By Paul Della · Licensed Insurance Agent · The Della Agency
If you own a rental in New York, there's a good chance your policy has "DP-3" printed somewhere on the declarations page — and a better chance nobody ever explained what that means. It's worth two minutes, because the difference between DP-3 and its two siblings is the difference between a loss being covered and a loss being argued about.
DP-3 is the special form of the dwelling fire policy — the broadest of three dwelling forms and the one most rental property is written on. It covers the dwelling on an open perils basis, meaning damage is covered unless specifically excluded, and generally settles at replacement cost rather than depreciated value. DP-1 is the basic named-perils form settled at actual cash value; DP-2 is a broader named-perils form. The open perils distinction matters most in practice: under a named-perils form you need your loss to match a list, while under DP-3 the insurer has to point to an exclusion. It still isn't unlimited — flood, water backup, wear and tear, and earth movement are typical exclusions.
"Dwelling fire policy" is a misleading name. It suggests a policy that covers fire, and not much else — which was roughly true of the original form a long time ago. The modern DP-3 covers considerably more than fire, and the way it covers is what separates it from the cheaper forms sitting next to it on a quote.
This guide explains what a DP-3 actually is, how open perils works and why it matters at claim time, how the three dwelling forms compare, how a DP-3 differs from the homeowners policy you may be used to, and where the coverage still stops. We're a licensed New York agency in North Babylon working with rental property owners statewide.
What Is a DP-3 Policy?
The short answer: the special form of the dwelling policy — open perils on the dwelling, replacement cost settlement, built for property you own but don't live in.
Dwelling policies come in three forms, and the North Carolina Department of Insurance lays out the structure the same way it works across states: DP-1 basic, DP-2 broad, DP-3 special. The DP-3 is the most comprehensive of the three.
It's designed around non-owner-occupied property, which shapes what's in it. Rather than the broad personal property coverage a homeowners policy carries, a DP-3 covers a limited amount of the owner's property kept on site to service the building. Rather than loss of use paying your living expenses, it carries loss of rents replacing income. Liability is frequently added rather than built in — worth confirming rather than assuming, as our guide to landlord liability insurance covers.
What "Open Perils" Actually Means
The short answer: your dwelling is covered for any cause of loss the policy doesn't specifically exclude — which reverses who has to prove what.
This is the single most valuable thing about the form, and it's easy to miss because it sounds like jargon.
Under a named perils policy (DP-1, DP-2), the policy lists covered causes of loss. If what happened to your property isn't on that list, there's no coverage — the burden is on the loss to match the list.
Under open perils (DP-3), the logic inverts. Damage to the dwelling is covered unless the policy names an exclusion that applies. The insurer identifies the exclusion rather than you finding your peril on a list. For unusual losses — the ones nobody drafted a list item for — that difference is decisive.
One caveat worth knowing: on many DP-3 policies the dwelling is open perils while personal property remains named perils. Those are two different standards inside one policy, and the declarations page will tell you which applies to what.
DP-1 vs. DP-2 vs. DP-3
The short answer: the forms differ on which perils are covered and how losses are paid — and both differences show up as money at claim time.
| Form | Perils | Dwelling settlement |
|---|---|---|
| DP-1 (basic) | Named perils, limited list | Actual cash value |
| DP-2 (broad) | Named perils, longer list | Replacement cost |
| DP-3 (special) | Open perils | Replacement cost |
The second column is the one people fixate on, but the third is where DP-1 quietly hurts. Actual cash value pays replacement cost minus depreciation — so a twenty-year-old roof is paid like a twenty-year-old roof, not like a new one. On an older building, that gap between what you collect and what rebuilding costs can be substantial, and you fund the difference. Our guide to replacement cost vs. actual cash value works through how wide it gets.
DP-1 does have a role — it's sometimes what's available for properties that are hard to insure, older buildings, or vacant ones. But when a DP-3 is obtainable, the upgrade usually buys more than it costs.
DP-3 vs. HO-3: How It Differs From a Homeowners Policy
The short answer: similar open-perils approach on the dwelling, but built for a property you don't live in — less personal property, loss of rents instead of loss of use, liability often added rather than included.
If you've owned a home, you're used to an HO-3: dwelling on open perils, broad personal property coverage, personal liability built in, and loss of use paying your hotel and meals if you're displaced.
A DP-3 shares the open-perils approach on the dwelling but reflects a different situation:
- Personal property is limited to items you keep on site to service the property — appliances you supply, maintenance equipment — not a household's belongings.
- Loss of rents replaces loss of use, because your financial exposure is missed income rather than a hotel bill.
- Liability is frequently added by endorsement rather than automatically included.
- Tenant property and liability are outside the policy entirely — that's the tenant's renters insurance.
