Which dwelling policy form primarily insures a structure on an actual cash value basis?

The DP-1 policy, also known as the Basic Form, is designed to provide coverage on an actual cash value (ACV) basis for the structure. This means that in the event of a covered loss, the insured would receive an amount equivalent to the current value of the property, minus depreciation. This is particularly critical in understanding how loss settlements work under this policy type, as it contrasts with other dwelling policy forms that may offer replacement cost coverage.

Unlike the DP-2 (Broad Form) and DP-3 (Special Form), which both provide broader coverage options, including replacement cost coverage under certain conditions, the DP-1 has a more limited range of insurable perils and settles losses at ACV. This means that policyholders need to be aware that they may not receive the full amount needed to rebuild or repair their dwelling in the event of a loss, as depreciation is taken into account.

The DP-1 is typically favored when the property is older or when the insured is looking for a more cost-effective option with limited risks. Understanding the distinctions between these dwelling policy forms and their respective coverage types is essential for making informed insurance decisions.