Types of rental property insurance policies

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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Friday, 8 October 2021

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