Unit 3 A

Christina owns a home insured by a $200,000 DP-3policy. When she purchases the home, she fixed up the detached garage, turning it completely into a studio apartment, which she now runs out. One day, a fierce wind storm blows the roof off her home in the studio rental. How much of a detached garage will be covered under this DP-3 policy?

$0

To meet the 80% level of co-insurance required by his lender, Tom discovers he must insure his home for at least $320,000. What is the value of Tom's home?

$400,000

Ron works from home. After a kitchen fire renders his home uninhabitable, he is forced to rent an apartment in town while the repairs are made. Not knowing how long the repairs will take, Ron signs a 6 month lease at $1,500/month. The repairs are completed in just four months time. Assuming Ron holds a $200,000 standard HO-3 policy, how much will he be covered under Coverage D - Loss of Use?

$6,000

Stan built a porch for his home three years ago at a cost of $10,000. The value of the porch has depreciated by $6,000, and it would cost $12,000 to replace it today. After Stan's porch burnt down during a BBQ today, how much would a Standard Fire Policy indemnify Stan for his porch?

$6,000

Mary Jane's house is damaged by a kitchen fire, and the tenant that has been renting her upstairs bedroom has to move out. It takes Mary Jane two months to repair the damage, plus an additional four months to find a new tenant. How many months of lost rental income can Mary Jane expect to receive from her insurer?

2 months

The Alabama Homeowners Bill of Rights requires every insurer providing residential property insurance in the state to give each policyholder an outline and checklist of his policy's coverages within ____ days of when it issued the policy.

30

Which of the following properties would not qualify for a dwelling policy? A 5-family dwelling A fourplex with 5 tenants A permanently installed mobile home A single-family dwelling owned by a partnership

A 5-family dwelling

Dwelling coverage would provide indemnification for damages to all the following items EXCEPT: A stairwell leading up to the front door, a sunporch built away from the home, a pool house on the property, a car parked in a detached garage

A car parked in the detached garage

Which of the following would definitely NOT qualify for a homeowners policy?

A six-unit apartment building

Which of the following applicants would NOT be eligible for a homeowner's policy?

A small business that makes less than $70,000 per year

Which of the following items would NOT be covered against loss or damage under Coverage C - Personal Property of a homeowners insurance policy?

A television that belongs to the insured's tenant staying in the guest house

Removal of Debris coverage would pay for the cleanup of which of the following occurrences?

A windstorm blows shingles from the policyholder's roof all over the policyholder's front yard.

Which of the following expenses would NOT be covered under a homeowners policy additional coverage called Claims Expenses? A. Interest accrual on judgements B. Administrative costs related to renewing the insured's policy C. Premiums for bonds required in a lawsuit defended by the insurer D. Up to $250 per day for the insured's lost wages while the insured is helping with the claim investigation

Administrative costs related to renewing the insured's policy

Coverage C - Personal Property can apply to losses that occur:

Anywhere in the world

According to the Alabama Homeowners Bill of Rights, a policyholder has the right to:

Assurance that his insurer is financially stable

Why is it important to define terms in an insurance policy?

Because any ambiguity in the language of the policy will favor the insured

There are several terms that are often interchangeable with "endorsements." Which is NOT one of these terms?

Binders

Which of the following personal property items does NOT have a special limit of liability in the Homeowners forms?

Books

The Smiths have decided to hold a New Year's Eve party. Over 80 people attend, 40 of which end up on the balcony for some fresh air. Under the weight of so many people, the wooden frame of the balcony gives way. Which type of coverage in their HO-2 policy would help pay to rebuild the Smiths' balcony?

Collapse

In which section of the policy might you find the following statement? "Damage to insured property must be reported within 15 days of the damaging occurrence."

Conditions

Dan has a DP-3 policy on his $100,000 home.A tree falls onto his attached garage during the storm and breaks through the roof, causing $5000 in damage. Under which coverage within the dwelling policy will the damage to the roof possibly be covered?

Coverage A

During a terrible storm, a tree falls right next to Jill's home, nearly taking out her roof. Fortunately the tree missed her house, but it landed on her air conditioning compressor, destroying it completely. Which coverage form might cover the loss of Jill's air conditioning compressor?

Coverage A-Dwelling

In a dwelling policy, coverage for a standalone lamp post in the front yard would fall under:

Coverage B

James rents a home to Jill and maintains a DP-3 policy on the dwelling. One day, Jill accidentally leaves the oven on all day while she is out, and James' house burns to the ground, along with all the contents. Which coverage in Jameses DP-3 might pay for the items he left in the home for Jill's?

