A standard homeowner's policy does not cover a rental property. Put the wrong policy on an investment property and a claim can be denied outright. Here is what DP-1, DP-3, and landlord policies actually do — and what they cost.
The Three Main Policy Types
DP-1 (Basic Dwelling)
Named-peril coverage for fire, lightning, explosion, and a short list of other perils. Actual cash value (ACV) — depreciated — on the dwelling. Cheapest option, thinnest coverage. Often used on very low-cost rentals or vacant properties.
DP-3 (Special Form Dwelling)
Open-peril coverage (everything except specifically excluded perils). Replacement cost on the dwelling. The standard landlord policy for most investors. Includes loss of rental income if the property becomes uninhabitable due to a covered loss.
Landlord Policy (Sometimes Called DP-3 Plus)
Similar to DP-3 but with enhanced liability and optional endorsements — loss of rents, premises liability, personal property of the landlord left on-site, and often ordinance & law coverage.
Typical Costs
| Policy | Typical Annual Premium | Coverage |
|---|---|---|
| DP-1 | $600–$900 | Named peril, ACV |
| DP-3 | $900–$1,600 | Open peril, replacement cost |
| Landlord + Liability | $1,100–$2,100 | DP-3 plus enhanced liability |
Pricing varies significantly by state, property age, and location. Coastal and high-fire-risk areas run materially higher.
Builder's Risk (For Rehabs)
During a major rehab, a standard DP policy will not cover a vacant property under construction. You need a builder's risk policy:
- Covers the property during construction
- Typically 6–12 month terms
- Runs $1,200–$2,500 for a typical flip
- Required by most bridge lenders
Required Coverages Most Lenders Want
- Dwelling: 100% of replacement cost
- Liability: $300K minimum (many want $500K–$1M)
- Loss of rents: 12 months of rent value
- Deductible: typically $1,000–$2,500
- Wind/hail: specific coverage in coastal states
- Lender listed as mortgagee
Umbrella Policy
Once you own 3+ properties, a $1M–$2M umbrella policy costs $300–$600/year and provides liability coverage above your per-property limits. Cheapest risk reduction in the investor toolkit.
Common Mistakes
- Keeping a homeowner's policy in place after the property becomes a rental (claim denial waiting to happen)
- Under-insuring the dwelling (co-insurance penalty at claim time)
- Skipping loss-of-rents coverage
- Ignoring flood when property is in a flood zone
- Not notifying carrier during rehab/vacancy periods
Flood, Earthquake, and Specialty
Flood is never covered under standard DP-3. If your property is in a FEMA flood zone, you need separate NFIP or private flood coverage. Earthquake is a specialty add-on in earthquake-prone states. Review your specific property's exposure.
Shopping Tips
- Get 3 quotes minimum — spreads are wide
- Bundle properties with one carrier where possible for portfolio discounts
- Raise deductibles to $2,500 to lower premiums (self-insure small claims)
- Re-shop every 2–3 years — pricing drifts
Good insurance is boring until you need it. Make sure the policy type matches the property use, coverages match lender requirements, and you review annually. A $200 premium savings is not worth a denied claim.
Ready to finance your next deal?
Get a rate quote in under 60 seconds — no credit pull, no obligation.