HomeOwners Policy
What is the minimum amount of coverage that should be carried on an HO-2 on a home that was purchased four years ago for $75,000, which today has a replacement value of $100,000? A $80,000 B $100,000 C $60,000 D $75,000
A $80,000 Correct! A homeowner, at the time of loss, must be insured for at least 80% of replacement cost in order to collect the full replacement cost of a partial loss.
Chapter: Homeowners Policy Which of the following best describes liberalization clause in a policy? A Changes adopted by the insurer that broaden coverage automatically apply to the policy at no additional premium. B The insurer is relieved of its contractual obligations to the insured. C The insured may assign the policy to any person without their written consent. D The policy cannot be cancelled.
A Changes adopted by the insurer that broaden coverage automatically apply to the policy at no additional premium. Correct! Liberalization clause states that if the insurer adopts any changes that broaden coverage in the policy, those changes will automatically apply to the policy at no additional premium as of the date the insurer implements the change in the insured's state, provided that this implementation date falls within 60 days prior to or during the policy period stated in the declarations.
Elaborate homes and those with detailed designs or decorative architecture with replacement costs greater than ACV or market value are insured on A HO-8. B HO-8 with an inflation guard endorsement. C HO-3. D HO-3 with an HO-15 endorsement.
A HO-8. Correct! HO-8 is used to insure houses with replacement cost more than market value and those built with irreplaceable materials. It is a modified HO-1 and provides ACV coverage for Coverage A.
Which of the following liability coverages must be added by endorsement to a homeowners policy in order to apply? A Personal injury B Bodily injury C Property damage liability D Medical payments to others
A Personal injury Correct! Personal injury applies only if added by endorsement and an additional premium is paid.
Chapter: Homeowners Policy Limited fungi, wet or dry rot, or bacteria endorsement in HO policies applies to A Property and liability losses B Specified losses C Property losses only D Liability losses only
A Property and liability losses Correct! Limited fungi, wet or dry rot, or bacteria coverage is an endorsement that may be used to add special limits for losses caused by fungi, dry and wet rot, and bacteria. This endorsement applies to both property and liability losses.
All of the following people would be considered insureds under the liability section of a homeowners policy, EXCEPT A The 22-year-old niece of the insured, who is visiting. B A 15-year-old foster child residing in the premises. C The mother of the insured who is residing in the household. D The legal representative of a deceased insured.
A The 22-year-old niece of the insured, who is visiting. Correct! Relatives, any age, are considered insureds only if they are residents of the household.
Which of the following would NOT be considered part of the insured location under the liability section of a homeowners policy? A Vacant farmland owned by the insured B A residence where an insured is temporarily residing C A family cemetery plot D A lakeside cabin rented by the insured for vacation
A Vacant farmland owned by the insured correct! Farm property specifically is excluded from coverage.
The insured's home is covered by an HO-3. Two years ago, the insured bought the home for $58,000. Today, its replacement value is $60,000. How much Coverage A does the insured need to qualify for replacement cost coverage? A $46,400 B $48,000 C $58,000 D $60,000
B $48,000 Correct! A house must be insured for at least 80% of its value on the date of loss to qualify for replacement coverage. In this example, 80% of $60,000 is $48,000.
An optional coverage endorsement to the homeowners policy that covers scheduled residential structures on the insured's premises that are rented to others is called A Residential endorsements. B Additional residence rental provision. C Other structures - increased limits. D Modified residence provision.
B Additional residence rental provision. Correct! The additional residence rental provision is an optional coverage endorsement to the homeowners policy that covers scheduled residential structures on the insured's premises that are rented to others. It modifies the liability exclusions to extend liability coverage to the rented residence.
Which of the following risks would NOT be eligible for coverage under a homeowners policy? A An applicant who owns and lives in a single-family dwelling that also contains incidental business activities B An applicant who owns and lives on a commercial farm C An applicant who lives in a duplex that she does not own D An applicant who owns and lives in a duplex
B An applicant who owns and lives on a commercial farm correct! Risks that contain a farming exposure are not eligible for homeowners insurance.
