DP1 vs DP3 vs HO-4: Picking the Right Policy for Your Minnesota Rental
- Gerald Burns
- Jun 9
- 9 min read
DP3 is the right landlord policy for most Minnesota rentals — open-peril coverage, replacement cost, built for non-owner-occupied dwellings.
DP1 is the cheap, named-peril cousin. It fits very low-value rentals and almost nothing else.
HO-4 is not a landlord policy at all. It's renters insurance for your tenant.
Keeping a regular homeowners (HO-3) policy on a property you've started renting out is the most common — and most expensive — mistake MN landlords make.
For a typical $250K Twin Cities rental, the gap between the cheapest and the right policy is usually $400–$900/year. The gap on a real claim can be $40,000+.
A Minnesota dwelling policy — the kind you put on a rental property — is built on a different chassis than the homeowners policy you carry on the house you live in. The naming convention trips up most new landlords: HO-3, DP1, DP2, DP3, HO-4. They sound like they should be cousins. They're not. Some of them aren't even the right family of policy for what you're trying to do.
This post walks through what each one actually does, what they cost in Minnesota in 2026, and how to tell whether the policy you have right now on your rental is the right one.
--------------------------------------------------------------
1. Why your homeowners policy quietly stops working when you rent the place out
When you converted your house — or your duplex, or your cabin — into a rental, your standard HO-3 homeowners policy stopped fitting the risk. HO-3 was written assuming you live in the place. You're the one who notices the slow drip under the kitchen sink before it becomes a $40,000 mold claim. You're the one running the HVAC, locking the doors, watching for ice dams in January. Tenants don't have the same incentives. Carriers know it.
Most homeowners policies have a clause that limits or voids coverage once the property is no longer owner-occupied. Some carriers will let you keep an HO-3 on a property occupied by an immediate family member at no rent; almost none will let you keep it on a property rented to a non-relative. The catch: if you don't tell your insurer, you're still paying premium — you're just paying for coverage that probably won't pay the claim you're worried about.
The fix is to switch to a dwelling policy. That's the DP series.
--------------------------------------------------------------
Did You Know
The DP series originated from the 1970s ISO Dwelling Property forms, which were a separate product line from the homeowners (HO) forms. The "DP" literally stands for Dwelling Property, and the policies were designed specifically for buildings the owner doesn't live in.
--------------------------------------------------------------
2. What DP1 actually covers — and where it leaves you exposed
DP1 is the basic dwelling policy. It's named-peril, which means it only pays for losses caused by perils specifically listed on the policy form. The standard DP1 lists about nine: fire, lightning, internal explosion, windstorm and hail, smoke, vehicles, vandalism, theft (often optional), and volcanic eruption.
If your loss happens for a reason that isn't on that list, DP1 doesn't pay. The gaps that hit MN landlords most often:
Water damage from a burst pipe. Basic DP1 doesn't list this as a covered peril. A frozen pipe in February that floods the basement of your Brooklyn Park duplex can be a $20,000 loss with zero coverage on a base DP1.
Falling-object damage. A tree on the roof is covered only in limited cases.
Mysterious disappearance. If a tenant moves out and an appliance walks with them, DP1 typically won't help.
DP1 is also almost always written on Actual Cash Value (ACV), not Replacement Cost. ACV pays the depreciated value of the damaged property. On a 15-year-old roof, that can be 30 cents on the dollar versus what it'd cost to replace.
DP1 has exactly one niche where it makes sense: very low-value rentals where the ACV math works in your favor — think a $60K rural cabin near Brainerd or an old farmhouse used as occasional rental housing. Outside that niche, the $300–$600/year you save on premium is almost always swallowed by your first real claim.
--------------------------------------------------------------
3. DP1 vs DP3: why DP3 is the right answer for most MN rentals
DP3 is the open-peril, replacement-cost cousin of DP1. Open peril means the policy covers any cause of loss UNLESS it's specifically excluded on the form. So the burden flips: instead of the carrier needing to confirm your loss is on the list, you need to confirm it isn't on the exclusion list. The default position is "covered."
