Homework 8 (Exam 2)

Beverly has an HO-3 contract with a $100,000 per occurrence limit on the Liability coverage. She rents out her basement to a college student, and the student's personal property is damaged by Beverly's negligence. The student sues her for $3,000. How much will the HO policy pay for this loss?

$3,000 is paid because the loss is not excluded.

Mary's house is burglarized and $22,000 in jewelry is stolen. What is the maximum amount her HO-3 policy will pay for this loss?

1500

Suppose that at the time of a $40,000 loss, your home has a replacement value of $200,000. And suppose you have $140,000 worth of insurance on it. Calculate the amount that you would receive from the insurer.

35,000 (with margin: 0)

Which of the following is a false statement?

An unendorsed HO-3 covers loss caused by backup of sewers or drains, water seepage below the ground, and overflow of a sump.

This pays for loss on an actual cash value basis.

Coverage C of HO-3

Coverage E-Personal Liability covers nonphysical personal injury such libel.

False

Which of the following is not an available endorsement to the HO Policy

Professional liability coverage Endorsement

Britney and Kevin were painting their backyard fence with a spray gun. A strong gust of wind blew paint on the neighbor's house. The neighbor sued them for all the clean-up costs. Which of the following is true about Britney and Kevin's HO policy?

This liability is covered by their HO policy.

Homeowners policies are sometimes referred to as package policies because they combine different types of coverage that were previously provided by several policies and a number of endorsements

True

One purpose of the exclusions in the HO policy is to eliminate losses due to moral hazard.

True

Unlike the open perils protection for the dwelling and other structures, personal property is covered against direct loss on a named perils basis.

True

This pays only after the limits of underling coverage have been exhausted

Umbrella policies

A fire damaged the home, destroying the two sofas, end tables and the rug in the living room. Are the sofa and end tables covered?

Yes. They are covered under Section I - Coverage C

In homeowners insurance, coinsurance is:

a contractual agreement that penalizes the insured when under-insured

in homeowners policy, ____ is coverage provided if a loss covered under section I of the homeowners policy renders the residence uninhabitable

additional living expenses

The HO 3 policy covers personal property you own:

anywhere in the world

Expenses incurred in defending a liability suit covered under Section II part E of the Homeowners policy

are payable, in addition to the policy limit of liability.

The section II coverages in the HO policy does all the following except:

covers the insured's own property destroyed by another's negligence

Actual cash value is defined as replacement cost minus

depreciation

What is the reason a $40,000 worth of home content loss will not be paid to the insured in case of fire damage?

The home (dwelling) is not insured for at least 80%