Unit 6 Dwelling Insurance
An explosion damaged he wall of the insured's garage. The insured paid to have the wall boarded up to protect the garage and the belongings in the garage from additional damage. Which other coverage would apply in this situation? A) Reasonable repairs B) Debris removal C) Other structures D) Improvements, alterations, and additions
A) Reasonable repairs The insured paid to protect the rest of the garage and his belongings from being damaged. In this case, he will most likely be reimbursed by the insurance company
Which of the following is NOT automatically covered by DP-1 A) Water B) Fire C) Lightning D) Internal Explosion
A) Water
All of the following could be covered under a dwelling policy EXCEPT A) a six-unit apartment building B) a home rented to another person C) a permanently located mobile home D) a townhouse
A) a six-unit apartment building To be eligible, an apartment building may not contain more than 4 units.
Coverage E in the dwelling policy provides coverage for
A) additional living expense
Dwelling policies insure only property and do not automatically contain liability insurance. For this reason dwelling policies are called A) monoline policies B) single line policies C) property only policies D) casualty policies
A) monoline policies
All of the following statements are true regarding an insured's duties to the insurer after a loss to an insured dwelling EXCEPT: A) the damaged property must be appraised. B) the insured must furnish proof of loss. C) undamaged property must be protected from further loss. D) the insurance company must be notified of the loss.
A) the damaged property must be appraised. The property needs to be appraised only if the insured and the insurer cannot agree on the amount or value of the loss. The conditions section of the policy spells out, in detail, both the insurer's and the insured's rights and duties. If the insured does not comply with these conditions, the insurer may be released from its obligation to pay for a loss.
The greatest difference between the dwelling basic form (DP-1) and the broad form (DP-2) is that the DP-2 automatically includes coverage for: A) vandalism and malicious mischief (VMM). B) fire and lightning. C) flood. D) earthquake.
A) vandalism and malicious mischief (VMM). he DP-1 basic form includes only fire, lightning, and internal explosion. Other coverages must be added by endorsement. Flood and earthquake are excluded on all DP forms.
Dwelling policies exclude losses from all of the following EXCEPT A) war B) vandalism C) intentional losses D) earthquakes
B) vandalism
Which of the following dwellings is NOT eligible for coverage under a dwelling policy? A) A rental property B) A home under construction C) A two-family home D) A farm
D) A farm
Which of the following statements about dwelling policies is CORRECT? A) Theft can be covered under an unendorsed dwelling policy. B) Liability coverage is automatically included in a dwelling policy. C) The building must be occupied to be insured. D) They may be used to insure rental homes.
D) They may be used to insure rental homes. Theft and liability coverage must be added to the policy by endorsement. Homes that are under construction (i.e., vacant) are eligible for dwelling coverage.
An insured lives in a house covered by an $80,000 special form (DP-3) policy. While the insured is on vacation, someone breaks into the house and steals $5,000 in electronic equipment. The damage to the door is estimated at $800. What coverage is provided by the DP-3 policy? A) $800 B) $0.00 C) $5,000 D) $5,800
A) $800 Theft coverage is not automatically included in dwelling policies; however, damage by burglars is included under the Vandalism and Malicious Mischief peril.
Brad has a dwelling policy with broad theft coverage for on and off of his premise. Which of he following theft losses would be covered? A) A $1,000 ring that was received as a gift B) A $500 money order that was sent in the mail C) A CD player removed from the dashboard of his car D) A credit card taken from his desk at home
A) A $1,000 ring that was received as a gift Property while it is in the mail, credit cards, and motor vehicles are not covered under the broad theft coverage endorsement. Jewelry is covered up to $1,500.
Which dwelling form pays losses to dwellings and other structures on an actual cash value basis? A) DP-1 B) DP-2 C) DP-3 D) All of these
A) DP-1 DP-2 and DP-3 pay losses to dwellings on a replacement cost basis
Wilson owns a 4-family apartment building. Which dwelling form(s) would provide coverage against building damage caused by the freezing of plumbing, heating, air conditioning, and sprinkler systems? A) DP-2 and DP-3. B) DP-1. C) DP-1 and DP-2. D) DP-3 only.
A) DP-2 and DP-3. Both the DP-2 and DP-3 would cover freezing of plumbing, heating, air conditioning, and sprinkler systems.
