Expert tips, state-specific guides, and money-saving strategies from your local independent insurance agent.
By ATSI Insurance Group • Updated May 2026
Some of the most expensive insurance mistakes happen at one specific moment: when an owner stops living in a home and starts renting it out. The HO3 (homeowners) policy that covered the home for years is suddenly the wrong policy. If a fire, water loss, or liability claim happens during that gap, the carrier can deny the claim and cancel the policy.
The correct policy for a home that's being rented to tenants is a DP3 (dwelling fire) landlord policy. It looks similar on paper but it's structured for a different relationship to the property. This guide explains what changes between HO3 and DP3, what events trigger the switch, and how to time it so you're never caught with the wrong policy in force.
An HO3 is the standard homeowners insurance form used for an owner-occupied single-family home, condo, or 1–4 unit dwelling where the owner lives in one of the units. It includes six core coverages:
Coverage A – Dwelling: The home's structure, set to rebuild cost.
Coverage B – Other Structures: Detached garage, sheds, fences (typically 10% of A).
Coverage C – Personal Property: Your belongings (typically 50–70% of A).
Coverage D – Loss of Use: Hotel and food costs if the home is uninhabitable after a covered loss.
Coverage E – Personal Liability: Lawsuits if someone is injured on your property or you cause damage elsewhere.
Coverage F – Medical Payments: Small medical bills for guests injured on your property regardless of fault.
HO3 covers the dwelling on a special form (open perils — covers any cause of loss not specifically excluded). It assumes the named insured lives in the home and stores their personal property there. That assumption is baked into the rate.
A DP3 is a dwelling fire policy used for a residential property the owner does not live in. The most common use case is a single-family home or 1–4 unit building rented to tenants on a long-term lease. The structure of the coverage is similar to HO3 but with key differences:
Coverage A – Dwelling: Same purpose — the rebuild cost of the structure.
Coverage B – Other Structures: Same as HO3.
Coverage C – Personal Property: Very limited or zero. DP3 covers only landlord-owned property left at the dwelling (appliances, lawn equipment in the garage). Tenant-owned property is the tenant's responsibility through their renters insurance.
Coverage D – Fair Rental Value: Replaces "loss of use." If the property becomes uninhabitable after a covered loss, DP3 pays the rent you would have collected during repairs.
Coverage E – Personal Liability: Landlord liability — lawsuits arising from your role as the property owner.
Coverage F – Medical Payments: Same as HO3 but typically lower limit.
DP3 is also typically written on a special form (open perils) with replacement cost. That's what distinguishes it from DP1 (basic named-peril, actual cash value) and DP2 (broad named-peril, replacement cost).
HO3 includes substantial coverage for the owner's belongings inside the home. DP3 doesn't. If you stop living in the home, your contents move out with you, and the DP3 only needs to cover what you leave behind for the rental (appliances, blinds, etc.). The tenant insures their own stuff with renters insurance.
HO3 pays your hotel and food costs if you can't live in the home after a covered loss. DP3 pays you the rent you would have collected from tenants during the repair period. Same idea, different beneficiary — designed around who's actually living there.
HO3 liability covers you as a homeowner and includes off-premises liability (you're still covered if your dog bites someone at the park). DP3 liability is narrower — it covers you as a landlord at that specific property. If you have multiple rentals, each needs its own DP3 liability or you should consider a commercial landlord package.
DP3 dwelling premium is often slightly higher per dollar of dwelling coverage than the equivalent HO3 because rental properties have higher claim frequency — tenants don't take care of homes the way owners do. However, the absence of personal property coverage on DP3 typically reduces total premium by enough that the two policies usually price within 10–25% of each other.
Some HO3 carriers won't write a 100-year-old house with knob-and-tube wiring. Some DP3 specialty markets will. The flip side: HO3 carriers compete harder on price, so a clean, modern home almost always prices better as HO3 than DP3.
The most common scenarios that move a property from HO3 to DP3:
You move out and rent the home to a long-term tenant. The classic case. The day you move out and the tenant moves in, you need DP3.
You inherit a home and don't live in it. If you keep the property as a rental rather than sell, the policy should be DP3 from the start.
You buy a second home and rent out the first. The first home becomes a rental on the day the new tenant signs the lease.
You buy an investment property. Investment properties never qualify for HO3 because the owner never lived there. Day one is DP3.
You convert a home to short-term rental. Airbnb / Vrbo properties often need a hybrid (DP3 + commercial endorsement) or a specialty short-term rental policy. Standard HO3 explicitly excludes most short-term rental activity.
You let a family member live in the home rent-free. Gray area. Some HO3 policies still cover the property if a family member is the only resident; some require a DP3 because the named insured no longer occupies it. Confirm with the carrier.