Coverage C

François has a DP-3 policy on his home, which covered him from most losses on an open-peril basis. He likes to collect old films, many of which are recorded on Safety Film (cellulose acetate). The problem is that cellulose acetate film gradually breaks down overtime and will eventually "self-destruct." The films are uninsurable for gradual breakdown under the DP-3 policy because:

Damage caused by an inherent vice is excluded.

Which of the following sections of a homeowners policy lists the facts that are particular to the homeowner and the insured property?

Declarations page

Frank recently purchased some rural property that he would like to use as a hunting lodge. He won't be able to live there year-round, but will keep it furnished with regular camping equipment. Frank needs to purchase insurance to protect his investment. Which policy would best fit Frank's needs?

Dwelling insurance

Dwelling policies and homeowners policies provide a variety of insurance protection for consumers. What is the primary difference between a typical homeowners policy and a dwelling policy?

Dwelling policies do not provide liability insurance.

ABC Trucking owns a nice vacation house in the country, to which they regularly bring high-ticket clients as a benefit for staying loyal to them. They would to purchase a policy to insure from things like fire, windstorm damage, or vandalism. Which policy type could ABC Trucking purchase to cover the property?

Dwelling policy

Grace purchased 40 acres of land a couple miles outside of town. To save time and money, she put up a basic mobile home and installed it permanently to the ground. Not planning on forming any of the land, Grace is now looking for a way to ensure the second home and property. Which policy could best fit her needs?

Dwelling policy

Which is not covered under HO-2 Broad Form?

Earthquake

George has an HO-2 policy on his home. One day a plane flying overhead loses a tire which smashes through George's roof, causing extensive damage to his home and its contents. George files a claim with his insurance for the damages to his property. Under which two named perils could George's insurance cover the claim?

Falling objects, aircraft

An unendorsed DP-1 basic form covers what three perils?

Fire, lightning, internal explosion

The Standard Fire Policy divides a basic property insurance into how many parts?

Four

Frances is visiting her mom's grave and notices that several headstones in the cemetery have been defaced with spray-paint, including her mother's. Frances hires a professional cleaning service to remove the spray-paint from her mother's headstone. Which type of additional coverage in her homeowners policy could help Frances with the cost of removing the paint?

Grave markers coverage

Anton is purchasing a homeowners policy for his house in the woods. He wants to make sure he is covered for damage done to his home by wild animals. Which of the following would be his LEAST expensive option?

HO-3

James has purchased a single family home and wants to purchase an open-peril homeowner's policy to protect his financial interest in the property. From which policies should James choose to get the amount of coverage he is looking for?

HO-3 and HO-5

Which ISO homeowners form is designed for renters and covers personal property only?

HO-4 Contents Broad Form

Which of the following ISO forms is most commonly used?

Homeowners 3

Which homeowners policy form is intended for renters?

Homeowners 4

Paul lives in an area where property values are appreciating rapidly. He would like his homeowner's policy to reflect the increase in the value of his home. Which endorsement might Paul purchase to accomplish this?

Inflation guard

Which of the following statements does NOT apply to the Standard Fire Policy?

It automatically covers wind and vandalism

A homeowner's policy is called a "package" policy because:

It bundles property and liability insurance into one policy

Which statement is FALSE about coverage for trees, shrubs, and other plants in the DP-2 and DP-3? It is limited to $500 per tree or plant. It cannot pay more than 5% of the coverage a limit of liability. It pays in addition to the coverage A limit of liability. It includes the perils of wind storm and hail.

It includes the perils of wind storm and hail.

Which of the following statements about the Standard Fire Policy is true?

It is the basis of all property insurance policies

Dwelling policies exclude inherent vice because:

Items containing inherent vice will eventually break down or self-destruct

Peggy is visiting her friend Laura at Laura's home. During the visit, Peggy trips over Laura's dog and takes a nasty fall down the stairs. Which homeowners coverage would pay for Peggy's injuries?

Laura's liability coverage

The Homeowners 6 policy would likely NOT cover which of the following?

Light fixtures on the buildings exterior

After the collapse of the Smiths' balcony, they find there are many new code requirements than there must have been when the balcony was originally constructed. Which type of of additional coverage can help with the added expenses needed to rebuild their balcony to current standards?

