Chapter 2

If your carpet is damaged in your home it would be covered under which of the following coverages? A) Dwelling B) Other Structures C) Contents D) Personal Property

Answer A is correct. Coverage A Dwelling covers anything attached to the building including: carpet, built in appliances, etc.

Which is true of the Special Dwelling Forms? A) Contents are covered on an actual cash value basis. B) It will cover the cracking of walls. C) It will automatically cover the theft of contents. D) Losses to the dwelling are paid on an actual cash value basis.

Answer A is correct. Cracking of walls and theft are exclusions to this policy. Furthermore, losses to the dwelling are paid on a replacement cost basis, while the contents are paid on an actual cash value basis.

All of the following are true of Dwelling Special Forms, except: A) The dwelling and contents are both covered on an open peril basis. B) Losses to the dwelling are paid on a replacement cost basis. C) Mobile homes are not eligible. D) The dwelling must be used principally for dwelling purposes.

Answer A is correct. Only the dwelling is covered on an open peril basis.

While vacationing overseas, which of the following would be covered under the contents coverage of the Coverage C limit of insurance on a Dwelling policy? A) A camera lost and owned by the insured while overseas. B) A camera lost and owned by a guest in your home. C) A rowboat damaged while overseas. D) A canoe stolen while overseas.

Answer A is correct. The insured may use up to 10% of Coverage C Contents coverage for loss caused by a covered peril anywhere in the world; EXCEPT: Rowboats, Canoes or property of a guest or servant.

A Basic Dwelling policy automatically provides coverage against fire, lightning and A) theft. B) internal explosion. C) hail. D) smoke

Answer B is correct. The Basic Dwelling policy automatically covers only fire, lightning and internal explosion. Hail and smoke are among the perils that may be added by an extended coverage endorsement (ECE). Theft is not covered under a DP-1 Basic Dwelling policy at all.

Additional Living Expense coverage that is included under the Broad and Special Dwelling forms protects the insured against A) fire damage to the house. B) extra living costs incurred when the home becomes uninhabitable due to damage by a peril insured against. C) wind damage to the roof of the house. D) theft loss of personal property.

Answer B is correct. This coverage pays for additional living expenses the insured incurs after a covered loss, including reasonable motel, dining, laundry, and transportation expenses, etc.

A Dwelling policy is considered to be which of the following? A) A Multiline package policy B) A Limited policy C) A Monoline policy D) An Omniline policy

Answer C is correct. A Dwelling policy is referred to as a Monoline policy because it only covers property. It is not a package policy. Package policies include liability and other types of coverages. Liability can be added by endorsement only!

What is another name for the DP-4? A) Basic Form B) Broad Form C) Tenants or Renters Form D) Modified Form

Answer C is correct. The DP-4 is referred to as the Renters or Tenants Form and is Contents Coverage only. It is written as a Basic Form, Named Perils Coverage.

All of the following may be eligible for coverage under the Dwelling Program, except: A) A duplex B) A house in the suburbs C) A mobile home D) A farmhouse

Answer D is correct. A farmhouse does not fit the eligibility requirements of the Dwelling Program.

All of the following are Extended Coverage perils EXCEPT: A) aircraft. B) riot. C) hail. D) lightning.

Answer D is correct. The Extended Coverage endorsement includes: wind, hail, aircraft, riot, vehicles, volcanic eruption, explosion, and smoke. Lightning is one of the perils that are automatically included in the Basic form DP-1 (Fire, Lightning, Internal explosion)

All of the following are true of dwelling policies, except: A) Mobile homes are eligible if written on a DP-1. B) Farm dwellings are not eligible. C) Incidental business occupancies are permitted, but they must provide service rather than sales. D) Trees, shrubs and plants are covered for up to $1,000 total.

Answer D is correct. The limit for trees, shrubs and plants is $500 for any 1 item or 5% of Coverage A.

