Dwelling Fire vs. Landlord Policies: What You Need to Know

Laura Olson
Jan 15, 2024

A fire in a rental property can have devastating consequences for a landlord. If the right insurance policy is not in place, the landlord could be left with a huge financial burden.

The cost of repairing the damage caused by the fire can be high. If the property is left uninhabitable, the landlord may also have to pay for alternative accommodation for the tenants. In some cases, the landlord may even be liable for damages if their negligence caused the fire.

As a property owner, it’s important to understand the insurance policies available to you to ensure you choose the proper coverage. Speaking of which, did you know that dwelling fire and landlord policies are different? This article explains everything you need to know so you do not get burned by confusing the two. 

Dwelling Fire Policies vs. Landlord Policies: What's the Difference?

More often than not, you will find landlord policies referred to as dwelling fire policies. While both policies are for properties that are not the owner's primary residence, they have a subtle technical variance that makes all the difference. 

Dwelling fire and landlord policies cover the property's primary and additional structures, like fences and garages. However, dwelling fire insurance does not provide content coverage for the landlord's property used in the rental—such as appliances or landscaping equipment—nor personal liability coverage. On the other hand, a landlord insurance policy will cover everything under the dwelling fire policy in addition to providing coverage for liability, loss of income, and contents.

Coverage Included in a Dwelling Fire Policy

Dwelling fire policies come in three varying forms, each covering different perils. DP1, also referred to as the basic form, is the most affordable and basic dwelling fire policy. DP3, or special form, is the most comprehensive and costly policy. Finally, DP2 or broad form offers a middle ground between DP1 and DP2, offering more coverage than DP1 at a lower price than DP3.

DP1 (Basic Form)

DP1 is a named-peril policy, meaning the insurance company will only cover perils named in the policy. It provides coverage against 9 perils:

  1. Fire
  2. Smoke
  3. Lightning
  4. Explosions
  5. Windstorms
  6. Hailstorms
  7. Aircraft
  8. Vehicles
  9. Volcanic eruptions

Besides offering coverage for just nine perils, the claim payout for DP1 also differs from the other policies. DP1 is the only policy that pays out claims using ACV (Actual Cash Value). 

DP2 (Broad Form)

DP2 is also a named-peril type of policy. In addition to the 9 perils covered under DP1, it also covers:

  • Burglary
  • Vandalism
  • Weight of ice & snow
  • Frozen pipes
  • Falling objects
  • Broken glass
  • Electrical damage
  • Cracking, tearing, and bulging
  • Structure collapse

Besides the difference in the level of coverage with DP1, the claim payout method also differs. Claims under DP2 are paid using RCV (Replacement Cost Value). That means you will receive the cost of replacing or repairing damages to the property without factoring in the property's depreciation.

Apart from covering the property's structure, DP2 can also include loss of rent coverage, which provides property owners with rental income reimbursements when the property remains vacant during repairs.

DP3 (Special Form)

Unlike the previous coverages under the dwelling fire policy, which are named peril, DP3 is an all-risk or open-peril policy. It simply means the insurance company covers all perils unless they explicitly exclude them from the policy. 

DP3 is the most extensive dwelling fire policy, covering all the perils under DP2 and then some. Like DP2, DP3 also pays replacement cost value and can include loss of rent coverage.  

That said, the open-peril only applies to the property's primary and additional structures. The named-policy structure kicks in when it comes to personal property. Although exclusions under this policy vary between service providers, they will typically include the below:

  • Earth movement 
  • Flood 
  • Mold, rot, and rust
  • Negligence 
  • Intentional damage
  • Ordinance or law

To help ensure you choose the right insurance policy and coverage for your rental property, search the Obie risk map to learn about the natural risks in your area.

How Much is Landlord Insurance?

What's Included in a Landlord Policy?

For property owners, damage to the property's structure is not the only risk to one's property investments. Other events, such as losing rental income when the property becomes unlivable, can affect one's investment significantly. So can facing liability lawsuits from tenants, their guests, and other third parties.

That's where a landlord policy comes in. This policy is more comprehensive than the dwelling fire policy. It is inclusive of loss of rent and personal liability. The former ensures your insurance provider refunds you for lost rental income you would otherwise receive were the property to remain occupied.

It kicks in once your property becomes uninhabitable due to damages from a covered peril, allowing you to meet expenses during this period. The latter provides coverage against financial loss you would incur if you were sued for bodily and property damages a third party incurs on your property. This ranges from falls on the property to loss of property from a failure to maximize the security of the property.

In addition, a landlord policy also covers your personal contents used in the rental property. This coverage is important for a landlord renting out a property that may include appliances, furniture, and equipment like a lawnmower or snow blower.

Pros and Cons of Each Type of Policy

Dwelling fire and landlord policies have their pros and cons. A dwelling fire policy is a more affordable option that offers financial protection against property damage and loss of rent, depending on the type of dwelling fire policy. This makes it ideal for a property owner on a budget, with a secondary residence or a vacant property.

However, the disadvantage is that it does not offer protection against personal liability. In addition, some types of dwelling fire policies are not extensive, exposing one to more property damage risk. By contrast, landlord insurance protects one's property, loss of rental income, and personal liability.

Since landlord insurance also includes two additional coverages compared to a dwelling fire policy, it offers a property owner with multiple properties or commercial units better options and protection. However, on the downside, a landlord policy is pricier.

How to Choose the Right Insurance Policy for a Rental Property

The right insurance policy for a rental policy depends on your situation. Here's how to choose the right one:

  • Choose the right policy for your type of property: The kind of property you have matters. For example, a dwelling fire policy might be the best option if you have a residential rental property that you also occupy, like a duplex. On the other hand, a landlord policy could be the best option if you have multiple residential and commercial units. 
  • Coverage: Pay close attention to the perils covered under the policy. The best coverage for a rental property owner should include property, contents, personal liability, and loss of rent coverage. Make sure you speak with your insurance broker or agent to get clarity around this before binding.
  • Understand your needs: Every property owner's needs are unique. Understanding what you need ensures you consider unique risks that affect you. For example, if your property is in a flood zone area, you should really consider coverage against flooding. 
  • Shop around: It's important for landlords to shop around for an insurance policy for rental property to make sure they're getting the best coverage possible. There are a lot of different insurance companies out there, and each one offers different policies. Some might offer better coverage for certain things than others. Shopping around can help you find a policy that's affordable and gives you the coverage you need.

Get an Instant Online Quote From Obie Today

As a landlord, you understand the importance of protecting your investment. But finding the right landlord insurance can be a challenge. There are so many options out there, and it's hard to know which one is right for you.

That's where Obie comes in. Obie is a cutting-edge insurance company that makes it easy to find and buy the right policy for your rental property. Obie uses technology to streamline the process, so you can get the coverage you need without all the hassle.

Plus, Obie’s policies are designed specifically for landlords. That means they offer comprehensive protection against a wide range of risks, including damage from tenants, liability claims, and more. So you can rest assured knowing your investment is safe.

Get a quote from Obie today and see how easy it is to find the perfect landlord insurance policy for your needs. Visit the Obie website and enter your rental property address to get an instant quote.