Which one of the following statements regarding personal liability coverage is CORRECT? A) It is added by endorsement to the homeowners policy. Answer: D Personal liability coverage must be added to the dwelling policies if desired. It is automatically included in the homeowners policy. Which
one of the following is NOT a factor in determining eligibility for coverage under a particular homeowners form? A) Intended use. Answer: C Dwelling type, intended use, and occupancy are used to determine eligibility for coverage under each homeowners form. The square footage of the dwelling is not relevant in
determining eligibility. Which of the following is NOT an eligibility requirement for a homeowners policy? A) Named insured is owner-occupant of dwelling or a renter who maintains a residential occupancy. Answer: C Secondary or seasonal residences may be insured under a homeowners policy. All of the following properties can be insured under an unendorsed homeowners policy EXCEPT a: A) townhouse that is owner occupied. Answer: B All of the types of property described can be insured under a homeowners policy, but only mobile homes require a special endorsement. Which of the following individuals is NOT
an insured under Section I of the homeowners policies? A) Person hired by the insured to perform work on the insured premises. Answer: A The definition of who is an insured under homeowners policies, while quite broad, is
not all inclusive and would not be extended to include people hired by the insured to perform work on the insured's premises. Those individuals should look to their own commercial policies for protection. For personal property coverage, who is NOT insured by a homeowners policy? A) A 20 year-old resident. Answer: C A homeowners policy insures the personal property of the named insured, all relatives of the named insured who live in the same household, and any other residents who are under the age of 21 and in the care of any member of the insured's family. On request of the named insured, the personal property of guests or a residence employee
may be covered. Under the homeowners policy, what is the maximum number of roomers, boarders permitted in residential structures eligible for homeowners coverage? A) 3 Answer: C Under the Homeowners policy, eligible residences may contain
two roomers or boarders per family. Notice that this differs from dwelling policy eligibility, which allows up to five roomers or boarders. Which one of the following homeowners forms is used to cover tenants or renters? A) HO-2.
Answer: D The HO-4 is the coverage form for tenants and renters. The HO-2 is the broad form of homeowners insurance. The HO-6 provides coverage for condominium owners and town home owners. The HO-5 is the comprehensive form. Robert wants open perils coverage on his dwelling and named perils coverage for his personal property. Which homeowners form should he choose? A)
HO-3. Answer: A The homeowners HO-3 Special Form provides open perils coverage on the dwelling and named perils coverage on personal property. HO-2 is the Broad Form and HO-6 is the condominium unit-owners form. Which homeowners policy
would be written to cover personal property only? A) HO-5. Answer: B The HO-2, HO-3, and HO-5 all provide coverage on both the dwelling and personal property. HO-4 (referred to as the Renters or Tenants Form) does not provide coverage on the dwelling because the insured does not own it. Which one of the following homeowners forms provides open perils coverage? A) HO-8. Answer: D The HO-2, HO-4, and HO-8 are all named perils policies. HO-3 provide open perils coverage on the dwelling (Coverage A) and named perils coverage on personal property. Who would use a HO-6 homeowners form? A) Owner of a rental house. Answer: D Most of the homeowners forms were created for owner-occupants of dwellings. Typically, neither tenants nor condominium owners own the entirety of the dwellings they occupy, so other policy forms had to be designed for them. For tenants, the HO-4 is available, and for condominium owners the HO-6 form is used. Which one of the following dwellings would a Homeowner Form HO-3 cover? A) Condominium. Answer: D Homeowner Form HO-3 covers owner-occupied, single family dwellings. Condominiums are covered by the HO-6. Office and apartment buildings would be covered by a commercial policy. In homeowners policies, what does Coverage A insure? A) Dwelling. Answer: A Coverage A provides dwelling coverage, Coverage B covers other structures, Coverage C insures personal property, and Coverage D covers loss of use. Which one of the following is NOT an appurtenant structure for purposes of a homeowners policy? A) Storage shed. Answer: B Appurtenant structures for purposes of a homeowner's policy are any structures that are set apart from the dwelling by clear space. This includes detached garages, fences, swimming pools, and storage sheds. Structures connected to the dwelling by only a fence, utility wire, or similar connection are considered unattached. Which