If a loss occurs, the insured with a homeowners policy is required to do the following EXCEPT A Protect the property from further damage, and keep records of any repair expenses. B Arrange for an appraisal by an unbiased third party. C Provide the insurer with prompt notice of the loss. D Notify the police if a loss is caused by theft.
B Arrange for an appraisal by an unbiased third party. Correct! The appraisal system would be used only if there is a disagreement as to the size of loss. Then, each side picks an appraiser, and the appraiser selects the unbiased third party.
Chapter: Homeowners Policy Which one of the following statements regarding coverage for the flood and earthquake perils is true? A Flood insurance is usually provided in property policies; earthquake insurance, however, is available by endorsement only. B Both are excluded perils in all property policies. C Flood and earthquake coverage is available in all policies. D Flood and earthquake coverage is available only through the government.
B Both are excluded perils in all property policies. correct! Flood and earthquake are both excluded perils in all property policies; however, coverage for both or either one can usually be purchased separately for an additional premium (by endorsement).
Under the HO-4 and HO-6 homeowners policy forms, property is insured against A Comprehensive form perils. B Broad form perils. C Basic form perils. D Special form perils.
B Broad form perils. Correct! HO-4 and HO-6 provide the same level of coverage as Coverage C in the HO-2 and HO-3.
Under the HO-4 and HO-6 homeowners policy forms, property is insured against A Comprehensive form perils. B Broad form perils. C Basic form perils. D Special form perils.
B Broad form perils. correct! HO-4 and HO-6 provide the same level of coverage as Coverage C in the HO-2 and HO-3.
Which of the following examples of losses paid under an HO-3 also would be paid under an HO-2 homeowners policy? A Interior damage caused by water seeping under the shingles on the roof B Damage to the dwelling caused by ash or dust from a volcanic eruption C Damage to the dwelling caused by the insured when moving furniture D Accidental scorching caused when a hot iron is placed upon a built-in counter top
B Damage to the dwelling caused by ash or dust from a volcanic eruption Correct! An HO-3 covers losses on an open peril basis. An HO-2 covers losses on a named peril basis. Both forms cover damage to the dwelling caused by ash or dust from a volcanic eruption.
A common extension of property insurance coverage that goes beyond the coverage for fire and lightning is known as A Seasonal increases. B Extended coverage. C Vandalism and malicious mischief coverage. D Basic coverage.
B Extended coverage. Correct! A common extension of property insurance coverage that goes beyond the coverage for fire and lightning is called extended coverage. This coverage extends insurance against losses by perils such as windstorm, hail, riots and strike related civil unrest, aircraft damage, vehicle damage, and smoke damage. In the past, EC was written as an endorsement, but in recent years has been added to many forms as either optional coverage or as part of the minimum coverage provided by the policy.
Chapter: Homeowners Policy A common extension of property insurance coverage that goes beyond the coverage for fire and lightning is known as A Seasonal increases. B Extended coverage. C Vandalism and malicious mischief coverage. D Basic coverage.
B Extended coverage. Correct! A common extension of property insurance coverage that goes beyond the coverage for fire and lightning is called extended coverage. This coverage extends insurance against losses by perils such as windstorm, hail, riots and strike related civil unrest, aircraft damage, vehicle damage, and smoke damage. In the past, EC was written as an endorsement, but in recent years has been added to many forms as either optional coverage or as part of the minimum coverage provided by the policy.
Which of the following homeowners forms is designed to provide named peril coverage for personal property to individuals who rent an apartment? A HO-3 B HO-4 C HO-6 D HO-2
B HO-4 Correct! An HO-4 does not provide insurance under Coverages A and B because the insured does not have an insurable interest in the structure.
Which of the following homeowners policies covers those who rent their dwelling? A HO-2 B HO-4 C HO-6 D HO-1
B HO-4 Correct! The personal property of a tenant is covered by the HO-4 policy.
