DP1 vs DP3 Coverage - Which would you choose?

5 Replies

Hello Everyone,

I am closing on my next investment property next month and I am down to choosing between the below 2 insurance policies.
I will have to admit - I chose the cheapest insurance policy on my first rental and I did not look at anything besides cost.
I am looking at it with more detail now

First Insurance Policy
Cost - $626
Coverage - DP1 for $90,000
Personal Property - $2000
Premises Liability $500,000
Medical Payments Per occurrence - $25,000
Medical Payments per Person - $1000
Deductible - $1000
Fair Rental Value - $12,000

Second Insurance Policy
Cost - $730
Coverage - DP3 for $249,000
Fair Rental Value - $49,000
Additional Living Expenses - $49,800
Personal Liability $500,000
Medical Payments to Others - $3,000

Information on property
Old property constructed in 1880. The property needs some work when I purchase it.
The property is 3 stories with 1700 Square Feet.
Purchase price is $54,000 and the Loan will be 75% at $40,500

I am clueless when comparing insurance policies because they don't necessarily use the same terms.
From what I can tell - the big difference between the 2 policies is DP1 which is actual cash value and DP3 which is replacement cost.

What is every's thoughts?
Which policy should I take and why?

Hey Basit,

I would be happy to discuss the differences with you!  I'm in the insurance industry and work for a broker who is licensed in all 50 states. 

When would you have some time to connect on the phone to discuss the various options and coverages?

Also, I will message you with my contact information.  Looking forward to the opportunity to help you!



In property Insurance there are two primary ways of describing what coverage is given by a policy.  There is Special Form (aka All Risk).    Although that is the coverage provided on most standard Homeowners policies it is not what you are comparing here.   The second type of coverage is "Named Perils" is the coverage for the DP1 & DP3 forms.  Named Perils coverage is called that because the Perils (causes of loss) that are covered are Named in the policy.  Only those Perils named are insured by the policy.   The DP3 provides all the coverage of the DP1 and additional perils.   The difference in premium is negligible and the limits of coverage are better for the quote with the DP3.   Without knowing the actual companies, I can't say for certain that the DP3 policy would be better but odds are.

If you want to PM me the companies on the two quotes I may be able to give you further advise.   We represent 30+ companies so there is a chance we deal with one or both.

If I had to go on just what you have there I would choose policy #2. But you really need to put apples to apples for anyone to say with any kind of certainty. Your two policies don't list all the same benefits. 

@Basit Siddiqi Do you understand the diff between actual cash value and replacement? If not... Simple example = your house catches on fire.. A wall needs to be replaced. The cost for a new wall is $6,000. Acv policy says your wall wasn't new... Your wall was only worth $3000, so we will pay 3000, and you will pay 3000. Do the math... A Big fire will cost you a lot. Replacement value policy would give you $6000 to replace the wall. Id go with replacement every time.

@Basit Siddiqi option #2 hands down.

For $100 per year, you will get most of your claim paid.  Option # 2 May pay out as low as 25% of your claim cost.

So on a $50k freezing pipe claim, option # 1 gives you $50k, option #2 gives you $12,500.

Not sure a freezing pipe claim can he that high, but you get the idea.