Finance Quiz 8
Betty's personal property is insured for $100,000 under her Homeowners 3 policy. If she usually keeps some personal property at a mountain cabin that she owns, how much coverage for this property is available under her homeowners policy? A) $10,000 B) $20,000 C) $40,000 D) $50,000
A) $10,000
Which of the following statements regarding Section II coverage under the Homeowners 3 policy is true? A) Medical payments to others are covered regardless of whether the insured is legally liable. B) Legal defense costs incurred by the insurer to defend the insured reduce the per-occurrence limit of liability available. C) The insurer is not required to defend the insured against a groundless, false, or fraudulent lawsuit. D) Any amount paid under medical payments coverage reduces the personal liability limit available for the same claim.
A) Medical payments to others are covered regardless of whether the insured is legally liable.
Section I of the Homeowners 3 policy provides coverage for which of the following? A) loss of use B) personal liability C) disability of the homeowner D) medical payments
A) loss of use
One additional coverage under the homeowners policy makes available up to 10 percent of the Coverage A limit to cover increased repair costs after a loss in order to comply with a stricter building code. This additional coverage is called A) ordinance or law. B) reasonable repairs. C) concurrent causation. D) debris removal.
A) ordinance or law
The major difference between the dwelling coverage (Part A) of the Homeowners 2 (Broad From) policy and the Homeowners 3 (Special Form) policy is that A) the HO-3 provides open perils ("all risks") coverage and the HO-2 provides named-perils coverage. B) the HO-3 provides actual cash value coverage, the HO-2 provides replacement cost coverage. C) the HO-3 is always written without a deductible, the HO-2 always written with a deductible. D) the HO-3 can be used for any type of construction, the HO-2 is limited to wood frame homes.
A) the HO-3 provides open perils ("all risks") coverage and the HO-2 provides named-perils coverage.
All of the following situations are excluded from coverage under Section II of the homeowners policy EXCEPT A) the rental of a spare bedroom which is used by the tenant as an office. B) the use of a rented airplane to take a vacation. C) the ownership of a ten-unit apartment house as an investment. D) the performance of professional services by the insured at the residence premises.
A) the rental of a spare bedroom which is used by the tenant as an office.
Darla purchased an unendorsed Homeowners 3 policy. While the policy was in force, a fire occurred that destroyed a living room set. The living room set cost $4,000 new, but was 25 percent depreciated when the loss occurred. Replacement furniture will cost $4,400. Assuming no deductible, how much will Darla receive from her insurer? A) $3,000 B) $3,300 C) $3,400 D) $4,400
B) $3,300
All of the following statements about the cancellation of a Homeowners 3 policy are true EXCEPT A) The insurer may cancel a new policy for any reason if it has been in force for less than 60 days and is not a renewal policy. B) At least 100 days' notice of cancellation must be given if an insurer cancels a policy for nonpayment of premium. C) A policy written for longer than 1 year can be cancelled for any reason on the anniversary date by giving the insured at least 30 days' notice of cancellation. D) After a policy has been in force for at least 60 days, it can be cancelled by the insurer if the risk has increased substantially since the policy was issued.
B) At least 100 days' notice of cancellation must be given if an insurer cancels a policy for nonpayment of premium.
Which of the following statements concerning the coverage of collapse of the dwelling under an unendorsed Homeowners 3 policy is true? A) There is no coverage for collapse, regardless of the cause of the collapse. B) Collapse is covered if it is caused by one of the Coverage C perils. C) If collapse is caused by an earthquake, the loss is covered. D) There is no coverage for collapse unless the proper endorsement is added to the policy.
B) Collapse is covered if it is caused by one of the Coverage C perils.
Which of the following statements about the personal liability coverage (Coverage E) of an unendorsed homeowners policy is true? A) Coverage is written on an accident basis. B) Coverage is provided for bodily injury liability. C) Coverage is provided for business and professional liability. D) Coverage is provided for personal injury liability.
B) Coverage is provided for bodily injury liability.
Which homeowners policy is designed for the tenants of a rented premises? A) Homeowners 2 B) Homeowners 4 C) Homeowners 6 D) Homeowners 8
B) Homeowners 4
Which of the following statements regarding watercraft liability under Section II of an unendorsed HO-3 policy is (are) true? I. No coverage is available for watercraft liability. II. Liability arising out of the use of watercraft that are under certain length and horsepower limits is covered. A) I only B) II only C) both I and II D) neither I nor II
B) II only
Which statement regarding Section II of an unendoresed homeowners 3 policy is true? A) Liability arising from intentional property damage caused by the insured's teenager is covered. B) Liability arising out of a home business is not covered. C) Medical expenses for the insured's injured child are covered. D) First-aid expenses for injuries suffered by guest at the home are not covered.