Chapter: Homeowners Policy The Homeowners watercraft endorsement would automatically cover which of the following? A Outboard motor boats with 30 hp B Inboard motor boat with 35 hp C Outboard motor boat with 50 hp D Sailing boat that is 40 feet long
B Inboard motor boat with 35 hp correct! The Homeowners form provides coverage for the following personal watercraft: outboard motor boats under 25 hp, inboard motor boats up to 50 hp, and sailing boats under 26 feet.
Which of the following would NOT be considered an insured under a homeowners policy? A An individual, under 21, in the care of but not related to the insured B Individuals named in the policy declarations C A divorced spouse living in another state D Residents of the household that are blood relatives of the insured
B Individuals named in the policy declarations CA divorced spouse living in another state Correct! Insureds are defined in the policy as the named insured and spouse, if a resident of the same household and persons related to the named insured by blood or marriage who are residents of the household, as well as persons under age 21, not related to the insured, but in the care of the insured.
Which of the following homeowners endorsements increases its limits each year by a selected percentage? A Scheduled personal property B Inflation guard C Permitted incidental occupancies D Personal property replacement cost
B Inflation guard Correct! The inflation guard endorsement is used to help maintain insurance to value requirements for replacement cost coverage. With this endorsement, the limit of insurance on the dwelling automatically increases each year by a selected percentage. This endorsement is not needed on actual cash value policies.
Chapter: Homeowners Policy Which of the following types of property would be covered in any of the homeowners coverage forms? A Animals, birds or fish B Landlord furnishings in an on-premises apartment C Structures used for business purposes D Structures rented to others who are not tenants of the dwelling, other than a garage
B Landlord furnishings in an on-premises apartment Correct! Landlord furnishings in an on-premises apartment are covered for up to $2,500.
Following the holiday season, an insured decides to store his decorations in the attic for the summer. While moving the decorations, he accidentally drops a heavy box that crashes through the ceiling and damages a table and lamp in the dining room causing $1,000 of damage to them. His HO 00 03 will pay A The market value of the damaged property. B Nothing. C $1,000. D $1,000 less the deductible.
B Nothing. Correct! The peril "falling objects" does not include loss to property contained in a building unless the roof or an outside wall of the building is first damaged by a falling object. Damage to the falling object is not included.
Chapter: Homeowners Policy The limited fungi, wet or dry rot, or bacteria coverage endorsement applies to which type of losses? A Liability and personal articles B Property and liability C Personal effects and liability D Property and personal injury
B Property and liability Correct! This endorsement applies to both property and liability losses.
Question 2 of 12 Chapter: Homeowners Policy Which of the following perils is covered by the HO-2 and HO-3? A War B Sudden and accidental rupture of a heating system C Loss due to power interruption that occurs off the premises D Flood
B Sudden and accidental rupture of a heating system correct! Off-premises power failure, flood, and war are excluded from all DP and HO policies.
An apartment occupant's personal property would be insured under which homeowners form? A Unit-owners form (HO-6) B Tenant broad form (HO-4) C Comprehensive form (HO-5) D Broad form (HO-2)
B Tenant broad form (HO-4) Correct! The HO-4 form (tenant broad form) is for the apartment dweller. It covers what the insured owns, their contents, and has no coverage for the apartment.
Chapter: Homeowners Policy An apartment occupant's personal property would be insured under which homeowners form? A Unit-owners form (HO-6) B Tenant broad form (HO-4) C Comprehensive form (HO-5) D Broad form (HO-2)
B Tenant broad form (HO-4) Correct! The HO-4 form (tenant broad form) is for the apartment dweller. It covers what the insured owns, their contents, and has no coverage for the apartment.
Who is covered by an HO-4 policy? A Owners of a home B Tenants C Owners of a vehicle D Owners of a condominium
B Tenants Correct! The HO-4 is a tenant broad form that may not be issued to an owner-occupant.
All of the following people would be considered insureds under the liability section of a homeowners policy, EXCEPT A The legal representative of a deceased insured. B The 22-year-old niece of the insured, who is visiting. C A 15-year-old foster child residing in the premises. D The mother of the insured who is residing in the household.