one of the following could be insured under Coverage B of a homeowners policy? A) A detached garage rented to a neighbor to store his sports car during the winter. Answer: A Other Structures--Coverage B covers structures on the premises set apart from the dwelling by clear space, such as a detached garage. The policy does not cover other structures rented to others for other than use as a private garage. A detached garage used for business is also not covered. Which of the following items could be insured under Coverage C of a homeowners policy? A) Motorized go cart. Answer: C Coverage C covers personal property under a homeowners policy. Personal property usually located in a secondary residence may be insured under Coverage C. In addition, the following personal property is covered: personal property the insured owns or uses that is located anywhere in the world; personal property of others while it is in the portion of the residence the insured occupies; and personal property of a guest or employee while it is located in any resident the insured occupies. Animals and motorized vehicles are excluded. Bill and Marge have a HO-2 policy insuring their main residence for $150,000. How much coverage do they have for personal property kept at their summer cottage? A) $7,500.00 Answer: A The HO-2 policy provides an additional 50% of the amount of coverage on the dwelling for loss of personal property, but only 10% of the personal property limit can be applied to property not located at the insured's primary residence. Which of the following items may be covered under Coverage C-Personal Property of a homeowners policy? A) Animals. Answer: D Personal property the insured owns or uses that is located anywhere in the world is covered under a homeowners policy, as is personal property of others at the insured's request while it is in the portion of the residence premises the insured occupies, property of a guest or residence employee when it is located in any residence the insured occupies, and personal property usually located in a secondary residence (limited to 10% of Coverage C). Animals, birds, fish, aircraft, aircraft parts, and property belonging to boarders are not covered property. For a homeowners policy, which one of the following statements about insuring personal property normally kept at a residence other than the residence premises is CORRECT? A) It is covered only if the insured has paid an additional premium. Answer: B Unscheduled personal property kept at a location other than the main residence is covered up to a limit of 10% of the coverage C limit. Personal property on the described premises is always covered. An insured owns a personal auto policy and a homeowners policy. He purchases a new TV and puts it in the trunk of his car. On the way home he hits another car, and the crash totally destroys the TV. The damage to the TV is covered by which insurance policy? A) auto. Answer: D Under homeowners policies, Coverage C--Personal Property covers all personal property of the insured, including televisions. A television is not part of the insured's automobile, and therefore would not be covered under his auto policy. Under Coverage C-Personal Property, the homeowners policy (HO-3) covers property owned or used by an insured. When jewelry valued at $5,000 is stolen from the residence, the policy will pay: A) $1,000.00 Answer: C The HO-3's insuring agreement contains the obligation of the insurer to pay covered claims, subject to specified conditions and exclusions. Under the special limits of liability section, the policy limits loss by theft of jewelry, watches, furs, and precious and semiprecious stones to $1,500. If the insured needs additional coverage, the property may be scheduled, and an additional premium will be charged. Coverage D in homeowners insurance is for what type of loss? A) Personal property. Answer: C The 6 insuring agreements in the homeowners forms are Coverage A--Dwelling, Coverage B--Other Structures, Coverage C--Personal Property, Coverage D--Loss of Use, Coverage E--Personal Liability, and Coverage F--Medical Payments. After a fire damages a home, how much is the insured entitled to recover for buying materials to board up the windows under the homeowners policy? A) No coverage is available. Answer: B The additional coverage of reasonable repairs will pay the reasonable costs incurred by the insured for necessary repairs made solely to protect covered property from further damage. All of the following statements about debris removal coverage under the homeowners policy are correct EXCEPT: A) the homeowners policy allows 5% of the limit of liability applying to the damaged property for reimbursement for debris removal. Answer: A Reasonable expenses for the removal of property damaged under Coverages A through D are covered as an additional coverage under the homeowners policy. This expense is included in the limit of liability for the damaged property. An additional 5% of the policy limits may be used for removal if the