Chapter 22
HO-2
(broad form): a policy that covers the dwelling, other structures, and personal property on a named perils basis. Covered perils include fire, lightning, windstorm, hail, explosion, and other. (Wind covered, flood not covered.)
HO-5
(comprehensive form): provides open perils coverage ("all-risks coverage") on the dwelling, other structures and personal property. All direct physical losses are covered except those losses specifically excluded. This more complete coverage is now provided by endorsing HO - 3
HO-4
(contents broad form): covers a tenant's personal property on a named perils basis and also provides some personal liability insurance. Most renters can use this policy. No structure coverage provided. IMPORTANT - Covers personal property, provides ALE, and some BI & PD liability coverage!
HO-8
(modified coverage form): designed for older homes. Dwelling and other structures are based on the amount required to repair or replace using common construction materials and methods - NOT Replacement Cost! This is for cases where replacement value exceeds market value. Must control moral hazard.
HO-3
(special form): covers the dwelling and other structures on a risk-of-direct-physical loss basis. All direct physical losses are covered except those losses specifically excluded. Personal property is covered on a named perils basis. This policy is our focus!
HO-6
(unit owners form): covers personal property on a named perils basis. A minimum of $5,000 of insurance is also provided on the condominium unit that covers improvements and additions. $1,000 of loss assessment coverage is also provided.
ELIGIBLE DWELLINGS
1, 2, 3, OR 4 family dwellings used exclusively for private residential purposes A 1 family dwelling may not be occupied by more than 1 additional family
7. Which of the following statements about the coverage for other structures (Coverage B) under the Homeowners 3 policy is true? (a)The amount of insurance on other structures is equal to a percent of the coverage on the dwelling. (b)Structures attached to the dwelling by a fence or utility line are considered to be part of the dwelling rather than other structures. (c)Coverage applies even if the other structure is used for business purposes. (d)There is coverage for a private garage only if it is rented to a tenant of the dwelling.
A
All of the following are covered perils under the personal property coverage (Coverage C) of an unendorsed Homeowners 3 policy EXCEPT (a) earthquake. (b) theft. (c) windstorm. (d) explosion.
A (earthquake and flood are not covered under standard homeowners policy)
10. All of the following statements about the coverage for loss of use (Coverage D) under an HO-3 policy are true EXCEPT (a) If a covered loss makes the home unfit for living, the insurer pays additional living expenses the insured may incur as a result of the loss. (b) Duration of payments for additional living expenses is limited to maximum of 15 days. (c) There is coverage for the fair rental value of any part of premises rented to others. (d) There is coverage if civil authorities prohibit the insured from using the premises because of a loss to a neighboring premises from an insured peril.
B
2. Which homeowners policy is designed for the tenants of rented premises? (a) Homeowners 2 (b) Homeowners 4 (c) Homeowners 6 (d) Homeowners 8
B
6. All of the following are covered under the dwelling coverage (A) of the Homeowners 3 policy EXCEPT (a) any structure attached to the dwelling. (b) the land on which the insured dwelling is located. (c) materials and supplies intended for alteration or repair of the dwelling. (d) materials and supplies intended for construction of a detached garage.
B
9. Which of the following property is covered under the personal property coverage (Coverage C) of the Homeowners 3 policy? (a) a pet iguana owned by the insured (b) a bicycle owned by a foster child living with the named insured (c) music CDs located in insured's auto (d) a stamp collection insured under a separate policy
B (needs to be located in the home.)
11. All of the following are additional coverages under Section I of the Homeowners 3 policy EXCEPT (a) the reasonable expenses of removing debris of covered property after an insured loss. (b) fire dept. service charges for which the insured is liable by contract or agreement. (c) windstorm damage to trees and shrubs. (d) losses incurred from the unauthorized use of a stolen credit card.
C
17. Which homeowners policy is specially designed to insure renters? (a) HO-2 (b) HO-3 (c) HO-4 (d) HO-6
C
4. Insured's under Section I of the Homeowners 3 policy include which of the following? I. A spouse of the named insured if living in the same household II. The named insured's children who are under age 24 and who are temporarily away at college (a) I only (b) II only (c) both I and II (d) neither I nor II
C
8. The Homeowners 3 policy limits the coverage provided on certain personal property (e.g. coins and silverware). This personal property can be adequately insured by (a) lowering the deductible which applies to personal property losses. (b) storing the property away from the home at another location. (c) adding a schedule to the policy listing the property with specific amounts of insurance. (d) adding an appraisal clause to the policy.
