AIC 41 Assignment 1
Sally insures her house with an unendorsed HO-3 policy with a Coverage A—Dwelling limit of $275,000, which is the replacement cost of the house. A fire destroys the house including a collection of blueprints belonging to Sally's employer, valued at $10,000. Sally was storing the blueprints at her home while her office was changing locations. Assuming no deductible applies, how much, if any, will Sally's HO-3 insurer pay to replace the blueprints? Select one: A. $0 B. $1,500 C. $2,500 D. $10,000
A. $0 Sally's insurer will pay nothing since business data, including drawings, stored either on paper or electronically, are specifically excluded.
The perils covered for Coverage C—Personal Property of the HO-3 policy differ significantly from the special form coverage for Coverage A and B. Damage from which one of the following events would be covered under Coverage A but not for Coverage C? Select one: A. A chandelier accidently fell from the ceiling and damaged the dining room floor, the dining room table, and a centerpiece. B. Due to a power surge the home heat pump and a window air conditioner suffered electrical damage. C. Due to the weight of ice and snow on the roof, the roof collapsed and damaged various contents in the home. D. A pipe froze and leaked causing damage to the floor and personal property while the homeowners were asleep.
A. A chandelier accidently fell from the ceiling and damaged the dining room floor, the dining room table, and a centerpiece.
Under the HO-3 policy Section I—Conditions, the Loss Settlement condition Select one: A. Establishes the process for determining the amount to be paid for a property loss. B. Outlines a method for resolving disagreements between the insured and the insurer. C. Provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it. D. States that the insurer will adjust all losses with the insured or the insured's spouse, if a resident in the same household.
A. Establishes the process for determining the amount to be paid for a property loss.
The HO-3 policy Coverage D provides coverage for Select one: A. Loss of Use. B. The dwelling. C. Personal property. D. Other Structures.
A. Loss of Use.
The HO-3 policy provides Select one: A. Open perils coverage on dwellings. B. Named perils coverage on other structures. C. Named perils coverage on dwellings. D. Open perils coverage on personal property.
A. Open perils coverage on dwellings.
All of the following are true statements concerning the HO-6 policy, EXCEPT: Select one: A. The HO-6 defines residence premises as a one- to four-family dwelling where the insured resides. B. Section I—Perils Insured Against provides named perils coverage for Coverages A and C. C. The insured selects the limit for Coverage C—Personal Property. D. Coverage A includes other structures owned solely by the insured.
A. The HO-6 defines residence premises as a one- to four-family dwelling where the insured resides. The HO-3 defines residence premises as a one- to four-family dwelling where the insured resides. The HO-6 defines residence premises as the unit where the insured resides.
Which one of the following statements is correct regarding Section I Coverage C—Personal Property of the HO-3 policy? Select one: A. There is damage to personal property from rain and snow only if wind or hail first damages the building. B. There is no coverage for damage from falling objects that penetrate the building. C. Damage caused by mold, fungus, or wet rot caused by a sump pump is covered. D. Coverage is as broad as the special form coverage for dwellings and other structures.
A. There is damage to personal property from rain and snow only if wind or hail first damages the building.
Anne and Dave insure their house with an unendorsed HO-3 policy with a Coverage A—Dwelling limit of $300,000, which is the replacement cost of the house. A thief breaks into the house while Anne and Dave are on vacation and steals the following items: Jewelry $5,000 Sterling silver $4,700 Ignoring any deductible that may apply, how much will Anne and Dave's insurer pay for the loss of the items? Select one: A. $3,000 B. $4,000 C. $5,000 D. $9,700
B. $4,000
Which one of the following is considered real property? Select one: A. An automobile B. A brick storage shed C. Household appliances D. A motorhome
B. A brick storage shed
In the HO-3 policy, the Coverage C limit for personal property usually located at the insured's resident premises is Select one: A. Stated as a dollar amount selected by the insured. B. Calculated as a percentage of the HO-3 Coverage A—Dwelling limit. C. Decreased when replacement cost coverage is chosen. D. Reduced when the insured has one or more alternate residences.
