RMIN Ch 20 Homeowner Insurance Section I

11) 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 percentage 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

17) Which of the following statements about the additional coverages under Section I of the Homeowners 3 policy is true? A) There is coverage for the reasonable cost incurred to protect property from further damage after a covered loss occurs. B) There is unlimited coverage for furnishings of the landlord in an apartment on the premises that is rented to others. C) Property removed from the premises because it is endangered by an insured peril is covered on a named-perils basis while it is outside the insured premises. D) Damage caused by the settling of the insured structure is covered as a collapse.

A

19) 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

21) Which of the following statements about covered perils under the personal property coverage (Coverage C) of the Homeowners 3 policy is true? A) Theft losses to boats and watercraft are covered only if they occur at the insuredʹs residence. B) Damage from an explosion is covered only if the explosion is the result of fire or lightning. C) Property damage from vehicles is covered only if it is caused by the insured. D)Smoke damage is covered only if it arises from agricultural or industrial operations.

A

10) All of the following are covered under the dwelling coverage (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

15) 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 named insuredʹs spouse B) a bicycle owned by a foster child living with the named insured C) music CDs located in the named insuredʹs automobile D) a stamp collection insured under a separate policy

B

2) Which of the following statements about eligibility requirements for homeowners insurance is (are) true? I. A contract can be written on a six-unit apartment complex as long as the tenants are families. II. Separate forms are available for renters and condominium owners. A) I only B) II only C) both I and II D) neither I nor II

B

4) Which homeowners policy is designed for the tenants of rented premises? A) Homeowners 2 B) Homeowners 4 C) Homeowners 6 D) Homeowners 8

B

40) Ellen believes the value of the loss to her home is $30,000. The insurer has offered $18,000 to settle the loss. If Ellen and the insurer cannot agree on the value of the loss, which homeowners policy provision specifies how this dispute will be settled? A) insurerʹs option B) appraisal clause C) loss payment clause D) mortgage clause

B

14) The Homeowners 3 policy limits the amount of coverage provided on certain personal property (e.g. coin collections 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

18) 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 department service charges for which the insured is liable by contract or agreement. C) damage to trees and shrubs caused by a windstorm. D) losses incurred from the unauthorized use of a stolen credit card.

C

20) Which of the following losses to a dwelling would be covered under an unendorsed Homeowners 3 policy? A) smoke damage resulting from agricultural operations of a neighboring farmer B) damage to the structure caused by a flash flood C) damage to the structure caused by the weight of heavy snow D) damage to a floor caused by water backing up through a sewer pipe

C

24) Which of the following is (are) included among the duties of an insured following a loss covered under the Homeowners 3 policy? I. To file a proof of loss within a specified time period after the insurerʹs request. II. To prepare an inventory of damaged personal property. A) I only B) II only C) both I and II D) neither I nor II

C

26) David has a Homeowners 3 policy that provides $280,000 of insurance on his dwelling, which has a current replacement value of $400,000. Ignoring any deductible, how much will David collect if a kitchen with a replacement value of $24,000 but an actual cash value of $18,000 is destroyed in a fire? A) $18,000 B) $20,000 C) $21,000 D) $24,000

C

32) Cal is renting an apartment. Which homeowners policy is specially designed to insure renters? A) HO-2 B) HO-3 C) HO-4 D) HO-6

C

37) All of the following are additional coverages provided under Section I of the Homeowners 3 policy EXCEPT A) reasonable repairs. B) debris removal. C) personal liability. D) property removal.

C

1) Which of the following statements is (are) true regarding renters insurance? I. Renters insurance is needed if you rent a house, but is not needed if you rent an apartment. II. The ISO renterʹs policy provides ʺall-risksʺ coverage on the insuredʹs personal property. A) I only B) II only C) both I and II D) neither I nor II

D

12) All of the following losses are subject to special limits of liability under the Homeowners 3 policy EXCEPT the A) theft of firearms. B) destruction by fire of property used for business purposes. C) storm damage to a boat at a marina. D) destruction of jewelry by fire.

