DP3 vs. HO3: Choosing the Right Dwelling Property Insurance

When insuring a property, choosing the right coverage is crucial. Two common options for dwelling property insurance are the DP3 and HO3 policies. While both offer similar coverage components, they cater to different needs and situations.

DP3 (Dwelling Property 3)

A DP3 policy, also known as a dwelling fire policy, is a type of insurance specifically designed for properties that are not owner-occupied. This means it's most commonly used for properties that are rented or leased to others. Examples include:

• Rental Properties: Long-term rental homes or apartments where the owner doesn't reside on the property.
• Vacation Rentals: Properties rented out on platforms like Airbnb or Vrbo for short-term stays.
• Investment Properties: Properties held for investment purposes, which may or may not be currently rented.

What does a DP3 policy cover?

A DP3 policy offers a comprehensive package of coverage, including:

• Coverage A: Dwelling: This covers the physical structure of the home itself, including the walls, roof, floors, and attached structures like garages.
• Coverage B: Other Structures: This extends coverage to detached structures on the property, such as sheds, fences, or detached garages.
• Coverage C: Personal Belongings: This covers the personal belongings of the property owner, but typically not the belongings of tenants or renters.
• Coverage D: Loss of Use: This provides coverage for lost rental income if the property becomes uninhabitable due to a covered peril. It can also cover additional living expenses if the property owner is temporarily displaced.
• Coverage E: Personal Liability: This is often optional with a DP3 policy. It provides coverage if someone is injured on the property and the owner is found liable.
• Coverage F: Medical Payments: Also optional, this covers medical expenses for injuries sustained by guests or others on the property, regardless of fault.

Why choose a DP3 policy?

A DP3 policy can be a suitable choice for landlords or property owners who:

• Need coverage for rental properties: Standard homeowners insurance policies often exclude or limit coverage for rental properties.
• Want flexibility: DP3 policies can be customized with optional coverages to meet the specific needs of the property owner.
• Seek affordability: DP3 policies can sometimes be more affordable than traditional homeowners insurance, especially for properties with older roofs.

HO3 (Homeowners 3)

An HO3 policy is the most common type of homeowners insurance in the United States. It's specifically designed for owner-occupied homes, meaning the homeowner resides in the property. This policy offers a broad range of coverage, protecting your home, belongings, and providing liability coverage.

Coverage Components

Similar to a DP3 policy, an HO3 includes the following coverage components:

• Coverage A: Dwelling: This covers the physical structure of your home, including the walls, roof, foundation, and attached structures.
• Coverage B: Other Structures: This extends coverage to detached structures on your property, such as sheds, fences, or detached garages.
• Coverage C: Personal Belongings: This covers your personal belongings and those of your resident family members, providing protection against damage or loss.
• Coverage D: Loss of Use: This covers additional living expenses if your home becomes uninhabitable due to a covered peril. It can help pay for temporary housing, meals, and other essential expenses.

Key Differences from DP3

While the coverage components are similar, there are some key differences between HO3 and DP3 policies:

• Owner-Occupancy: HO3 policies are specifically for owner-occupied homes, while DP3 policies are for rental properties or non-owner-occupied dwellings.
• Personal Liability: HO3 policies include personal liability coverage by default, protecting you if someone is injured on your property and you are found liable. In DP3 policies, this coverage is often optional.
• Medical Payments: HO3 policies also include medical payments coverage, which covers medical expenses for injuries sustained by guests or others on your property, regardless of fault. This is also typically optional in DP3 policies.
• Personal Belongings: HO3 policies cover the personal belongings of the homeowner and resident family members, while DP3 policies usually only cover the belongings of the property owner.

Why choose an HO3 policy?

An HO3 policy is a popular choice for homeowners because it offers:

• Comprehensive Coverage: It provides broad protection for your home, belongings, and liability risks.
• Affordability: It strikes a balance between comprehensive coverage and affordability, making it a cost-effective option for many homeowners.
• Peace of Mind: Knowing you have a robust policy in place can provide peace of mind and financial security in case of unexpected events.

Key Differences

While DP3 and HO3 policies share some similarities, understanding their key differences is crucial for choosing the right coverage. Here's a closer look at those differences:

Primary Risk

• DP3: Primarily designed for properties rented to others, such as long-term rentals or vacation homes.
• HO3: Specifically designed for owner-occupied homes, where the homeowner resides in the property.

Personal Belongings:

• DP3: Typically covers the personal belongings of the property owner, but not the belongings of tenants or renters.
• HO3: Covers the personal belongings of both the homeowner and resident family members.

Liability Coverage

• DP3: Personal liability coverage (for injuries to others on the property) is often optional.
• HO3: Personal liability coverage is usually included by default.

Medical Payments

• DP3: Medical payments coverage (for injuries to guests on the property) is often optional.
• HO3: Medical payments coverage is usually included by default.

Roof Surfacing Payment Schedule (RSPS)

• DP3: Some insurers include an RSPS endorsement, which can affect claim settlements for roof damage based on the roof's age and material.
• HO3: RSPS endorsements are less common in HO3 policies.

Choosing the Right Policy

The best policy for you depends on your specific circumstances:

• DP3: Ideal for rental properties, especially those with older roofs or unique situations like Airbnb rentals.
• HO3: Suitable for owner-occupied homes, offering a balance of coverage and affordability.

Need Help?

If you're unsure which policy is right for you, get in touch with Worth Insurance today. Our team can assess your needs and recommend the most suitable coverage for your property.