What is Dwelling Insurance?

What's the difference between dwelling and homeowners insurance, and how much dwelling insurance do you need?

Dwelling insurance: definitions and details

Sometimes a property doesn’t need a full homeowners insurance policy. A hunting cabin, for example, might require different coverage than your primary home. Similarly, a beachfront vacation home or a rental property might have its own insurance needs. In these instances, the best coverage option could be a dwelling policy, especially if the owner does not reside at the covered property. 

A dwelling policy offers relatively flexible coverage. Dwelling insurance allows you to pick and choose the various coverages to apply to your property. A standard dwelling policy only covers the dwelling itself, with other coverages as optional add-ons. Liability coverage, for instance, doesn't come standard but can be added via an endorsement. 

Have a look at the information below to find out more about dwelling policies and whether or not they provide the coverage you need. 

  1. Dwelling policy vs. homeowners policy
  2. What kinds of buildings are eligible for a dwelling policy?
  3. Dwelling policy coverages
  4. What are the different types of dwelling policies?
  5. Endorsements to a dwelling policy
  6. What does a dwelling policy not cover?
  7. Dwelling insurance coverage: what to consider

 

How is a dwelling policy different from a homeowners policy? 

A dwelling policy is entirely different from homeowners insurance. It is often used to cover a house or dwelling not occupied by its owner. Dwelling policies don’t go as far to cover you or your property as do typical homeowners policies, which have greater levels of built-in coverage. Dwelling insurance policies are typically designed for those who own properties other than where they live. Dwelling insurance may also be a good option for a landlord who owns rental properties. 

Dwelling policies may cover properties considered too risky for standard homeowners policies, which is one of the reasons they typically don't provide robust coverage. This form of coverage is not to be confused with the dwelling coverage that comes with a homeowners policy. The “dwelling” in a homeowners policy refers to the actual house or primary structure in which the owner lives. 

 

What kinds of buildings are eligible for a dwelling policy? 

The following structures are those most commonly insured via dwelling policy: 

  • Vacation homes
  • Rental properties
  • Older homes
  • Certain mobile homes that are permanently located
  • Dwellings currently under construction

 

Dwelling policy coverages

Many different coverages are available as part of a dwelling policy. While levels of coverage differ depending on the level of policy, many of these coverages must be added onto the standard coverage:

  • Coverage A (Dwelling): Covers the main dwelling, including attached garages or carports.
  • Coverage B (Other Structures):Covers detached structures on the property.
  • Coverage C (Personal Property):Covers personal belongings. If the covered dwelling is used as a rental, the tenant’s property is not covered.
  • Coverage D (Fair Rental Value):Covers rental properties, ensuring a property owner receives compensation if a rental property is deemed unfit for normal use. 
  • Coverage E (Additional Living Expenses): Covers the cost of living expenses should your property become uninhabitable due to a covered loss. This coverage is not standard on the basic form (DP-1) but can be added as an endorsement. 

Personal liability supplements that can be added:

  • Coverage L (Personal Liability):Similar to the liability coverage that comes with homeowners policies. This covers damages caused by bodily injury or property damage.
  • Coverage M (Medical Payments):Covers the medical expenses of anyone injured at the covered dwelling, harmed by the insured party, or injured by an animal cared for by the insured. 

 

What are the different types of dwelling policies?

Like homeowners insurance policies, dwelling policies come in different tiers of coverage. These include DP-1 (basic), DP-2 (broad), and DP-3 (special), with DP-3 providing the most coverage. 

 

What does a DP-1 policy cover?

DP-1 is the term for a dwelling policy tier that covers your home and personal property against named perils. It covers the dwelling, other structures, and personal property at actual cash value, which factors in depreciation when considering your claim payout. This means your payout will be less than you originally paid for the covered items. 

 

Insurance Terminology

Property Covered Against

Contents Covered Against

DP 1 - Basic Form

Named perils

Named perils

 

A dwelling (DP-1) insurance policy is often called a named peril policy. A peril is a cause of loss, such as fire or wind. Each covered peril is specified in the policy documents. Below are the named perils covered by a DP-1 policy.

