DP3 vs. HO3

The DP3 refers to an insurance policy covering a residential building, usually rented to others. The HO3 is reserved for homeowners, but not exclusively single-family homes.

If you own a multi-family (2-4 family) property and live in one of the units you can usually use the tried, true and tested HO3 policy to cover the entire dwelling, your contents (your stuff), and your own personal liability exposure. Because you live there, the cost of insurance is lower than if you didn't.

If the owner does not live at the property, a homeowners policy won't work. Instead you would use a Dwelling Fire Policy to properly protect your interests. The most popular Dwelling Fire policy is known as the DP3.  

The DP3 is popular because it is an Open Peril policy that covers losses to the building’s structure, "loss of use'"or rental coverage, and customarily personal liability as well. Contents (also known as personal property, such as furniture or appliances) are NOT automatically included the same way as in the homeowners policy, but can be added. Many rentals don't include furniture, so there's no charge unless you add this. 

If the owner insures a rental property with an HO3 but lives elsewhere, it's a bad fit; you risk NOT being covered for losses. Most 2- and 3-family properties rented to others that are not owner-occupied are insured under the DP3.   View the table below comparing features of the HO3 to the DP3.  

Buildings with 3 or more families that are investment properties rented to others are most often insured on a commercial policy rather than either the DP3 or HO3 (though some insurance companies will insure up to a 4-family building using a DP3).  This commercial policy will include coverage for loss of rents and responds to any suits you may be brought into in the event of a claim.  

For more guidance on which approach is best for you, and so you can sleep as well as your tenants, contact the Gordon Atlantic Insurance professionals toll free by calling 1-800-649-3252.  Prefer to type versus talk?  Click below.  

 

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Homeowners vs. Dwelling Policy Comparison Chart

Homeowners Policy (HO-3)

 Dwelling & Fire Policy (DP-3)

The HO-3 has been the most common homeowner’s policy for 60 years and is adequate for the majority of homeowners and their insurance needs.   For owners who live in the home.

The DP-3 is similar to a homeowners but used for rental properties that the owner does not occupy.  It covers the basics of the house (dwelling), but other coverages are not automatic: speak to us about customizing protection to your needs.

Coverage A

Dwelling. The amount your policy will pay to rebuild your home if  it is destroyed.  This should be based on arealistic estimate of the cost to rebuild new.

Dwelling. The amount of money your policy will pay to rebuild your dwelling / house.  This should be based on a realistic estimate of what it would cost to rebuild.

Coverage B

Other Structures. 10% of coverage  A is automatically included. The amount your policy will pay to rebuild structures such as sheds & garages.  More available if you need it

Other Structures. Not automatic. Have a garage? Other outbuilding? Add optionally.

Coverage C

Personal Property. The amount you have to replace all of your “stuff” in the event of a loss.  Customarily paid on a 'replacement cost' (non-depreciated) basis, but not automatically.

Personal Property Generally not included. Tenants should have their own insurance.  Landlords can optionally include personal property for appliances if furnished.

Coverage D

Loss of Use.  The funds you will have to rent another place while your damaged home is fixed or rebuilt.

Loss of Use or Fair Rental Value. The funds you will have for the tenants to rent another place or stay at a hotel while your damaged house is fixed or rebuilt.

Clarification

Replacement Cost Contents. Ensures you get the cost to replace fix or replace damaged  personal items. 

Replacement Cost Building.  Allows for an amount over the coverage limit if a catastrophe drives repair or rebuild costs higher than normal.  

Replacement Cost. On personal property, generally not included.

On buildings also generally not included.  The policy limit is just that - a limit.

Coverage E & F

Personal Liability. In the event that you become a defendant in a lawsuit, the insurance company will provide defense coverage and judgments.  Common limits are $300,000, $500,000 and.up to $1 million

Personal Liability. In the event that you become a defendant in a lawsuit, this can provide defense and judgments, generally up to $1 million. Important for rental properties. Not all DP-3 policies include Personal Liability so you may want to have a separate Liability policy for this protection. 

Medical Payments to Others. Suppose someone is injured on your property,Medical Payments will be reimbursed /paid up to the amount you buy.  Think of it as Goodwill coverage: you don't have to be sued for the person to have related medical bills paid for.

NOTE: If you own a primary home and have a homeowner’s policy, you may often extend the liability to cover the rental (multi-family) property.

Optional Coverages and Endorsements

There are many additional coverage items you can add to your HO-3 such as sewer backup, personal jewelry, identity fraud coverage, business pursuits, small boat coverage, etc.