Carl Brooks
Most landlords buying a dwelling fire policy have no idea that the “fire” in the name is largely a historical accident. Today these policies cover far more than fire, and in some cases far less than a standard homeowner policy in ways that will absolutely blindside you at claim time.
I’ll be honest: I didn’t fully appreciate this distinction until my third year adjusting claims, when I had to explain to a landlord in central Ohio why his rental’s burst pipe wasn’t covered under his DP-1 policy. He was furious. He’d paid premiums for six years, never filed a claim, and assumed he had something resembling comprehensive coverage. He didn’t. He had the cheapest dwelling fire form available, and it covered exactly what the insurer needed to list on the declarations page to satisfy the mortgage lender. Nothing more.
That’s the conversation I want to have here.
What a Dwelling Fire Policy Actually Is
A dwelling fire policy, often called a “DP policy,” is a property insurance contract designed for homes that don’t qualify for or don’t need a full HO-3 homeowner policy. That typically means rental properties, vacant homes, homes under renovation, older structures that standard carriers won’t touch, and secondary residences where the owner isn’t present most of the time.
The Insurance Information Institute notes that DP policies are among the most misunderstood products in personal lines insurance, largely because the market has three distinct forms (DP-1, DP-2, DP-3) that sound similar but behave very differently at claim time. Your state’s insurance department (find yours through the NAIC’s state map) can tell you which forms are approved in your state and what minimum coverage standards apply.
The “fire” name comes from the 1943 New York Standard Fire Policy, which was the baseline contract that most states adopted. That form was eventually modernized into the ISO dwelling program we use today, but the name stuck even as coverage expanded.
The Three Forms, Without the Sales Pitch
Helpful resource: Ring Video Doorbell 4 with Motion Detection is a top-rated option for this. (As an Amazon Associate this site earns from qualifying purchases.)
Here’s where I want to slow down, because this is where people get hurt.
DP-1 is a named-peril policy covering a short list of causes: fire, lightning, and internal explosion. Some carriers add windstorm, hail, smoke, vandalism, and a few others as endorsements, but the base form is brutally narrow. It almost always pays on an actual cash value (ACV) basis, meaning depreciation gets subtracted from your claim payment. A 15-year-old roof that burns? You might get 40 cents on the dollar. I’ve seen this play out dozens of times. The landlord expected a check for $28,000 and got $11,400.
DP-2 is still named-peril but covers 18 specific perils including those water-related losses that catch people off guard (sudden and accidental discharge, but not flood). Most DP-2 policies pay replacement cost value (RCV) on the dwelling, which is a significant upgrade. This is where a lot of landlords land, and for many it’s a reasonable balance.
DP-3 is the broadest form: open-peril on the dwelling structure (covered unless specifically excluded), named-peril on contents. This is essentially the landlord equivalent of an HO-3. It costs more, but what surprised me when I dug into loss data is how much the claim experience differs between DP-1 and DP-3 customers. A lot.
| Policy Form | Covered Perils (Dwelling) | Loss Settlement | Typical Annual Cost* | Fair Rental Value Loss? |
|---|---|---|---|---|
| DP-1 | 3 basic (+ optional add-ons) | ACV (usually) | $450–$850 | Not included by default |
| DP-2 | 18 named perils | RCV (usually) | $700–$1,200 | Optional endorsement |
| DP-3 | Open-peril (exclusions apply) | RCV | $900–$1,600 | Often included |
| HO-3 (for comparison) | Open-peril dwelling / named-peril contents | RCV | $1,100–$2,000 | N/A (owner-occupied) |
*Ranges are illustrative estimates based on industry data as of July 2026 for a single-family rental with $200,000 in dwelling coverage. Your actual premium will vary significantly by location, age of home, and carrier.
The Coverage Gaps Nobody Warns You About
I’ll be honest about something the marketing materials absolutely will not tell you: dwelling fire policies don’t automatically include liability coverage. With a standard HO-3, you get $100,000 or more in personal liability almost without thinking about it. With a DP policy, many landlords assume liability is in there somewhere. Sometimes it is. Often it’s an endorsement you have to request. I once reviewed a claim where a tenant’s guest slipped on an icy exterior staircase, broke a wrist, and sued the landlord for $74,000. The DP-1 policy had no liability coverage. The landlord paid out of pocket.
A few other gaps worth calling out:
The fair rental value provision, when it is included, typically covers lost rent only if the dwelling is uninhabitable due to a covered loss. If your tenant stops paying and you have to evict them, that’s not a covered loss. That’s a landlord-tenant dispute, and no DP policy on the market will touch it.
Tenant belongings are not covered under any standard DP policy. The tenant needs their own renter’s insurance. This sounds obvious but I fielded this question on roughly one in four rental property claims I handled.
Vacancy clauses are aggressively enforced. Most DP policies have language that suspends or eliminates certain coverages if the property is vacant for 30 to 60 consecutive days. What surprised me was how broadly carriers interpret “vacant.” One claim I reviewed: the landlord left furniture in the property but had no active tenant. Adjuster determined it was vacant. Vandalism claim denied.