An insured has an unendorsed $50,000 special form (DP-3) dwelling policy. The insured's dog bites a child, and the parents sue the insured for $500 for the child's medical bills, $1,000 for rabies shots, and $5,000 for pain and suffering. How much will the policy pay? A) $500 B) $0 C) $6,500 D) $1,500
B) $0 The insured has no coverage because the policy is unendorsed and liability coverage is not automatically included in dwelling policies.
The policy minimum limit for Coverage L - personal liability is A) $1,000 per person B) $50,000 C) $100,000 D) $200,000
C) $100,000
Which of the following coverages are included in all dwelling forms? A) Collapse B) Trees, Shrubs, and other plants C) Debris removal D) Glass
C) Debris removal The other 3 listed are in DP-2 and DP-3, but not DP-1.
Which of the following is NOT a requirement of a dwelling policy? A) Not required to be owner occupied B) Covers hunting cabins in rural areas C) Required to be owner occupied D) Covers rental homes
C) Required to be owner occupied
All of the following perils are covered under the DP-2 Broad Form EXCEPT: A) freezing of pipes. B) loss caused by fireplace smoke. C) earthquake. D) falling objects.
C) earthquake. Damage caused by earth movement is not covered under any of the dwelling forms.
The following perils may be insured against under a basic dwelling policy EXCEPT: A) lightning. B) vandalism and malicious mischief. C) flood. D) fire.
C) flood. Water damage, including flooding, is not a covered peril under a dwelling policy. Fire and lightning are covered perils on the basic form, and vandalism and malicious mischief is available for an additional premium.
Which of the following items of personal property would be covered under a dwelling policy? A) A pet B) A motorcycle C) A motorized boat D) A pool table
D) A pool table
All of the following statements regarding other coverages under the Basic Form (DP-1) are true EXCEPT A) rental value provides 20% of the Coverage A limit B) other structures provides up to 10% of the Coverage A limit C) the fire department service charge pays up to $500 D) other coverages are included for an additional premium
D) other coverages are included for an additional premium
Which of the following statements about the dwelling basic form (DP-1) is CORRECT? A) The policy is designed to provide broad coverage for personal property. B) The DP-1 provides coverage for appurtenant structures. C) The DP-1 is an open-perils policy. D) The policy covers fire, lightning, and all types of explosion.
B) The DP-1 provides coverage for appurtenant structures. The policy provides coverage for appurtenant (other) structures. The DP-1 policy is a named perils policy that provides coverage only for perils specifically named in the policy: fire, lightning, and internal explosion.
The limit of liability under the dwelling under construction endorsement is provisional. If a loss occurs, the amount paid will be based on the: A) completion date. B) face amount of the policy. C) value of the partially completed home D) actual amount of the loss.
C) The limit of liability is based on the value of the partially completed house because the risk exposure becomes greater as construction continues.
An insured has a $60,000 special form (DP-3). When a covered loss in the amount of $10,000 damages the attached garage, how much of that amount is paid under the Coverage B-Other Structures? A) $6,000 B) $10,000 C) $0.00 D) $1,000
C) $0.00 The attached garage is considered part of the dwelling so the $10,000 is paid under Coverage A-Dwelling. Real property located on the described property and separated from the dwelling by clear space is covered by Coverage B-Other Structures.
An insured purchased a dwelling policy with $40,000 of coverage. The insured also purchased an automatic increase in insurance endorsement that increases the face amount of the policy by 4% each year. If the insured suffers a total loss during the third year that the policy is in effect? A) $41,600 B) $40,000 C) $43,264 D) $44,995
C) $43,264 The calculations for this particular question are as follows: 1st year of coverage = $40,000; 2nd year of coverage= $41,600 ($40,000 x 4%); 3rd year of coverage= $43,264 ($41,600 x 4%).