Under Coverage C of the Special Dwelling Form, all of the following are included, except: A) Household and personal property. B) Property of others that is in the care, custody and control of the insured. C) At the insured's option, property of guests and servants. D) The insured's golden retriever.

Answer D is correct. The policy does not cover animals or pets.

The Dwelling Broad Form (DP-2) includes coverage for all of the following, except: A) Breakage of glass that is a part of a building, storm door or window. B) Damage caused by burglars (but not property taken by burglars). C) Accidental discharge or overflow of water or steam from a heating or air conditioning system or household appliance. D) Water damage by flood.

Answer D is correct. There is no flood coverage in a dwelling policy.

Which Dwelling forms include the Glass or Safety Glazing Material other coverage? A) DP-1 only B) DP-2 and DP-3 C) DP-2 only D) DP-3 only

Answer B is correct. This coverage is only provided under the DP-2 Broad form and DP-3 Special form coverages. DP-1 is Basic and does not include this coverage. This coverage pays for the breakage of glass or safety glazing material and damage to covered property caused by glass breakage.

Which of the following Dwelling forms provides Basic Form / Named Peril coverage for personal property only, for people that rent their home? A) DP-1 B) DP-2 C) DP-3 D) DP-4

Answer D is correct. DP-4 is referred to as the tenants or renters form covering contents only on a Basic Form / Named Peril Basis.

Who of the following would be covered for theft of contents with a broad theft coverage endorsement added to a DP-2? A) An owner occupied dwelling that ran a business out of the home. B) A renter occupied dwelling that lost valuables as a result of a burglary theft. C) Both A and B D) Neither A nor B

Answer A is correct. The Broad Theft Coverage Endorsement provides coverage for owner occupied dwellings only which would include a dwelling owner operating a business out of their home.

Which statement is true of a Special Dwelling Policy? A) If an insured dies, coverage continues for the insured's legal representatives. B) Coverage is not provided for collapse of a building. C) There is coverage for structures used for commercial, manufacturing or farming purposes. D) Losses caused by power failure or by any ordinance or law are covered.

Answer A is correct. The insured's legal representative is automatically covered in the event of the insured's death.

The insured has two separate Dwelling policies that cover the same property. Policy A for $30,000 and Policy B for $60,000. The insured has a $12,000 loss. If both policies use the pro-rata method to handle other insurance, how much will Policy B pay for this loss? A) $8,000 B) $10,000 C) $12,000 D) $0

Answer A is correct. The total amount of coverage combined is $90,000. Policy A provides $30,000 of coverage which represents 1/3 of that total and Policy B provides $60,000 of coverage which represents 2/3 of that total. Therefore Policy B's pro-rata share of the total loss would be 2/3 of $12,000 = $8,000.

An insured's home is covered by the DP-3 form. The policy provides $20,000 in coverage on a $50,000 home. When high winds destroy the roof, it is determined it will cost the insured $2,000 to replace it. Assuming the actual cash value of the roof is $750, how much would the insured collect for this loss? A) $750 B) $1,000 C) $2,000 D) None of the above

Answer B is correct. ACV-Actual Cash Value does not apply at all. This is direct loss to the dwelling, the dwelling loss is paid replacement cost everywhere EXCEPT: the DP-1 Basic form. Therefore, the 80% replacement value rule applies. The dwelling must be covered for at least 80% of the replacement cost at the time of the loss. The value of the home is $50,000. 80% of $50,000 = $40,000, this is what they should of had. They only had $20,000, which is 1/2 or 50% of what they should of had ($40,000) Therefore, the insured will receive 1/2 or 50% of the cost to replace the roof. 1/2 of $2,000 = $1,000.

Coverage E – Additional Living Expense is what type of coverage? A) Direct loss coverage B) Indirect loss coverage C) Concurrent loss coverage D) Concurrency coverage

Answer B is correct. Additional living expenses incurred as a result of a direct loss are considered to be Indirect Loss or Consequential Loss.

