South Carolina Personal Lines Practice Exam

What does a DP1 policy refer to?

1. Comprehensive Form

2. Basic Form

3. Broad Form

4. Special Form

The correct answer is: Basic Form

A DP1 policy, also known as a Dwelling Policy 1 or Basic Form policy, is primarily designed to provide coverage for specific risks associated with residential properties that are not owner-occupied. The focus of the DP1 policy is on providing a minimal level of protection by covering named perils listed in the policy, such as fire, lightning, and explosion. This form does not provide comprehensive coverage; rather, it offers basic protection which is typically lower in scope compared to other dwelling forms like the DP2 (Broad Form) and DP3 (Special Form) policies. The distinct characteristic of the DP1 policy is that it utilizes a named perils approach, meaning only those perils explicitly listed in the policy are covered. This is beneficial for property owners looking to minimize their premium expenses, as it offers a more affordable option for basic coverage needs. As a result, the classification as a Basic Form encapsulates its core aspects of limited coverage against specified risks, making it appropriate for certain types of residential properties that may not require extensive insurance.