policy limits are exceeded by the loss. Trees, shrubs, and other plants are covered as additional coverages for Coverages A through D. The coverage is limited to certain perils, however. All of the following perils are covered when causing damage to a tree or shrub EXCEPT: A) theft. Answer: C The insurer will cover trees, shrubs, plants, or lawns at the residence premises for loss caused by fire, lightning, explosion, riot, civil commotion, aircraft, nonowned vehicles, vandalism and malicious mischief, and theft. Wind, a common peril causing damage to trees, is not covered. If the shrubs in front of a house burn when the house catches fire, how much is the insured entitled to recover for the shrubs under his HO-3? A) Policy limit. Answer: B For all forms except the HO-4 and HO-6, trees, shrubs and other plants are covered to 5% of the limit on Coverage A, subject to a maximum of $500 for any one tree, shrub or plant. In the HO-4 and HO-6, the limit is 10% of the Coverage C limit or a maximum of $500 for one tree, shrub, or plant. Credit card fraud is covered under a homeowners policy to a maximum of what amount? A) $100.00 Answer: D Credit card fraud is covered to a maximum of $500. Coverage does not apply to loss arising out of business use or the dishonesty of an insured. Which one of the following is NOT an additional coverage found in homeowners policies? A) Fire department service charge. Answer: C Debris removal, fire department service charges, and loss assessment costs are all additional coverages in the homeowners policies. Market valuation of a loss is not an additional coverage. Roberta inherited a home from her grandmother. This home is 150 years old, in fair condition, and has ornate doors and trim. Unfortunately, the market value is much less than the cost to rebuild with the same doors and trims. Which is the best homeowners policy for Roberta? A) HO-2. Answer: D The HO-8 policy provides coverage for homes whose market value is markedly less than its replacement cost. Loss settlement would be based on actual cash value or repair cost. Which of the following statements regarding theft coverage in the HO-8 policy is NOT true? A) Higher on-premises theft coverage limits are available. Answer: B Special limits of liability for theft of jewelry, watches, furs, firearms, precious and semiprecious stones, silverware, goldware, and pewterware do not apply to the HO-8. The Broad Form/HO-2 policy provides which type of coverage? A) Named-peril coverage for personal property coverage and open-perils coverage for dwelling coverage. Answer: B The HO-2 policy provides property coverage for both dwelling and personal property on a named-peril basis. Perils covered include fire; lightning; removal; glass breakage; extended coverages; theft; falling objects; weight of ice, snow, and sleet; accidental discharge of heating or cooling systems; freezing of plumbing systems or appliances; and bulging and cracking of steam or hot water heating systems. Which of the following unendorsed policies provides open peril coverage on Coverage C--Personal Property? A) HO-3. Answer: C The comprehensive HO-5 policy is an open peril contract on personal property. Dwelling and other structures are also covered on an open peril basis. Open peril coverage provides coverage for all risks except those specifically excluded in the contract. Which of the following is NOT a peril covered under the personal property coverage in the HO-3 Special Form? A) Hail. Answer: D Water damage is specifically excluded. This includes, for example, damage caused by flood, tidal water, water that backs up through sewers, or water discharged from a sump pump. Mary's purse was stolen from her as she walked down the sidewalk. She has an HO-2 policy. Will Mary's policy cover this loss subject to the deductible? A) Yes, theft is a covered peril under all of the homeowners forms. Answer: A The peril of theft is automatically included in all homeowners policies, whether theft occurs on the insured's premises or not. Which one of the following is NOT an exclusion found in Section I of the homeowners policies? A) Failure of the insured to care for the property before the loss. Answer: A Earth movement, water damage, and power failure are all standard exclusions in the homeowners forms. Neglect of the insured to care for the property may be a hazard but it is not an excluded cause of loss. If a loss has already occurred, however, the insured is required to take reasonable care to protect the property from further damage or else any additional loss will not be covered. How would a loss be adjusted under a homeowners policy with an insurance-to-value clause if a homeowner failed to carry coverage of at least 80% of the replacement cost of the home? A) Cost to replace the property. Answer: C Failure to carry insurance of at least 80% of the replacement cost value results in the payment of the greater of these 2 sums: the actual cash value, or the result of dividing the policy limit by 80% of the replacement