What Does a DP3 Policy Cover you Ask?

As a landlord, ensuring the safety and security of your rental property is a top priority. But with so many insurance options available, how do you determine which policy is the best fit for your investment? Enter the DP3 policy – an often-selected insurance solution specifically designed to protect rental properties against a wide range of risks. In this blog post, we’ll take a close look at the composition of DP3 policies and how they compare to some other insurance typical options, guiding you (we hope!) towards making an informed decision for your residential-investment properties. Let’s jump in and figure out what these two letters and a number mean.

Short Summary

  • DP3 policies provide more comprehensive coverage for rental properties, including open peril protection and personal liability coverage.
  • Landlords should consider additional insurance options to cover excluded perils such as floods and earthquakes.
  • While often excluded, preventive measures can reduce the risk of intentional damage or neglect.
  • To some it’s already well-known but comparing quotes from various insurance providers and working with an insurance agent that specializes in this area are essential steps in choosing the best DP3 policy for landlords’ needs.

Understanding DP3 Policies

Business, Signature, Contract

The DP3 policy, also known as a dwelling fire policy or dwelling fire insurance, is a type of insurance program specifically tailored to rental properties, providing more comprehensive coverage for landlords against a range of risks. Unlike homeowners insurance, which is limited to owner-occupied residential properties, DP3 policies are designed for rental properties where the owner does not reside. This makes DP3 policies the most suitable option for landlords looking to safeguard their investment properties against potential damages and losses. But, let’s hammer this point home even more. The moment you rent your property to a third party, even your first cousin, you likely need landlord insurance and you can no longer rely on your homeowners insurance. Too many insureds make the mistake of sticking with their homeowners insurance policy and fail to update their agent or insurance company, resulting in the potential exclusions of coverage in the event of a claim — this is not a gotcha so please keep this point in mind. Insurance companies identify a different set of risks when you have a rental property vs. a primary residence, and thus the coverages differ. For now, let’s get back to the DP3 policy.

A significant advantage of DP3 policies is the open peril policy (you may sometimes hear this referred to as a “special peril” policy), which offers extensive protection by covering all perils unless specifically excluded. This means that, with a DP3 policy, landlords can enjoy generally expect that their rental properties are protected from a wide range of potential risks, allowing them to focus on the day-to-day management of their investments. Of course, review your specific policy carefully but as a general rule, if you have the opportunity to obtain a DP3 policy compared to a DP2 or DP1 policy, you will enjoy greater coverage under a DP3.

Typical Coverage under a Dwelling Fire Policy Three

DP3 policies provide coverage for the physical structure of the property, loss of rental income compensation if tenants must vacate due to a covered loss (for example a kitchen fire that requires tenants to relocate), and, frequently, premises liability protection for property damage and bodily injuries that occur to third parties (not the household members!) at or on the rental home. Keep in mind that various endorsements can be added for additional protection, such as medical payments coverage that can be added to the policy for added protection. Also, it’s important to note that personal property and theft coverage are typically not included in a DP-3 policy, so landlords should consider purchasing additional coverage for personal property in a furnished unit as well as securing coverage for items provided to tenants, such as appliances which may be subject to theft.

When selecting a policy, landlords should evaluate what is suitable for their particular investment property, considering factors such as the type of property, location, and potential risks associated with the rental.

Open Peril Policy

An open peril policy in DP3 insurance offers extensive protection for landlords by covering all perils unless specifically excluded. This means that, with an open peril policy, landlords can enjoy comprehensive coverage for their rental properties, knowing that they are protected from a wide range of potential risks.

The distinction between an open peril policy and a named peril policy is worth an extra few minutes for landlords to stop and study. While a named peril policy only covers perils specifically identified in the policy, an open peril policy provides coverage for all perils, unless explicitly excluded. This is why you often hear people refer to open or special peril policies as comprehensive.

Key Components of a DP3 Policy

Motherboard, Electric, Technology

A well-rounded DP3 policy encompasses several key components that work together to provide comprehensive protection for rental properties. These components include dwelling coverage, which protects the physical structure of the house, including the roof, walls, and foundation; other structures coverage, which protects structures on the property that are not attached to the home, such as a detached garage or shed; loss of rent coverage, which affords compensation for the cost of alternative living arrangements for tenants while the home is undergoing repair or reconstruction due to a covered loss; and personal liability coverage, which offers protection against potential lawsuits due to bodily injury or property damage to third parties.

Dwelling Coverage

Dwelling coverage in DP3 policies provides protection for the structure of the rental property against covered perils, such as fire, windstorms, and vandalism.