Ordinance or law coverage

Jerry's home lies in the path of an oncoming hurricane, so he decides to load his big-screen television into his truck to get it out of harm's way. However, as he is driving the television to a more secure location, he hits a big pothole that sends the TV flying across the truck and destroys it. Which extended coverage of a homeowner's policy would indemnify Jerry for the loss of his television?

Property removal coverage

Lightning strikes a tree and Pam sprint yard, sending a limb crashing through her bay window. Pam has a contractor to put up some plywood, temporary shelter in the living room from the elements until she can get a few estimates and have the window replaced. Which coverage in her DP-3 could help with the cost of installing the plywood?

Reasonable repairs

Strong winds have blown many shingles off of Mark's roof, and the weather forecast is predicting an 80% chance of thunderstorms tomorrow. Mark heads to his local hardware store and purchases a ladder and tarp so he can temporarily keep water out of his home until the roof can be repaired. Which type of additional coverage might reimburse Mark for the cost of the materials purchased?

Reasonable repairs

The Alabama Homeowners Bill of Rights outlines a policyholder's right to:

Reject any settlement amount that the insurer offers

Actual Cash Value Formula

Replacement Cost - Depreciation = Actual Cash Value

Which of the following statements is true about coverage C under a DP-2 or DP-3? Rowboats and canoes are covered, but only while on the premises., Coverage for boats of any kind is excluded under "general exclusions.", Boats of any kind are covered, but only while on the premises., Coverage for Rowboats boats and canoes is excluded; other boats are covered.

Row boats and canoes are covered, but only while on the premises.

Greg is sitting in his home when he feels the ground shake and give way beneath him. He is just able to escape before a large portion of his house falls into an enormous hole. Which endorsement would help Greg cover the losses caused by the ground falling out from underneath his home?

Sinkhole collapse endorsement

Any contributions that policyholders make to their Catastrophe Savings Accounts are not subject to:

State income tax???

Harold has owned his condo for five months , and he is insured with an HO-6 policy. One night lightning strikes a tree next to the building, causing it to fall on the roof of his condo. Harold files a claim with his insurer for the cost of repairs; however, the claim comes back denied because:

The HO-6 form only covers the owners belongings and finished surfaces, not the unit's structure.

Which of the following losses might qualify for coverage under Coverage F - Medical Payments? A. The insured is teaching his daughter to fly a kite in the front yard. She runs into a tree and breaks her nose. B. The insured invites Mr. and Mrs. Saxon over for tea. Mrs. Saxon spills her hot tea and severely burns herself. C. The insured cuts himself with his newly sharpened knives while preparing dinner. D. The insured's tenant, Jenny, slips and falls while she's dancing to music in her room.

The insured invites Mr. and Mrs. Saxon over for tea. Mrs. Saxon spills her hot tea and severely burns herself.

A neighbor stepped on a rusty rake while walking through Jake's backyard, unannounced. He ends up with a bad case of tetanus and has to stay in the hospital for three days. He files a claim against Jake, who protests any wrongdoing because he believes his neighbor was trespassing and should be responsible for his own injury. Jake wants a court of law to settle the dispute. How can the insurer settle the claim put forth by Jake's neighbor?

The insurer can settle anyway it finds advantageous to its interests.

The Declarations page will always provide a lot of the coverages provided within the policy. What will be listed next to each type of coverage on the Declarations page?

The insurer's limit of liability for that particular coverage

An out-of-control motorist careens off the road and smashes through Sally's front yard and into her attached garage, taking out several lamp posts, her mailbox, and a small gazebo along the way. Under Sally's homeowners policy, which items might be covered under Coverage B - Other Structures?

The lamp posts, mailbox, and gazebo

Theft is a covered peril under a homeowner's policy, but not all theft losses are covered. Which of the following theft losses IS covered?

Theft of the insured's property while the insured is on vacation

Greg own a four-unit townhouse, in which he and three other families reside. Greg decides to finish the basement and leases it out as a garden apartment to another family, generating more income. After an intense blizzard causes the roof to collapse under the weight of the snow, Greg files a claim against his HO-3 policy. The claim comes back denied because:

There are now five families in the building

After Tom and his neighbor get into a heated argument, Tom destroys his neighbor's A/C compressor with a baseball bat, causing $2,500 in damages. The next day, Tom realizes his poor behavior and files a claim with his insurer for his liability in the damages to his neighbor's A/C unit. Why might Tom's insurer deny his claim?