B. Calculated as a percentage of the HO-3 Coverage A—Dwelling limit.
Which one of the following describes the difference between the HO-3 policy and the HO-2 policy? Select one: A. The HO-3 is designed for an owner-occupant of a house. The HO-2 is designed for a tenant-homeowner of an apartment. B. The HO-3 provides coverage for all causes of loss, unless specifically excluded, for Coverages A and B. The HO-2 provides coverage for named perils for Coverages A and B. C. The HO-3 provides Coverage C limits that are 50% of Coverage A. The HO-2 provides Coverage C limits that are 40% of Coverage A. D. The HO-3 is the preferred homeowners policy for homeowners who have had no prior losses. The HO-2 is designed for homeowners who have experienced some losses.
B. The HO-3 provides coverage for all causes of loss, unless specifically excluded, for Coverages A and B. The HO-2 provides coverage for named perils for Coverages A and B.
Jack and Gabriela rent the second floor of a two-family dwelling. They have an unendorsed HO-4 policy with a Coverage C—Personal Property limit of $90,000. Due to a fire on the first floor of the dwelling, Jack and Gabriela were forced to stay in a motel for five nights. The motel costs were $100 a night and they spent $50 a day on meals. They estimate their normal food budget to be $15 a day. There was no damage to the second floor of the dwelling or any of Jack and Gabriela's personal property, so they submitted a claim for $750 to their insurer. How much, if any, will their insurer pay? Select one: A. $0 B. $500 C. $675 D. $750
C. $675 $100/night x 5 days = $500 $50/day x 5 days = $250 (food expense) $15/day x 5 days = $75 (normal food expense) $500 + $250 = $750 $750 - $75 = $675
There are three exclusions in the HO-3 policy that apply only to Coverages A and B in addition to the basic nine exclusions in Section I—Exclusions. These three exclusions are weather, Select one: A. Acts or decisions of any person, group, organization, or governmental body, and intentional loss. B. Ordinance or law, and faulty workmanship. C. Acts or decisions of any person, group, organization, or governmental body, and faulty workmanship. D. Governmental actions, and faulty workmanship.
C. Acts or decisions of any person, group, organization, or governmental body, and faulty workmanship.
The Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money Coverage—Increased Limit endorsement may be appropriate for Select one: A. Insureds who tend to overspend because of credit availability. B. Insureds who use automated teller machines. C. Insureds who hold credit cards. D. Insureds who pay their bills online.
C. Insureds who hold credit cards.
The HO-5 policy is designed to meet the risk management needs of Select one: A. Owners of condominium units. B. Tenants of apartments or dwellings. C. Owner-occupants of dwellings who would like the broadest coverage available among ISO's forms for their property. D. Owner-occupants of dwellings who may not meet insurer underwriting standards required for other policy forms.
C. Owner-occupants of dwellings who would like the broadest coverage available among ISO's forms for their property.
The deductible, which appears on the declarations pages of a homeowners policy, is deducted from Select one: A. All loss payments. B. The total of all losses during the policy period. C. Section I (property) losses. D. Section II (liability) losses.
C. Section I (property) losses.
The Muller family owns a house with a current replacement cost of $250,000. They purchased the house for $275,000. The Mullers have an unendorsed HO-3 policy with a Coverage A limit of $180,000. A fire totally destroys their home. Ignoring any deductible that may apply, how much will the Muller's insurer pay for their destroyed house under the policy? Select one: A. $130,000 B. $162,000 C. $180,000 D. $225,000
D. $225,000
Jill and Tom have a home with a $300,000 replacement cost and an HO-3 policy with a Coverage A limit of $270,000. Lightning strikes the central air conditioning unit and destroys it beyond repair. The unit has a replacement cost of $5,000, is five years old, and has a useful life of 10 years. Ignoring any deductible that might apply, how much will the insurer pay to replace the air conditioning unit? Select one: A. $2,500 B. $3,000 C. $4,500 D. $5,000
D. $5,000
What is the Section I standard deductible in the HO-3 policy? Select one: A. $50 B. $100 C. $250 D. $500
D. $500
Mike and Leona own a single-family home insured to value under an HO-3 policy with a limit of $350,000 for the Coverage A—Dwelling. While they were out to dinner one evening, an electrical fire started in the kitchen, destroying the kitchen and part of their bedroom on the second floor. The fire destroyed the contents of the bedroom and the clothing in their closets, as well as Leona's jewelry valued at $5,000 and a fur coat valued at $2,000. Ignoring any deductible that may apply, how much coverage is provided for the jewelry and fur coat? Select one: A. $1,500 B. $2,000 C. $5,000 D. $7,000