That last point is why requiring renters insurance in the lease matters, as our guide on whether renters insurance is required in New York explains.
What a DP-3 Still Doesn't Cover
The short answer: flood, water backup without an endorsement, wear and tear, neglect, and earth movement — on an open perils form, the exclusions are the coverage boundary.
Because everything not excluded is covered, the exclusion list is where you should actually read:
- Flood — excluded, requiring separate coverage. Real exposure for coastal New York property, per our Long Island flood insurance guide.
- Water backup — sewer, drain, and sump backup is typically excluded unless you add the endorsement, and it's a common loss in older housing stock.
- Wear and tear, deterioration, neglect — maintenance, not insurance. The aging roof isn't a claim.
- Earth movement — generally excluded.
- Vacancy-related losses — most policies restrict coverage once a property has been vacant beyond a set period.
The vacancy provision catches landlords specifically. A property between tenants for an extended stretch, or sitting empty during renovation, may fall outside normal coverage — tell your agent rather than assuming the policy simply continues.
An unusual failure damages a rental property's dwelling — something not on any standard named-perils list. Under a DP-1, the owner has to find the cause on the policy's covered list; it isn't there, so there's no coverage, and even a covered loss would have been paid at depreciated value. Under a DP-3, the loss is covered unless the insurer identifies an applicable exclusion, and the dwelling is settled at replacement cost. Same building, same event, two very different outcomes — decided by which form was quoted years earlier. (Illustrative; your policy language and the specific facts control.)
The Bottom Line on DP-3 Coverage
DP-3 is the special form of the dwelling policy and the one most rental property owners should be asking for. Two features do the work: open perils on the dwelling, so a loss is covered unless the policy excludes it rather than only if it appears on a list, and replacement cost settlement, so you're not funding depreciation out of pocket on an older building.
It isn't unlimited, and on an open perils form the exclusions are the real boundary — flood, water backup without an endorsement, wear and tear, earth movement, and vacancy provisions all deserve a read. Pull your declarations page and check three things: which form you're on, whether the dwelling is settled at replacement cost or ACV, and whether liability and water backup are actually there. Send it to us and we'll check it with you for free.
Learn more about our landlord insurance coverage, or request a free quote and we'll review your rental property coverage.
Frequently Asked Questions
DP-3 is the special form of the dwelling fire policy, the most comprehensive of the three dwelling forms, and the one most commonly used for rental property. It covers the dwelling and other structures on an open perils basis, meaning damage is covered unless the policy specifically excludes it, and it generally settles dwelling losses on a replacement cost basis rather than depreciated value. It is designed for property the owner does not occupy, which is why it includes loss of rents rather than loss of use.
DP-1 is the basic form, covering a limited list of named perils and typically settling losses at actual cash value, meaning depreciation is subtracted. DP-2 is the broad form, covering a longer list of named perils and generally settling the dwelling at replacement cost. DP-3 is the special form, covering the dwelling on an open perils basis at replacement cost. The practical difference is that with DP-1 and DP-2 a loss must match a listed peril, while with DP-3 it is covered unless excluded.
Open perils, sometimes called all risk or special form, means the dwelling is covered for any cause of loss that the policy does not specifically exclude. This reverses the burden compared with a named-perils policy. Under a named-perils form, you need the cause of your loss to appear on the policy's list. Under open perils, the insurer identifies an exclusion that applies. Note that personal property on a DP-3 is often still covered on a named-perils basis even though the dwelling is open perils.
An HO-3 is a homeowners policy for an owner-occupied residence, and it includes broad personal property coverage, personal liability, and loss of use paying additional living expenses. A DP-3 is a dwelling policy generally used for property the owner does not occupy, with limited personal property coverage for items used to service the building and loss of rents instead of loss of use. Liability is often added to a DP-3 rather than built in.
No. Open perils is broad but not unlimited, and the exclusions matter. Flood is excluded and requires separate coverage, and water backing up through sewers or drains is typically excluded unless an endorsement is added. Wear and tear, deterioration, neglect, and maintenance issues are excluded as they are on any property policy. Earth movement is generally excluded. Read the exclusion section, because on an open perils form the exclusions are where the coverage boundary actually lives.
Which Dwelling Form Are You Actually On?
Send us your declarations page and we'll tell you the form, whether the dwelling settles at replacement cost or ACV, and whether liability and water backup are really there. Free, no obligation.
✓ Last reviewed by the Della Agency team on . We refresh our guides quarterly — coverage rules, costs, and New York insurance regulations change.
This guide is general information, not coverage or legal advice. Dwelling policy forms, covered perils, settlement basis, endorsements, vacancy provisions, and exclusions vary by insurer and by policy — read your own policy and declarations page and confirm current terms with your insurer. Availability of specific forms depends on the property and underwriting. Examples are illustrative.