cost, multiplied by the cost to repair or replace, less the deductible. The insurance-to-value provision of the homeowners policy seeks to reward those policyholders who carry adequate insurance with a replacement cost settlement. If the amount of insurance carried is insufficient, the insured will at least receive the actual cash value of the loss or an amount between ACV and replacement cost. Frank owns a house valued at $500,000. He purchases a policy insuring it for $300,000 with an 80% coinsurance clause and a $1,000 deductible. Faulty wiring causes a fire that results in a loss of $100,000. How much will the policy pay? A) $74,000.00 Answer: A To satisfy the coinsurance clause requirement, the policyholder must carry coverage in an amount equal to at least the specified percentage of the total value of the property being insured. In this case, the value of the property is $500,000. Therefore, the amount of coverage needed to satisfy the 80% coinsurance requirement is $400,000 (or 500,000 × 80%). However, Frank's policy limit is only $300,000, which is $100,000 less than necessary to satisfy the coinsurance requirement. The following formula is used to determine the amount that the insurer will pay for the loss in this case: amount of insurance carried ($300,000) divided by amount of insurance required ($400,000), multiplied by amount of loss ($100,000), minus any deductible ($1,000). The insurance payment in this case is therefore $74,000, after the deductible is applied. Frank's house has a replacement cost of $250,000. His HO-3 policy has a Coverage A limit of $180,000 and a $500 deductible. A fire causes a loss of $10,000 replacement cost and $8,000 actual cash value. What is the most Frank can collect for his loss? A) $10,000.00 Answer: B The insurance-to-value provision is applied if the insured fails to carry coverage of at least 80% of the total replacement cost of the house. Since Frank should carry $200,000, but only carries $180,000, the insurance-to-value provision will apply. To determine the coinsured value of the loss, divide the amount of insurance on the building by 80% of the replacement cost of the building [$180,000 ÷ ($250,000 × .80 = $200,000) = 0.90]. Next, multiply this factor by the actual cost to repair or replace the damaged part of the building [0.90 × $10,000 = $9,000]. Compare this coinsured value to the actual cash value of the loss, and whichever is greater is then reduced by the deductible [$9,000 − $500 = $8,500]. A house has a replacement cost of $150,000. To make sure that the replacement cost provision of a homeowners policy applies, the minimum policy amount for the dwelling should be: A) $120,000.00 Answer: A The loss settlement provision of homeowners policies require that the insured carry a limit of insurance at least equal to 80% of the full replacement cost of the dwelling, in return for which the insured will be able to recover his loss on a replacement cost basis. If a homeowners policy insures the dwelling to less than 80% of replacement cost, how would a dwelling loss be adjusted? A) The loss would be settled by subtracting reasonable depreciation from the replacement cost. Answer: C If an insured fails to carry coverage of at least 80% of replacement cost, he is responsible for part of the loss. An insured has a homeowners policy for $60,000 on the dwelling. Lightning completely destroys the home, which has a replacement cost of $40,000. How much will the insured receive? A) $6,000.00 Answer: B The insured will receive $40,000, the replacement cost of the dwelling. This is the full amount necessary to replace or repair the damaged property to its condition before the loss. The insured would not receive $60,000, the full amount of the policy, because that would enrich the insured. The intent of the insurance payment is to restore the insured to the condition she was in before the loss, not to improve that condition. In general, the insured must replace the property with like kind and quality before the claim is fully recovered. Which one of the following is part of the formula for calculating the actual cash value of a dwelling? A) Assessed value. Answer: B The actual cash value (ACV) of a dwelling is the replacement cost of the property less depreciation. Under an HO-2 policy with a coverage limit of $50,000 on the dwelling, what is the amount of personal property coverage that would be available? A) $20,000.00 Answer: D Homeowners policies provide an automatic amount of coverage for other structures, personal property, and loss of use. The amount of coverage for personal property is 50% of Coverage A. Bart keeps a dog that is known in the neighborhood to be vicious. One day the dog attacks a neighbor while she is working in her own yard. The court orders that the animal be put to sleep. Bart's homeowners policy will cover all of the following expenses related to this incident EXCEPT: A) cost to have the dog put to sleep. Answer: A The neighbor's medical expenses and property damage losses would be covered by