D. $7,000 Since this is a fire loss, the sublimit does not apply and $7,000 is provided for the jewelry and fur coat.
All of the following items are examples of personal property, EXCEPT: Select one: A. A diamond wedding ring B. A set of cookware C. A fishing boat D. A detached garage
D. A detached garage
Doris owns jewelry appraised at $10,000. She would like insurance coverage that will protect her jewelry for its appraised value. Doris also would like broad coverage for her jewelry in case she accidentally loses a piece or a stone falls out of a ring. Assuming that she purchased an HO-3 policy, which one of the following will provide the coverage she wants? Select one: A. An HO-3 with a Supplemental Loss Assessment Coverage endorsement with a $10,000 limit B. An HO-3 with a Scheduled Personal Property endorsement scheduling $9,000 of the jewelry, on top of the $1,000 coverage limit provided by the HO-3 C. The unendorsed HO-3 D. An HO-3 with a Scheduled Personal Property endorsement scheduling all of the jewelry
D. An HO-3 with a Scheduled Personal Property endorsement scheduling all of the jewelry
Which part of Coverage C—Personal Property of the HO-3 policy identifies sublimits for specified types of covered property? Select one: A. Declarations B. Exclusions C. Property Not Covered D. Special Limits of Liability
D. Special Limits of Liability
All of the following items are examples of personal property, EXCEPT: Select one: A. Sports equipment B. Silverware C. A fishing boat D. Underground pipes
D. Underground pipes
Carol has an unendorsed HO-5 policy with adequate limits and a $500 deductible. Carol rented a place at the shore for a week in August. While she was on the beach a sudden rainstorm developed and Carol suffered water damage to her personal property from the rain through a window she had left open. To replace the damaged items it cost her $650. After depreciation the personal property was valued at $450. How much would Carol be able to collect from her insurer? Select one: A. Carol would not collect anything as her policy covers actual cash value less the deductible. B. Carol would collect $450 as her deductible does not apply to off premises claims. C. Carol would not collect anything as the HO-5 does not cover rain damage through open windows. D. Carol would collect $150 as the HO-5 policy is a replacement cost policy.
A. Carol would not collect anything as her policy covers actual cash value less the deductible.
A young working couple is purchasing their first home. Facing budget pressures, they are content to accept named perils coverage on the dwelling in exchange for a lower premium. Assuming there are no mortgage restrictions, which one of the following ISO policy forms would be most appropriate for this couple? Select one: A. HO-2—Broad Form B. HO-6—Unit-Owners Form C. HO-5—Comprehensive Form D. HO-4—Contents Broad Form
A. HO-2—Broad Form
A family rents its vacation home to others for several months each year. A fire caused extensive damage to the home just before the rental season began one year, and the family was unable to collect any rent on the property until it was repaired. This inability to collect rent is an example of which one of the following outcomes of loss? Select one: A. Lost income B. Increased expenses C. Reduction in value of property D. Special damages
A. Lost income
Under the HO-3 policy, a structure that is attached to the dwelling on the insured's residence premises, but only by a fence, utility line, or similar connection is Select one: A. Not considered part of the dwelling, but is a separate structure. B. Considered personal property. C. Not considered to be covered property. D. Considered part of the dwelling.
A. Not considered part of the dwelling, but is a separate structure.
Which one of the following statements regarding assets exposed to loss is true? Select one: A. Real property includes only tangible property. B. Earthquake damage to a swimming pool is an example of a personal property loss exposure. C. Personal property includes only tangible property. D. Hail damage to a motor vehicle is an example of a real property loss exposure.
A. Real property includes only tangible property. All real property is tangible property having a physical form that can be seen or touched. Personal property can include intangible property such as patents or copyrights.
