Dwelling Policies: Comparing DP-1, DP-2, and DP-3

In the world of property insurance, specifically within the complete FL 2-20 exam guide curriculum, Dwelling Policies (DP) serve as a vital alternative to Homeowners (HO) policies. While Homeowners policies are designed for owner-occupied primary residences, Dwelling forms are more flexible. They are primarily used for rental properties, seasonal dwellings, or properties that do not meet the strict underwriting requirements of an HO-3 or HO-5 policy.

The Florida 2-20 exam requires candidates to distinguish between the three primary forms: DP-1 (Basic), DP-2 (Broad), and DP-3 (Special). Each form offers a different level of protection, ranging from very limited named perils to comprehensive open-peril coverage. Understanding these nuances is critical for correctly answering practice FL 2-20 questions regarding property valuation and peril application.

The DP-1 Basic Form is the most restrictive of the three. It is a named-peril policy, meaning only the causes of loss specifically listed in the contract are covered. By default, the DP-1 only covers three perils:

• Fire
• Lightning
• Internal Explosion

However, an insured can opt to add Extended Coverage (EC) perils for an additional premium. These include Windstorm, Civil Commotion, Smoke, Hail, Aircraft, Vehicles, Explosion, and Riot (often remembered by the acronym W.C. SHAVER). Vandalism and Malicious Mischief (VMM) can also be added as an endorsement if EC perils are purchased.

One of the most important exam points regarding DP-1 is its loss settlement. Unlike the broader forms, DP-1 typically pays losses on an Actual Cash Value (ACV) basis for both the structure and the contents. This means depreciation is subtracted from the replacement cost at the time of loss.

The DP-2 Broad Form is also a named-peril policy, but it significantly expands the list of covered causes of loss compared to the DP-1. It includes all the DP-1 perils (including EC and VMM) plus several "broad form" perils such as:

• Damage by Burglars (not the theft of property itself, but damage to the building caused by burglars)
• Falling Objects
• Weight of Ice, Snow, or Sleet
• Accidental Discharge or Overflow of Water or Steam
• Freezing of Plumbing, Heating, or Air Conditioning systems

Crucially, the DP-2 moves from ACV to Replacement Cost settlement for the dwelling and other structures, provided the insured maintains coverage equal to at least 80% of the full replacement value. Personal property (Coverage C) remains settled at ACV.

The DP-3 Special Form is the most popular choice for landlords and represents the highest level of protection. The DP-3 is unique because it uses two different approaches for coverage:

• Coverages A and B (Dwelling and Other Structures): These are covered on an Open Peril basis. This means the policy covers all risks of physical loss unless the peril is specifically excluded (such as flood, earthquake, or neglect).
• Coverage C (Personal Property): This is covered on a Named Peril basis, typically matching the broad perils found in the DP-2.

For the Florida 2-20 exam, remember that if a loss occurs to the structure and the cause is not excluded, the DP-3 will cover it. Like the DP-2, the dwelling and other structures are settled at Replacement Cost, while contents are settled at ACV.