B The 22-year-old niece of the insured, who is visiting. Correct! Relatives, any age, are considered insureds only if they are residents of the household.
Chapter: Homeowners Policy The personal injury liability endorsement to an HO policy applies to all the following EXCEPT A Invasion of privacy. B False arrest. C A third party breaks a leg when the insured knocks him down. D Slander.
C A third party breaks a leg when the insured knocks him down. Correct! The broken leg is covered by personal liability coverage.
Chapter: Homeowners Policy An optional coverage endorsement to the homeowners policy that covers scheduled residential structures on the insured's premises that are rented to others is called A Modified residence provision. B Residential endorsements. C Additional residence rental provision. D Other structures - increased limits.
C Additional residence rental provision. correct! The additional residence rental provision is an optional coverage endorsement to the homeowners policy that covers scheduled residential structures on the insured's premises that are rented to others. It modifies the liability exclusions to extend liability coverage to the rented residence.
Which one of the following statements regarding coverage for the flood and earthquake perils is true? A Flood and earthquake coverage is available only through the government. B Flood insurance is usually provided in property policies; earthquake insurance, however, is available by endorsement only. C Both are excluded perils in all property policies. D Flood and earthquake coverage is available in all policies.
C Both are excluded perils in all property policies. correct! Flood and earthquake are both excluded perils in all property policies; however, coverage for both or either one can usually be purchased separately for an additional premium (by endorsement).
Under the HO-4 and HO-6 homeowners policy forms, property is insured against A Special form perils. B Comprehensive form perils. C Broad form perils. D Basic form perils.
C Broad form perils. Correct! HO-4 and HO-6 provide the same level of coverage as Coverage C in the HO-2 and HO-3.
Which of the following homeowners forms is designed for individuals that own and reside in a condominium? A HO-3 B HO-4 C HO-6 D HO-2
C HO-6 Correct! HO-6 is designed specifically to cover the exposure of a condominium.
How does the mobilehome endorsement affect the other coverage of law or ordinance in a homeowners policy? A It limits the coverage B It has no effect on this coverage C It removes the coverage D It broadens the coverage
C It removes the coverage correct! The mobilehome endorsement makes the other coverage of law or ordinance inapplicable to the policy.
Following the holiday season, an insured decides to store his decorations in the attic for the summer. While moving the decorations, he accidentally drops a heavy box that crashes through the ceiling and damages a table and lamp in the dining room causing $1,000 of damage to them. His HO 00 03 will pay A $1,000 less the deductible. B The market value of the damaged property. C Nothing. D $1,000.
C Nothing. correct! The peril "falling objects" does not include loss to property contained in a building unless the roof or an outside wall of the building is first damaged by a falling object. Damage to the falling object is not included.
Chapter: Homeowners Policy Which of the following liability coverages must be added by endorsement to a homeowners policy in order to apply? A Property damage liability B Medical payments to others C Personal injury D Bodily injury
C Personal injury correct! Personal injury applies only if added by endorsement and an additional premium is paid.
Which of the following liability coverages must be added by endorsement to a homeowners policy in order to apply? A Property damage liability B Medical payments to others C Personal injury D Bodily injury
C Personal injury correct! Personal injury applies only if added by endorsement and an additional premium is paid.
Which of the following endorsements is used to insure Coverage C (personal property) for values beyond the limitations of the homeowners policy? A Blue skies endorsement B Personal property injury endorsement C Scheduled personal property endorsement D Personal property replacement cost endorsement
C Scheduled personal property endorsement correct! Items that are scheduled and insured under a scheduled personal property endorsement are covered on a valued basis.
The contents coverage on a homeowners policy would pay how much after the loss of one of a pair of golden candlesticks? A The actual cash value of the pair B Nothing C The difference in the actual cash value as a pair and as a single D The replacement cost of the pair
C The difference in the actual cash value as a pair and as a single Correct! According to the pair or set clause, the insurer may elect to restore the set to its value before the loss, or pay the difference between the actual cash value of the property before and after the loss.
