Types of rental
property insurance policies
When you're
shopping for rental property insurance policies, you may notice that there are
different types of policies called "forms." Similar to homeowners
insurance, differing rental property insurance forms have different levels of
coverage. The descriptions provided below are generalized, but they can give
you an idea of what to expect for each type of form.
DP-1: Rental property
insurance is categorized as a dwelling policy, or DP, and the DP-1 is the cheapest
form with the most basic coverage. DP-1 forms usually only cover named perils,
meaning that if a peril, or disaster, is not explicitly named in the form, you
will not be reimbursed for the damage. These policies often reimburse you on an
actual cash value basis, meaning that your insurer will pay you for covered
damage minus wear and tear, called depreciation.
DP-2: This form
provides slightly broader coverage than the DP-1. Like the DP-1, DP-2 coverage
tends to be on a named peril basis. However, DP-2 coverage will generally
extend to a broader range of perils. For example, an insurer might offer
coverage for burglary damage in its DP-2 policy but not in its DP-1. The DP-2
form also improves on the DP-1 by typically providing coverage on a replacement
cost basis, meaning that damage will be covered at the price it would take to
cover the damage at current market prices, without accounting for depreciation.
DP-3: This form, the
most expensive, provides the broadest range of coverage of the three. This type
of policy will provide extensive peril coverage, protecting against all perils
except those explicitly excluded in the policy. Like the DP-2 policy, its
coverage will be provided on a replacement cost basis.
Optional additions
to your rental property insurance
The coverage
provided by rental property insurance will vary by insurer, and coverage that
is standard with one insurer may be optional or unavailable with another. Below
we've listed a few examples of common endorsements you may be able to add to
your rental property insurance. We recommend shopping for quotes to find the
best combination of price and coverage that fits your needs.
Optional rental property insurance endorsements
- Vandalism coverage: This usually covers
deliberate physical damage to the home. Allstate is an example of an
insurer that does not cover vandalism with its rental house insurance but
offers it as an endorsement.
- Ordinance or law coverage: This covers a loss of
value or costs associated with enforcing local laws surrounding the repair
of property caused by an insured loss. If this type of add-on is important
to you, you could look to State Farm, which offers this endorsement.
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Jason Gwerder
Friday, 8 October 2021