B) Liability arising out of a home business is not covered.
Polly purchased a Homeowners 3 policy. She has a swing set in the backyard of her home. While her son and the neighbor's child were using the swing set, it collapsed. Both of the children required medical care. Which of the following statements is true? A) The medical expenses Polly's son are covered under the policy. B) The medical expenses of the neighbor's child are covered under the policy. C) If Polly's son sues Polly and wins, the insurer will pay the damage award. D) If the neighbor sues Polly, Polly must pay for the lawyer who defends the suit.
B) The medical expenses of the neighbor's child are covered under the policy.
A dwelling with a replacement cost of $150,000 was insured under a Homeowners 3 policy for $100,000 at the time the roof was destroyed by a windstorm. The actual cash value of the loss was $9,000, but it will cost $12,000 to replace the roof. Ignoring any deductible, what will the insurer pay to settle this loss? A) $8,000 B) $9,000 C) $10,000 D) $12,000
C) $10,000
David has a Homeowners 3 policy that provides $280,000 of insurance on his dwelling, which has a current replacement value of $400,000. Ignoring any deductible, how much will David collect if a roof with a replacement value of $16,000 but an actual cash value of $10,000 is destroyed in a fire? A) $10,000 B) $12,000 C) $14,000 D) $16,000
C) $14,000
Which of the following statements about Coverage E: Personal Liability under the homeowners 3 policy is true? A) Losses attributable to personal injury are covered. B) The liability limit stated in the policy is an aggregate limit for the policy period. C) The insured must be legally liable for insurer to pay damages. D) Bodily injury liability only applies to injuries that occur at the insured dwelling.
C) The insured must be legally liable for insurer to pay damages.
Which of the following statements regarding Section II conditions under the homeowners policy is true? A) Other insurance is handled on a pro rata basis. B) Under no circumstances may the insured bring a lawsuit against the insurer. C) The liability limit is the same regardless of the number of persons injured in a covered occurrence. D) There is no requirement for the insured to submit written notification of a possible claim to the insurer.
C) The liability limit is the same regardless of the number of persons injured in a covered occurrence.
Which of the following statements about the personal property coverage (Coverage C) of the Homeowners 3 policy is (are) true? I. There are special limits of liability that apply to certain types of personal property. II. The full amount of coverage applies only if the property is permanently located at any residence of the insured. A) I only B) II only C) both I and II D) neither I nor II
C) both I and II
The purpose of the appraisal clause in the Homeowners 3 policy is to A) determine the appropriate amount of homeowners insurance to purchase. B) set a value on the home for estate purposes if the homeowner dies. C) settle valuation disputes between the insurer and insured after a loss has occurred. D) determine a mortgage lender's insurable interest after a loss has occurred.
C) settle valuation disputes between the insurer and insured after a loss has occurred.
Liability arising out of which of the following is covered under the personal injury endorsement to the homeowners policy? A) bodily injury B) property damage C) slander D) professional liability
C) slander
Shauna purchased a condominium unit. Which homeowners policy is specially designed for condominium unit owners? A) HO-2 B) HO-3 C) HO-4 D) HO-6
D) HO-6
Jose and Maria would like "open-perils" coverage on their home and their personal property. Which unendorsed homeowners form provides this coverage? A) Homeowners 2 B) Homeowners 3 C) Homeowners 4 D) Homeowners 5
D) Homeowners 5
Which of the following statements is true regarding the Homeowners 3 policy and identity theft? A) Identity theft is covered under Coverage D—Loss of Use. B) Identity theft is covered under Coverage C—Personal Property. C) Identity theft is covered under Coverage E—Personal Liability. D) Identity theft is covered by adding an endorsement.
D) Identity theft is covered by adding an endorsement.
All of the following statements about conditions under a Homeowners 3 policy are true EXCEPT A) If an insurer broadens coverage without an additional premium during the policy period, the broadened coverage applies immediately to the present policy. B) A waiver or change in any policy provision must be approved in writing by the insurer to be valid. C) The insurer must give written consent for an assignment of the policy to be valid. D) If the named insured dies, coverage automatically ceases with respect to any property of the deceased.
D) If the named insured dies, coverage automatically ceases with respect to any property of the deceased.
Glenda insured her home for its full replacement cost under an unendorsed Homeowners 3 policy. Which of the following statements is true? A) The dwelling and other structures are covered on a named-perils basis. B) Losses to personal property are settled on a replacement cost basis. C) The personal property is covered on an open-perils basis. D) Losses to the dwelling and other structures are settled on a replacement cost basis.
D) Losses to the dwelling and other structures are settled on a replacement cost basis.
