plus vandalism and malicious mischief, windstorm or hail and burglary damage. "Burglary damage" is the damage a burglar does to the building, not the stolen property. Theft of contents is generally an endorsement. NCDOI adds that accidental discharge or overflow of water is covered under the DP-2 "as long as the building was not vacant for 60 days before a loss."

The DP-3 treats the building as an open-perils risk, with the usual exclusions: neglect, intentional loss, mold, rust and rot, wear and tear, and earth movement. Belongings stay on a named-perils list. For the difference between the two approaches, read named perils vs open perils coverage.

How a dwelling policy pays

The valuation clause is where the three forms differ most in dollars. NCDOI says the DP-1 settles claims on an actual cash value basis, with replacement cost available for an additional cost, while DP-2 claims typically settle on a replacement cost basis. Reference summaries of the ISO DP 00 03 describe the same structure: replacement cost on the building if you insure it to at least 80% of replacement cost, with contents usually paid at actual cash value unless you buy a replacement cost endorsement.

Say a kitchen fire in a rental house causes $40,000 of covered repairs, and the damaged parts are old enough that depreciation takes $12,000 off. (These are made-up numbers.) On an actual cash value basis you collect about $28,000 less the deductible. On a replacement cost basis you collect up to $40,000 less the deductible once the work is done, often in two payments: the actual cash value first, then the held-back depreciation. replacement cost vs actual cash value: why it matters covers those mechanics.

Ordinance-or-law coverage, which pays the extra cost of rebuilding to current code, is typically excluded from the base form and has to be added separately; the FAIR Plan sample policy below lists it among its general exclusions. If a code upgrade is likely after a loss on an older building, ask for it by name; ordinance or law coverage: paying to rebuild to code explains it.

What you must add

Three gaps catch owners most often.

1. Liability. If a tenant's guest slips on your steps, the DP form pays nothing for the injury or your defense. You need either a liability endorsement attached to the dwelling policy (ISO's is the DL 24 01 personal liability supplement) or a separate landlord liability policy. Whether your policy carries one will show on the declarations page.
2. Theft. The bare DP-1 and DP-2 forms do not cover stolen contents, and the burglary damage in the DP-2 does not either. Landlords furnishing a unit should ask what theft coverage costs.
3. Loss of rents. The DP forms include fair rental value, the rent you lose while a covered loss makes the unit unfit to live in. In the basic form, a rental-value payment typically comes out of the dwelling limit; in the broader forms it has its own limit. Check the figure on your declarations page. If you live in part of the building, additional living expense applies instead. See fair rental value for how the two differ.

ISO wording is a template, not a mandate. Not every carrier sells all three forms: Steadily, a landlord specialist, names only DP-1 and DP-3 on its policy-type pages. A carrier can write stricter terms, particularly on vacancy and roof age, and a few carriers write only landlord-specific forms that look different from the ISO DP series. Treat the policy you receive as the controlling document.

Dwelling forms as the FAIR plan product

State insurers of last resort often write dwelling-style policies, sometimes the only product they offer. The California FAIR Plan's dwelling policy is a named-peril form covering fire or lightning, internal explosion and smoke, with extended coverage and vandalism or malicious mischief as options (FAIR Plan). The sample policy the FAIR Plan posts (form CFP 00 01, edition 05/2026, listed as effective March 17, 2026) pays actual cash value on the building, measured by fair market value after a total loss, unless the declarations show a dwelling replacement cost option, which applies an 80% insurance-to-value test. Its vandalism peril stops applying when the dwelling has been vacant or unoccupied for more than 30 consecutive days. The California Department of Insurance states that the FAIR Plan offers no liability coverage and no coverage for perils such as burglary, and suggests considering a difference in conditions policy alongside it (CDI).

That gap is why Difference in conditions policies to pair with a FAIR plan exist as a companion product. If a state plan is your only source, FAIR plans explained: the insurer of last resort for homes covers how the plans work, and the Florida and California state guides describe their respective plans.

What the market looks like

Dwelling fire policies are a small slice. In the NAIC report on 2023 data, published July 2026, the dwelling fire form had about 2.1 million house-years of exposure, roughly 2% of the 102 million house-years in the report. The average premium was $1,019, compared with $1,737 for HO-3 policies (NAIC). Do not treat the gap as a bargain. A dwelling policy covers less, the properties and limits differ, and the averages are not like for like.

Choosing a form

1. Write down the property's use: tenant-occupied, vacant, seasonal or owner-occupied but ineligible for a homeowners form.
2. Ask the agent which ISO or carrier form is being quoted and whether it is named-perils or open-perils for the building.
3. Ask how the building is paid: actual cash value or replacement cost, and what the insurance-to-value percentage is.
4. Price liability and, if the unit is furnished, theft.
5. Ask what happens if the property sits vacant, and for how many days.
6. Confirm what your lender requires. For loans Fannie Mae buys, its Selling Guide (B7-3-02, August 5, 2026) says policies on 1-4 unit properties "should be written on a 'Special' coverage form or equivalent," which points toward open perils on the building and away from a bare DP-1. The which homeowners policy form fits your home? and the HO-1 through HO-8 guide help you compare these against a homeowners form.

Key takeaways

• A dwelling fire policy insures a building and its contents, not a household. It fits rentals, vacant or seasonal homes, and properties that do not qualify for a homeowners policy.
• DP-1 is basic named perils and usually pays actual cash value, DP-2 is broader named perils, and DP-3 covers the building against all unexcluded risks, with belongings still on a named list.
• Liability and medical payments are not included in any of the three forms; add a liability supplement or a separate landlord liability policy.
• Theft, vacancy limits and roof or code upgrades are the usual gaps. Ask about each by name.
• Some state plans sell dwelling-style policies with limited perils and no liability; a difference in conditions policy can fill part of the gap.