Dwelling Policy Practice Test 2025 – 400 Free Practice Questions to Pass the Exam

The dwelling policy form that primarily covers a structure on an actual cash value basis is the DP-1 form. This policy is designed for certain dwelling coverage and is structured to provide the most basic level of coverage. Under this form, the payment for covered losses is calculated based on the actual cash value, which takes the replacement cost of the property and subtracts depreciation. This means that if a covered loss occurs, the payout may not be sufficient to cover the full replacement cost of the damaged structure, as it reflects the value of the property at the time of the loss.

In contrast, the other dwelling policy forms—including DP-2 and DP-3—generally offer broader coverage options and are more comprehensive. DP-2 typically includes some coverage on a replacement cost basis for the dwelling, while DP-3 offers open perils coverage with similar provisions for replacement cost. DP-4 is not a standard dwelling policy form but rather relates to mobile homes. Therefore, the DP-1 is specifically identified for its reliance on an actual cash value approach for paid claims related to the structure.