What is a DP-2 Home Insurance Policy?

A DP-2 policy is a type of dwelling fire policy that covers named perils on rental properties. It is a mid-range insurance policy – somewhere between DP-1 and DP-3 – and provides sufficient protection for most landlords. If you need to insure your rental property, a DP-2 policy is a crucial consideration. Here’s everything you need to know: 

What is a DP-2 insurance policy?

A DP-2 insurance policy is a landlord insurance policy that protects rental properties from any of the named peril losses. It’s a broad form insurance policy that covers more perils than the basic DP-1 policy, but less than the more robust DP-3 insurance policy.

DP-2 coverage offers dwelling coverage on a replacement cost basis and does not account for depreciation. This policy covers your property’s primary structure as well as connected structures like fences, sheds, or a detached garage. Damage to your personal property will be settled on an Actual Cash Value (ACV) basis which subtracts for depreciation.

DP-2 insurance only covers perils or events listed in the policy. However, you can also add personal liability coverage to a DP-2 policy to help offset payments if, for example, a guest claims that you’re liable for damages or injuries while on your property. 

Who is a DP-2 insurance policy for?

A DP-2 insurance policy is for homeowners who rent all or part of their home to generate income. If you have property you rent out, you’ll likely need a DP-2 policy. Likewise, if you bought a new home and are renting out your current home until you’re able to sell it, you’ll need a dwelling property policy.

What does a DP-2 insurance policy cover?

Events covered by a DP-2 insurance policy may vary, but these 17 perils are the most commonly listed: 

• Vandalism and malicious mischief

• Explosion

• Fire or lightning 

• Electrical damage

• Windstorm and hail

• Riot/civil commotion

• Vehicles

• Aircraft

• Falling objects

• Smoke

• Freezing pipes

• Glass breakage

• Collapse 

• Burglary 

• Weight of snow

• Cracking and bulging (of appliances)

• Water or steam discharge 

Replacement cost value and actual cash value

The replacement cost value (RCV) is the amount required to repair or replace a damaged part of the property without accounting for depreciation. RCV under a DP-2 policy only applies to your dwelling and other structures. If, for example, a 10-year-old covered fence is destroyed by fire or vandals, the insurance company will pay for the cost of a new similar fence at the current market value. Actual cash value (ACV), on the other hand, accounts for the depreciated value of your property.

What isn’t covered by a DP-2 insurance policy?

A DP-2 policy typically doesn’t cover the following:

• Theft

• Damage from improper maintenance of the structure

• Earthquakes

• Floods

• Water damage

Other types of dwelling protection policies

DP-2 home insurance policy is only one of three dwelling fire coverage policies. The other two are DP-1 and DP-3.

DP-1 is the basic form named perils policy that typically names only nine covered perils, including fire, lightning, and internal explosions. It covers the dwelling, other detached structures on the property, personal property, and loss of use. Coverage is provided on an ACV basis. You have to speak with your insurer to find out if a DP-1 policy is appropriate for you. 

The third and most comprehensive property insurance coverage type is the special form DP-3 home insurance policy. It’s an open peril or all-risk policy covering all types of losses except those specifically excluded in the policy. Personal property and other items inside the dwelling are covered on a named peril basis. The exclusions on a DP-3 policy vary, but typically include neglect, earthquakes, war, intentional loss, mold, and water damage. Dwelling coverage is also provided on an RCV basis while personal property is covered on ACV basis.

How much does a DP-2 insurance policy cost?

The National Association of Insurance Commissioners found the 2019 national average cost of a dwelling fire coverage to be $651. DP-2 costs vary based on location. Residents of Colorado pay the highest for a DP-2 policy, while people living in Idaho pay the least DP-2 premiums. 

The factors that affect DP-2 insurance premiums include: 

• The house’s square footage and location 

• Proximity to a fire hydrant or fire station 

• Landlord’s credit history

• Likelihood of being affected by natural disasters

• Condition of the structure’s electrical and mechanical systems

• Building costs in the area 

• Neighborhood crime rate

A DP-2 policy is an excellent option for landlords who want to protect their rental properties. Get a homeowner insurance quote in 60 seconds and purchase a policy in five minutes with Hippo.

Still have questions?

Have more questions about an DP-2 policy? We have answers.

What is covered by a DP-2?

A DP-2 policy covers damage caused by named perils to the property’s primary structure and connected structures like fences, sheds, and detached garages.

What is covered by a DP-2 that is not covered by a DP-1?

A DP-2 policy covers all perils covered by a standard DP-1 policy and more. There are usually 17 perils on a standard DP-2 policy. The perils insured under DP-2 but not under DP-1 include: 

• Glass breakage;

• Burglary

• Falling objects

• Weight of ice, snow, and sleet

• Collapse

• Discharge of water or steam

• Sudden cracking, burning, or bulging

• Freezing of plumbing, heating, and air conditioning

• Sudden electrical current

What is covered under Coverage A?

Coverage A, also known as main structure coverage, is the part of your home insurance policy that covers repair or rebuilding costs of the home’s physical structure like roof, siding, walls, floors, windows, foundations, and support beams when damaged by a covered peril. 

Which could be covered under a DP-2 policy on a replacement cost basis?

A DP-2 policy typically covers the dwelling and other structures on a replacement cost (RCV) basis. This means that you get the total cost of repair or replacement of the damaged property at the prevailing market value. Personal Property is covered on an Actual Cash Value (ACV) basis.

What’s the difference between DP-1, DP-2, and DP-3 insurance?

DP-1, DP-2 and DP-3 are types of insurance policies covering rental property owners from named or open perils. The former two are named peril policies, meaning that they pay claims on losses listed in the policy. DP-1 is the most basic landlord insurance policy and the most affordable of the three.

DP-3 is an open peril policy and covers all losses except those excluded in the policy. It’s the most comprehensive and expensive of the three options. DP-1 pays claims on an actual cash value (ACV) basis, while DP-2 and DP-3 pay the replacement cost value (RCV) of a claim. 

By what other name is the dwelling form DP-2 known?

DP-2 is also known as the broad form coverage, and it is a landlord insurance policy protecting rental properties against losses from named perils.