Tom's vandalism was intentional, and therefore excluded under his liability policy

Fred lives near a business that is currently the object of a protest. As police try to break up the protesters, a riot ensues and spills onto Fred's property, where protesters set fire to four of his trees. How much can Fred be indemnified for the loss of all four trees (ignoring any deductible)?

Up to $2,000

Following a covered loss, which of these expenses would NOT be covered under Coverage F - Medical Payments in a homeowners policy? A. Funeral services B. Dental costs C. Hospital stays D. Weight loss surgery

Weight loss surgery

Under the Requirements in Case Loss Occurs provision, the insurer typically requires that the claimant make a claim inventory form

When he files a property claim

Just two days before a hurricane hits New Orleans, Jim brings most of his valuable items (TV, stereo, jewelry, firearms, etc.) to his parents' house in Hammond, to keep them safe from the storm. Two weeks later, Jim's valuables are destroyed when a flood sweeps through Hammond, severely damaging his parents' house. Under which peril are the valuables covered?

Windstorm

John's home is totally destroyed by a fire, and along with it most of his personal property. A few of the items were scheduled in his homeowners policy, such as his Rolex watch and a few antiques, but everything else was left as "unscheduled property." These "unscheduled" items,

will be covered under the normal policy limits

Elizabeth has a personal laptop worth $1,400. One night, while Elizabeth is out, a thief breaks into her home and steals her laptop. How much can Elizabeth expect to be indemnified by her insurer for the loss of her laptop (ignoring any deductible)?

$1,400

Elizabeth has a laptop computer that she takes everywhere she goes. While she is at the grocery store, her car is broken into and the laptop is stolen. Assuming it is valued at $2,000, how much can Elizabeth expect to be indemnified by her insurer (ignoring any deductible)?

$1,500

Sam's house is underinsured. It has a replacement cost of $200,000, but Sam's policy only covers losses up to $80,000. During a violent hailstorm, Sam's $20,000 roof is completely destroyed. Assuming his insurer requires the standard 80% level of coverage, how much will Sam receive as a settlement for the roof (ignore the deductible)?

$10,000

Jake's house is covered under a DP-2 policy with a $100,00 coverage A limit of liability. A fire destroys the dwelling and a $30,000 detached guesthouse. Assuming he has not endorsed or otherwise modified the coverage amounts of the policy, how much can Jake expect to receive from his insured?

$110,000

Michelle's $300,000 home experiences $90,000 in damage from a lightning storm. The adjuster calculates depreciation at 25%, making the ACV loss $67,500. Although Michelle's policy covers repairs at replacement cost, she receives an initial check for $67,500. Actual repairs to her home end up totaling $79,500. How much, if any, further indemnification may Michelle receive from the loss?

$12,000

Jacobs home burns to the ground, despite the fire departments attempt to save it. His home is fully insured under his DP-3 policy for $150,000. How much can Jacob expect to receive from his insurance to cover the loss and any bills he may receive from the fire department?

$150,500

Mr. Dewitt's homeowners policy has a $200,000 limit of liability for Coverage A - Dwelling. How much coverage will his policy automatically provide for Other Structures (assuming he has a typical policy with no endorsements)?

$20,000

An out-of-control motorist careens off the road and smashes through Sally's front yard and into her attached garage, taking out several lamp posts, her mailbox, and a small gazebo along the way. If Sally has a $100,000 homeowner's policy and the replacement costs for the damaged items were as follows: the lamp posts and mailbox: $700; the gazebo: $2,500; and the garage: $12,500, what will Sally's Coverage B - Other Structures pay for her losses (assuming no deductible)?

$3,200

Underinsured Home Loss Coverage

(amount of insurance/80% of the property value) x the covered loss

If an Alabama insurer wants to cancel a HO policy because the policyholder isn't paying premiums, it needs to give the policyholder ____ days advance notice.

10

Ben built a small shed in the backyard of the house he's renting, to hold his lawn equipment and other tools. One afternoon, a strong storm brought a tree down on Ben's shed, practically destroying it. Which type of coverage in Ben's HO-4 policy could indemnify him for the cost of replacing the shed?

Building additions and alterations coverage

Ron works from home. After a kitchen fire renders his home uninhabitable, he is forced to rent an apartment in town while the repairs are made. Which type of coverage could help Ron pay the cost of renting the apartment?

