RMIN Chapter 20

Betty's 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

Which of the following statements about coverage for loss of use (Coverage D) under the Homeowners 3 policy is true?

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.

Which of the following statements about the Homeowners 6 (unit-owners form) policy is true?

A) It includes personal liability coverage.

Which of the following statements about the coverage for other structures (Coverage B) under the Homeowners 3 policy is true?

A) The coverage applies to a detached garage or tool shed on the residence premises.

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.

Section I of the Homeowners 3 policy provides coverage for which of the following?

A) loss of use

One additional coverage under the homeowners policy makes available up to 10 percent of the Coverage A limit to cover increased repair costs after a loss in order to comply with a stricter building code. This additional coverage is called

A) ordinance or law.

The major difference between the dwelling coverage (Part A) of the Homeowners 2 (Broad From) policy and the Homeowners 3 (Special Form) policy is that

A) the HO-3 provides open perils ("all risks") coverage and the HO-2 provides named-perils coverage.

All of the following are duties of the mortgagee under the standard mortgage clause EXCEPT

A) to reimburse the insurer for any loss payments.

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?

B) $3,300

All of the following statements about the cancellation of a Homeowners 3 policy are true EXCEPT

B) At least 100 days' notice of cancellation must be given if an insurer cancels a policy for nonpayment of premium.

Which of the following statements concerning the coverage of collapse of the dwelling under an unendorsed Homeowners 3 policy is true?

B) Collapse is covered if it is caused by one of the Coverage C perils.

Which of the following statements about the replacement cost provision of the Homeowners 3 policy is true?

B) Except for small losses, the insured must repair or replace the damaged property in order to receive full replacement cost.

Which homeowners policy is designed for the tenants of rented premises?

B) Homeowners 4

Which of the following statements about eligibility requirements for homeowners insurance is (are) true? I. A contract can be written on a twenty-unit apartment complex as long as the tenants are families. II. Separate forms are available for renters and condominium owners.

B) II only

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.

B) II only

Which of the following statements about the appraisal clause in the Homeowners 3 policy is (are) true? I. It is used to determine a value for personal property when the policy is issued. II. It is used to help settle disputes over the amount of a loss after a loss has occurred.

B) II only

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.

B) II only

Which of the following statements about covered perils and loss settlement under an unendorsed Homeowners 3 policy is true?

B) Personal property losses are settled on an actual cash value basis.

Michelle had four matching end tables in her home. A fire damaged the home, destroying two of the end tables. Michelle's 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?

B) The insurer will pay the difference in actual cash value of the property before and after the loss.

Which of the following property is covered under the personal property coverage (Coverage C) of the Homeowners 3 policy?

B) a bicycle owned by a foster child living with the named insured

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?

B) appraisal clause

Which of the following is an additional coverage provided under Section I of the Homeowners 3 policy?

B) debris removal

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

B) schedule.

All of the following are covered under the dwelling coverage (Coverage A) of the Homeowners 3 policy EXCEPT

B) the land on which the insured dwelling is located.

If there is a conflict between state law and a provision in a homeowners policy,

B) the state law takes precedence.

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?

C) $10,000

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?

C) $21,000

Cal is renting an apartment. Which homeowners policy is specially designed to insure renters?

C) HO-4

Which of the following statements about covered perils under the personal property coverage (Coverage C) of the Homeowners 3 policy is true?

C) Property damage from vehicles is covered only if it is caused by the insured.

Brian purchased an unendorsed Homeowners 3 policy. Under the policy, Brian's detached garage is also covered. Which of the following statements regarding coverage on the garage is true?

C) The cost of removing debris is included in the policy limit on the garage, but if the damage and cost of removing debris exceed the limit, an additional five percent of the policy limit is available.

A fire destroyed the home next door to Brad's home. The fire department chief was concerned that the damaged home would collapse on to Brad's home, so he ordered Brad to evacuate his home. Which of the following statements is true concerning the cost of Brad's hotel room while he is complying with the fire chief's order?

C) The cost of the hotel room is covered under the "prohibited use" coverage of Part D.

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

C) adding a schedule to the policy listing the property with specific amounts of insurance.

Persons insured 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 full-time college students

C) both I and II

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 insurer's request II. To prepare an inventory of damaged personal property

C) both I and II

The homeowners policy excludes a loss brought about by two or more perils where one peril is covered under the policy and the other perils are excluded. This situation is called

C) concurrent causation.

Which of the following losses to a dwelling would be covered under an unendorsed Homeowners 3 policy?

C) damage to the structure caused by the weight of heavy snow

All of the following are additional coverages under Section I of the Homeowners 3 policy EXCEPT

C) damage to trees and shrubs caused by a windstorm.

Mike and Susan built their "dream home." They insured their home for its full replacement cost. They also added an endorsement that will pay up to an additional 20 percent of the policy limit in case the cost of rebuilding the home after a loss is greater than the policy limit. The basis under which Mike and Susan insured their home is called

C) extended replacement cost.

If the insurer broadens coverage during the policy period without an increase in premium, and the broadened coverage is not part of a general program revision, the insured is entitled to the broadened coverage under which policy provision?

C) liberalization clause

All of the following are general exclusions under Section I of the Homeowners 3 policy EXCEPT

C) losses resulting from a power failure caused by an insured peril at the residence premises.

Which of the following is a covered peril under the personal property coverage (Coverage C) of an unendorsed Homeowners 3 policy?

C) windstorm

Shauna purchased a condominium unit. Which homeowners policy is specially designed for condominium unit owners?

D) HO-6

Jose and Maria would like "open-perils" coverage on their home and their personal property. Which unendorsed homeowners form provides this coverage?

D) Homeowners 5

All of the following statements about conditions under a homeowners policy are true EXCEPT

D) If the named insured dies, coverage automatically ceases with respect to any property of the deceased.

Ted purchased a home. To finance the purchase, he borrowed $140,000 from ABC Bank, pledging the home as collateral for the loan. 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?

D) The insurer will pay ABC the value of its insurable interest and then attempt to recoup the loss payment from Ted.

Which of the following types of water damage is covered under an unendorsed Homeowners 3 policy?

D) damage from water that overflows from a malfunctioning washing machine

All of the following losses are subject to special limits of liability under the Homeowners 3 policy EXCEPT the

D) destruction of jewelry by fire.

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.

D) neither I nor II

Which of the following statements about the personal property coverage (Coverage C) of the Homeowners 3 policy is (are) true?

D) neither I nor II

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 renter's policy provides open perils ("all-risks") coverage on the insured's personal

D) neither I nor II

Under the Homeowners 3 policy, all of the following are options of the insurer for settling claims EXCEPT

D) paying the claim with insurance company stock.

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)

D) percentage deductible.