DP-1, DP-2, and DP-3 Dwelling Policies

DP-1, DP-2, and DP-3 identify three common levels of dwelling-property coverage: basic, broad, and special. The Texas P&C exam outline specifically lists all three dwelling-policy forms. For study purposes, the main comparison is the way each form grants coverage for causes of loss: named perils identify covered causes, while an open-peril or special-form grant starts with direct physical loss and then applies exclusions and conditions. These labels are a framework, not a replacement for the policy wording.

A dwelling policy often insures a residential building that is rented out, used seasonally, kept as a second home, or otherwise does not fit a standard owner-occupied homeowners policy. NAIC describes dwelling fire policies as covering dwellings, other detached structures, and contents against specified perils; it says such a policy may also provide liability coverage and additional living expenses. TDI describes a dwelling policy more narrowly as coverage for the home structure from specified perils and contrasts it with a homeowners package that can include belongings, detached structures, personal liability, and loss of use. The exact product can vary, so the label “dwelling” does not itself say which protections have been selected.

When a dwelling form may be considered

A landlord insuring a long-term rental house is a familiar example. The owner has a financial interest in the building and may want insurance for the structure and selected landlord-owned property. The tenant has separate interests in personal belongings, liability, and temporary living expenses. A landlord’s property policy does not automatically cover a tenant’s belongings, and a tenant’s renters policy does not replace the owner’s building coverage.

Dwelling coverage can also be considered for a seasonal or secondary residence, a home that is vacant during renovations, or a property that does not meet an insurer’s eligibility rules for its homeowners product. Those are possible use cases, not automatic eligibility decisions. An insurer may instead offer a homeowners, landlord, commercial, vacant-property, or specialty form depending on occupancy, ownership, rental frequency, building condition, and underwriting. Short-term rentals create a distinct exposure: TDI cautions that homeowners insurance may not cover damage or injury associated with rental activity and says traditional landlord insurance may not be appropriate for short-term rentals.

A tenant generally looks to a renters policy, commonly called an HO-4 form in the standard homeowners family, for personal property and personal liability protections selected by the renter. Whether a renter needs temporary housing benefits or liability protection depends on the contract and their circumstances. A landlord’s DP form and a tenant’s renters form protect different interests; having one does not make the other redundant.

The three forms at a glance

The NAIC’s 2025 homeowners market-data definitions give this high-level classification: DP-1 basic is described as covering the dwelling structure and attached structures against specified named perils; DP-2 broad adds named perils; DP-3 special uses an all-risks description for the dwelling and attached structures except excluded causes. TDI’s historical Texas order for the 2003 USAA forms similarly distinguishes a named-peril DP 00 02TX form from an all-risk DP 00 03TX form. Both sources are summaries or descriptions tied to identified form classifications. An actual insurer’s policy may have modified terms, a state-specific version, or endorsements that change the comparison.

DP-1: basic named-peril coverage

The DP-1 is the basic form. A named-peril form covers a loss only when the cause fits a peril the contract lists, subject to conditions and exclusions. The insured must connect the damage to a covered listed cause; the absence of a named cause can be decisive. The NAIC form description gives fire, lightning, and windstorm as examples of named causes associated with the DP-1 category, but a producer should consult the form rather than rely on a broad list copied from a study chart.

Suppose a rented cottage’s roof is damaged in a wind event. The DP-1 question is not simply whether wind caused damage; the examiner must ask whether windstorm is listed for that policy, whether a separate endorsement or coverage option applies, whether an exclusion or deductible changes the result, and whether the damaged roof is covered property. A policy may use optional or state-specific features. If the question says wind coverage was not purchased or was excluded, the form label cannot restore it.

A basic named-peril structure is often a lower-breadth option than a broad or special form, but the consumer should compare the full offered policy. A lower premium can reflect narrower covered causes, lower limits, a larger deductible, different settlement terms, or property exclusions. The form number alone does not establish price, eligibility, or whether coverage is adequate for the property’s hazards.

DP-2: broader named-peril coverage

The DP-2 retains a named-peril approach but generally includes a broader list of covered causes than the DP-1. NAIC’s high-level description gives falling objects, weight of snow, and vandalism as examples of additional named perils. The key exam distinction is that “broader” means more causes appear in the covered list; it does not convert the contract into an open-peril policy.

For a named-peril question, ask whether the cause appears in the particular policy’s list. If a tree falls onto a detached garage, a broad-form summary may make falling objects a relevant cause, but the answer still depends on the policy’s definition of covered property, the tree’s cause of falling, applicable exclusions, maintenance duties, limits, and deductible. A listed peril is a necessary coverage step, not the only step.

Avoid memorizing a universal DP-2 peril list from an old edition or an unofficial chart. Forms can differ in edition, state, insurer, endorsements, exceptions, and amendments. The Texas Department of Insurance’s order adopting particular DP 00 02TX and DP 00 03TX forms noted that the DP 00 02TX was a broad named-peril form and compared its wording and endorsements with then-existing Texas dwelling forms. That order is useful evidence that state-specific variations matter, but its historical details are not current terms for every Texas dwelling policy.