D

28) 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

31) All of the following statements about conditions under a homeowners 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 an assignment of the policy to be valid. D) If the named insured dies, coverage automatically ceases with respect to any property of the deceased.

D

33) Shauna purchased a condominium unit. Which homeowners policy is specially designed for condominium unit owners? A) HO-2 B) HO-3 C) HO-4 D) HO-6

D

41) Ted purchased a home. To fund the purchase, he borrowed $140,000 from ABC Bank, pledging the home as collateral. Shortly after purchasing the home, Ted lost his job. He could not find another job and could not pay the mortgage each month. Ted set fire to the home. The claims adjuster suspected arson, and an investigation proved that Ted intentionally caused the loss. Under the mortgage clause of the Homeowners 3 policy, how will this loss be settled? A) The insurer has no liability because the loss was intentional. B) The insurer will pay Ted the actual cash value of the loss as intentional loss is not excluded. C) The insurer will pay ABC the value of its insurable interest and pay Ted the value of his insurable interest. D) The insurer will pay ABC the value of its insurable interest and then attempt to recoup the loss payment from Ted.

D

43) Jose and Maria would like ʺall-risksʺ coverage on their home and their personal property. Which unendorsed homeowners form provides this coverage? A) Homeowners 2 B) Homeowners 3 C) Homeowners 4 D) Homeowners 5

D

9) 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

29) All of the following are duties of the mortgagee under the standard mortgage clause EXCEPT A) to reimburse the insurer for any loss payments. B) to notify the insurer of any change in ownership of the property of which the mortgagee is aware. C) to provide a proof of loss form if the insured fails to do so. D) to pay the premium if the insured fails to do so.

A

35) Bettyʹs personal property is insured for $100,000 under her Homeowners 3 policy. If she usually keeps some personal property at a mountain cabin that she owns, how much coverage for this property is available under her homeowners policy? A) $10,000 B) $20,000 C) $40,000 D) $50,000

A

7) The major difference between the Homeowners 2 policy and the Homeowners 3 policy is the A) insured perils for the dwelling. B) insured perils for personal property. C) type of liability coverage provided. D) amount of coverage for other structures.

A

16) All of the following statements about the coverage for loss of use (Coverage D) under the Homeowners 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) The duration of payments for additional living expenses is limited to a maximum of 15 days. C) There is coverage for the fair rental value of any part of the 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

25) Which of the following statements about the replacement cost provision of the Homeowners 3 policy is true? A) It applies to personal property losses only. B) Except for small losses, the insured must repair or replace the damaged property in order to receive full replacement cost. C) The insured is required to carry an amount of insurance equal to 100 percent of the replacement value of the insured property. D) Loss settlements are equal to 50 percent of the value of the loss if the insured is carrying less than the required amount of insurance.

B

3) All of the following statements about the Homeowners 6 (unit-owners form) policy are true EXCEPT A) It includes personal liability coverage. B) It covers personal property on an ʺall-risksʺ basis. C) It provides limited coverage for improvements and alterations. D) It provides limited coverage for loss assessments.

B

30) All of the following statements about the cancellation of a Homeowners 3 policy are true EXCEPT A) The insurer may cancel a new policy for any reason if it has been in force for less than 60 days and is not a renewal policy. B) At least 100 days notice of cancellation must be given if an insurer cancels a policy for nonpayment of premium. C) A policy written for longer than 1 year can be cancelled for any reason on the anniversary date by giving the insured at least 30 days notice of cancellation. D) After a policy has been in force for at least 60 days, it can be cancelled by the insurer if the risk has increased substantially since the policy was issued.