Coverage D - Loss of use

John is doing some lawn maintenance using a steel blade on his weed-whacker. He fails to properly tighten the blade and it comes loose while he is trimming some tall grass at the edge of his property. The blade flies off towards his neighbor's house and crashes into the HVAC unit, severing the lines and effectively destroying the unit. Which coverage in John's homeowners policy might pay for the damage he caused to his neighbor's HVAC system?

Coverage E - Personal Liability

Under Coverage F - Medical Payments to Others, the Payment of Claim provision states:

Coverage F is voluntary coverage: even if a claim is paid, it is not an admission of the insurer's liability.

Mike is wanting to upgrade his homeowner's insurance so he will have the best coverage possible. "You get what you pay for;" says Mike, "and, I'm purchasing total peace of mind." Which policy is Mike referring to?

HO-5

Jennifer bought a foreclosed home at a great bargain of $25,000. The home needs a lot of work; so, for now, Jennifer only wants to protect her initial investment in her new home with a very basic homeowner's policy. Which policy would best fit Jennifer's needs?

HO-8

Which homeowners policy is the most basic, only providing coverage on a named-peril basis and only paying actual cash value for all covered damages?

HO-8

In a homeowner's policy, Coverage D provides coverage for:

Loss of use

Which of the following coverages would need to be added by endorsement to a DP-3? Other structures, personal property, medical payments, loss of use

Medical payments

Stu has a collection of rare comic books. He wants to purchase theft insurance for his collection, separate from his home and other property. What term most accurately describes the type of policy Stu would purchase?

Monoline Policy

To make some extra money, Denise turns her storage shed into a small dwelling and rents it out to a tenant. Shortly after the tenant moves in, a drunk driver crashes into the storage shed apartment, demolishing it. Would Coverage B - Other Structures of Denise's homeowners policy cover the repairs to the shed-apartment? Why or why not?

No, because the shed-apartment was wholly rented out

Abby owns a condo and has a $200,000 HO-6 policy. One afternoon she finds a little bugs running all over her kitchen. After calling a pest control service, she learns that there is a termite infestation in the building. How much of a structural damage caused by the termites will be covered under the policy?

None

Joe has a DP-1 policy on his home without any endorsements . During a storm, a tree falls onto is attached garage. The tree crashes through the garage roof and lands on Dan's water softener tank, destroying it completely. Which of these damages would be covered under coverage A in Joe's policy? The roof, both the water softener and the roof, the water softener, none

None

Joe has a DP-2 policy on his home. During a storm, lightning strikes a utility pole, causing it to fall onto his attached garage. The pole crashes through the garage roof and lands on Joe's water softener tank, destroying it completely. Which of these damages would be covered under coverage be in Joe's policy?

None

While backing out of the driveway, Gary accidentally puts the car into drive and plows through several yards of his privacy fence. The total damage to the fence comes to $3,500. Assuming Gary has an HO-2 Broad Form policy, how much of the damages would be covered?

None

During a heavy rainstorm, Ben's basement flooded and suffered extensive water damage. Which section of Ben's Homeowners 3 policy will cover this damage?

None (HO policies do not cover damage by water)

Leonard has a dwelling insured under a DP-1 with a limit of liability of $100,000 and no endorsements. An automobile swerves off the road and crashes through Leonard's dwelling. The cost to repair the wall is $10,000. However, when Leonard attempts to get the permits to do the repair, he finds out that the current code requires that he preform a $1,000 upgrade to the plumbing in the wall. How much will the policy pay (Ignore the deductible)?

Nothing. Damage from vehicles is not a covered peril under a DP-1 without an endorsement.

Jean operates a home-based business. She also leases her basement out to a friend, Rita, who also works from home. When a kitchen fire causes extensive smoke damage to her home, she and her tenant must find another place to live and work while repairs are being made. Which of the following expenses might Coverage D - Loss of Use help pay for?

The cost of lodging for Jean, and the lost rental income from Rita.

Molly leaves town for a one-week vacation. When she returns, she finds the back door to her house has been kicked in and damage. Her laptop is gone and - to her surprise - she finds the copper piping in the basement has been torn out and stolen as well! She has a DP-3 with coverage for contents but no additional endorsements. What, if anything, is covered?

The damage to the door and copper piping.

The Liberalization clause in a homeowners policy:

applies not only to changes made during the policy period, but also to any changes made up to 60 days before the policy went into effect.