The dwelling policy will provide how much additional coverage for a fire department service charge? A) $250 B) $750 C) $500 D) $1,000
C) $500
Trees, shrubs, and other plants are included in coverages in DP-2 and DP-3; however, the policy will not pay more than A) $100 for any one tree, shrub, or plant B) $250 for any one tree, shrub or plant C) $500 for any one tree, shrub, or plant D) $1,000 for any one tree, shrub, or plant
C) $500 for any one tree, shrub, or plant
In DP-1, property removed to protect it from a basic peril is covered for 5 days. In DP-2 and DP-3, property removed is covered for A) 10 days B) 20 days C) 30 days D) 45 days
C) 30 days
The loss payment condition states that the insurance company has how many days to pay for a loss after reaching an agreement with the insured? A) 30 B) 45 C) 60 D) 90
C) 60
After a blizzard, the roof of the insured's home collapsed due to the weight of the snow. This would be covered under which form? A) DP-1 B) Basic C) DP-2 D) Named peril
C) DP-2
A DP-2 policy would cover losses from all of the following perils EXCEPT: A) weight of ice, snow or sleet. B) damage by burglars. C) infestation of insects. D) falling objects.
C) infestation of insects. The DP-2 is a named-perils policy, meaning that only those perils specifically listed are covered. Infestation of insects is not a listed peril.
The DP-3 provides A) basic coverage for the dwelling and broad coverage for personal property B) broad coverage for the dwelling and basic coverage for the personal property C) open peril coverage for the dwelling and broad coverage for personal property D) open peril coverage for both the dwelling and personal property
C) open peril coverage for the dwelling and broad coverage for personal property DP-3 is also called the Special Form. It provides named peril coverage for personal property and open peril coverage for the dwelling and other structures.
A property owner wants to insure both the rental property and any of the tenant's belongings if they are stolen. Which policy would you recommend and why? A) DP-1 basic form because the property owner needs only named peril coverage. B) DP-2 broad form because it automatically provides the extended coverage endorsement (ECE). C) DP-3 special form because it includes coverage for personal property. D) DP-3 special form and a separate tenant's policy to cover personal property.
D) DP-3 special form and a separate tenant's policy to cover personal property.
Damage to covered property caused by glass breakage is A) covered in all dwelling forms B) excluded in all dwelling forms C) covered in DP-1 D) covered in DP-2 and DP-3
D) covered in DP-2 and DP-3 The glass or safety glass material coverage pays for breakage of glass or safety glazing material ad damage to covered property caused by glass breakage.
An insured has a $70,000 dwelling policy (DP-1 basic) with a $500 deductible. While the insured is on vacation, burglars enter the house and steal several items. The total loss is estimated to be $5,000. How much of that loss will be paid under the policy? A) $5,500 B) $0.00 C) $4,500 D) $5,000
B) $0.00 The DP-1 basic is a named peril policy that provides coverage only if a loss is caused by one of the perils specifically named or identified in the policy. If a peril is not listed, it is not covered. The DP-1 basic covers only fire, lightning, and internal explosion. Burglary is not listed as a named peril and is not covered.
The Johnson family home is covered by DP-3. When a fire destroys the home, they are forced to live in a hotel for 2 months. What coverage would reimburse them for the hotel, dining, laundry, and transportation expenses during these 2 months? A) Coverage L B) Coverage E C) Coverage M D) Coverage C
B) Coverage E DP-2 and DP-3 include coverage E- additional living expense.
The special form (DP-3) covers the dwelling and other structures for: A) broad form perils only. B) extended coverage perils. C) open perils D) named perils only.
C) open perils The DP-3, the special form, is an open-perils policy. This type of insurance pays for all losses to the insured property except for losses specifically excluded in the policy. The open-perils policy contrasts with the named-peril policy, which covers only the losses spelled out in the policy.
An insured has an $80,000 dwelling policy with a $500 deductible. In addition to the house, the property includes a detached garage, storage shed, and an artist's studio. During a thunderstorm, the garage and storage shed are damaged by lightning. The loss is $3,000 to the garage and $1,000 to the shed. What amount is covered by the policy? A) $4,000 B) $3,500 C) $0 D) $3,000
B) $3,500 Coverage B--Other Structures provides coverage for real property located on the described location and separated from the dwelling by clear space. Up to 10% of Coverage A (in this case $8,000) is included for other structures. Lightning is a covered peril so the policy would pay $3,500 (the $4,000 loss less the $500 deductible).