Which of the following statements regarding the Coverage E limit in the homeowners policy is true? A) It is an aggregate limit, and once the amount paid for one or more claims reaches the limit, no additional coverage is provided. B) The limit applies only if a court orders the insured to pay—there is no coverage for settlements reached out-of-court. C) Any legal defense costs incurred by the insurer are counted against the limit of liability. D) The limit applies on a per-occurrence basis to bodily injury and property damage liability.
D) The limit applies on a per-occurrence basis to bodily injury and property damage liability
The concurrent causation exclusion in the Homeowners 3 policy specifies that: A) if two or more perils jointly cause a loss, there is no coverage if one of the perils is excluded. B) if the insured has two or more policies in force at the time of the loss, the loss is not covered. C) if the insured has two or more policies in force at the time of the loss, the loss is pro-rated between the insurers. D) if two or more perils jointly cause a loss, there is coverage as long as one of the perils is covered.
A) if two or more perils jointly cause a loss, there is no coverage if one of the perils is excluded.
All of the following are duties of the mortgagee under the standard mortgage clause EXCEPT A) to reimburse the insurer for any loss payments. B) to notify the insurer of any change in ownership of the property of which the mortgagee is aware. C) to provide a proof of loss form if the insured fails to do so. D) to pay the premium if the insured fails to do so.
A) to reimburse the insurer for any loss payments.
Which of the following statements about the replacement cost provision of the Homeowners 3 policy is true? A) It applies to personal property losses only. B) Except for small losses, the insured must repair or replace the damaged property in order to receive full replacement cost. C) The insured is required to carry an amount of insurance equal to 100 percent of the replacement value of the insured property. D) Loss settlements are equal to 50 percent of the value of the loss if the insured is carrying less than the required amount of insurance.
B) Except for small losses, the insured must repair or replace the damaged property in order to receive full replacement cost.
A credit-based score that is highly predictive of future claims cost is an individual's A) CLUE score. B) insurance score. C) motor vehicle record score. D) underwriting score.
B) insurance score.
Cal is renting an apartment. Which homeowners policy is specially designed to insure renters? A) HO-2 B) HO-3 C) HO-4 D) HO-6
C) HO-4
Tom is planning to build a home. He is weighing many factors, including construction materials, location, and other considerations. Which of the following statements is true with regard to homeowners insurance and Tom's new home? A) The higher the construction costs are in the area, the lower Tom's homeowners insurance premiums will be. B) The lower the homeowners deductible selected, the lower the premium will be. C) Older homes cost more to insure than newer homes. D) A wood frame home costs less to insure than a brick home.
C) Older homes cost more to insure than newer homes
If the insurer broadens coverage during the policy period without an increase in premium, and the broadened coverage is not part of a general program revision, the insured is entitled to the broadened coverage under which policy provision? A) waiver of policy provisions B) subrogation C) liberalization clause D) pair or set clause
C) liberalization clause
Which of the following statements about the Homeowners 8 policy is (are) true? I. Losses to the dwelling are settled on a replacement cost basis if the dwelling is insured for its full market value. II. It is designed primarily for expensive, newer, dwellings. A) I only B) II only C) both I and II D) neither I nor II
D) neither I nor II
Which of the following statements about the personal property replacement cost endorsement used with the homeowners policy is (are) true? I. The damaged or destroyed property must be repaired or replaced, no matter the size of the loss. II. It is designed primarily for antiques and fine art. A) I only B) II only C) both I and II D) neither I nor II
D) neither I nor II
Under the Homeowners 3 policy, all of the following are options of the insurer for settling claims EXCEPT A) paying the claim in cash. B) replacing the property. C) repairing the property. D) paying the claim with insurance company stock.
D) paying the claim with insurance company stock.
Following catastrophic hurricane losses, South Coast Insurance Company changed its deductible provision. Rather than using a specified dollar value, $250 for example; the dollar value of the deductible increases with the size of the loss. The type of deductible that South Coast changed to is called a(n) A) calendar-year deductible. B) aggregate deductible. C) straight deductible. D) percentage deductible.
D) percentage deductible
All of the following are endorsements that can be added to an ISO Homeowners 3 policy EXCEPT: A) personal property replacement cost endorsement. B) scheduled personal property endorsement. C) earthquake endorsement. D) personal liability endorsement.
D) personal liability endorsement.
