Types of Property Insurance Policies
Policy Families
Candidates must distinguish dwelling policies, homeowners policies, commercial property forms, and specialty coverages such as flood and earthquake. Dwelling policies (DP-1, DP-2, DP-3) cover owner-occupied or rented dwellings and do not include liability unless endorsed. Homeowners policies (HO-2, HO-3, HO-5, HO-8) combine property and liability for owner-occupied residences. Commercial property forms (CPP, BPP) cover business real and personal property.
Key Differentiators
Know occupancy eligibility, valuation methods, and included perils. HO-3 covers the dwelling on an open-peril basis and personal property on a named-peril basis. HO-5 covers both on an open-peril basis. HO-8 is for older homes with functional replacement cost. Flood coverage is generally excluded and requires a separate policy.
Traps
Questions often test whether a dwelling policy includes liability (it does not by default) or whether an HO-3 covers personal property on an open-peril basis (it does not). Another trap is assuming flood is covered under a homeowners policy.
Rule of Thumb
Match the form to occupancy and ownership. If the insured rents the property to others, a dwelling or commercial form is more likely correct than a homeowners form.
Worked Example
A landlord insures a single-family rental. The correct choice is a DP-3 dwelling policy, not an HO-3, because the owner does not occupy the home.