Which one of the following is considered real property? Select one: A. An automobile B. A house C. Furniture D. A motorhome
B. A house
Grayson runs a business from his home. His loss exposures include personal property used in the business and liability for his business activities. Grayson has an HO-3 policy for his home. Which one of the following endorsements will provide coverage for Grayson's business loss exposures? Select one: A. Supplemental Loss Assessment Coverage endorsement B. Home Business Insurance Coverage endorsement C. Personal Property Replacement Cost Loss Settlement endorsement D. Scheduled Personal Property endorsement
B. Home Business Insurance Coverage endorsement
Jack signs a contract to purchase a house. The house has a replacement cost of $250,000 and the land is worth $200,000. In selecting the Coverage A limit for Jack's homeowners policy, he should Select one: A. Not include the value of the land. The value of the land should be included in his Coverage B limit. B. Not include the value of the land. Land at the residence premises is specifically excluded for property coverage. C. Include the value of the land, plus an extra 25%. D. Include the value of the land.
B. Not include the value of the land. Land at the residence premises is specifically excluded for property coverage.
Under the HO-3 policy, Coverage B—Other Structures applies to structures Select one: A. On the residence premises and more than 100 feet from the dwelling. B. On the residence premises that are not attached to the dwelling and are separated from the dwelling by clear space. C. On the residence premises and attached to the residence premises by permanent structures. D. Not on the residence premises but owned by the insured.
B. On the residence premises that are not attached to the dwelling and are separated from the dwelling by clear space.
After a loss covered by a homeowners policy, an insured may find that repairs must be made under a newer, stricter building code. An endorsement that provides increased coverage for such a situation is the Select one: A. Supplemental Loss Assessment Coverage endorsement. B. Ordinance or Law—Increased Amount of Coverage endorsement. C. Change in Code endorsement. D. Loss Contingency endorsement.
B. Ordinance or Law—Increased Amount of Coverage endorsement.
Under the HO-3 policy Section I—Conditions, the Abandonment of Property Condition Select one: A. Establishes how the amount to be paid for a property loss will be determined. B. Provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it. C. Outlines a method for resolving disagreements between the insured and the insurer. D. States that the insurer will adjust all losses with the insured or the insured's spouse, if a resident in same household.
B. Provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it.
Property insurance coverage on dwellings and other structures covering all causes of loss not specifically excluded is known as Select one: A. Functional replacement cost coverage. B. Special form coverage. C. Replacement cost coverage. D. Named perils coverage.
B. Special form coverage.
Which one of the following statements concerning the Scheduled Personal Property Endorsement is true? Select one: A. The Section I deductible applies to scheduled items. B. The Coverage C special limits do not apply to scheduled items. C. Cameras cannot be scheduled under the endorsement. D. The endorsement covers fewer causes of loss than does the HO-3 policy.
B. The Coverage C special limits do not apply to scheduled items.
Which one of the following statements about the HO-2 policy and HO-3 policy is correct? Select one: A. The HO-2's Section I—Perils Insured Against is the same as that in the HO-3. B. The HO-2's Section I—Perils Insured Against is different from the HO-3. C. Both the HO-2 and HO-3 provide special form coverage for Coverages A, B, and C. D. Both the HO-2 and HO-3 provide named perils coverage for Coverages A, B, and C.