On what basis are losses to dwellings and other structures paid under the DP-2 and DP-3? A) Actual Cash Value B) Replacement cost C) Market value D) Agreed value

Answer B is correct. Dwellings and Other Structures are paid by Replacement cost everywhere in this book EXCEPT: DP-1 Basic form, where it is paid ACV. Market value is used to cover items whose values fluctuate according to the market conditions. Agreed value is used to cover fine arts, antiques, etc.

Which statement is false? A) A Special Dwelling Form will cover damage to the building from a vehicle. B) Under a Dwelling Basic Form, if an insured were to accidentally hit a fence in the backyard with his car, the damage to the fence would be covered. C) Normally property insurance policies will cover loss of property away from premises subject to sublimits. D) The Dwelling Broad Form will cover trees, shrubs and plants up to $500 each.

Answer B is correct. The Basic Dwelling Form does not cover damage to the property done by the insured's auto.

The insurer will pay the insured’s necessary costs to clean up following a property loss. These costs are automatically included in the policy's Other Coverages section of the policy.. Which of the following Other Coverage would cover this clean up cost? A) Reasonable repairs. B) Debris removal. C) Property removed. D) Collapse.

Answer B is correct. The Debris Removal (Other Coverage) of a Dwelling policy will pay the insured's reasonable expenses for the removal of debris of covered property following a loss by a covered peril.

All of the following are true of Dwelling Forms, except: A) Coverage A includes materials on premises intended for repair. B) Mobile homes are only eligible on the basic form. C) Under Coverage A, antennas and awnings are covered for wind losses. D) The Broad Form Policy will cover water damage caused by overflow of a bathtub.

Answer C is correct. Antennas and awnings are not covered for the peril of wind.

What is the difference in the way a DP-1 settles a claim on Coverage A as compared to DP-2 and DP-3? A) DP-1 pays replacement cost and the DP-2 and DP-3 pays ACV if 80% coinsurance requirements are met at the time of loss. B) DP-1 pays replacement cost and the DP-2 and DP-3 pays ACV if 80% coinsurance requirements are met at time of application only. C) DP-1 pays ACV and the DP-2 and DP-3 pays replacement cost if the 80% coinsurance requirement is met at the time of loss. D) DP-1 pays ACV and the DP-2 and DP-3 pays replacement cost if the 80% coinsurance requirement is met at the time of application only.

Answer C is correct. Coverage A is the Dwelling. The Dwelling is paid at Replacement Cost Everywhere in this book, EXCEPT: the DP-1. The DP-1 Basic Form policy is the only one that pays at ACV on the Dwelling. The DP-2 and 3 both pay at Replacement Cost, but the 80% Coinsurance requirement must always be met at the time of loss to get R/C.

Which is true regarding dwelling policies? A) Coverage B includes the insured's use of a garage as an office. B) Coverage C includes property of tenants and boarders. C) At the insured's option, property of guests and servants is covered under Coverage C. D) Coverage D is considered a direct loss coverage.

Answer C is correct. Coverage C may be extended to cover property of guests and servants.

For which of the following losses would you have coverage under a DP-3? A) A neighbor is injured in your yard. B) Your bicycle is stolen from your garage. C) Ice blocks your gutters and water seeps into your home. D) A UPS driver trips over a toy on the front porch steps and injures himself.

Answer C is correct. Dwelling policies cover property only and provides no theft coverage. Whether it is a DP-1, 2, or 3, it would require a Personal Liability Supplement or a Broad Theft Coverage Endorsement to cover liability or theft. Ice blocking the gutters causing water damage would be covered.

All of the following are false of the Dwelling Forms, except: A) The Special Form covers contents on an open peril basis. B) The Broad Form automatically covers contents for theft. C) The Basic Form covers the perils of fire, lightning and internal explosion. D) The Basic Form covers loss to trees, shrubs and plants.