Most HO3 policies have an explicit owner-occupancy requirement in the application or the policy form itself. If you have a claim and the adjuster discovers the home was rented to tenants, the carrier has options:
Claim denial. The most common outcome. The policy was rated for an owner-occupied risk and the actual risk is different. The denial is typically based on material misrepresentation.
Mid-policy non-renewal. Carrier finds out at renewal time, declines to renew, and you scramble for replacement coverage often at higher cost.
Reduced settlement. Some carriers will pay the claim but only at the lower DP3 limits and after deducting the premium difference.
None of those outcomes is acceptable for a property worth $300,000+. The downside far outweighs whatever rate difference you avoid by not switching.
The clean approach: line up the DP3 effective date with the day the tenant moves in. Steps:
30 days before move-in: Notify your independent agent. They can quote DP3 from multiple carriers and start the application.
10–14 days before move-in: Bind the DP3 with an effective date matching the lease start date.
Lease start date: DP3 takes effect. Cancel the HO3 effective the same day. The carrier refunds unused premium pro-rata.
Notify the mortgage lender. The lender wants the new DP3 declarations page on file. Some lenders also need to be informed because owner-occupancy may have been a loan condition.
If you're caught having already moved out without switching, contact your agent immediately. Most carriers will allow a mid-policy endorsement or replacement DP3 effective today, and many won't ask uncomfortable questions about the gap if you proactively fix it before a claim.
You'll occasionally see DP1 or DP2 quotes. The differences:
DP1 (basic form): Named-peril coverage on actual cash value. The cheapest option. Covers fire, lightning, explosion, vandalism, riot, smoke, vehicles, hail, and a few other specific perils. Common for very old homes, vacant properties, or homes in markets with limited carrier appetite.
DP2 (broad form): Named-peril on replacement cost. Adds more covered perils than DP1 (theft is a common addition).
DP3 (special form): Open perils on replacement cost — broadest coverage. Standard for most owned-and-rented residential properties.
Almost always go DP3 if you can. DP1 and DP2 are step-down options when DP3 isn't available or affordable.
Your DP3 doesn't cover tenant property and doesn't cover tenant liability. As a landlord, the smartest move is to require tenants to carry renters insurance with the landlord listed as additional interest. This protects you in two ways:
The tenant's renters policy pays for damage they cause that you might otherwise sue them for.
The tenant has their own liability and contents coverage, reducing the chance they'll try to claim against your DP3 if their belongings are damaged.
Many landlords write a $100,000 liability / $20,000 contents renters insurance requirement directly into the lease.
ATSI Insurance Group is an independent agency licensed in Florida and Massachusetts. We handle the HO3-to-DP3 transition routinely and structure the timing so you never have a coverage gap. We shop both standard markets and specialty rental property programs, and we help you decide whether DP3 is the right fit or whether a small commercial landlord package makes more sense (typically once you're over 4 units or have multiple properties).
For multi-property owners we usually consolidate onto a master rental property program with one carrier where possible — simpler administration, often better pricing through schedule rating, and one COI for the bank. Visit our Florida rental property insurance page or Massachusetts rental property insurance page for more on landlord-specific carriers we work with.
HO3 is a homeowners policy for an owner-occupied home. DP3 is a dwelling fire policy for a non-owner-occupied home being rented to tenants. HO3 covers the dwelling, the owner's contents, owner's liability, and full additional living expenses. DP3 covers the dwelling, very limited landlord-owned contents, landlord liability, and fair rental value if tenants are displaced after a covered loss.
Yes. HO3 policies require the home to be owner-occupied. The moment you move out and the home becomes a rental, the HO3 is technically out of compliance. If you have a claim under those circumstances, the carrier can deny the claim and cancel the policy. The correct policy for a rented home is DP3 (or DP1/DP2 in some carriers and states).
It depends on the carrier and the property. The dwelling premium on a DP3 is often slightly higher than the same dwelling on HO3 because rental properties have higher claim frequency. However, DP3 typically excludes the owner's personal property and reduces other coverages, which can offset the rate increase. The total premium is usually within 10–25% of the equivalent HO3.
DP1 is a basic named-peril dwelling fire policy — cheap but covers only specific listed perils like fire, lightning, explosion, vandalism. DP2 is a broad named-peril form that adds more covered perils and pays on replacement cost. DP3 is a special form that covers any cause of loss not specifically excluded and almost always pays on replacement cost. DP3 is the standard policy for most owned-and-rented residential properties.
Yes. Both your insurance carrier and your mortgage lender need to be notified when the property changes from owner-occupied to non-owner-occupied. Your mortgage may also need to be modified or refinanced because most owner-occupied loan programs require the borrower to live in the home. Failing to disclose the change can put you in default of both the insurance contract and the mortgage.
Whether you're moving out next month or you're 30 days into renting out a home you didn't switch over, ATSI shops your DP3 across multiple carriers and structures the policy to match the property and the tenant situation. Call your local office or fill out our online quote form.