Which of the following statements about an earthquake endorsement for a homeowners policy is (are) true? I. The endorsement also covers landslides and volcanic eruptions. II. The coverage for earthquakes is written without a deductible. A) I only B) II only C) both I and II D) neither I nor II
A) I only
Which of the following statements about endorsements to the homeowners policy is (are) true? I. The purpose of the inflation guard endorsement is to help prevent home owners from being under-insured. II. The purpose of the watercraft endorsement is to provide coverage for watercraft when they are used outside the United States. A) I only B) II only C) both I and II D) neither I nor II
A) I only
Which of the following statements concerning the scheduled personal property endorsement with agreed value loss settlement is (are) true? I. The endorsement provides open-perils ("all-risks") coverage on the scheduled property. II. Losses under the endorsement are settled on an actual cash value basis. A) I only B) II only C) both I and II D) neither I nor II
A) I only
Which of the following statements is (are) true concerning the home business insurance coverage endorsement? I. It increases the coverage on business personal property at the insured residence from $2,500 to the Coverage C limit. II. It excludes coverage for liability arising out of the home business. A) I only B) II only C) both I and II D) neither I nor II
A) I only
Which of the following statements about coverage for loss of use (Coverage D) under the Homeowners 3 policy is true? A) If a covered loss makes the home unfit for living, the insurer pays additional living expenses the insured may incur as a result of the loss. B) The duration of payments for additional living expenses is limited to a maximum of 30 days. C) There is no coverage for loss of rent if an insured peril makes the part of the premises rented to others uninhabitable. D) There is coverage for loss of business income if an insured peril forces a home business to be terminated.
A) If a covered loss makes the home unfit for living, the insurer pays additional living expenses the insured may incur as a result of the loss.
Which of the following statements about the Homeowners 6 (unit-owners form) policy is true? A) It includes personal liability coverage. B) It covers personal property on an open-perils basis. C) It covers the dwelling on an open-perils basis. D) It is designed for tenants who rent an apartment or a home.
A) It includes personal liability coverage.
Which of the following statements about the coverage for other structures (Coverage B) under the Homeowners 3 policy is true? A) The coverage applies to a detached garage or tool shed on the residence premises. B) Structures attached to the dwelling by a fence or utility line are considered to be part of the dwelling rather than other structures. C) Coverage applies even if the other structure is used for business purposes. D) There is no coverage for a private garage if it is rented to a tenant of the dwelling.
A) The coverage applies to a detached garage or tool shed on the residence premises.
Which of the following losses would be covered under Section II of an unendorsed Homeowners 3 policy? A) The homeowner accidentally dropped a bowling ball, injuring another bowler's foot. B) The homeowner's nanny was injured on her day off while hiking at a state park. C) The insured slandered a city council member at a city council meeting. D) The homeowner's dog bit the homeowner's daughter.
A) The homeowner accidentally dropped a bowling ball, injuring another bowler's foot.
Which of the following statements about covered perils under the personal property coverage (Coverage C) of the Homeowners 3 policy is true? A) Theft losses to boats and watercraft are covered only if they occur at the insured's residence. B) Damage from an explosion is covered only if the explosion is the result of fire or lightning. C) Property damage from vehicles is covered only if it is caused by the insured. D) Smoke damage is covered only if it arises from agricultural or industrial operations.
A) Theft losses to boats and watercraft are covered only if they occur at the insured's residence.
Which of the following statements about the additional coverages under Section I of the Homeowners 3 policy is true? A) There is coverage for the reasonable cost incurred to protect property from further damage after a covered loss occurs. B) There is unlimited coverage for furnishings of the landlord in an apartment on the premises that is rented to others. C) Property removed from the premises because it is endangered by an insured peril is covered on a named-perils basis while it is outside the insured premises. D) There is no coverage for the increased cost of construction or repair to comply with an ordinance or law.
A) There is coverage for the reasonable cost incurred to protect property from further damage after a covered loss occurs.
Section II of the homeowners policy has exclusions applying to all of the following EXCEPT A) activities of the named insured's minor children. B) business activities. C) transmission of a communicable disease. D) intentional injuries.
A) activities of the named insured's minor children.
Which of the following statements about the appraisal clause in the Homeowners 3 policy is (are) true? I. It is used to determine a value for personal property when the policy is issued. II. It is used to help settle disputes over the amount of a loss after a loss has occurred. A) I only B) II only C) both I and II D) neither I nor II
B) II only
Which of the following statements about the insurer's obligation to provide a legal defense under the personal liability coverage (Coverage E) of the homeowners policy is (are) true? I. The insurer agrees to defend the insured only if the suit is not groundless, false, or fraudulent. II. The insurer's obligation to defend the insured ceases after the amount paid for damages from an occurrence equals the policy limit. A) I only B) II only C) both I and II D) neither I nor II
B) II only
Which of the following statements about the scheduled personal property endorsement to the homeowners policy is (are) true? I. It provides named-perils coverage on scheduled items. II. It can be used to insure valuable items such as jewelry, silverware, and coin collections. A) I only B) II only C) both I and II D) neither I nor II
B) II only
Which of the following statements is (are) true concerning the use of an individual's credit history as an insurance rating factor? I. Individuals with poor credit histories, as a group, generally file fewer homeowners claims than do individuals with good credit histories. II. A poor credit history can be improved over time, allowing for the purchase of homeowners insurance at a lower premium. A) I only B) II only C) both I and II D) neither I nor II
B) II only
Which of the following statements is (are) true regarding how the Homeowners 3 policy handles the peril of collapse? I. Collapse is specifically excluded, and there are no exceptions to the exclusion. II. Collapse that is caused by a Coverage C peril is covered. A) I only B) II only C) both I and II D) neither I nor II
B) II only
Which of the following statements concerning coverage under the Homeowners 3 policy is true? A) If a power failure away from the insured dwelling causes a loss, the loss is covered. B) If a Coverage C peril causes a collapse, the resulting damage is covered. C) If an insured peril damages a portion of a pair or set (e.g. matching lamps or end tables), the insurer must pay the full value of the entire pair or set. D) If a discharge from a home appliance causes the home to flood, the loss is excluded.