DP3 also defaults to Replacement Cost on the dwelling. If a windstorm rips the shingles off your rental's roof, DP3 pays to replace the roof at today's prices. DP1 would pay the depreciated value of an aging roof and leave the rest on you.
For Minnesota landlords specifically, three things make DP3 the default:
Ice and water damage. Minnesota winters mean ice dams, frozen pipes, and sudden thaws. DP3's open-peril structure handles most of these cleanly. DP1 often doesn't.
Severe weather. According to NOAA's 2023 climate normals, the Twin Cities metro averages 23 thunderstorm days per year. DP3 handles hail, wind, and tree-fall scenarios more cleanly than DP1.
Renovation and turnover gaps. Between-tenant work — flooring, paint, light remodeling — sits more comfortably under DP3 than under DP1's narrower coverage.
DP2 still exists too, but it's a middle child almost nobody writes anymore. If a Minnesota agent quotes you a DP2 on a residential rental in 2026, ask why they didn't go DP3.
--------------------------------------------------------------
Not sure which form your current rental is on? Pull your declarations page and send it over. I'll tell you exactly what you have, what it covers, and whether you're under-insured — no obligation. Call (763) 582-1888 or request a review at https://www.cityinsurancemn.com/contact. Licensed in MN, AR, WI, TX, NC, FL.
--------------------------------------------------------------
4. HO-4 isn't a landlord policy — and the confusion costs people money
If an agent ever offers you an HO-4 for your rental, that agent is either testing you or doesn't write landlord business. HO-4 is renters insurance — the policy your TENANT carries to cover their own stuff and their personal liability inside your building.
HO-4 covers the tenant's personal property, their personal liability, and their additional living expenses if the unit becomes uninhabitable. It does not cover the building. It is not a substitute for landlord insurance.
What you should do as a landlord is require your tenants to carry HO-4 — usually $15,000–$30,000 in personal property and $100,000 in personal liability — and have you listed as additional interest on the policy (more on that wording below). Most MN landlords now build this into the standard lease. It's one of the cheapest risk transfers in insurance, and it kills a lot of small disputes before they grow into lawsuits.
--------------------------------------------------------------
Did You Know
In Minnesota, a landlord generally can't be added as "additional insured" on a tenant's renters policy (that's a coverage extension built for commercial relationships), but you CAN be added as "additional interest" — meaning you get notified if the policy lapses or cancels. Most landlord-tenant agreements use the wrong term. Get this right in your lease.
--------------------------------------------------------------
5. What drives the price on an MN landlord policy
Premium on a landlord policy in Minnesota is built from a handful of variables. If you understand which ones move the number, you can predict roughly where a quote will land — and you'll know when something looks off.
The four biggest drivers:
Coverage form. DP1 is the cheapest. DP3 is more — usually meaningfully more. The form choice often matters more than the carrier choice on the final price.
Replacement cost vs actual cash value. Replacement cost costs more up front but pays the full repair cost on a claim. ACV runs cheaper but pays depreciated value. On older buildings, the gap between the two after a real loss is dramatic.
Roof age and material. This is the single line item that moves carrier pricing the most. A 5-year-old architectural shingle roof and a 22-year-old 3-tab roof on otherwise identical houses can quote 30–50% apart.
Loss history. One paid claim in the last five years narrows your carrier options. Two and you're often pushed into the surplus-lines market — where prices climb fast.
Other variables that matter but move the number less: deductible (higher deductible = lower premium), distance to a fire station, dog breed if your tenant keeps one, swimming pool, trampoline, and whether the property has had continuous insurance (lapses get penalized).
What to ask when you receive a quote:
What dwelling form is this — DP1, DP2, or DP3?
Is Coverage A written on replacement cost or actual cash value?
Is loss of rents included, and at what dollar amount?
What's the wind/hail deductible, and is it a flat dollar amount or a percentage of Coverage A?