B. The HO-2's Section I—Perils Insured Against is different from the HO-3.
Under the HO-3 policy, which one of the following correctly describes the property covered under Section I, Coverage A—Dwelling? Select one: A. The dwelling on the "residence premises" on the declarations and land on which the dwelling is located B. The dwelling on the "residence premises" on the declarations, including structures attached to the dwelling and materials and supplies located on or next to the dwelling used to construct or repair the dwelling C. The dwelling on the "residence premises" on the declarations, not including structures attached to the dwelling D. The dwelling on the "residence premises" on the declarations, including structures attached to the dwelling and personal property owned or used by an "insured" while it is anywhere in the world
B. The dwelling on the "residence premises" on the declarations, including structures attached to the dwelling and materials and supplies located on or next to the dwelling used to construct or repair the dwelling
Sam and Sophia insure their house with an unendorsed HO-3 policy. Sam stores a small fishing boat and trailer behind the house. While they are out for the evening, a fire destroys most of their kitchen and completely destroys the boat and trailer. Assuming Sam's boat and trailer are valued at $4,000 and ignoring any deductible that may apply, what amount will their HO-3 insurer pay for the loss of the boat and trailer? Select one: A. $0 B. $1,000 C. $1,500 D. $4,000
C. $1,500
Jack insures his house with an unendorsed HO-3 policy with a Coverage A—Dwelling limit of $250,000, which is the replacement cost of the house. A thief breaks into the house while Jack is on vacation and steals his gun collection valued at $7,500. Ignoring any deductible that may apply, how much, if any, will Jack's HO-3 insurer pay for the loss to the guns? Select one: A. $0 B. $1,500 C. $2,500 D. $7,500
C. $2,500
Jim and Elana own a single-family home insured to value under an unendorsed HO-3 policy with a limit of $350,000 for the Coverage A—Dwelling. Jim has an extensive gun collection valued at $15,000. A thief breaks into their home while they are away on vacation and steals the complete gun collection. Ignoring any deductible that may apply, the HO-3 insurer will pay Select one: A. $0. B. $1,000. C. $2,500. D. $15,000.
C. $2,500.
Bert and Maggie insure their house with an unendorsed HO-3 policy with a Coverage A—Dwelling limit of $300,000, which is the replacement cost of the house. A fire destroys their detached garage. The cost to replace the garage is $35,000. Ignoring any deductible that may apply, how much will Bert and Maggie's insurer pay to replace the detached garage? Select one: A. $20,000 B. $25,000 C. $30,000 D. $35,000
C. $30,000 Coverage for other structures is automatically provided under the HO-3 with a limit that is 10% of the limit for Coverage A. This 10% limit applies collectively to all "other structures" at the residence premises.
Bob and Martha have an unendorsed HO-3 policy. They purchased a new home and leased furniture for the living room and dining room. The furniture leasing company asked to be added as an additional insured for the leased furniture. If they incur a covered loss to the leased property, a claim draft would likely be payable to Select one: A. The loss payee only. B. Neither the named insured nor the loss payee. C. Both the named insured and the loss payee. D. The named insured only.
C. Both the named insured and the loss payee.
All of the following are true regarding the HO-6 policy, EXCEPT: Select one: A. Coverage C—Personal Property in the HO-6 is written for a limit selected by the insured. B. The definition of the residence premises refers to a "unit." C. Coverage B—Other Structures is included in the HO-6 subject to a basic limit. D. Coverage A—Dwelling is included in the HO-6 policy subject to a basic limit.
C. Coverage B—Other Structures is included in the HO-6 subject to a basic limit.
The HO-8 policy contains a special building valuation clause that specifies that damage will be covered on a Select one: A. Historical cost basis. B. Replacement cost basis. C. Functional replacement cost basis. D. Actual cash value basis.
C. Functional replacement cost basis.
Jim and Sue, a young married couple, are under contract to purchase a condominium unit. Which one of the following ISO policy forms is best designed to meet their homeowners insurance needs? Select one: A. HO-2—Broad Form B. HO-4—Contents Broad Form C. HO-6—Unit-Owners Form D. HO-8—Modified Coverage Form
C. HO-6—Unit-Owners Form
Jim purchased an HO-3 policy with a $270,000 Coverage A—Dwelling limit. Unaware that Jim had purchased a policy, his wife Sue Ellen also purchased an HO-3, with a $330,000 Coverage A—Dwelling limit. A fire destroys the couple's home, which has a $300,000 replacement cost. How will the two insurers share the loss? Select one: A. Jim's insurer will pay $270,000; Sue Ellen's insurer will pay $30,000 B. Jim's insurer will pay $150,000; Sue Ellen's insurer will pay $150,000 C. Jim's insurer will pay $135,000; Sue Ellen's insurer will pay $165,000 D. Jim's insurer will pay $165,000; Sue Ellen's insurer will pay $135,000
C. Jim's insurer will pay $135,000; Sue Ellen's insurer will pay $165,000
Javiera owns a vacation home insured by an HO-3 policy. In order to save money, Javiera shut off the heat in the winter months, during which time she lived elsewhere. Javiera neglected to drain the water pipes. The pipes froze and burst, and when the weather warmed, the house flooded. Which one of the following statements is true? Select one: A. The damage is covered because the HO-3 covers all water damage to an insured dwelling. B. The damage is covered because water damage is considered "direct physical loss to property described in Coverage A. C. The damage is not covered because Javiera failed to take reasonable precautions against freezing. D. The damage is not covered because the HO-3 excludes coverage for water damage.