Section II of Bart's homeowners policy. There is no provision in the policy for covering expenses incurred while complying with a court order that is the result of a claim. Section II of a Homeowners policy covers all the following EXCEPT: A) liability for loss of use of another's property. Answer: D Section II coverages are the same in all 6 forms. They cover personal liability of the insured and medical expenses of a person injured on the insured's premises (with permission), injured as a result of the activities of the insured, or during the course of employment for the insured or by an animal owned by the insured. Section II does not cover injuries to the insured or to resident family members Which of the following coverages in the homeowners policy is used to protect Sam when a friend files suit after falling down basement stairs that Sam is repairing? A) Coverage D-Loss of Use. Answer: C Coverage E-Personal Liability provides coverage to the insured if a claim is made or a suit is brought against the insured for damages because of bodily injury to property damage to others. Coverage E requires that Sam's negligence be the cause of the accident. Bill and Marge suffer the following losses as the result of a severe storm: $3,900 wind damage to their roof; $1,000 loss of income because a boarder in their house had to move; $1,250 in repair costs to prevent further loss to covered property; and $500 in medical expenses when Marge was hit by part of the falling roof. How much will their HO-3 policy pay for these losses? Assume all losses are within the applicable policy limits and ignore any deductible that may apply. A) $6,150.00 Answer: A All of the losses are covered except for the medical expenses. The damage to the roof is covered under Coverage A; the loss of income from the boarder is covered under Loss of Use; and the repair costs to prevent further damage is covered under Additional Coverages. All three of these are coverages provided under Section I of the homeowners policy. Medical expenses fall under Section II coverages, but do not apply to injuries to an insured. The medical payments coverage provided by the homeowners policy covers reasonable medical expenses incurred within how many years of an accident? A) Five. Answer: B The insuring agreement for Coverage F--Medical Payments specifically states that only those medical expenses incurred within three years of the date of an accident are covered. Max and Sam are neighbors who get into an argument over the placement of their common property line. The argument becomes a fight in which Sam's nose is broken. Sam sues Max for his medical expenses. How will Max's homeowners policy respond to this loss? A) The insurer will deny the claim because of the intentional injury exclusion. Answer: A Loss arising out of acts the insured expects or intends is excluded under both Coverage E and Coverage F. Section II of the homeowners policy provides liability coverage for all of the following EXCEPT: A) use of a 17-foot sailboat. Answer: B The homeowners policy excludes liability arising out of the use of watercraft, although some exceptions apply. One exception is for sailing vessels that are less than 26 feet long. John's dog bites a friend who is visiting John's house. Which part of John's homeowners policy, if any, would cover the visitor's ensuing medical expenses? A) Coverage F only. Answer: C This loss could be covered under Coverage E if John is determined to be legally liable for the loss, or Coverage F. Loss caused by an animal owned by the insured is not excluded under Coverage E or Coverage F. All of the following are homeowners Section II additional coverages EXCEPT: A) first aid provided by the insured. Answer: D Section II provides coverage to third parties. First aid provided to the insured is not covered because the insured is not a third party. Joan is a music teacher who teaches piano to 20 students who come to her home for weekly lessons. Which endorsement does Joan need to add to her homeowners policy to make sure she is covered if a student is injured on her property? A) Personal liability. Answer: B The permitted incidental occupancy endorsement deletes exclusions in the policy pertaining to a business conducted on the resident premises. Stephanie is an agent in a local insurance agency. While visiting a client in his home, Stephanie accidentally leaves a coffee cup on an antique coffee table, damaging the wood surface. She asks her sales manager whether she has coverage under her homeowners policy. Which of the following is the best advice given to Stephanie? A) The personal injury endorsement should be added to your policy to provide coverage for injury or damage you may cause to a client. Answer: C The business pursuits endorsement provides homeowners liability coverage for personal damage or injury caused while conducting business as a sales person working for a company. The basic homeowners policy does not provide this coverage automatically. George just returned from Europe with a