DP-3: special form and the open-peril idea

A DP-3 is commonly called the special form. In a special or open-peril grant, the policy generally covers direct physical loss to covered property unless the cause or loss is excluded, restricted, or otherwise outside the grant. Instead of asking only whether the cause appears on a list, the analysis starts by asking whether there was direct physical loss to covered property and then tests the exclusions, conditions, limits, and exceptions.

The NAIC’s classification specifically describes the DP-3 special form as open-peril coverage for the dwelling and attached structures, subject to exclusions. TDI’s historical 2003 approval order describes the particular DP 00 03TX form as covering dwelling and other structures for direct physical loss with exceptions, and it calls the companion DP 00 02TX a named-peril policy. These descriptions support the broad exam contrast, but neither phrase guarantees every item is insured for every cause.

Property categories may have different coverage grants within one policy. A DP-3’s building coverage may be special-form while personal property remains subject to a named-peril list, a separate limit, or optional coverage. Do not infer that the contents automatically receive the same open-peril treatment as the dwelling. Read the form’s separate coverage sections and any endorsements.

Open-peril coverage also remains subject to exclusions. A special-form policy may exclude flood or earthquake, or exclude a loss because of wear, neglect, intentional conduct, or another listed cause. The exact exclusions and exceptions vary. “All risk,” a phrase sometimes used informally for open-peril coverage, does not mean every possible loss is insured. For a real claim or exam scenario, the wording—not the marketing shorthand—decides.

Property sections and what they protect

A dwelling policy may contain separate limits or coverage grants for the dwelling, other structures, personal property, and loss of use or rental value. The policy can also offer liability coverage or additional living expense coverage, but these features should not be assumed from the DP-1, DP-2, or DP-3 name. Read the declarations, coverage form, and endorsements to see which sections were actually purchased and who or what qualifies.

A landlord may own a refrigerator or stove that remains at the rental dwelling. A policy could cover selected landlord-owned contents if the terms and declarations include them, but a tenant’s furniture and laptop are a different property interest. The NAIC definition says dwelling-fire policies may cover contents and may also provide liability and additional living expenses; the optional phrasing matters. Do not assume that a basic dwelling form insures every movable item or provides the same personal-liability package as a homeowners contract.

How dwelling policies differ from homeowners forms

Homeowners coverage usually combines protection for an owner-occupied residence, personal property, liability, medical payments to others, and loss of use or additional living expense, subject to the chosen homeowners form. TDI describes a dwelling policy as a subset focused on the home structure and specified perils. NAIC likewise distinguishes dwelling-fire policies from homeowners policies, which provide a more comprehensive package of dwelling, other-structures, contents, liability, medical-payments, and additional-living-expense protections.

That does not mean every dwelling policy is only property coverage or every homeowners policy fits every owner-occupied home. Dwelling policies may add coverages, and homeowners policies can have rental, vacancy, business-use, or other restrictions. Product naming and insurance forms vary across insurers. For example, a homeowner who begins renting a room or the whole property should tell the insurer and ask whether the current policy permits that use. TDI warns that many homeowners policies will not cover or may limit coverage for rental property and advises discussing landlord insurance or a separate policy with the insurer.

The form names also do not map one-to-one to the HO-2, HO-3, or HO-5 levels. DP-1/2/3 identify dwelling forms; HO labels identify homeowners policy forms. Both families can use named-peril or open-peril concepts, but each contract has its own definitions, coverage parts, exclusions, limits, and settlement provisions. Do not transfer an HO provision into a DP form just because the coverage letter or peril label sounds familiar.

Loss settlement: do not stop at the form number

A covered loss can still be settled under different valuation rules. The policy may use actual cash value, replacement cost, a stated amount, a special limit, or a settlement method modified by an endorsement. The appropriate method can differ between the dwelling and personal property. A producer should check the loss-settlement section and declarations rather than assume a particular settlement basis from “DP-1,” “DP-2,” or “DP-3” alone.

For example, a landlord’s building is damaged by a covered fire. First determine whether the fire is covered under the form. Then identify the insured building and limit, apply any deductible, and read the valuation wording for repair or replacement. If the landlord also claims damaged appliances or furniture, confirm whether those items are covered property and whether a different limit or valuation rule applies. A broader peril grant does not guarantee replacement-cost payment; a replacement-cost provision does not make an excluded peril covered.

Settlement can also depend on repair timing, proof of completed repair, depreciation, coinsurance or insurance-to-value terms, ordinance or law coverage, and sublimits. These details vary. See our separate guides on actual cash value and insurance to value for those concepts; this comparison focuses on the form family rather than repeating valuation mechanics.

