DP1 vs DP3 vs HO-4: Picking the Right Policy for Your Minnesota Rental
Updated: 7 days ago
If you rent out a house, duplex or cabin in Minnesota, the policy names can be confusing: HO-3, DP1, DP2, DP3, HO-4. They sound alike but cover very different things. Picking the wrong one is one of the most common, and most expensive, mistakes a new landlord makes.
This guide explains what each policy is, when it fits, and how to check the one you have now.
Your homeowners policy stops fitting when you rent
A standard homeowners policy (HO-3) is written for a home you live in. Once you move out and rent it to someone else, the risk changes, and many homeowners policies limit or exclude coverage when the home isn't owner-occupied.
If you've started renting out your home, tell your agent. The usual fix is to move the property to a dwelling policy (the "DP" policies), which are built for homes the owner doesn't live in.
DP1: basic coverage with real gaps
A DP1 is the most basic landlord policy.
Named perils only. It pays only for causes of loss listed in the policy, such as fire, lightning, windstorm, hail, explosion, smoke and vandalism. If the cause isn't on the list, it isn't covered.
Water damage is the big gap. A basic DP1 usually doesn't cover water damage from a burst or frozen pipe. In a Minnesota winter, that's a real risk.
Often actual cash value. Many DP1 policies pay actual cash value, which subtracts depreciation. On an older roof, that can be far less than the cost to replace it.
Loss of rent: check whether it's included and what the limit is.
Where DP1 can make sense: a low-value property where you could absorb a bigger loss yourself, or a property that doesn't qualify for a DP3.
DP3: the usual choice for Minnesota rentals
A DP3 is the broadest dwelling policy.
Open perils on the building. It covers any cause of damage to the building unless the policy excludes it. Common exclusions include flood, earthquake, wear and tear, and gradual leaks.
Usually replacement cost on the building. It pays what it costs to repair or rebuild, without subtracting depreciation (some policies treat older roofs differently, so ask).
Better fit for Minnesota weather. Ice dams, frozen pipes, wind and hail are common here. A DP3's broader coverage handles many of these losses that a DP1 may not.
DP2 sits in the middle: it adds more named perils than a DP1, including some water damage, but it's still named-peril. Fewer insurance companies offer it today.
HO-4 is not a landlord policy
An HO-4 is renters insurance. It's the policy your tenant buys to cover their own belongings, their personal liability, and their living costs if the unit can't be lived in after a covered loss.
It does not cover your building. If anyone suggests an HO-4 for your rental, they've misunderstood what you need.
Many landlords require tenants to carry renters insurance in the lease. It protects the tenant's belongings (which your policy doesn't cover) and gives them liability coverage if they cause damage or injure someone. You can ask to be listed on the tenant's policy as an interested party so you're notified if it's cancelled.
What to check on your current policy
Pull your declarations page (the summary page of your policy) and look for:
The form. It should say DP-3 (or DP-1, DP-2, or "dwelling fire"). If it says HO-3 and you don't live there, call your agent.
How the building is valued. "Replacement cost" or "actual cash value"?
Loss of rent (fair rental value). Is it listed, and is the limit enough to cover several months of rent?
Liability. Is landlord liability included, and at what limit? Some policies include it; some need it added.
Deductibles. Is there a separate wind and hail deductible? Is it a dollar amount or a percentage of the building limit?
Roof. Does the policy pay older roofs at actual cash value?
What affects the price
The form (DP1 costs less than DP3)
Replacement cost or actual cash value
Age and condition of the roof, and of the plumbing, electrical and heating
Claims history on the property and for you as the owner
Deductible
Vacancy. A property that sits empty between tenants may need special coverage.
FAQ
I've been renting out my house on a homeowners policy. What should I do?
Call your agent now and tell them it's a rental. Ask to move it to a dwelling policy. Waiting until there's a claim is the risk.
Does a DP3 cover damage my tenant causes?
Sudden, accidental damage, such as a kitchen fire, is usually covered. Wear and tear, neglect and intentional damage usually aren't. That's what security deposits are for.
Is flood covered?
No. Flood is excluded on DP1, DP2 and DP3. Flood insurance is a separate policy.
I rent my cabin on Airbnb. Is a DP3 enough?
Often not. Many dwelling policies exclude or limit short-term rentals. Tell your agent how the property is rented so the policy matches.
Does my lender care which policy I have?
Yes. Lenders usually require the building to be insured for enough to rebuild and the lender to be listed on the policy. Many also expect loss of rent coverage.
Not sure which form your rental is on? Call City Insurance and Financial Services at (763) 582-1888 or contact us, or see our landlord and rental property insurance page. Related reading: umbrella insurance for landlords and landlord liability when a tenant slips on the sidewalk.
City Insurance and Financial Services, Minnetonka, MN.
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