B

34) Michelle had four matching end tables in her home. A fire damaged the home, destroying two of the end tables. Michelleʹs home was covered by an unendorsed Homeowners 3 policy. Which of the following is true with regard to the settlement for the end tables in this case? A) Loss to a pair or set is excluded under the policy. B) The insurer will pay the actual cash value of the loss. C) The insurer will pay the replacement cost of the loss. D) If a partial loss to a pair or set occurs, the insurer is liable for replacement of the entire pair or set.

B

36) Linda wants to purchase a homeowners policy, but she has some valuable personal property to internal policy limits apply. Her agent said that she could obtain coverage under her homeowners by attaching a list of this valuable property with specific amounts of insurance. Such a listing is a(n) which policy called A) binder. B) schedule. C) application. D) warranty.

B

38) Darla purchased an unendorsed Homeowners 3 policy. While the policy was in force, a fire occurred that destroyed a living room set. The living room set cost $4,000 new, but was 25 percent depreciated when the loss occurred. Replacement furniture will cost $4,400. Assuming no deductible, how much will Darla receive from her insurer? A) $3,000 B) $3,300 C) $3,400 D) $4,400

B

44) All of the following statements about covered perils and loss settlements under an unendorsed Homeowners 3 policy are true EXCEPT A) The dwelling is covered on an all-risk basis. B) Personal property losses are settled on a replacement cost basis. C) Losses to the dwelling may be settled on an actual cash value basis. D) Personal property is covered on a named-perils basis.

B

45) Which of the following statements is (are) true regarding how the Homeowners 3 policy handles the peril of collapse? I. Collapse is specifically excluded, and there are no exceptions to the exclusion. II. Collapse that is caused by a Coverage C peril is covered. A) I only B) II only C) both I and II D) neither I nor II

B

23) 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 the insured to use all reasonable means to save and preserve property after the time of 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

39) A dwelling with a replacement cost of $150,000 was insured under a Homeowners 3 policy for $100,000 at the time the roof was destroyed by a windstorm. The actual cash value of the loss was $9,000, but it will cost $12,000 to replace the roof. Assuming no deductible, what will the insurer pay to settle this loss? A) $8,000 B) $9,000 C) $10,000 D) $12,000

C

42) Mike and Michelle built their ʺdream home.ʺ They agreed to insure the home for its full value. Their insurer offered a special homeowners policy. Under the policy, if a total loss occurs, the insurer agrees to replace the home exactly as it was before the loss even if the replacement cost exceeds the amount of insurance stated in the policy. What is this type of homeowners policy called? A) waiver of inventory policy B) fair market value policy C) guaranteed replacement cost policy D) actual cash value policy

C

8) Persons insureds 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 insuredʹs children who are under age 24 and who are full-time college students A) I only B) II only C) both I and II D) neither I nor II

C

13) Which of the following statements about the personal property coverage (Coverage C) of the Homeowners 3 policy is (are) true? I. The coverage applies only in the United States and Canada. II. The full amount of coverage applies only if the property is permanently located at any residence of the insured. A) I only B) II only C) both I and II D) neither I nor II

D

22) Which of the following types of water damage is covered under an unendorsed Homeowners 3 policy? A) damage from flood B) damage from water backing up through a drain C) damage from water below the surface of the ground that seeps into a basement D) damage from water that overflows from a malfunctioning washing machine

D

27) 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

46) Following catastrophic hurricane losses, South Coast Insurance Company changed its deductible provision. Rather than using a specified dollar value, $250 for example; the dollar value of the deductible increases with the size of the loss. The type of deductible that South Coast changed to is called a(n) A) aggregate deductible. B) franchise deductible. C) straight deductible. D) percentage deductible.

D

5) Which of the following statements about the Homeowners 8 policy is (are) true? I. Losses to the dwelling are settled on a replacement cost basis if the dwelling is insured for its full market value. II. It is designed primarily for expensive, newer, dwellings. A) I only B) II only C) both I and II D) neither I nor II

D

6) 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 $5,000. A) I only B) II only C) both I and II D) neither I nor II

D