South Carolina Personal Lines Practice Exam

What type of perils are covered by DP-1 policies?

1. Broad perils

2. Named perils

3. All risk perils

4. Limited perils

The correct answer is: Named perils

DP-1 policies, also known as the Dwelling Property 1 policy, are designed to cover specific types of risks that are explicitly listed within the policy itself. This means that they are classified as named perils, as there is a definitive list of perils that are insured against. Commonly included named perils in DP-1 policies may consist of things like fire, lightning, and internal explosion, among others. Named peril coverage is crucial for insureds to understand, as it delineates the exact conditions under which claims can be made. The advantage is that it provides clarity on what is covered, as opposed to broad or all risk policies, where coverage can seem more extensive but also more ambiguous in terms of exclusions. The specificity of named perils helps policyholders know precisely what risks are insured and allows insurers to better assess and manage risk.