Dwelling Fire Policy – Dwelling Fire Insurance

For some clients, a dwelling fire policy is the the proper alternative to a homeowners policy.  Don’t be mislead, dwelling fire insurance covers much more than just fire.  But this kind of policy isn’t for everyone, so here are the dwelling fire basics.

A dwelling fire policy may be beneficial for

• Vacation homes
• Vacant homes
• Seasonal homes
• Secondary homes
• Rental properties of all kinds (long-term, weekly, monthly, or seasonally)
• Older homes

Dwelling Fire Insurance Basics

The coverage is very similar to a homeowners policy, with one significant difference – a dwelling fire policy is created for someone that does not make the property their primary residence. If you need to insure a rental or investment property, a dwelling fire policy is a smart decision.

Differentiating the Dwelling Policy Types

Just like homeowners insurance, there are several different types of dwelling fire policies. DP-1 is known as the basic form, DP-2 is known as the broad form and DP-3 is known as the special form. Each offers a significantly different level of coverage.

DP-1: Basic Form

The basic form is a “named perils” policy (that is, the policy explicitly names what perils are covered) and covers losses due to:

• Fire
• Lightning
• Internal explosion, such as a stove or water heater

There are two optional endorsements available with DP-1 coverage:

• Vandalism and malicious mischief
• Extended coverage, which includes damages due to the following:
  • Hail or windstorms
  • Other explosions
  • Riot/civil commotion
  • Aircraft or vehicles
  • Smoke
  • Volcanic eruptions

Claims under a DP-1 dwelling fire policy are settled on an actual cash value (ACV) basis by default—however, you can sometimes opt for a replacement cost value (RCV) policy for an additional cost.  This form is usually the choice (and possibly only option) for vacant homes or properties.

DP-2: Broad Form

The dwelling fire policy broad form is also a “named perils” policy and covers the same perils as the basic form, with the following additions included:

• Extended coverage (see above)
• Vandalism and malicious mischief
• Burglary damage
• Weight of ice and snow
• Glass breakage (as long as the building was not vacant for 60 or more days before a loss)
• Accidental discharge or overflow of water or steam (as long as the building was not vacant for 60 days before a loss)
• Falling objects (such as trees)
• Freezing of pipes
• Electrical damage
• Collapse (due to decay, vermin or insect damage, or other perils)
• Tearing apart, cracking, burning, bulging

Unlike the DP-1 form, the DP-2 form settles claims on a replacement cost basis.

Loss of rent coverage may be included with a DP-2 policy. If tenants are forced to move out while the landlord repairs the dwelling due to a covered loss, this coverage would reimburse the landlord for rent lost during the process.

DP-3: Special Form

The DP-3 form is the most comprehensive dwelling fire coverage available. It is an “open perils” or “all risk” policy, which means real property (dwelling and other structures) will be covered for all types of damage, except those exclusions named in the policy. However, damaged personal property (all the items inside the dwelling and other structures) is covered on a “named perils” basis.

DP-3 form exclusions vary, but will typically be some or all of the following:

• War
• Water damage
• Laws and ordinances
• Neglect
• Intentional loss
• Mold, rust, rot and other gradual losses
• Certain types of water damage
• Earth movement, such as earthquakes