What type of coverage can be automatically increased under a Dwelling Policy?

The correct answer is the automatic increase in insurance coverage, which allows for an increase in the amount of insurance coverage provided under a Dwelling Policy. This feature is particularly important in a dwelling policy as it helps policyholders keep up with inflation and rising construction costs without the need for them to manually adjust their coverage amount each year.

This type of coverage works by automatically raising the insured amount, ensuring that it aligns with the current value of the property and replacement costs that may increase over time. This is especially relevant in regions where property values are steadily rising and where homeowners may otherwise find themselves underinsured.

The other coverage options, although they correspond to different aspects of property insurance, do not inherently include the feature of automatic increases in their coverage amounts. Actual Cash Value is the value of the property minus depreciation; Replacement Cost refers to the cost of replacing the property with a similar one without consideration for depreciation; and Guaranteed Replacement Cost ensures the full cost of rebuilding the home, regardless of policy limits, but none of these offer the automatic adjustment feature provided by automatic increase in insurance.