B) If a Coverage C peril causes a collapse, the resulting damage is covered.
Which of the following is a general exclusion under Section I of the Homeowners 3 policy? A) Water damage caused by accidental discharge from a household appliance. B) Losses due to the failure of the insured to use all reasonable means to save and preserve property after the time of a loss. C) Losses resulting from a power failure caused by an insured peril at the residence premises. D) Losses due to a windstorm.
B) Losses due to the failure of the insured to use all reasonable means to save and preserve property after the time of a loss.
Which of the following statements about the coverage for medical payments to others (Coverage F) under the homeowners policy is true? A) Medical payments may be made for any resident of the named insured's household. B) Medical expenses incurred within 3 years of an accident are covered. C) Medical payments are made only if the insured is not legally liable. D) Covered medical expenses are limited to emergency room charges.
B) Medical expenses incurred within 3 years of an accident are covered.
Which of the following statements about the additional coverage for damage to property of others in Section II of the homeowners policy is true? A) The maximum amount of coverage is $25,000 per occurrence. B) Payments are made on the basis of the replacement cost of the damaged property. C) There is coverage for property damage arising out of a business engaged in on a full-time basis by an insured. D) There is coverage for intentional property damage by any insured who is a teenager.
B) Payments are made on the basis of the replacement cost of the damaged property.
Which of the following statements about covered perils and loss settlement under an unendorsed Homeowners 3 policy is true? A) The dwelling is covered on a named-perils basis. B) Personal property losses are settled on an actual cash value basis. C) Losses to the dwelling are always settled on an actual cash value basis. D) Personal property is covered on an open-perils basis.
B) Personal property losses are settled on an actual cash value basis.
Michelle had four matching end tables in her home. A fire damaged the home, destroying two of the end tables. Michelle's home was covered by an unendorsed Homeowners 3 policy. Which of the following is true with regard to the settlement for the end tables in this case? A) Loss to a pair or set is excluded under the policy. B) The insurer will pay the difference in actual cash value of the property before and after the loss. C) The insurer will pay the replacement cost of the loss. D) If a partial loss to a pair or set occurs, the insurer is liable for replacement of the entire pair or set.
B) The insurer will pay the difference in actual cash value of the property before and after the loss.
All of the following losses are excluded from coverage under Section II of an unendorsed Homeowners 3 policy EXCEPT A) Phyllis, a medical technician, misread a lab test and the patient is suing her. B) While using his canoe, Bert hit another canoe. The other canoe sank. Bert is being sued. C) Violet runs a for-profit daycare service in her home. The parents of a child injured while in Violet's care are suing Violet. D) The homeowner's son was injured when he fell off a swing in the homeowner's yard.
B) While using his canoe, Bert hit another canoe. The other canoe sank. Bert is being sued.
Which of the following property is covered under the personal property coverage (Coverage C) of the Homeowners 3 policy? A) a pet dog owned by the named insured B) a bicycle owned by a foster child living with the named insured C) a motor vehicle owned by the named insured D) a stamp collection insured under a separate policy
B) a bicycle owned by a foster child living with the named insured
Ellen believes the value of the loss to her home is $30,000. The insurer has offered $18,000 to settle the loss. If Ellen and the insurer cannot agree on the value of the loss, which homeowners policy provision specifies how this dispute will be settled? A) insurer's option B) appraisal clause C) loss payment clause D) mortgage clause
B) appraisal clause
All of the following are exclusions in the homeowners policy that apply to medical payments to others (Coverage F) EXCEPT A) bodily injury resulting from nuclear radiation. B) bodily injury to persons who are social guests at the insured location. C) bodily injury to persons eligible to receive workers compensation benefits. D) bodily injury to residents of the household who are in the care of an insured.
B) bodily injury to persons who are social guests at the insured location.