It’s important to note that dwelling coverage under a DP3 policy does not encompass the contents or land. Landlords should consider purchasing additional coverage or an endorsement to their policy to ensure adequate protection for the contents of their rental home, such as appliances, furniture, and other personal belongings, particularly in a situation where a furnished rental is introduced.

Other Structures Coverage

If you’re a landlord with additional structures on your rental property, such as garages or sheds, you’ll want to consider getting other structures coverage in your DP3 policy. This coverage provides protection for detached structures and ensures that you’re covered against potential damages and financial losses.
While other structures coverage typically protects up to 10% of the dwelling coverage limit (i.e. if your dwelling limit is $650,000, your other structures limit would be $65,000), it doesn’t cover damages caused by floods, earthquakes, or other natural disasters. So, it’s important to note that you may need to purchase separate policies or endorsements to protect against these risks and ensure comprehensive coverage for your rental properties.

Loss of Use (Fair Rental Value)

Loss of use coverage in DP3 policies provides compensation to landlords for loss of rental income if the property becomes uninhabitable due to a covered peril. This means that if a rental property is damaged by a covered peril, such as a fire or storm, and requires repair or reconstruction, the landlord will be compensated for the rental income lost during that time. This can be essential where cash flow is required to pay a mortgage, utilities, or other expenses that continue, even though a tenant has vacated and stopped paying rent.

Personal Liability Coverage

Personal liability coverage in DP3 policies protects landlords against legal and financial repercussions stemming from property damage or bodily injury claims. This coverage can be particularly important for landlords, as it can help reimburse legal fees, settlement costs, court-awarded damages, and medical bills to injured third parties.

Common Exclusions and Limitations

Puzzle, Fits, Match

While DP3 policies offer comprehensive coverage for rental properties, they also have certain exclusions and limitations that landlords should be aware of. Generally, DP3 policies exclude flood and earthquake insurance, as well as intentional damage and neglect. Understanding these exclusions can help landlords make informed decisions when selecting a policy and ensure that their rental properties are adequately protected.

To address these exclusions, landlords may need to purchase separate policies or endorsements, such as flood and earthquake insurance. In addition, landlords need to take preventive measures to avoid intentional damage or neglect and maintain their properties in good condition.

Flood and Earthquake Insurance

Flood and earthquake insurance are typically not included in DP3 policies and may require separate policies to protect rental properties from these specific risks. Flood damage can result in very significant losses. Additionally, these losses frequently occur even in low-to-moderate flood-risk areas. Similarly, earthquake exposures are typically excluded. Depending on where a property is located, it’s important to consider adding this coverage by endorsement or separate policy given the magnitude of the potential losses.

Intentional Damage and Neglect

This is an area of coverage that is often overlooked and not completely understood. Intentional damage and neglect are not covered under DP3 policies, as they are considered preventable risks. This means that landlords (or their third-party property management companies) are responsible for taking reasonable care of their rental properties and addressing any potential issues that may lead to intentional damage or neglect.

To avoid the consequences of intentional damage and neglect, landlords should implement preventive measures, such as regular property inspections, maintenance, and tenant screening. By taking these steps, landlords can help ensure that their rental properties remain in good condition and minimize the risk of preventable damages and losses.

Personal Property Coverage

Unlike a homeowners insurance policy where contents are covered since a personal residence is involved, personal property is excluded under landlord insurance policies. This coverage, however, can be added to DP3 policies to protect items such as furniture, appliances, electronics, and other personal belongings. By adding personal property coverage to their DP3 policy, landlords can fill a key coverage gap related to their rental properties and ensure that they are protected from potential damages and financial losses.

Vandalism and Theft Coverage

Vandalism and theft coverage can be added to DP3 policies to protect against losses resulting from criminal acts, such as theft, burglary, or property damage caused by vandals. While limited burglary coverage in DP-3 policies typically applies when there is visible damage to the property resulting from a burglary, the addition of vandalism and theft coverage can provide more comprehensive protection against these risks.

Additional Liability Protection

Additional liability protection can be added to DP3 policies to increase coverage limits for third-party liability. As noted earlier, legal fees and medical, settlement, and court expenses resulting from property damage or bodily injury claims can mount quickly. Given the many exposures that landlords face, it’s important to select a significant liability limit under the DP3 Policy and, in many cases, consider adding to this limit through a commercial umbrella policy. This coverage extends the limits of the underlying portion of the dwelling policy to cover matters that are significant and would otherwise exhaust the primary layer of insurance.

Comparing DP3 Policies with Other Insurance Options

Balance, Swing, Equality

When considering insurance options for rental properties, landlords need to compare DP3 policies with other options, such as DP1 and DP2. While DP3 policies offer comprehensive, all-risk coverage for rental properties, DP1 policies provide more limited coverage for damages caused by specified perils, such as fire, lightning-induced storm damage, windstorms, hailstorms, explosions, and vandalism.