Losses that result from the freezing of a plumbing system while the dwelling is vacant would be EXCLUDED under a homeowners policy UNLESS AThe insured purchased the water damage endorsement. BThe insured had drained the plumbing system. CThe insured purchased special form coverage. DThe dwelling had been vacant for no more than 90 days.
Correct! The insured would need to have made reasonable efforts to maintain heat in the insured building or have drained the plumbing system.
An insured decides to store some heavy boxes in the attic. While moving them around, he accidentally drops a heavy box that crashes through the ceiling, causing $1,000 of damage. The insured's HO-3 policy form will pay A $500. B $1,000. C $500 minus the deductible. D $1,000 minus the deductible.
D $1,000 minus the deductible. Correct! Because the HO-3 covers structures on an open peril basis, the insurance company would pay $1,000 minus any deductible the insured must pay.
The dwelling insured on HO-2, HO-3, or HO-5 forms is covered for replacement, provided that it is insured for at least what percentage of replacement cost on the date of loss? A 25% B 40% C 75% D 80%
D 80% Correct! HO-2, -3, and -5 provide replacement cost coverage if the house is insured for at least 80% of its value on the date of the loss.
The personal injury liability endorsement to an HO policy applies to all the following EXCEPT A Slander. B Invasion of privacy. C False arrest. D A third party breaks a leg when the insured knocks him down.
D A third party breaks a leg when the insured knocks him down. correct! The broken leg is covered by personal liability coverage.
The insured with a homeowners policy has had damage to his property caused by a volcano. Which of the following is true? A None of the damage is covered. B All eruptions are considered separate occurrences no matter how close together. C Coverage for each volcanic eruption would require a separate deductible. D All volcanic eruptions within a 72-hour period will be considered one occurrence.
D All volcanic eruptions within a 72-hour period will be considered one occurrence. correct! All volcanic eruptions that occur within a 72-hour period will be considered one event.
Chapter: Homeowners Policy Which of the following risks would NOT be eligible for coverage under a homeowners policy? A An applicant who lives in a duplex that she does not own B An applicant who owns and lives in a duplex C An applicant who owns and lives in a single-family dwelling that also contains incidental business activities D An applicant who owns and lives on a commercial farm
D An applicant who owns and lives on a commercial farm correct! Risks that contain a farming exposure are not eligible for homeowners insurance.
Chapter: Homeowners Policy The difference in the contents coverage on an HO-3 and HO-5 is which of the following? A Contents are covered open peril on HO-3, and named peril on HO-5. B Contents are covered for replacement cost on HO-5, and ACV on HO-3. C Contents are covered for replacement cost on HO-3, and ACV on HO-5. D Contents are covered open peril on HO-5, and named peril on HO-3.
D Contents are covered open peril on HO-5, and named peril on HO-3. Correct! HO-5 provides open peril coverage for contents; HO-3 is named peril coverage for contents. Replacement cost coverage is available only by endorsement to either form.
Chapter: Homeowners Policy Because an insured owns a lot of expensive jewelry, her insurance agent has advised her to purchase a scheduled personal property endorsement. If the insured adds this endorsement to her homeowners policy, which of the following statements would be correct? A The amount of coverage will be doubled. B The endorsement becomes excess coverage. C The endorsement becomes primary coverage, and the HO contract is secondary. D Coverage C limits will no longer apply to the jewelry insured by the endorsement.
D Coverage C limits will no longer apply to the jewelry insured by the endorsement. correct! When items are scheduled, they are excluded from Coverage C as insured items, and are covered only under the scheduled personal property endorsement.
Which of the following examples of losses paid under an HO-3 also would be paid under an HO-2 homeowners policy? A Damage to the dwelling caused by the insured when moving furniture B Accidental scorching caused when a hot iron is placed upon a built-in counter top C Interior damage caused by water seeping under the shingles on the roof D Damage to the dwelling caused by lava or dust from a volcanic eruption
D Damage to the dwelling caused by lava or dust from a volcanic eruption correct! An HO-3 covers losses on an open peril basis. An HO-2 covers losses on a named peril basis. Both forms cover damage to the dwelling caused by lava or dust from a volcanic eruption.