C. The damage is not covered because Javiera failed to take reasonable precautions against freezing.
Alfred has an unendorsed HO-3 policy. After a severe fire loss to Alfred's house, an investigation proved that Alfred intentionally set the fire. Alfred was jailed for arson, and his property claim was denied. Which one of the following describes the rights granted by Alfred's HO-3 to the mortgagee? Select one: A. The mortgagee will collect the full amount of the claim if it joins with the insurer in prosecuting Alfred. B. The mortgagee will not collect any amount of the claim because the loss was a fraudulent act. C. The mortgagee will collect the amount of its insurable interest in the property. D. The mortgagee will collect the full amount of the claim.
C. The mortgagee will collect the amount of its insurable interest in the property.
Which one of the following is an insured peril under Coverage C of an unendorsed HO-3 policy? Select one: A. Damage to the outside awning from the weight of snow and ice B. Damage to china and crystal from earthquake tremors C. Damage to the kitchen table from the ceiling fan that fell on it D. Damage to furniture from sudden release of soot from the furnace
D. Damage to furniture from sudden release of soot from the furnace
Under the HO-3 policy, which one of the following excludes coverage for property seized by law enforcement officials investigating a crime? Select one: A. Intentional loss B. Ordinance or law C. Acts or decisions D. Governmental action
D. Governmental action
Sue and Rich are under contract to purchase a historic home in a city where local property values, including the value of the historic home, are far below replacement cost. Which one of the following ISO homeowners policies would likely be most suitable for Sue and Rich? Select one: A. HO-2—Broad Form B. HO-4—Contents Broad Form C. HO-6—Unit-Owners Form D. HO-8—Modified Coverage Form
D. HO-8—Modified Coverage Form
The Personal Injury endorsement to a homeowners policy adds an additional liability insuring agreement expanding the homeowners policy to cover personal injury, which includes all of the following, EXCEPT: Select one: A. Publishing oral or written material involving libel, slander, or invasion of privacy B. False arrest, detention, or imprisonment C. Malicious prosecution D. Intentionally publishing material known to be false
D. Intentionally publishing material known to be false
Which one of the following statements regarding assets exposed to loss is true? Select one: A. Real property includes intangible property. B. Earthquake damage to a swimming pool is an example of a personal property exposure. C. Personal property includes only tangible property. D. Lightning damage to a tree is an example of a real property loss exposure.
D. Lightning damage to a tree is an example of a real property loss exposure.
Which one of the following best explains why an HO-2 policy has a slightly lower premium than an HO-3 policy with similar limits? Select one: A. The HO-2 covers only the named insured and resident relatives for specific causes of loss. B. There is no coverage for other structures under the HO-2. C. Recovery under the HO-2 is on an actual cash value basis rather than on replacement cost basis for buildings. D. The HO-2 covers the dwelling building and other structures against fewer causes of loss.
D. The HO-2 covers the dwelling building and other structures against fewer causes of loss.
All of the following statements about the HO-5 policy are correct, EXCEPT: Select one: A. The HO-5 special limits for jewelry and furs apply to items that are lost. B. The HO-5 generally covers personal property damaged by rain through an open window even if the building itself is not damaged. C. The HO-5 covers water damage for personal property away from a premises owned by an insured. D. The HO-5 does not contain an intentional loss exclusion.
D. The HO-5 does not contain an intentional loss exclusion.
Under Section I—Additional Coverages of an HO-3 policy, which one of the following statements is true when an insurer reimburses an insured for reasonable costs to protect a property from further damage when it is damaged by a covered cause of loss? Select one: A. The coverage for expenses incurred increases the limit of coverage that applies to the covered property. B. The deductible stated on the declarations page does not apply. C. The costs of materials would be paid as part of the loss under Coverage C. D. The coverage for expenses incurred does not increase the limit of coverage that applies to the covered property.
D. The coverage for expenses incurred does not increase the limit of coverage that applies to the covered property.
