South Carolina Personal Lines Practice Exam

In a DP-2 policy, which type of loss is covered under the perils listed?

1. Flood damage

2. Fire damage

3. Earthquake damage

4. Intentional damage

The correct answer is: Fire damage

In a DP-2 policy, which is a type of dwelling policy specifically designed for rental properties or properties that are not owner-occupied, coverage includes a broader range of perils compared to the DP-1 policy. Fire damage is one of the primary perils explicitly covered under the DP-2 policy. This policy form typically includes coverage for various named perils such as fire, lightning, and explosion, as well as additional perils like windstorm or hail and vandalism, depending on the specifics of the policy. The reason fire damage is a fundamental part of this policy is that it represents a significant risk to structures, and property owners often seek insurance to protect against potential loss from such common hazards. Additionally, the DP-2 policy offers coverage on a replacement cost basis for the dwelling itself, which further emphasizes the protection against substantial perils like fire. In contrast, other options like flood damage, earthquake damage, and intentional damage are not covered under a standard DP-2 policy. Flood damage typically requires a separate flood insurance policy, earthquake damage is generally excluded unless specifically endorsed, and intentional damage is excluded as it is not considered an insurable risk. Hence, understanding the included perils, like fire, clarifies why it is the