The DP1 insurance policy is the most basic insurance policy available for rental properties in the United States. This policy is often referred to as Dwelling Fire Form 1, or DP-1 insurance. It provides very basic insurance coverage for rental properties.
DP1 Insurance for Rental Homes
DP1 Provides Basic Insurance Coverage
In the United States, most landlords have three standard policy types available to insure their rental properties. The DP1 is the first, followed by the DP2 and the DP3.
The DP1 policy offers the most basic coverage of all the rental property policies. It contains no bells and whistles. Thus, the most common reason for a landlord to purchase this type of insurance would be to reduce the costs of insurance at the expense of coverage.
DP-1 Rental Insurance is Named Perils
The DP1 rental home insurance policy is a named perils insurance policy. This means that all the perils that are insured are specifically listed (or named) in the policy itself. The insurance coverage is restricted to the perils that are explicitly called out in the policy.
The DP2 rental home insurance policy is also a named perils policy, although its list of perils is much more extensive than the DP1’s list. The HO1 and HO2 insurance policies are the home insurance counterparts to the DP1 and DP2, and are also named peril policies.
The DP3 rental home insurance policy is an open perils policy, as are its home insurance counterparts the HO3 and HO5. Open perils policies insure against all perils, with the exception of a few exclusions specifically listed in the policy.
DP1 Named Perils List
The standard DP1 insurance policy only covers 9 perils. The following list shows what is considered a named peril – and as a result covered – in a standard DP-1 rental home insurance policy:
Vehicle damage is typically only included if it’s not done by the insured. Vandalism and Malicious Mischief is on standard DP1 insurance policies, but there are actually many that don’t include it automatically and require it to be added – or endorsed – onto the policy for an additional premium.
Other than that, if a peril from the list above damages your rental home, the DP 1 insurance policy should cover it after your deductible.
DP1 Insurance is Actual Cash Value Insurance
Most DP1 rental property insurance policies are Actual Cash Value (ACV) policies. An Actual Cash Value dwelling insurance policy is much like a car insurance policy; the older the dwelling gets, the less it is worth. If you are a landlord and your rental property is insured with Actual Cash Value, depreciation will be deducted from any damages you are awarded for a claim.
Let’s say for example that a hailstorm rips the roof off of your rental property, and you need it replaced. If the roof is 15 years old, the materials originally used on the roof are very old, and aren’t worth very much. If it cost you $10,000 to replace the roof 15 years ago, the insurance company may only give you $5,000 to replace the roof now if they determine that the value of the materials has depreciated by 50%.
The alternative to ACV insurance is Replacement Cost insurance, which will not deduct depreciation from the amount you can receive for a claim. Unfortunately, most DP1 policies will not allow you to insure your rental with replacement cost insurance.
