Dwelling Policies vs. Homeowners Insurance

You may choose to insure your property with a dwelling policy (the three major dwelling policies are commonly known as DP-1, DP-2, and DP-3). The major problem with a dwelling policy is that it does not automatically provide liability coverage, as homeowners insurance does. If you are trimming a tree on the property and a branch falls and damages a neighbor’s house, no coverage is provided for the damage, even though you are legally liable for it. You would have to purchase supplemental liability home insurance coverage for this exposure.

Also, none of the dwelling policies provide any theft coverage. This would need to be added by special endorsement, for which you have to pay an additional premium.

Why purchase a dwelling policy at all? The major reason for purchasing a dwelling policy is for a house that you own but do not occupy. Another reason: in order to qualify for homeowners insurance, there must not be more than two family living units and no more than two boarders or roomers per family.

If you move to an apartment, condominium, senior community, or other residence, and you rent out your home or allow relatives to live in it, you will no longer be eligible for homeowners insurance on that property and will want to consider a dwelling policy special form (DP-3) with a personal liability endorsement and premises liability (non-owner occupied dwelling) endorsement. This would provide you with HO-3 type coverage for your home.

Another reason you may end up with a dwelling policy is if your home is old, or poorly maintained (for example, if the plumbing or wiring does not meet current building standards), or you have a history of losses that is unacceptable, the insurance company may refuse to issue a homeowners policy and may offer you only dwelling coverage.