What the Data Says About Rental Property Losses
According to the Insurance Information Institute, fire and lightning together account for roughly 23% of homeowner and dwelling insurance losses by dollar value, despite representing a smaller fraction of total claims by count. Water damage and freezing claims are more frequent but tend to be smaller individually. This matters when you’re choosing a form, because if your rental is in a cold climate with older plumbing, a DP-1 that doesn’t cover burst pipes is a real gamble.
The National Fire Protection Association (NFPA) reported that one- and two-family dwellings account for the majority of residential structure fire losses in the U.S. annually. And the ISO (Insurance Services Office) dwelling program data consistently shows that landlord properties have higher average claim severity than owner-occupied homes, partly because unoccupied or tenant-occupied homes sometimes go longer before damage is discovered.
That fire figure ($84,200 average) is why ACV vs. RCV matters so much. On an $84,000 claim, a 30% depreciation haircut is $25,200 you’re absorbing yourself.
Three Real-World Scenarios
Scenario 1: Landlord in Memphis, Tennessee owns a 1978 single-family rental and buys a DP-1 primarily to keep premiums low. Tenant reports a kitchen fire. The 12-year-old cabinets and 8-year-old flooring are badly damaged. Claim is covered under fire peril, but ACV settlement applies. Depreciation calculated at $19,400. Landlord receives $31,600 instead of the $51,000 replacement cost. Has to finance the remaining renovation. → Lesson: ACV on an older property is a hidden cost that compounds.
Scenario 2: Landlord in Minneapolis buys a DP-2 with RCV on the dwelling and adds the fair rental value endorsement. Polar vortex hits, pipes burst in an unheated basement. Claim filed under sudden and accidental discharge peril (which DP-2 covers). Adjuster confirms loss is covered. Dwelling uninhabitable for 6 weeks, rental income of $1,400/month covered during repair period. Total payout: $23,700 for repairs plus $2,100 in lost rent. → Lesson: The endorsements you add in November feel expensive until February.
Scenario 3: Landlord owns a vacant home under renovation in Phoenix, AZ. Bought a DP-3 but didn’t notify the carrier the property had been unoccupied more than 60 days. Vandalism occurs. Carrier invokes vacancy clause. Claim denied for vandalism, though fire would still have been covered under the base form. → Lesson: Vacant home endorsements exist, cost roughly $150–$400 extra annually, and are worth every dollar if the home might sit empty.
How to Actually Read Your Declarations Page
When your policy arrives, skip to the declarations page and find three things before you look at anything else. First, which form number is listed: DP-1, DP-2, or DP-3. Second, whether loss settlement says “ACV” or “replacement cost.” Third, look for the endorsements section and confirm whether liability, fair rental value, and vacancy are actually listed with dollar limits next to them. If they’re not there with a listed limit, assume they don’t exist. Carriers aren’t obligated to call you and tell you what you forgot to buy.
If you’ve got multiple rentals, it’s worth maintaining a home inventory with documentation stored somewhere fireproof. A fireproof document safe (note: this site may earn a commission on Amazon purchases) can protect policy documents, purchase records, and renovation receipts that become critical if you’re negotiating an ACV claim. Same logic applies to water leak sensors in basements or near water heaters: caught early, a plumbing failure is a $400 repair. Missed for three weeks, it’s a DP-1 claim that doesn’t cover the mold remediation that follows.
Sources
- Insurance Information Institute (III): Industry loss data, policy type descriptions, and homeowner/dwelling insurance statistics
- National Association of Insurance Commissioners (NAIC): State insurance department directory and consumer insurance guides
- ISO (Insurance Services Office) Dwelling Program Forms DP-1, DP-2, DP-3: Standard policy language and peril definitions used by most U.S. carriers
- National Fire Protection Association (NFPA), Structure Fire Data Reports: Annual residential fire loss statistics
- III / ISO Joint Loss Data (2025): Average claim payouts by peril type for residential dwelling policies
This article is for general informational purposes only and does not constitute insurance advice. Coverage details, exclusions, and costs vary significantly by insurer, policy type, and location. Always review your policy documents and consult a licensed insurance professional for advice specific to your situation.
Recommended Resources
Disclosure: As an Amazon Associate, we earn a small commission from qualifying purchases at no extra cost to you. We only recommend products that genuinely support the topics covered in this article.
- Kidde 10-Year Battery Smoke & CO Detector (~$32), Dual smoke and carbon monoxide detector with 10-year sealed battery, no battery replacement needed for a decade.
- Ring Alarm 8-Piece Security Kit (~$199), Professional-grade DIY home security system with optional 24/7 monitoring, top way to qualify for insurance discounts.
- Kidde Hardwired Smoke & CO Detector w/ Battery Backup (~$40), Hardwired interconnected smoke and CO detector, when one alarm sounds, all alarms in the house sound.