Answer C is correct. The Basic Form only covers the three perils. Other perils are optional.

All of the following are false of a Dwelling Form, except: A) The Special Form covers the contents on an open peril basis. B) The Basic Form covers the contents for theft. C) The Basic Form covers the perils of fire, lightning and internal explosion. D) The Broad Form covers the cost to repair defective plumbing.

Answer C is correct. The Basic Form without endorsement covers only three perils. All other answers are false.

The Dwelling Basic form automatically provides coverage against fire, lightning and A) wind. B) vehicles. C) internal explosion. D) aircraft.

Answer C is correct. The Dwelling Basic form DP-1 automatically covers fire, lightning and internal explosion. There are eight additional perils available by extended coverage endorsement ECE: These are wind, hail, aircraft, riot, vehicles, volcanic eruption, explosion, and smoke.

The Dwelling Special form provides A) named peril coverage on the dwelling and open peril coverage on the personal property. B) named peril coverage on the dwelling and personal property. C) open peril coverage on the building and named peril coverage on personal property. D) open peril coverage on the building and personal property.

Answer C is correct. The Dwelling Special form (DP-3) provides the broadest coverage of the dwelling forms. It provides open peril coverage on the dwelling and other structures and named peril coverage on personal property.

Which statement is true concerning dwelling policies? A) 100% of Coverage C carries worldwide coverage. B) The Basic Form pays for losses to the dwelling on a replacement cost basis. C) The Special Form covers the dwelling for the open perils and the contents for the broad form perils. D) The Special Form automatically covers the contents for the peril of theft.

Answer C is correct. The Special Form covers the dwelling for open perils, and the contents for broad form perils.

Each of the following business occupancies would be permitted in a dwelling insured under a Dwelling form EXCEPT: A) a photographic studio. B) a beauty shop run by the insured and her daughter. C) a small store selling musical instruments to the general public at retail. D) a professional office providing services to clients.

Answer C is correct. To be eligible for coverage under a Dwelling policy, an incidental business operating in the dwelling must be conducted by the insured, it must be a service type business rather than retail sales. A photography studio, beauty shop and professional office providing service to clients are service type businesses.

All of the following are covered perils under the Extended Coverage Endorsement to the DP-1 except: A) Vehicles B) Windstorm C) Weight of ice, snow or sleet D) Volcanic eruption

Answer C is correct. Weight of ice, snow or sleet is not part of the Extended Coverage perils.

Which of the following coverages are included in the Dwelling policy? Assume there are no endorsements attached to the policy. A) Property coverage for homes, other structures and personal property. B) Fair rental value coverage C) Broad theft coverage D) Both A and B

Answer D is correct. Broad theft coverage is only available by endorsement. Property coverages for homes, other structures, and personal property are all covered under a Dwelling policy under coverages A,B, & C.

All of the following are true of the Dwelling Broad Form Policy, except: A) The dwelling and contents are covered for the broad form perils. B) Losses to the dwelling are paid on a replacement cost basis. C) It automatically includes incidental business occupancies. D) It includes dwellings located on farms.

Answer D is correct. Dwellings located on farms are not eligible for the Dwelling program.

Which of the following coverages can be found in all Homeowners forms but would not be found in an unendorsed Dwelling policy? A) Wind B) Hail C) Aircraft D) Theft

Answer D is correct. Theft is not included in a dwelling policy without an endorsement. Wind, Hail, and Aircraft are all part of the Extended Coverage Endorsement that covers the additional perils spelled out in this acronym - W H A R V V E S.

Coverage for which of the following is excluded by a Dwelling policy? A) Additional living expenses incurred as a result of a direct loss to the insured's dwelling. B) Attached carport on the insured's dwelling C) Personal property of a guest in the home that was damaged as a result of a fire in the home. D) Currency and coins

Answer D is correct. This type of personal property is specifically excluded under coverage C.