Which of the following is an additional coverage provided under Section I of the Homeowners 3 policy? A) medical payments to others B) debris removal C) personal liability D) intentional property damage caused by an insured
B) debris removal
One of the "Tips for Buying a Homeowners Policy" is to consider purchasing a personal umbrella policy. What coverage is provided by a personal umbrella policy? A) blanket property coverage for any damage caused by water B) excess liability coverage and coverage for some liability claims excluded by underlying policies C) all-risk, replacement cost, property coverage D) coverage for business and professional liability
B) excess liability coverage and coverage for some liability claims excluded by underlying policies
Liability arising out of which of the following is covered under the personal injury endorsement to the homeowners policy? A) property damage liability B) false arrest C) bodily injury D) business liability
B) false arrest
Which of the following situations is covered under Section II of an unendorsed homeowners policy? A) injuries which occur at a park resulting from a motorcycle owned by the insured B) injuries resulting from an auto not subject to registration because it is in dead storage C) injuries resulting from an auto rented by the insured while on a vacation. D) injuries resulting from a trailer being pulled by the insured's auto
B) injuries resulting from an auto not subject to registration because it is in dead storage
Which of the following losses would be covered under the personal liability coverage (Coverage E) of an unendorsed Homeowners 3 policy? A) liability arising out of the manufacture and sale of illegal narcotics B) liability arising out of damage to a neighbor's property that occurred over time C) liability arising out of a business operated in the home. D) liability arising out of bodily injury to an insured
B) liability arising out of damage to a neighbor's property that occurred over time
Linda wants to purchase a homeowners policy. She has some valuable personal property to which internal policy limits apply. Her agent said that she could obtain coverage under her homeowners policy by attaching a list of this valuable property with specific amounts of insurance. Such a listing is called a(n) A) binder. B) schedule. C) application. D) warranty.
B) schedule
All of the following are covered under the dwelling coverage (Coverage A) of the Homeowners 3 policy EXCEPT A) any structure attached to the dwelling. B) the land on which the insured dwelling is located. C) materials and supplies intended for alteration or repair of the dwelling. D) materials and supplies intended for construction of a detached garage.
B) the land on which the insured dwelling is located.
If there is a conflict between state law and a provision in a homeowners policy, A) the policy wording takes precedence. B) the state law takes precedence. C) the policyholder is entitled to whichever provides broader coverage. D) the policy is null and void.
B) the state law takes precedence
Liability arising out of which of the following is covered under Coverage E of an unendorsed Homeowners 3 policy? A) use of the insured's auto on a public road B) use of the insured's golf cart at a golf course C) use of the insured's motorcycle on a highway D) use of the insured's 40-foot boat with a 200 horsepower engine
B) use of the insured's golf cart at a golf course
Which of the following statements about eligibility requirements for homeowners insurance is (are) true? I. A contract can be written on a twenty-unit apartment complex as long as the tenants are families. II. Separate forms are available for renters and condominium owners. A) I only B) II only C) both I and II D) neither I nor II
B. II only
Which of the following statements about the additional coverages included in Section II of the homeowners policy is true? A) Damage to property of others is covered only if the insured is legally liable. B) Damage to property arising out of a business engaged in by the insured is covered. C) Interest that accrues on a judgment after the judgment is awarded but before the judgment is paid is covered under claims expenses. D) First aid expenses incurred by the insured for a bodily injury covered under the policy are not covered.
C) Interest that accrues on a judgment after the judgment is awarded but before the judgment is paid is covered under claims expenses.
Which of the following statements about buying homeowners insurance is true? A) There is no reason to carry insurance for more than 80 percent of a dwelling's replacement cost. B) The deduction for depreciation will be increased if a personal property replacement cost endorsement is purchased. C) Premiums often can be reduced substantially by selecting a higher deductible. D) There is little reason to compare cost since the lack of competition results in little price variation among companies.
C) Premiums often can be reduced substantially by selecting a higher deductible.
Brian purchased an unendorsed Homeowners 3 policy. Under the policy, Brian's detached garage is also covered. Which of the following statements regarding coverage on the garage is true? A) The garage is covered on a named-perils basis. B) Any losses to the garage are settled on an actual cash value basis. C) The cost of removing debris is included in the policy limit on the garage, but if the damage and cost of removing debris exceed the limit, an additional five percent of the policy limit is available. D) The garage is covered under the dwelling coverage, Part A.
C) The cost of removing debris is included in the policy limit on the garage, but if the damage and cost of removing debris exceed the limit, an additional five percent of the policy limit is available.
