Do you have a rental property or a home you don’t occupy? You might need a DP1 insurance policy.

DP1 policies are the most basic form of insurance available in the United States for rental properties or homes that are vacant most of the time. You might also hear it called Dwelling Fire Form 1 insurance. These policies are suited for properties that aren’t eligible for typical homeowners policies.

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What Do DP1 Policies Cover?

A DP1 policy is a very basic insurance policy. It’s a named-perils policy, which means that the only perils it protects against are specifically named in the policy form. Coverage is restricted to the perils named in the policy.

DP1 policies protect against damage from some common perils, including:

    • Fire and lightning
    • Internal and external explosions
    • Windstorms
    • Hail
    • Riots and civil commotions
    • Smoke
    • Aircrafts
    • Vehicles
    • Volcanic explosions

But it won’t protect from all common perils. Some DP1 policies protect against vandalism and malicious mischief, but many don’t, so it’s important to read your policy to see whether you’re protected against vandalism. Vandals are a leading cause of property damage in vacant homes.

DP1 policies almost never cover freezing pipes. Freezing pipes can cause major water damage and create the need for very expensive repairs. If you decide to carry a DP1 policy on your vacant home, be sure to winterize the property when it’s vacant. This lowers the risk of freezing pipes in the event of a cold snap.

Critically, DP1 policies also don’t cover loss of rents. If your property is a rental, a DP1 is absolutely not for you.

The Difference Between DP1, DP2, and DP3 Policies

There are two other types of dwelling fire policies—DP2 and DP3 policies.

Like a DP1 policy, a DP2 policy is also a named-perils policy, but the list of covered perils is longer than for a DP1.

A DP3 policy is an open perils policy, which means they insure against all perils except those specifically excluded in the policy. They’re usually more expensive than a DP1 or DP2 policy, but they cover you against more incidents.

Another key difference between the two policies is the way they pay for the damages to your property. DP1 policies are typically actual cash value (ACV) policies. Because the older your vacant home is, the less it is worth, the insurance company will factor depreciation into the amount you’re awarded after a claim.

DP2 and DP3 policies are typically replacement cost insurance, which means the insurance company won’t deduct depreciation from the amount of damages you’re awarded.

DP Policies: Reimbursement in Practice

What does this mean in practice? Imagine that a storm with high winds badly damages the roof on your vacant home or rental property, and you have to replace it. If you have a DP1 policy, the insurance company will consider how old your roof is before deciding how much to give you to replace it. It may cost you $10,000 to repair the roof, but you may only receive $5,000 from the insurance company because the roof is so old that the materials used in it have depreciated.

However, if you have a DP2 or DP3 policy, you’re more likely to receive the $10,000 that it costs to replace the roof because they’re not deducting depreciation from your award amount. You’d only be stuck paying the deductible you agreed to pay.

DP1 policies are usually the cheapest option on the market for rental homes and non-owner-occupied structures. This is partially because they don’t cover as much as the other options. DP3 policies are usually the most expensive, but they also cover more.

When shopping for insurance for a property you don’t live in, it’s best to look at all the factors that can impact which choice is best for you. These include the price, which perils are covered, and the type of insurance (actual cash value vs. replacement cost).

Do I Need a DP1 Insurance Policy?

DP3 policies are usually the preferred landlord insurance for people with rental properties, but there are some situations where a DP1 policy is the best choice. Do any of these situations apply to you?

    • You own a property that’s sitting vacant.
    • You own a rental property and you’re also on a very tight budget.
    • You moved to a different house and now you’re trying to sell the one you used to live in.
    • You inherited a house after someone passed away, and it’s sitting empty while you’re trying to sell it.
    • You have an investment property, but you don’t currently have any tenants, and you think it might be more than a month until a new tenant moves in.

It can be tempting to save money by letting these homes go uninsured, but you must invest in vacant home insurance as long as you own a vacant property. If damage occurs, you could be on the hook for tens of thousands of dollars in repairs. One of the biggest risks affecting vacant homes is the fact that no one is there to find small issues that have the potential to turn into bigger ones, including:

    • People seeking to vandalize or steal from the vacant home
    • Squatters
    • Lightning
    • Fire
    • Undetected water leaks

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Frequently Asked Questions - DP1 Policy

Does my DP1 policy cover vandalism and malicious mischief?

Vandalism and malicious mischief are included in standard DP1 policies, but many DP1 policies out there don’t include it as a named peril. Check your insurance coverage to see if your policy covers vandalism.

Can I buy a DP1 policy for the home I live in?

DP1 policies are similar to HO-3 policies, but they’re for different situations. HO-3 policies are basic homeowners insurance policies. DP1 policies are specifically for properties that the homeowner is not occupying. This is because owner-occupied homes and rental or vacant properties have different risks.

For example, you’re more likely to notice water damage from a leaking pipe in the house you live in than you are in a home that sits vacant most of the time. There are also some differences between HO-3 and DP1 coverage; HO-3 policies usually cover your personal property inside your home, but DP1 policies usually don’t.

What doesn’t a DP1 policy cover?

DP1 policies don’t cover any perils that aren’t specifically named in the policy. This includes some common sources of damage, such as water, which accounts for many homeowners insurance claims. They also usually don’t cover damage from theft, freezing pipes, appliances, falling objects (like trees), or power surges.

DP1 Polcies: The Bottom Line

No matter why your home is vacant, there’s an insurance policy out there that can meet your needs. Use Insurify to compare homeowners insurance quotes and find an affordable policy that meets your needs.

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Updated June 28, 2021

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