DP-3 Policy

What is DP3 Policy?

If you are a landlord or own a home you do not plan to live in and are planning to rent it to a tenant; then you will be subject to different risks in the event of a loss or accident.

From fire and vandalism to burst water pipes and freezing pipes, there are a lot of risks a landlord needs to consider, and that’s why the DP3 form is designed to give your property complete protection.

Purchasing a DP3 policy is essential to secure and protect your rental property from unexpected incidents.

A DP3 policy is the third and most in-depth insurance policy and is considered the best insurance cover for rental properties. Also referred to as Dwelling Fire Form 3, this insurance is suitable for residential homes that are not occupied by the owner.

This type of dwelling fire insurance operates as an open peril policy, meaning all perils are covered unless they are specifically detailed as exclusions within your policy agreement.

DP3 policies can protect the structure of your home, fair rental value, and usually personal liability- subject to your agreement. Although the policies cover your home’s main structure, just like the other insurance policies- DP1 and DP2- it will not cover the contents of your home.

Experts Tip: If you rent your home, you should advise your tenants to purchase renter’s insurance or H04, as a DP3 policy does not offer in-depth cover for their items.

Dwelling Fire Form 3

Dwelling Fire Form 3 and DP3 policies are intentionally made for rented residential homes, not commercial rentals. It helps to cover the structure of the rental property itself and protect and furnishings belonging to the landlord.

DP3 policies vary from the standard homeowner’s insurance agreements, and it’s essential to know they will not work or give you the same coverage for your rental properties.

Landlords face massive risks when choosing to rent out properties.

Remember: A landlord must consider the possibility of any risk occurring before renting a home as you are trusting another individual to live in your property.

See a sample DP3 Policy here

DP3 Coverage

Open Peril Policy

Many landlords seeking to insure their house with a quality policy will often choose the DP3 policy over the DP1 or DP2 policy because it’s an open-peril policy.

An open perils policy simply means insurance companies will cover all losses resulting from all perils. However, it’s important to remember that some perils can be excluded, which will be detailed in your policy.

Whereas DP1 and DP2 are named-peril policies, there is a strict list of hazardous perils that your policy will cover, and if it’s not mentioned, you will not receive any coverage.

Fair Rental Value

If your home becomes unlivable or uninhabitable, you will no longer receive your monthly rent payments from tenants. Many landlords will depend on rental payments for their primary level of income. That’s why fair rental value exists to cover these costs.

For instance, if your house is damaged by an internal explosion that causes damage to your electrical circuits, it will need to be completely repaired. This will mean tenants have to move out and find a safe place to live. During that period, you will lose out on your rent payments.

Extra Info: If you have a loss of rent coverage under your landlord insurance, you could qualify for compensation for loss of rental income of the fair rental value up to the limit detailed within your policy. Check under Coverage D in your homeowners’ policy for further information.

Personal Liability

Personal liability coverage helps protect you, as the landlord, legally and offers cover for actions or events such as accidents that caused damage to your property or any form of bodily injury.

The cost of medical bills and legal defense dues can also be covered with personal liability cover up to your policy limits.

Tip: Sometimes, personal liability is not included in all DP3 policies, so check your policy to see if you are covered.

DP3 Policy: Exclusions

As mentioned, DP3 policies continue to be the most popular strand of dwelling fire insurance because they are structured on an open perils basis.

Although there’s an extensive range of perils covered in the event of damage, some perils which can be excluded from policies are:

•      Ordinance or law
•      Earth movement
•      Power failure
•      Water damage
•      War
•      Neglect
•      Nuclear Hazard
•      Governmental Action
•      Mold
•      Intentional Loss

HO3 vs. DP3

Picking the right policy for your home, whether DP3 or HO3, is mainly dependent on how you use your property.

If you are planning to rent your property, a DP3 policy is most suitable. However, if you are residing in the home, you will want to ensure your property all year round, then the HO3 policy is usually the best choice. Generally, homeowners insurance is higher than landlord insurance.

Both the DP3 and HO3 policies share many similarities, such as being both created to provide cover for homes and other structures while operating on an open perils format. Both home insurance types offer cover for all perils, except the listed exclusions detailed in the policy.

There are also some significant differences between the two. For example, the HO3 policy comes with some aspects that would need to be added as an endorsement to the DP3 policy, and the DP3 policy covers some risks not covered under the HO3 policy.

There are six different coverage types that both insurances can offer cover for, and they are:

Coverage A: Damage to the home.

Coverage B: Damage to other buildings on the property.

Coverage C: Damage or loss of personal belongings.

Coverage D: Loss of use or Fair rental value.

Coverage E: Personal liability for damage to property or injury to person/s.

Coverage F: Medical payments to injured guests.

Below is a chart that sets out the differences and similarities between the two forms:

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DP3 vs. HO6

HO6 insurance policies are a form of property insurance that provides coverage for condominiums(condos).

Typically, condo owners own an individual unit and not usually the entire building; specialized coverage is required.

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DP1, DP2 , DP3: Comparison Chart

The dwelling fire form policies are a suitable type of insurance for landlords with occupied or vacant properties.

The three forms, DP1, DP2, and DP3, vary in the amount of cover they offer, the way they settle payments, and other endorsements to provide stability and security to landlords.

The first policy, DP1, is like the DP2 policy as they both operate using a named-perils structure. Unlike the standard 9 perils covered in a DP1 policy, a DP2 policy ups the perils to 18 covered and ensures the replacement cost value as opposed to the actual cash value.

The third and most in-depth policy is dwelling fire from 3 or DP3, and it’s deemed the most robust policy. It uses an open-peril structure, protecting against a wide range of perils except those specifically detailed in your policy as exclusions. Like the DP2 policy, it provides payouts using the replacement cost method.

This chart simplifies each policy showing their similarities and differences:

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* Except those detailed in the policy as uncovered or excluded perils.

DP3 Policy Round-Up

Also referred to as Dwelling fire form three, this policy is the third and most in-depth and rated as the best insurance cover for rental properties. The policy is suitable for residential homes, not commercial properties that the owner does not occupy.

DP3 insurance operates as an open peril policy, meaning all perils are covered unless they are specifically detailed as exclusions within your policy agreement.

It offers protection for the structure of your home, fair rental value, and usually personal liability- subject to your agreement.

Although the policies cover your home’s main structure, just like the other policies- DP1 and DP2- it will not cover the contents of your home.

Understanding the differences between DP3 and HO3 is essential when deciding what policy is best for your home.

Note to Reader

This information is for informational purposes only. Each insurance company has different coverages for its policies.