A fire destroyed the home next door to Brad's home. The fire department chief was concerned that the damaged home would collapse on to Brad's home, so he ordered Brad to evacuate his home. Which of the following statements is true concerning the cost of Brad's hotel room while he is complying with the fire chief's order? A) The cost of the hotel room is not covered, as Brad's home was not directly damaged. B) The cost of the hotel room is covered under the "fair rental value" coverage of Part D. C) The cost of the hotel room is covered under the "prohibited use" coverage of Part D. D) The cost of the hotel room is covered under the dwelling coverage of Part A.
C) The cost of the hotel room is covered under the "prohibited use" coverage of Part D.
The Homeowners 3 policy limits the amount of coverage provided on certain personal property (e.g. coin collections and silverware). This personal property can be adequately insured by A) lowering the deductible which applies to personal property losses. B) storing the property away from the home at another location. C) adding a schedule to the policy listing the property with specific amounts of insurance. D) adding an appraisal clause to the policy.
C) adding a schedule to the policy listing the property with specific amounts of insurance.
Tom and Tammy Evans were ready to purchase a home. The home was to serve as collateral for their mortgage loan. Two insurers declined to insure the home, citing "an adverse CLUE report." Why would an insurer reject a homeowners insurance application because of an adverse CLUE report? A) because the previous owner had defaulted on the mortgage loan B) because the home is located in an area where the zoning law had been changed C) because there had been property insurance claims filed on the home's previous owner D) because the home is located in an area that does not have a certified fire department
C) because there had been property insurance claims filed on the home's previous owner
Factors that affect the cost of homeowners insurance include which of the following? I. Construction material II. Deductible amount A) I only B) II only C) both I and II D) neither I nor II
C) both I and II
Persons insured under Section I of the Homeowners 3 policy include which of the following? I. A spouse of the named insured if living in the same household II. The named insured's children who are under age 24 and who are full-time college students A) I only B) II only C) both I and II D) neither I nor II
C) both I and II
Which of the following is (are) included among the duties of an insured following a loss covered under the Homeowners 3 policy? I. To file a proof of loss within a specified time period after the insurer's request II. To prepare an inventory of damaged personal property A) I only B) II only C) both I and II D) neither I nor II
C) both I and II
Which of the following persons is (are) eligible for benefits under medical payments to others (Coverage F) of the homeowners policy? I. A friend who slips and falls on a wet patio while visiting the named insured II. A neighborhood child who is severely scratched by a cat in the care of the named insured A) I only B) II only C) both I and II D) neither I nor II
C) both I and II
The homeowners policy excludes a loss brought about by two or more perils where one peril is covered under the policy and the other perils are excluded. This situation is called A) ordinance or law. B) proximate cause. C) concurrent causation. D) nullification.
C) concurrent causation
Which of the following losses to a dwelling would be covered under an unendorsed Homeowners 3 policy? A) smoke damage resulting from agricultural operations of a neighboring farmer B) damage to the structure caused by a flash flood C) damage to the structure caused by the weight of heavy snow on the roof D) damage to a floor caused by water backing up through a sewer pipe
C) damage to the structure caused by the weight of heavy snow on the roof
All of the following are additional coverages under Section I of the Homeowners 3 policy EXCEPT A) the reasonable expenses of removing debris after an insured loss. B) fire department service charges for which the insured is liable by contract or agreement. C) damage to trees and shrubs caused by a windstorm. D) losses incurred from the unauthorized use of a stolen credit card.
C) damage to trees and shrubs caused by a windstorm
Mike and Susan built their "dream home." They insured their home for its full replacement cost. They also added an endorsement that will pay up to an additional 20 percent of the policy limit in case the cost of rebuilding the home after a loss is greater than the policy limit. The basis under which Mike and Susan insured their home is called A) actual cash value. B) valued policy coverage. C) extended replacement cost. D) guaranteed replacement cost.
C) extended replacement cost
Which of the following losses would be covered under the medical payments coverage of the Homeowners 3 policy? A) injuries to another person arising out of the insured's negligent operation of an automobile B) medical payments resulting from the transmission of a communicable disease C) injury to a resident employee at the insured's home D) workers compensation medical payments
C) injury to a resident employee at the insured's home
All of the following persons are insured for personal liability under the homeowners policy EXCEPT A) children of the named insured under age 24 who are attending college full time and temporarily residing elsewhere. B) foster children under the age of 21 who reside with the named insured. C) nonresident employees of the named insured. D) the spouse of the named insured if a resident of the same household.
C) nonresident employees of the named insured.