One major advantage of a DP3 policy over a DP1 policy is that the former provides coverage for losses at Replacement Cost Value, while the latter provides coverage for losses at Actual Cash Value. Replacement Cost provides coverage, essentially, based on the value of a new one. Under Actual Cash Value, depreciation (i.e. age) of damaged or destroyed items is taken into account, thus resulting in a potentially lower reimbursement amount. This means that a DP3 policy can offer broader protection for landlords’ losses and result in greater compensation in the event of a covered loss.

By comparing the different types of policies available, landlords can make an informed decision when selecting the best coverage for their rental properties.

Choosing the Right DP3 Policy

Doors, Choices, Choose

Selecting the right DP3 policy involves a combination of shopping for quotes and working with an insurance agent to find the best coverage and rates for your specific needs. There are several factors to consider when selecting a DP3 policy, such as coverage limits, deductibles, exclusions, and whether the policy provides coverage for the structure, loss of use or rental coverage, and personal liability.

Shopping for Quotes

Shopping for quotes involves comparing insurance policies and their associated costs from various providers to identify the most suitable option. By comparing multiple quotes, landlords can find the best DP3 policy for their rental property at the most competitive rate. To obtain quotes, landlords can research various insurance companies, compare their policies and rates, and choose the most advantageous option.

It is essential to thoroughly read the policy documents and ensure that the coverage meets your requirements before committing to a particular insurance provider. By taking the time to shop for quotes, landlords can remove gotchas and make informed and comfortable.

Working with an Insurance Agent

Working with an insurance agent can provide personalized guidance and assistance in selecting the right DP3 policy for a landlord’s specific needs, particularly when the insurance market faces macro headwinds resulting in fewer insurance options altogether. Therefore, it’s likely advantageous to work with an agent that has access to multiple insurance providers as well as a specialty in landlord insurance so that you will have peace of mind that you have built a robust insurance program that is competitively priced.


In conclusion, DP3 policies offer more comprehensive protection for rental properties compared to DP1 and DP3. By understanding the key components, exclusions, and optional coverages of DP3 policies, landlords can make smart decisions when selecting the appropriate insurance coverage for their investment properties.

With the right DP3 policy in place, landlords can focus on the day-to-day management of their rental properties, increasing tenant safety and satisfaction, improving their NOI, and expanding their investment portfolio! To do all of this, it’s critical to protect your rental properties, and a DP3 policy can be the key to safeguarding them and increasing the likelihood of long-term success.

Frequently Asked Questions

What is a DP3?

DP3 insurance is a specific type of dwelling-fire policy for landlords who rent out their homes to tenants. It covers the property structure, loss of use, or rental coverage, and typically offers personal liability protection.

DP3 policies provide essential coverage for rental properties not covered under a standard homeowners policy (HO-3).

What is the difference between citizens DP3 and HO3?

The main difference between DP3 and HO3 policies is occupancy. HO3 policies are designed for homeowners that live in their homes, while DP3 policies apply to situations where a homeowner owns the property, but does not reside there or rent it out.

Additionally, DP3 offers less coverage when it comes to personal property limits and theft coverage.

What does DP3 exclude?

DP3 policies protect your home’s structure, but they will not cover the contents or damage caused by an excluded loss specifically listed in the policy.

Are flood and earthquake insurance included in DP3 policies?

No, flood and earthquake insurance are not usually included in DP3 policies and may need to be bought separately. Separate endorsements or policies can be obtained to cover these potentially significant exposures.

What is the purpose of loss of rent coverage in a DP3 policy?

Loss of use coverage in DP3 policies helps protect landlords from loss of rental income in the event of their property becoming uninhabitable due to a covered peril. If tenants are required to vacate the investment property, obligations such as mortgage and utility payments continue and loss of rent coverage provides compensation while restoration or rebuilding occurs.

We hope that you find this article helpful!  Notable Risk leverages 20+ years of expert risk-management experience (and both MBA and Law Degrees!) that is not often found at independent insurance agencies. Hopefully, we will have an opportunity to help you with your insurance needs!

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DISCLAIMER: The information provided in this blog post is intended for general educational purposes only and should not be relied upon by any individual or party for any specific purpose. Additionally, the information contained herein is not regularly updated. Neither this blog post nor any of its content (express or implied) should be considered legal, financial, health, or other professional advice. It is essential to consult with your own advisors regarding any matters discussed in this blog post or elsewhere. Notable Risk LLC and its owners, members, managers, directors, officers, partners, consultants and similar entities do not make any representation or warranty regarding the accuracy or completeness of the information presented in this blog post or elsewhere.