Is there a separate roof endorsement? Some carriers default the roof to ACV even when the rest of the dwelling is RC, once the roof passes 10–15 years old.
If your current agent can't answer those five questions about your existing policy in two minutes, that's a sign worth calling someone else.
--------------------------------------------------------------
6. How to check whether your current policy is right
Pull your declarations page — the cover sheet of the policy — and look for three things:
The form code. Look for something like "DP-1," "DP-3," "HO-3," or "Dwelling Fire." If you see HO-3 on a property you don't live in, that's a problem. If you see DP-1 on a $300K Twin Cities rental, that's worth a conversation.
Coverage A valuation. Does it say "Replacement Cost" or "Actual Cash Value"? On most MN rentals you want Replacement Cost.
Loss of rents. Is it listed as a separate line item with a dollar amount? If it's blank or missing, a fire that displaces your tenants will cost you twice — once to repair, once in missed rent.
If any of the three look off, that's the call to make. The fix is usually a rewrite at renewal, not an expensive mid-term change.
--------------------------------------------------------------
7. Q&A: What MN landlords ask me most
Q: I've been renting out my Plymouth house for two years on a regular homeowners policy. Am I in trouble?
A: You're not in legal trouble, but you're probably under-covered and over-paying for coverage that may not respond on a real claim. Call your agent and ask to rewrite to a DP3 at renewal. If the carrier won't write the rental version (some don't), you'll need to move to a carrier that does. Don't wait until a claim to find out where the gap is.
Q: Does DP3 cover damage my tenant causes to the property?
A: It depends on the type of damage. Sudden, accidental damage — a tenant accidentally starts a kitchen fire — is generally covered. Long-term neglect or intentional damage — a tenant who never reports a leak for six months, or a tenant who punches holes in every wall before moving out — is usually excluded as wear and tear or vandalism by an insured. This is why you require HO-4 from your tenants and collect a real security deposit.
Q: I rent my cabin out a few weekends a year on Airbnb. Is DP3 enough?
A: Probably not. Short-term rental activity — anything resembling Airbnb or VRBO use — often triggers a "transient occupancy" exclusion on a standard DP3. You usually need either a short-term rental endorsement or a dedicated STR policy. There's a separate post coming on this — for now, if you're hosting on Airbnb without telling your agent, call them.
Q: My mortgage company is requiring "landlord insurance." Is that DP3?
A: Yes, in practice. The lender specifically wants to see the dwelling at replacement cost, themselves listed as mortgagee/loss payee, and loss of rents coverage if your loan-to-value is high enough. A clean DP3 with loss-of-rents endorsement and the lender added as mortgagee satisfies almost every MN mortgage requirement I've seen.
Q: I own one rental in Plymouth and one in Little Rock. Do I need two different policies?
A: Yes — they're in different states, with different carriers, different filed forms, and different state-specific endorsements. You can't put one umbrella policy over two properties without each underlying dwelling being properly insured first. There's a dedicated post on multi-state landlord insurance coming later in this series.
--------------------------------------------------------------
--------------------------------------------------------------
As an independent insurance agency Minnesota drivers trust, City Insurance MN compares multiple carriers to find your best rate.
Ready to see your savings?
Get your quote in minutes — no calls, no commitments.
Prefer to talk with an agent? Call (763) 582-1888
Independent. Local. Focused on what protects you most.
Serving Minnesota drivers with affordable auto and home insurance — City Insurance MN, proudly independent.
Licensed in Minnesota, Arkansas, Wisconsin, Texas, North Carolina, and Florida.
--------------------------------------------------------------
About City Insurance MN. City Insurance & Financial Service Inc. is an independent insurance agency based in Plymouth, MN, licensed in MN, AR, WI, TX, NC, and FL. Agent Gerald Burns writes personal, commercial, and landlord property policies for owners across Minnesota and Arkansas. Call (763) 582-1888 or visit https://www.cityinsurancemn.com to get a quote or review a policy you already have.
Comments