C
All of the following are general exclusions under Section I of the Homeowners 3 policy EXCEPT (a) losses due to earthquake. (b) losses due to the failure of insured to use all reasonable means to save & preserve property after a loss. (c) losses resulting from a power failure caused by an insured peril on the residence premises. (d) losses due to radiation from a nuclear power plant.
C
COVERAGE B OTHER STRUCTURES
Covers other structures on the premises that are separated from the dwelling Detached garages, tool sheds, or horse stables would be covered along with any structures connected to the dwelling by a fence or other connection 10% of the insurance on the dwelling applies to other structures EXCLUSIONS No coverage on a structure rented to a non tenant No coverage on a structure used for business purposes No coverage if structure used to store business property
COVERAGE A DWELLING
Covers the dwelling on the premises and any attached structures Attached structures are usually a carport or garage. Excludes land
1. Which of the following statements is (are) true regarding renters insurance? I. Renters insurance is needed if you rent a house, but not needed if you rent an apartment. II. The ISO renter's policy provides "all-risks" coverage on the insured's personal property (a) I only (b) II only (c) both I and II (d) neither I nor II
D
15. Under the Homeowners 3 policy, all of the following are options of the insurer for settling claims EXCEPT (a) paying the claim in cash. (b) replacing the property. (c) repairing the property. (d) paying the claim with insurance company stock
D
16. All of the following statements about conditions in a policy are true EXCEPT (a) If an insurer broadens coverage without an additional premium during the policy period, the broadened coverage applies immediately to the present policy. (b) A waiver or change in any policy provision must be approved in writing by the insurer to be valid. (c) The insurer must give written consent for assignments to be valid. (d) If the named insured dies, coverage automatically ceases with respect to any property of the deceased.
D
Which of the following statements about the appraisal clause in the Homeowners 3 policy is true? (a) The appraiser for each party is selected by a judge. (b) A binding settlement can be reached only if the umpire agrees with both appraisers. (c) Both the insured and the insurer must agree that the appraisal process be used. (d) Appraisal expenses are shared by the insured and the insurer
D
3. Which of the following statements about the Homeowners 3 policy is (are) true? I. Losses to the dwelling are always settled on an actual cash value basis. II. Coverage on personal property is limited to $5000. (a) I only (b) II only (c) both I and II (d) neither I nor II
D Dwelling losses settled on replacement basis. Personal property coverage limits can vary.
5. Section I of the Homeowners 3 policy provides coverage for all of the following EXCEPT (a) loss of use. (b) personal property. (c) other structures. (d) medical payments.
D (medical payments is a section 2 coverage)
HOMEOWNERS PROGRAMS
Insurance Services Offices (ISO) Provide forms and used by many insurance companies American Association of Insurance Services Provides forms and used by some insurance companies Personalized forms used by some insurers Mostly modified ISO forms NOTE: Business of insurance - state run!
HOMEOWNERS PROGRAMS
Policies consist of 2 major sections SECTION I Dwelling, others structures, personal property, loss of use, and additional coverages SECTION II Liability
COVERAGE C PERSONAL PROPERTY
Provides coverage for insured's personal property anywhere in the world Includes borrowed property Can be extended to property of guests Coverage is 50% of insurance on the dwelling Property permanently at another residence insured up to greater of 10% of C or 1000
COVERAGE D LOSS OF USE
Provides protection when the residence premises cannot be used because of a covered loss 30% of amount of insurance on dwelling Benefits provided are: Additional Living Expense (Baton Rouge-Boat to house - $2500 Checks provided) Fair Rental Value Prohibited use Pays for additional living expenses the insured may incur as a result of a covered loss making the home unfit to live in Additional living expenses are the increase in expense actually incurred by the insured to maintain the family's normal standard of living
HOMEOWNERS POLICY: HO - 3
Section I: Property Coverages Coverage A: Dwelling Coverage B: Other Structures Coverage C: Personal Property Coverage D: Loss of Use Additional Coverages Section II: Liability Coverages Coverage E: Personal Liability ($100,000 per occurrence) Coverage F: Medical Payments to Others ($1000 per person)
