Dwelling Policies in Maine

Dwelling policies are designed for properties that don't qualify for standard homeowners insurance—particularly rental properties, seasonal homes, and properties under renovation. Maine's significant rental and vacation home market makes dwelling policies important.

When to Use Dwelling Policies

Typical Uses

Key Difference: Homeowners policies (HO-3, HO-4, HO-6) are for owner-occupied properties. Dwelling policies are for rental properties or seasonal homes.

DP-1: Basic Form

Coverage Structure

DP-1 Characteristics:

• Coverage A: Dwelling - Named perils
• Coverage B: Other Structures - 10% of Coverage A
• Coverage C: Personal Property - Optional (10% of Coverage A if purchased)
• Coverage D: Fair Rental Value - 10% of Coverage A
• Liability: Not included (must add)

Named Perils Under DP-1

DP-1 covers only these 11 basic perils:

1. Fire or lightning
2. Windstorm or hail (with restrictions)
3. Explosion
4. Riot or civil commotion
5. Aircraft
6. Vehicles
7. Smoke
8. Vandalism or malicious mischief
9. Theft
10. Volcanic eruption
11. Glass breakage (limited)

Important: DP-1 does NOT cover weight of snow/ice, frozen pipes, or water damage—significant limitations for Maine properties.

Valuation

• Actual Cash Value (ACV): DP-1 pays ACV only (replacement cost minus depreciation)
• No Replacement Cost Option: Cannot upgrade to replacement cost
• Lower Premiums: Cheaper than DP-2 or DP-3 due to limited coverage

DP-2: Broad Form

Enhanced Coverage

DP-2 Characteristics:

• Coverage A: Dwelling - Broad named perils (16 perils)
• Coverage B: Other Structures - 10% of Coverage A
• Coverage C: Personal Property - Optional (typically 50% of Coverage A)
• Coverage D: Fair Rental Value - 20% of Coverage A
• Liability: Optional endorsement available

Broad Named Perils

DP-2 adds these important perils to DP-1 coverage:

1. Falling objects
2. Weight of ice, snow, or sleet ← Important for Maine
3. Accidental discharge of water or steam
4. Sudden and accidental tearing apart of heating/AC systems
5. Freezing of plumbing, heating, AC ← Critical for Maine winters

Maine Application: DP-2 is often preferred for Maine rental properties because it covers weight of snow/ice and frozen pipe damage—common Maine perils not covered by DP-1.

Replacement Cost Option

Unlike DP-1, DP-2 offers:

• Replacement Cost Coverage: Available for dwelling (Coverage A)
• Higher Payouts: No depreciation deduction
• Requires: Insured to 80% of replacement value
• Cost: Higher premiums than ACV

DP-3: Special Form

Most Comprehensive Dwelling Coverage

DP-3 Characteristics:

• Coverage A: Dwelling - Open perils (all risks except excluded)
• Coverage B: Other Structures - Broad named perils
• Coverage C: Personal Property - Broad named perils (if purchased)
• Coverage D: Fair Rental Value - 20% of Coverage A
• Liability: Optional endorsement available

Open Perils Coverage

DP-3 provides the broadest dwelling coverage:

• Covers all perils except those specifically excluded
• Similar to HO-3 dwelling coverage
• Includes: wind, hail, snow, ice, freezing, water damage, and more
• Exclusions: Flood, earth movement, war, nuclear hazard, intentional loss

Why Use DP-3?

• High-value rental properties
• Properties with significant exposure to multiple perils
• Landlords who want comprehensive protection
• Coastal rental properties exposed to storms

Fair Rental Value (Coverage D)

Rental Income Protection

Coverage D is unique to dwelling policies:

What It Covers:

• Lost rental income if property becomes uninhabitable
• Applies when covered peril damages dwelling
• Pays during repair/reconstruction period
• Reimburses owner for rental income loss

Coverage Limits:

Example:

Rental property: Coverage A = $200,000 (DP-2) Monthly rent: $1,500 Fire makes property uninhabitable for 4 months

• Coverage D limit: $40,000 (20% × $200,000)
• Lost rent: $6,000 ($1,500 × 4 months)
• Payment: $6,000 (within limit)

Time Period

Coverage D pays:

• During actual repair period
• Maximum time property should reasonably take to repair
• No coverage for pre-loss vacancies
• Ends when property is habitable (even if not repaired)

Liability Coverage for Rental Properties

Separate Liability Needed

Dwelling policies typically exclude liability coverage:

Solutions for Landlords:

1. Dwelling Liability Endorsement

   • Added to DP-1, DP-2, or DP-3
   • Covers premises liability
   • Medical payments to others
   • Typical limits: $100,000-$300,000

2. Commercial General Liability (CGL)

   • Separate policy for landlords
   • Broader coverage for rental business
   • Higher limits available
   • Recommended for multiple properties

3. Umbrella Policy

   • Excess liability over underlying policies
   • Higher limits ($1-5 million)
   • Covers multiple properties

Maine Landlord Liability Exposures

Common Maine rental property risks:

Dwelling Policy Comparison

Summary Table

Seasonal/Vacation Properties

Special Dwelling Policy Features

For Maine's seasonal properties, dwelling policies offer:

Advantages:

• Flexible Occupancy: Less restrictive than HO policies
• No 60-Day Vacancy Limit: Can be vacant all winter
• Seasonal Rating: May qualify for seasonal premium discounts
• Fair Rental Value: Covers lost rental income if property damaged

Common Approach:

• DP-3 for high-value coastal vacation rentals
• DP-2 for moderate seasonal properties
• Add liability endorsement if owners visit property

Winterization Requirements

Many Maine dwelling policies require:

• Heat Maintenance: Keep heat at minimum temperature (typically 55°F)
• Water Shutoff: Turn off water and drain pipes if heat not maintained
• Regular Inspections: Periodic property checks
• Notification: Inform insurer of seasonal occupancy pattern

Failure to Comply: May void coverage for winter damage (frozen pipes, ice dams).