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If you own a multi-family home (2-4 family), different insurance policies are used depending upon whether you actually live in the home or don't.
If you live in a multi-family dwelling, you can usually utilize the tried and true homeowners policy known as an HO-3. Insuring this type of property is no different than insuring a single family dwelling, and using an HO-3 form is usually the most economical approach.
If you’re an owner of a multi-family home, rent out all the units, and live elsewhere, then a different form is utilized: a Dwelling Fire policy. The most common (and best) version is called a DP-3. The DP-3 will cover losses to the home’s structure on an “open perils” basis, and includes loss of use or rental coverage, and personal liability coverage can be added. It is good coverage, but you're going to pay more for it than an HO-3 simply because the property's owner isn't there routinely to keep an eye on things.
Never try to squeeze an HO-3 onto a property if you live elsewhere; that gives the insurance company basis for denying a claim (this is considered a material misrepresentation of facts). Thus, most rental properties that are not owner-occupied must be insured under a DP-3.
Use an agency that represents multiple insurance companies as Gordon Atlantic Insurance does. Different companies have different appetites and "sweet spots," just as different building owners have different kinds of buildings. Getting the right fit so you can sleep at night knowing you've got the right protection for all your properties, both personal and investment, at a competitive price is key.
Below is a table highlighting the differences between homeowners and dwelling fire policies:
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Homeowners Policy |
Dwelling Fire Policy |
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The HO-3 has been the most common homeowners policy for 60 years and is adequate for the majority of homeowners and their insurance needs. Coverage A. Dwelling. The amount of money your policy will pay to rebuild your home if it is destroyed up to amount of coverage shown... Coverage B. Other Structures. Automatic coverage on your policy to pay to rebuild other structures such as garage, sheds & patios. Coverage C. Personal Property. The amount you have to replace all of your “stuff” in the event of a loss. Best to include “replacement cost” to minimize the effect of depreciation on a loss. Coverage D. Loss of Use. Funds to rent another place while your damaged home is fixed or rebuilt. Coverage E. Personal Liability. In the event that you become a defendant in a lawsuit, the insurance company will provide up to $1 Million is coverage. Coverage E. Medical Payments to Others. Goodwill coverage for medical costs incurred by guests. Optional Coverages & Endorsements. There are many additional coverage items you can add to your HO-3 including sewer backup, personal jewelry, identity fraud coverage, business pursuits, etc. Cost: generally less than a Dwelling Fire policy |
The DP-3 is for rental properties that the owner does not occupy. It only covers the basics of the house. Coverage A. Dwelling. The amount of money your policy will pay to rebuild your home if it is destroyed, up to amount of coverage shown. Coverage B. Other Structures. YOU Need to state an amount if needed. (Not automatic). Coverage D. Loss of Use or Fair Rental Value. The funds you will have for lost rent from no tenants while your damaged house is fixed or rebuilt. A small amount of tenant relocation coverage (to help them move) is also included. Optionally: (some companies include, some do not). Work with a professional to be sure this part is integrated with your other insurance. Coverage E. Personal Liability. If someone slips and falls, and you get a lawsuit, the insurance company will provide defense and judgments; up to $1 million is generally available. Not all DP-3 policies offer Personal Liability and you may have to get a separate Liability Policy for this protection. NOTE: Work with a professional to be sure this part is integrated with your other insurance. We may be able to extend your homeowners liability to cover the rental (multi-family) property. Optional Coverages & Endorsements. More limited under the DP-3 than the HO-3, as there are tenants living there, not the owner. Cost: generally more than a homeowners |
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