When purchasing homeowners insurance it’s important your know which policy will best fit your needs. Do you know the difference between a DP-3 and HO-3?
Single Family Home HO-3 Policies
The HO-3 is a standard single family home policy and is adequate for most homeowners’ personal insurance needs. With this policy, your home is covered for just about anything that happens, so long as it’s not excluded from coverage. In addition to HO-3 policies, many homeowners also add optional endorsements to strengthen coverage.
Multi-family homes and HO-3 policies
In most cases you can cover yourself, your structure and your personal property if you own a building of up to four units, and you’re domiciled in one of those units. It’s important to remember that a person can have several residences, but they can only have one domicile.
DP-3 for rental properties
A Dwelling Fire (DP-3) policy is typically taken out on a residential property that’s rented out to tenants. This policy covers losses to the home’s structure, loss of use or rental coverage, and usually personal liability. These policies also allow additional coverage through endorsements.
DP-3 vs HO-3
In comparing a DP-3 policy and a HO-3 policy, the DP-3 is a dwelling and fire policy, also known as an “open risk” or “all perils” policy. Your personal property usually isn’t usually included in DP-3 coverage but is in an HO-3.
If you live in a single family home, you’ll be sufficiently covered with an HO-3 policy, but be sure to explore your opportunities with special coverage and endorsements, particularly in the context of replacement value of both the home and personal property. Rental properties are best insured with a DP-3 policy as it will cover what’s most important to you and could even cover loss in rent in some scenarios.
As always, it’s best to consult an agent before making any final decisions. Contact Prepared Insurance with your questions.