Dwelling Policy (DP)Question 73 of 474
By default, on what valuation basis does the DP-1 Basic Form settle a partial loss to the dwelling?
a.Functional replacement cost using modern materials
b.Actual cash value (replacement cost minus depreciation)
c.Replacement cost without any deduction for depreciation
d.Agreed value chosen at policy inception
Explanation
DP-1 settles dwelling losses at actual cash value (ACV), which equals replacement cost minus depreciation. Replacement cost settlement on the dwelling is generally only available under DP-2 and DP-3 (and even then is subject to the 80% coinsurance condition). Agreed value and functional replacement cost are not the default DP-1 method.
Law Reference: ISO DP 00 01 — Loss SettlementThis topic, taught in full in the Personal Lines Insurance Producer guide. Personal Lines Insurance Producer — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
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Related questions on this topic
- A California Personal Lines broker-agent is asked to write property coverage for a client. Which of the following risks is BEST suited for an ISO Dwelling Policy and within the broker's license scope?
- Which ISO Dwelling Property form provides open-perils (special form) coverage on the dwelling structure but continues to insure personal property on a named-perils basis?
- A landlord's tenant must move out for three months while fire damage to the rented house is repaired. Which DP coverage reimburses the landlord for the rent the tenant would have paid?
- A landlord insured under a DP-3 is sued by a tenant who slipped on a broken porch step. What does the base DP-3 pay toward the landlord's liability defense?
- A landlord's DP-3 rental house has been vacant for 75 consecutive days while between tenants. Vandals break in and spray-paint the interior. How does the policy respond?
- A DP-3 dwelling has a replacement cost of $500,000. The landlord carries $300,000 of insurance and suffers a $60,000 partial loss with a $1,000 deductible. Using the coinsurance proportionate formula, what is the insurer's payment?
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