What’s the difference between DP3 and HO-3?

Much like an HO-3 policy, a DP3 policy, also called dwelling property insurance, covers your home as well as other structures on your property. However, these policies can have some important differences that make them more appropriate for specific situations. Let’s examine each option in more detail and see how they compare.

DP3 vs. HO-3: How the coverages compare

At first glance, the DP3 and HO-3 seem more similar than different. Both are designed to cover homes and other structures on an open peril basis. That means the structures are protected from all sources of damage except the few the policy lists as exclusions or perils that aren’t covered.

Both policies can also offer the following coverage parts.

• Coverage A, for the structure of the home

• Coverage B, for other structures on the property

• Coverage C, for personal belongings

• Coverage D, for loss of use and fair rental value

• Coverage E, for personal liability

• Coverage F, for medical payments to injured guests

The coverage available on HO-3 and DP3 policies is similar. However, the specifics of who and what are covered are different. The chart below shows how that works. 

DP3 vs. HO-3 coverage details

The biggest difference between DP3 and HO-3 is the type of risk each covers. DP3 policies are most commonly used for properties the owner rents to others. An HO-3 policy is for owner-occupied homes. Notice, too, that some coverages are added by default, while others are optional. 

Another big difference between DP3 and HO-3 is that some insures include a roof surfacing payment schedule (RSPS) endorsement. This endorsement is mandatory for homes with roofs that are more than 10 years old, but it’s optional for newer roofs.

An RSPS endorsement changes the basis for claim settlements to payments based on your roof’s age and surface materials when your roof is damaged by wind or hail. For all other covered sources of damage, the roof and the rest of the home’s structure are insured for their replacement cost.

Who needs a DP3 vs. HO-3?

Now that you know the similarities and differences between DP3 and HO-3, how do you know which is right for you?

The answer depends on your situation.

The DP3 policy is often a good option for people with rental properties. For example, it can be tricky to find insurance if you rent out your home on Airbnb, but a DP3 can often cover that situation. Moreover, including an RSPS endorsement on a DP3 makes it a good choice for homes with older roofs. The RSPS makes the premium more affordable and may eliminate the need to find coverage through a state-run program.

These are usually the most common reasons for choosing a DP3 policy:

• You own an investment property that you rent out short or long term.

• Your home has a roof that’s 10 years or older.

An HO-3 policy is a good balance of coverage and affordability to protect your primary residence. You might opt for this policy if: 

• You live in the home. 

• You don’t rent out your home.

• Your roof is brand new or has more than five years of useful life.

Getting the right coverage for your property is important, so contact your insurance agent if you have any questions.