Worked examples

Example 1: A named cause is not listed

A landlord has a basic DP-1 policy and claims damage from a cause that the policy does not list. The correct first step is to find the causes covered under that specific DP-1 and determine whether an endorsement adds the cause. If no grant applies, the claim does not become covered merely because the property is insured or because a broad DP-2 or DP-3 might address the cause differently.

Example 2: A DP-2 lists the cause, but an exclusion may apply

A falling object damages a covered structure under a broad DP-2. Falling objects are an example of an additional named peril in the NAIC’s high-level classification. The candidate should still check whether the object and structure qualify, whether the loss meets the form’s cause definition, and whether an exclusion, deductible, or limit changes the result. “Named peril included” is not the same as “every resulting expense is payable.”

Example 3: The building and contents have different grants

A special-form DP-3 covers direct physical loss to the rental dwelling unless excluded, but a tenant’s television is damaged. The tenant’s property does not become covered just because the landlord’s building is insured on an open-peril basis. Check whether personal property is insured at all, who owns the television, which policy covers it, and what cause-of-loss grant applies to contents.

Example 4: Rental income is interrupted

A covered fire makes a rented unit unfit while repairs are underway, and the landlord loses rent. Look for a fair-rental-value or rental-income provision, the policy’s definition of unfit for occupancy, the period and amount limits, and any conditions. Do not call the lost rent “Coverage D” or assume the same numbering across every dwelling form. Some policies may label or structure loss-of-use benefits differently.

Common exam traps

• Treating DP-1, DP-2, and DP-3 as one policy with identical grants and only different prices.
• Calling DP-2 open-peril coverage. It is commonly classified as broad named-peril coverage; a cause must be on the applicable list.
• Assuming DP-3 covers every cause. Exclusions, conditions, limits, and exceptions still apply.
• Assuming DP-3’s building grant makes contents open-peril too. Property categories can have different grants and limits.
• Assuming all dwelling policies automatically include tenant contents, liability, medical payments, or additional living expense.
• Confusing fair rental value or rental income with the landlord’s liability coverage or with physical damage to the dwelling.
• Assuming every rental, vacation, vacant, or short-term rental property is eligible for a dwelling form. Underwriting and use restrictions vary.
• Using a general DP chart as if it were an insurer’s current Texas policy form. Check state versions and endorsements.
• Selecting a policy solely by the label or premium and overlooking exclusions, deductibles, settlement basis, sublimits, and occupancy conditions.
• Importing homeowners-form terms into a DP policy, or using a dwelling-form coverage letter without checking its definitions.

A reliable way to compare the forms

1. Identify the purpose and occupancy: owner occupied, long-term rental, seasonal, vacant, or short-term rental.
2. Identify the exact form name, edition, state version, declarations, and endorsements.
3. For each property category, note whether coverage is present and what limit applies: dwelling, other structures, personal property, rental value, additional living expenses, and liability.
4. Determine the cause-of-loss structure: named perils or special/open perils. If named, find the exact listed cause; if open, start with direct physical loss and test exclusions.
5. Check which insured owns the damaged item and whether another person’s policy may apply.
6. Read valuation, deductible, coinsurance or insurance-to-value, sublimit, and claims conditions separately from the coverage grant.
7. State the conclusion narrowly: identify what section may respond and what additional policy language is needed to determine payment.

Frequently asked questions

What is the difference between DP-1, DP-2, and DP-3?

They are commonly called basic, broad, and special dwelling forms. DP-1 and DP-2 use named-peril structures, with DP-2 listing a broader set of covered causes. DP-3 commonly uses an open-peril grant for the dwelling and other structures, subject to exclusions. The issued form may differ.

Is a DP-3 an all-risk policy?

It is often described as an all-risk or open-peril form for the dwelling or structures. That phrase is shorthand: exclusions, conditions, limits, and the separate treatment of contents still matter. Review the actual policy.

Does a DP-3 cover personal property on an open-peril basis?

Do not assume so. A form can give the building a special-form grant while treating contents under a different peril list or limit. Read the policy’s personal-property section and declarations.

Are DP policies only for landlords?

No. Rental dwellings are a common use, but a dwelling policy may also be considered for seasonal, secondary, or other homes that do not fit an insurer’s homeowners form. Eligibility and appropriate policy type depend on the facts and underwriting.

Does a dwelling policy include liability coverage?

It may, but liability coverage is not guaranteed by the DP form number. NAIC says a dwelling-fire policy may also provide liability coverage and additional living expenses. Confirm whether those coverages appear in the actual policy and declarations.

Does a landlord policy cover a tenant’s belongings?

Do not assume that it does. The tenant’s belongings are generally the tenant’s property interest, while the landlord policy primarily addresses the owner’s insured building and any selected landlord-owned property. The tenant should review a separate renters policy.

Prepare for the Texas P&C exam

The Texas Property and Casualty exam course helps you distinguish the named-peril structure of basic and broad dwelling forms from the special-form approach, then apply property limits and exclusions. For a real home, rental, or tenant policy, review the issued form and endorsements with the insurer or a licensed agent.