Property & Casualty Insurance Exam (National Portion)Types of PoliciesMedium
A property owner wants to insure a rental dwelling that they do not occupy. They are looking for coverage for the dwelling structure itself, as well as limited personal property coverage for items like appliances and landlord's furnishings. Which Dwelling Policy form would be most suitable for their needs?
- ADP-2 (Broad Form)
- BDP-1 (Basic Form)
- CHO-3 (Special Form Homeowners)
- DDP-3 (Special Form)
Show answer & explanationAnswer & explanation
Correct answer: D. DP-3 (Special Form)
The DP-3 (Special Form) Dwelling Policy provides 'open perils' coverage for the dwelling and other structures, meaning all perils are covered unless specifically excluded. It also provides 'named perils' coverage for personal property. This offers the broadest protection for the dwelling structure, which is often desired for rental properties.
Why the other options are wrong
- A. DP-2 provides 'named perils' coverage on a replacement cost basis for the dwelling, broader than DP-1 but not as comprehensive as DP-3.
- B. DP-1 provides only 'named perils' coverage on an actual cash value basis, offering the least protection.
- C. HO-3 is a homeowners policy designed for owner-occupied dwellings and is not suitable for a non-owner occupied rental property.
Dwelling Policy Forms (DP-1, DP-2, DP-3)
Dwelling Policy forms provide property coverage for dwellings that are not eligible for homeowners insurance, such as rental properties or vacant homes, with varying levels of peril coverage.
- DP-1 (Basic): Named perils, ACV settlement.
- DP-2 (Broad): Named perils, RC settlement for dwelling.
- DP-3 (Special): Open perils for dwelling, Named perils for personal property, RC settlement for dwelling.
- Liability coverage is typically an endorsement, not standard.
Memory trick: DP-1 is Basic, DP-2 is Better, DP-3 is Best (for the dwelling).