An insured has a personal property replacement cost endorsement under her homeowners policy. If an expensive painting and an antique chair are stolen from the insured's home, what will the insured receive on the claim under that endorsement? A 70% of the replacement cost B 80% of the replacement cost C 100% of the actual cash value D Nothing
D Nothing Correct! The personal property replacement cost endorsement excludes property such as art and antiques.
An insured has a personal property replacement cost endorsement under her homeowners policy. If an expensive painting and an antique chair are stolen from the insured's home, what will the insured receive on the claim under that endorsement? A 70% of the replacement cost B 80% of the replacement cost C 100% of the actual cash value D Nothing
D Nothing correct! The personal property replacement cost endorsement excludes property such as art and antiques.
Chapter: Homeowners Policy An insured has a personal property replacement cost endorsement under her homeowners policy. If an expensive painting and an antique chair are stolen from the insured's home, what will the insured receive on the claim under that endorsement? A 70% of the replacement cost B 80% of the replacement cost C 100% of the actual cash value D Nothing
D Nothing correct! The personal property replacement cost endorsement excludes property such as art and antiques.
Chapter: Homeowners Policy A home is insured under an HO-2 policy. The homeowner decides to replace the roof on the house. He wasn't able to complete the roof in one day and left a portion of it unfinished overnight. A heavy rainstorm caused $20,000 of damage to the interior of the house and some furniture. In this situation, the policy will pay A The ACV of the damage. B Replacement cost of the damage. C 80% of replacement cost. D Nothing.
D Nothing. Correct! HO-2 is a named peril policy and rain is not a covered peril. It would pay for the damage caused by rain, if the hole was caused by a covered peril (wind or hail).
A home is insured under an HO-2 policy. The homeowner decides to replace the roof on the house. He wasn't able to complete the roof in one day and left a portion of it unfinished overnight. A heavy rainstorm caused $20,000 of damage to the interior of the house and some furniture. In this situation, the policy will pay A The ACV of the damage. B Replacement cost of the damage. C 80% of replacement cost. D Nothing.
D Nothing. correct! HO-2 is a named peril policy and rain is not a covered peril. It would pay for the damage caused by rain, if the hole was caused by a covered peril (wind or hail).
Proud homeowners, Sally and Fred, built an elaborate gazebo in their backyard. It was a major investment but one they gladly made since they are famous for their backyard parties. Sally and Fred's homeowners policy only coverages a fraction of the actual cost of the gazebo. What additional endorsement might Sally and Fred purchase to increase the limits of coverage on this structure? A Residential entertaining increases B Additional residential coverage C Guaranteed replacement on structures coverage D Other structures - increased limits
D Other structures - increased limits correct! Structures such as fences, tool sheds, and benches are usually covered by a 10% limit from your standard policy. However, this dollar limit may not always be adequate for larger or more elaborate structures such as gazebos, stables, and out buildings. Other Structures coverage increases the limit to help cover costs in case of loss.
If the insured owns a watch valued at $10,000, full coverage can be provided on a homeowners policy by purchasing the A Special limits of liability endorsement. B Personal property replacement cost endorsement. C Blanket personal property endorsement. D Scheduled personal property endorsement.
D Scheduled personal property endorsement. Correct! Scheduled personal property endorsement would provide all-risk coverage without the limitations for theft that are found in Coverage C. The amount of coverage purchased is usually based upon a recent appraisal, or the purchase price if newly purchased.
Losses that result from the freezing of a plumbing system while the dwelling is vacant would be EXCLUDED under a homeowners policy UNLESS A The insured purchased special form coverage. B The dwelling had been vacant for no more than 90 days. C The insured purchased the water damage endorsement. D The insured had drained the plumbing system.
DThe insured had drained the plumbing system. correct! The insured would need to have made reasonable efforts to maintain heat in the insured building or have drained the plumbing system.