beautiful Swiss watch valued at $10,000. He is concerned that his homeowners policy will not provide enough coverage. His insurance agent suggests that he add which endorsement to adequately cover his watch? A) Special property limits. Answer: B The scheduled personal property endorsement provides coverage for specific items of property, such as a watch, that exceeds the internal limit on the policy. Loss settlement is based on the actual cash value up to the amount listed on the endorsement. Sandy and Stewart had a fire loss, and the insurance company reimbursed them for their damaged personal property. They believed that they did not get enough for this property because the settlement was based on actual cash value. Which endorsement would have provided a better loss settlement? A) Personal property
replacement cost endorsement. Answer: A The personal property replacement cost endorsement modifies the basis of loss settlement from actual cash value to replacement cost. Payment at the time of loss will be no greater than the replacement cost, the limit of Coverage C, or any other special limits of liability stated in the policy. Jim and his family are considering a move to the West Coast but are very concerned about earthquakes. Jim called an insurance agent for advice. What is the best advice the agent could give Jim about adequately covering his new home for possible earthquake damage? A) The homeowners policy
automatically provides earthquake coverage. Answer: D The basic homeowners policy specifically excludes earthquakes, including the land shock waves or earth movement caused by a volcanic eruption; landslide; mine subsidence; mudflow; and earth sinking, rising, or shifting. The earthquake endorsement must be added to the homeowners policy to provide coverage for damage caused by earth movement. Adding the personal injury endorsement to the homeowners policy protects the insured against all of the following EXCEPT: A)
slander. Answer: C The personal injury endorsement can be added to the homeowners policy to protect the insured from injuries to others caused by libel, slander, or invasion of privacy. The endorsement specifically excludes some injuries such as contractual liability and injuries caused by a violation of criminal law. Which of the following endorsements will change Coverage C--Personal Property in the HO-3 from named peril to open peril? A) Special personal property. Answer: A The special personal property endorsement is added to the HO-3 to convert the Coverage C causes of loss from broad to special form perils. The open peril coverage is for risks of direct physical loss subject to the exclusions and limitations noted in the policy. Why is the homeowners special provisions endorsement important? A) It
modifies several homeowners policy provisions to comply with state requirements. Answer: A It modifies sections in the homeowners policy to align with specific state regulations. Each state has its own special provisions endorsement. The insured may list or schedule certain types of property under the scheduled personal property endorsement to increase the coverage. Which of the following items is NOT included in this endorsement? A) Postage stamps. Answer: D Firearms cannot be added to the scheduled personal property endorsement. Other categories include jewelry, furs, cameras, silverware, golf equipment, and fine art. Which homeowners endorsement is used to insure high value items of personal property? A) Personal property replacement cost. Answer: C The scheduled personal property endorsement provides a separate schedule of insurance for one or more of nine categories of valuable property. Which of the following is true regarding the ho3?Which of the following is true regarding the HO-3 (Special Form)? The dwelling and other structures (Coverages A and B) are written on an open perils basis -- The HO-3 (Special Form) provides the broadest coverage available on structures: open perils (or all-risk) coverage.
Which of the following may be covered under a DP 3 quizlet?Which of the following claims would be covered under the DP-3? Damage by vandalism to a dwelling vacant for 30 days before the loss - Loss from vandalism and malicious mischief is excluded if the dwelling has been vacant for more than 60 consecutive days immediately before a loss.
For which perils does the standard HOFor which perils does Mary's HO-3 coverage form provide protection? The HO-3 policy provides "All Risk" coverage for Coverages A and B, which includes all perils, including windstorm, unless excluded.
Which statement is true of a special form DP 3 dwelling policy?Which statement is true of a Special Form (DP-3) Dwelling Policy? -DP-3 policies cover physical damage losses to the structure on a replacement cost basis, subject to the usual 80% coinsurance requirement.
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Which of the following statements concerning coverage under the homeowners 3 policy is true?
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