For some consumers, a dwelling fire policy is a proper alternative to a homeowners policy. Despite its name, dwelling insurance policies can cover much more than just fire. But this kind of policy isn’t for everyone, so here are the dwelling fire basics.
A dwelling fire policy may be beneficial for:
- Vacation homes
- Vacant homes
- Seasonal homes
- Secondary homes
- Rental properties
- Older homes
Dwelling Fire Insurance Basics
The coverage is very similar to a homeowners policy, with one significant difference – a dwelling fire policy is typically used for someone that does not make the property their primary residence. Dwelling policies typically do not provide liability coverage, like some homeowners policy forms, but they can provide other similar coverages to standard homeowners policies.
Just like homeowners insurance, there are several different types of dwelling fire policies. DP-1 is known as the basic form, DP-2 is known as the broad form and DP-3 is known as the special form. Each provides a significantly different level of coverage.
DP-1: Basic Form
The basic form is a “named perils” policy. The policy explicitly names what perils are covered and typically covers losses due to:
- Fire
- Lightning
- Internal explosion
A DP-1 can also provide coverage for your other structures on the property, personal property usual to the occupancy dwelling, fair rental value, debris removal, and improvements, alterations and additions.
When a Premium for Extended Coverage is shown in the Declarations, perils such as Windstorm or Hail, Explosion, Riot or Civil Commotion, Aircraft, Vehicles, Smoke, and Volcanic Eruption can also be included (subject to exclusions). You also may be able to include Vandalism or Malicious Mischief. Talk to your agent about including these coverages.
Claims under a DP-1 dwelling fire policy are settled on an actual cash value (ACV) basis—however, you may be able to opt for a replacement cost value (RCV) policy for an additional cost. Speak with your agent about replacement cost options.
DP-2: Broad Form
The dwelling fire policy broad form is also a “named perils” policy and covers the same perils as the basic form, with additional coverages such as:
- Vandalism and malicious mischief
- Windstorm or Hail
- Fire or Lightning
- Explosion
- Riot or Civil Commotion
- Aircraft
- Vehicles
- Smoke
- Burglary damage
- Weight of ice and snow
- Accidental discharge or overflow of water or steam (as long as the building was not vacant for 60 days before a loss)
- Falling objects (such as trees)
- Freezing
- Sudden And Accidental Damage From Artificially Generated Electrical Current
- Volcanic Eruption
- Sudden and accidental tearing apart, cracking, burning, bulging
Unlike the DP-1 form, the DP-2 form typically settles claims on a replacement cost basis.
Loss of rent coverage, additional living expenses, collapse, debris removal, and improvements, alterations and additions may also be included with a DP-2 policy.
DP-3: Special Form
The DP-3 form is the most comprehensive dwelling fire coverage available. It is an “open perils” or “all risk” policy, which means real property (dwelling and other structures) will be covered for all types of damage, except exclusions named in the policy. However, damaged personal property (all the items inside the dwelling and other structures) is covered on a “named perils” basis.
DP-3 form exclusions may vary, but will typically be some or all of the following:
- Neglect
- Intentional loss
- Mold, rust, rot
- Constant or repeated leakage or seepage of water or steam
- Earth movement, such as earthquakes
- Wear and tear; deterioration
- Birds, rodents, insects or domestic animals
- Etc.
This is not a complete list of policy exclusions. It is important to review your Dwelling policy to understand exactly what your policy will and will not cover. There also may be optional Endorsem*nts available, to include other specific coverages.
If you have questions about Dwelling policies, talk with your insurance agent or insurance company.
You may also contact the North Carolina Department of Insurance, Consumer Services Division at: 1-855-408-1212.