How does the dwelling policy provide theft coverage? A) It is automatically included in the policy B) It must be added by endorsement C) It is included in the DP-3 only. D) It is only included In the DP-2 and DP-3
B) It must be added by endorsement
Which of the following would NOT be covered under Coverage A or Coverage B of the dwelling policy? A) A garage connected to the property by a fence B) A storage shed 50 feet behind the insured's dwelling C) A garage that is attached to the dwelling with a common wall D) A detached garage used for commercial purposes
D) A detached garage used for commercial purposes A detached garage used for commercial, manufacturing, or farming purposes may not be covered under a dwelling policy.
An insured has a dwelling Broad Form on her home with a replacement value of $100,000. How much insurance should the insured carry to obtain replacement cost coverage for the partial losses to the dwelling? A) $50,000 B) $80,000 C) $100,000 D) $180,000
B) $80,000 DP-2 and DP-3 settle losses to personal property at actual cash value. Partial losses to the dwelling are paid on a replacement cost basis as long as the insured carries insurance equal to 80% of the full replacement cost.
An insured suffers a covered loss to some rental property that forces the tenant to move to another location. Under which section of the dwelling policy would the insured receive payment during the time the property is being repaired? A) Coverage E--Additional Living Expense. B) Coverage D--Fair Rental Value. C) Coverage A--Dwelling. D) Coverage B--Other Structures.
B) Coverage D--Fair Rental Value. Coverage D--Fair Rental Value is the amount payable to an insured homeowner for loss of rental income due to damage that makes the premises uninhabitable. Payment is made for the shortest time required to repair or replace the part of the rental location.
Which form provides open peril coverage on the dwelling and other structures, insuring against risks of direct physical loss that are not specifically excluded in the policy? A) Broad Form B) Special Form C) Basic Form D) Premium Form
B) Special Form
An insured has $40,000 Dwelling Special Form (DP-3) policy. After hosting an afternoon party, the insured discovers that the family's credit cards are missing. If the cards are used, what coverage is provided under Coverage C - Personal Property, and why? A) $4,000. Coverage C provides up to 10% of the dwelling amount for loss of personal property B) $20,000. Coverage C provides up to 50% of the dwelling amount for loss of personal property C) $0. Coverage C provides insurance only for the insured's personal property. D) $0. Coverage C excludes coverage for credit cards.
D) $0. Coverage C excludes coverage for credit cards. The Dwelling Forms exclude coverage for accounts, bank notes, bills, coins, securities, animals, aircraft, motor vehicles and equipment, watercraft, and data.
In the broad theft coverage endorsement, what is the limit of liability for jewelry, watches, furs, and precious and semiprecious stones? A) $1,000 B) $1,500 C) $5,000 D) $10,000
B) $1,500
A dwelling policy can be used to insure all of the following EXCEPT: A) duplexes. B) lake cabins. C) apartment building with 6 units. D) rental homes.
C) apartment building with 6 units. A dwelling policy may be used to insure a building with up to four apartments.
Of the Dwelling Forms, which one of the following provides the broadest coverage? A) Special B) Standard C) Specific D) Premier
A) Special It can open perils coverage for buildings and related structures and named perils coverage for personal property.
Damage caused by burglars is excluded under which of the dwelling forms? A) Basic Form. B) Broad Form. C) Special Form. D) All forms exclude damage caused by burglars.
A) Basic Form. The Basic Form is the most restrictive of the three dwelling forms. The only perils insured against are fire, lightning, and internal explosion. Burglary, vandalism, and mischief are not listed as covered perils.
Coverage B in a dwelling policy provides coverage for A) the dwelling B) other structures C) personal property D) fair rental value
B) other structures
Which one of the following types of property CANNOT be covered by a dwelling policy? A) Row houses. B) 3 apartment dwellings. C) Farm dwellings. D) Mobile homes on permanent foundations.
C) Farm dwellings. They must be insured under the farm program policy
Under Coverage M - medical payments to others, the insurer will pay all necessary medical expenses incurred within A) 90 days after the accident B) 180 days after the accident C) 1 year after the accident D) 3 years after the accident
D) 3 years after the accident
In the Dwelling Forms, damage from vandalism is not covered if the building has been vacant for more than: A) 14 consecutive days. B) 30 consecutive days. C) 90 consecutive days. D) 60 consecutive days.
D) 60 consecutive days.
