South Carolina Personal Lines Practice Exam

What additional coverage is included with DP-2 and DP-3 policies but is available as an endorsement in DP-1 policies?

1. Replacement Cost coverage

2. Additional Living Expenses

3. Liability Coverage

4. Flood Insurance

The correct answer is: Additional Living Expenses

DP-2 and DP-3 policies include Additional Living Expenses (ALE) coverage as part of the standard policy benefits, offering financial support when policyholders are temporarily displaced from their homes due to a covered loss. This coverage assists with expenses for housing, food, and other necessary living costs during the period of recovery. In contrast, DP-1 policies do not provide this coverage automatically. Instead, Additional Living Expenses must be added as an endorsement for those insured under a DP-1 policy, allowing greater flexibility for policyholders who may not require this coverage based on their unique circumstances. The other coverages mentioned do not have the same distinction between these policy forms. Replacement Cost coverage is a standard benefit available in DP-2 and DP-3 but must be elected and specifically endorsed in a DP-1 policy. Liability coverage is generally included across most dwelling policies, albeit often with limitations. Flood Insurance is a separate coverage that typically requires a specific flood insurance policy and is not directly referenced within these dwelling policies.