  • Lightning 
  • Fire (fireplaces excluded)
  • Internal explosions

 

Extended coverage: Coverage for these perils can be obtained at additional cost:

  • Wind
  • Civil Unrest
  • Riot
  • Hail
  • Aircraft
  • Vehicle
  • Volcano
  • Smoke*
  • Explosion**

You can add vandalism and malicious mischief, often helpful for properties that sit vacant for many months of the year. It’s important to note, however, that this coverage doesn’t apply to any building that has been vacant for 60 consecutive days or more. This is different than unoccupied, with vacant being defined as “completely empty” of people and property.

Learn more about vacant home insurance.

*smoke damage caused by fireplaces is not covered.

**this expands from “internal explosion” to cover external explosions as well. 

 

What does a DP-2 policy cover?

A DP-2, though more robust than DP-1, is still fairly basic. It does, however, cover the dwelling and other structures at replacement cost, which reimburses you for the full amount required to replace an item at market value. Personal property coverage remains at actual cash value. 

 

Insurance Terminology

Property Covered Against

Contents Covered Against

DP 2 - Broad Form

Named perils

Named perils

 

DP-2 covers all of the basic perils (including DP-1 extended coverage and vandalism and malicious mischief).

It also covers the following perils:

  • Burglary damage
  • Collapse
  • Tearing asunder
  • Damage from ice and snow
  • Glass breakage
  • Falling objects
  • Frozen objects
  • Accidental water discharge
  • Electrical current

 

What does a DP-3 policy cover?

A DP-3 policy provides the most coverage of any dwelling policy. It is an open peril policy as far as the insured dwelling and other structures go. They will be covered against all perils except those that explicitly listed in the policy. Your personal belongings are covered on a named peril basis and are covered against the same perils listed in the DP-2 policy. DP-3 insures the dwelling and other structures at replacement cost while personal belongings are covered at actual cash value. 

 

Insurance Terminology

Property Covered Against

Contents Covered Against

DP 3 - Special Form

Open perils

Named perils

 

Dwelling policy endorsements

One of the attractive features of dwelling insurance policies is that they allow you to cherry-pick the types of coverage that you need. Along with the coverages listed above, here are some of the other endorsements that can be added:

Dwelling under construction: If your dwelling is still being built, you can add this endorsement to protect it. Policy limits increase as the construction progresses. 

Mobile home: Coverage for a mobile home can be added to a dwelling policy. However, this endorsement stipulates that the mobile home be permanently located on a secure foundation. 

Automatic increase in insurance: This endorsement allows you to guard against inflation by increasing the amount of insurance coverage in annual increments. 

Theft coverageThis coverage doesn’t come standard in any dwelling policy, but can be added through endorsement. There are two different endorsements available, broad theft coverage which is used if the dwellings that an owner occupies and limited theft coverage which is used for dwelling in which the owner does not live. Limits may apply to very valuable personal property. Find below some standard limits.

Sub-limit
Property
Limitations
$200
Money, gold, coins
 
$1,500
Jewelry, watches, furs
Theft-only
$1,500
Watercraft, trailers
Theft-only
$2,500
Firearms
 
$2,500
Silverware
 
$2,500
Business property
On-premises
$500
Business property
Off-premises
Varies
Electronics
 

 

What does a dwelling policy not cover?

The reach of your dwelling policy depends on the level of coverage you choose. If you choose to go with a DP-1 policy, for instance, your dwelling and personal belongings are left vulnerable to a number of uncovered perils. DP-2 and DP-3 policies add more expansive protections, though important coverages — such as liability and medical payments — would need to be added as endorsements to these policies. 

However, certain perils are never covered by any standard policy. Common exclusions include: 

  • Flood
  • Earthquake
  • Nuclear accidents
  • War
  • Government acts
  • Intentional loss

 

Dwelling insurance coverage: what to consider

A dwelling policy can be a great coverage option for a property other than your primary residence. If you own a rental unit, a dwelling policy with added liability coverage could be ideal. 

There are other circumstances where dwelling policies may be valuable. If, for instance, a homeowner has poor credit or a long history of claims, it’s possible that homeowners policies could be harder to come by. Similarly, if the dwelling is in very poor shape, a dwelling policy could be easier to obtain. However, if a homeowners policy is a possible option, they can provide for more peace of mind and more expansive coverage.


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This article was written by one of The Zebra’s resident insurance experts. Each article is thoroughly researched to provide readers accurate — and helpful — information possible. That’s insurance in black and white.®