Robert purchased an unendorsed Homeowners 3 policy. He is concerned that if his personal property is destroyed, the insurer will take depreciation into consideration when determining the loss settlement and will pay him less than the amount needed to purchase new property. Which endorsement can Robert add to his Homeowners 3 policy to address this concern? A) inflation guard endorsement B) personal injury endorsement C) personal property replacement cost endorsement D) earthquake endorsement
C) personal property replacement cost endorsement
John purchased an unendorsed Homeowners 3 policy. The coverage will expire next month. Which of the following changes will lower the premium that John will pay? A) reducing the deductible B) adding a replacement cost endorsement for personal property C) switching to an HO-2 policy D) adding a personal injury endorsement
C) switching to an HO-2 policy
Which of the following is a covered peril under the personal property coverage (Coverage C) of an unendorsed Homeowners 3 policy? A) earthquake B) nuclear radiation C) windstorm D) flood
C) windstorm
Gail lives near a fault line. She added an earthquake endorsement to her Homeowners 3 policy. All of the following statements about the endorsement are true EXCEPT A) The deductible is expressed as a percentage of the coverage limit rather than as a dollar amount. B) The endorsement also covers landslides and volcanic eruptions. C) Aftershocks occurring within 72 hours of an earthquake are considered part of the same occurrence. D) The endorsement also covers flood losses.
D) The endorsement also covers flood losses.
Ted borrowed $140,000 from ABC Bank to purchase a home and pledged the home as collateral for the loan. Shortly after purchasing the home, Ted lost his job. He could not find another job and could not pay the monthly mortgage. Ted set fire to the home. The claims adjuster suspected arson, and an investigation proved that Ted intentionally caused the loss. Under the mortgage clause of the Homeowners 3 policy, how will this loss be settled? A) The insurer has no liability because the loss was intentional. B) The insurer will pay Ted the actual cash value of the loss as intentional loss is not excluded. C) The insurer will pay ABC the value of its insurable interest and pay Ted the value of his insurable interest. D) The insurer will pay ABC the value of its insurable interest and then attempt to recoup the loss payment from Ted.
D) The insurer will pay ABC the value of its insurable interest and then attempt to recoup the loss payment from Ted.
Jane would like to save money on her homeowners premium. All of the following steps will help her to reduce her homeowners premium EXCEPT A) raising the deductible in the homeowners policy to a higher amount. B) shopping around a homeowners policy. C) installing burglar alarms, smoke detectors, and dead-bolt locks. D) adding a personal property replacement cost endorsement.
D) adding a personal property replacement cost endorsement.
Which of the following types of water damage is covered under an unendorsed Homeowners 3 policy? A) damage from a flood caused by torrential rain B) damage from water backing up through a drain C) damage from water below the surface of the ground that seeps into a basement D) damage from water that overflows from a malfunctioning washing machine
D) damage from water that overflows from a malfunctioning washing machine
All of the following are considered insured locations for medical payments to others (Coverage F) under a homeowners policy EXCEPT A) a new vacation home purchased by an insured during the policy period. B) a motel room where an insured is temporarily residing. C) a hall rented by the insured for her daughter's graduation party. D) farmland owned by the insured.
D) farmland owned by the insured.
All of the following losses are subject to special limits of liability under the Homeowners 3 policy EXCEPT A) theft of firearms. B) destruction by fire of property used for business purposes. C) storm damage to a boat at a marina. D) furniture destroyed by a fire.
D) furniture destroyed by a fire
For which of the following situations would there be personal liability coverage under the homeowners policy? I. The named insured accidentally injures her husband with a hammer. II. The named insured breaks his wife's valuable vase while practicing his golf swing. A) I only B) II only C) both I and II D) neither I nor II
D) neither I nor II
Persons insured for personal liability under the homeowners policy include which of the following? I. Relatives while visiting the named insured. II. Overnight guests who are not relatives of the named insured. A) I only B) II only C) both I and II D) neither I nor II
D) neither I nor II
Which of the following situations would be covered under Section II of a homeowners policy? I. The insured is sued by his girlfriend because he infected her with the AIDS virus. II. The insured's son is sued after a friend suffered serious injury as a result of using illegal drugs sold to him by the son. A) I only B) II only C) both I and II D) neither I nor II
D) neither I nor II
Which of the following statements about the Homeowners 3 policy is (are) true? I. Losses to the dwelling are always settled on an actual cash value basis. II. Coverage on personal property is limited to $5,000. A) I only B) II only C) both I and II D) neither I nor II
D) neither I nor II
Several different values can be considered when determining how much insurance should be carried on a dwelling (the Coverage A limit of the Homeowners 3 policy). The appropriate value that should be used is: A) the home's market value. B) the home's actual cash value. C) the home's appraised value for property tax purposes. D) the home's replacement cost.
D) the home's replacement cost.
Which of the following statements is (are) true regarding renters insurance? I. Renters insurance is needed if you rent a house, but is not needed if you rent an apartment. II. The ISO renter's policy provides open perils ("all-risks") coverage on the insured's personal property. A) I only B) II only C) both I and II D) neither I nor II
D. neither I nor II
