If you own a multi family (2-4 family) property and live in one of the units, then you can usually use the tried, true, and tested HO-3 homeowners policy to cover the entire building, its contents, and your liability exposure.
However, if you, the owner, do not live at the property, a homeowners policy won't work, and you use the "Dwelling Fire Policy" to protect your interests properly. The most popular policy is the DP-3.
The DP-3 is popular because it is an “Open Peril” policy that covers losses to the home’s structure, loss of use or rental coverage, and usually personal liability. Contents (also known as personal property, such as furniture or appliances) are not automatcially included as they are in the homeowners policy, but can be added if you need that coverage.
If the owner insures a rental property with an HO-3, but lives elsewhere, it's a bad fit: You risk NOT being covered for any losses by the insurance company. Work with a professional agent to steer you clear of such mistakes. Most rental 1-2 and 3-family properties that are not owner-occupied are insured under the DP-3. The table below compares features of the HO-3 to the DP-3.
Buildings with 3 and more families are most often insured through a commercial policy rather than either the DP-3 or HO-3 (though some insurance companies will insure up to a 4-family building using a DP-3). The most common approach with these larger buildings is a package which includes automatically both property coverage (for the building), lost rents, and liability protection in case you are sued.
Terms differ widely, so work with an agent or broker that represents multiple insurance companies, such as Gordon, to ensure the best possible fit, so you can sleep as well as your tenants.
For more guidance on which approach is best for you, contact us through the form to the right or just call us at 800-649-3252 to discuss your personal needs.