Chapter 13

Question 1

A homeowner policy requires notice of a loss to be given to each of the following EXCEPT:

Select one:

a. other insureds.
b. the credit card company if a credit card is stolen.
c. the insurer.
d. the police if a crime is involved.

Answer 1

The correct answer is: other insureds.

Question 2

A homeowner’s water pipe cracks due to freezing and begins to leak. The leakage damages the floor before flowing into the basement and causing further damage. The insured’s HO-3 will cover:

Select one:

a. both the damage caused by the water and the cost of repairing the pipe.
b. the cost of repairing the leaky pipe but not the resulting damage.
c. nothing because HO policies never cover water damage.
d. the damage caused but not the cost of repairing the pipe.

Answer 2

Refresher question from Chapter 4 (4-6). We need to remember that we are covering the peril, water in this case, not the delivery system.

The correct answer is: the damage caused but not the cost of repairing the pipe.

Question 3

The HO forms include a special limit for each of the following except:

Select one:

a. Securities
b. Jewelry
c. Boats
d. Clothes

Answer 3

The correct answer is: Clothes

Question 4

Section I of the HO-3 covers trees, shrubs, and plants for loss caused by each of the following EXCEPT:

Select one:

a. Wind
b. Lightning
c. Fire
d. Explosion

Answer 4

There is no coverage for damage to trees, shrubs, or plants if the cause of loss is wind. However, if wind causes a tree to fall on a covered structure, the policy will cover the damage to the structure and the removal of the tree.

The correct answer is: Wind

Question 5

After a burglary in a home covered by a HO-00-03 (HO-3), the insured must:

Select one:

a. promptly install a burglar alarm within 7 business days
b. notify the police

Answer 5

The correct answer is: notify the police

Question 6

If the insured’s dog bites a jogger, the HO will pay a maximum of defense costs plus:

Select one:

a. $1,000
b. $100,000
c. $101,000
d. $250,000

Answer 6

The HO policy will include the Med Pay in the limit of liability when paying the victim. So, the injured person may collect only $100,000, not $101,000. However, it will pay the Insured’s defense costs (supplementary) without limit.

The correct answer is: $100,000

Question 7

A DP-3 covers:

Select one:

a. Basement water damage from a heavy rain.
b. Intentional destruction by the owner.
c. Fire set by arsonists.
d. Pollution from a factory.

Answer 7

The correct answer is: Fire set by arsonists.

Question 8

Under a Pair or Set provision:

Select one:

a. Loss of one will not be loss of all.
b. Coverage is only provided if all items in the Pair or Set are damaged or destroyed.

Answer 8

The correct answer is: Loss of one will not be loss of all.

Question 9

The HO’s Supplementary (Additional) Payments pays:

Select one:

a. only after the limit of liability is reached.
b. only up to the limit of liability.
c. after the deductible is satisfied.
d. in addition to the limits of liability.

Answer 9

The correct answer is: in addition to the limits of liability.

Question 10

In comparing an HO-2 and HO-3, the HO-3 has:

Select one:

a. better Property Damage limits.
b. better Bodily Injury limits.
c. higher Med Pay coverage limits.
d. None of the above.

Answer 10

The correct answer is: None of the above.

Question 11

If the insured’s dog bites a jogger, the HO’s Bodily Injury Liability will pay for:

Select one:

a. retraining the dog.
b. defense costs if the jogger sues.
c. fencing for the dog.
d. a new kennel.

Answer 11

The correct answer is: defense costs if the jogger sues.

Question 12

The most a HO policy will pay for a liability slip and fall claim under Section II of the policy is:

Select one:

a. $15,000
b. $25,000
c. $40,000
d. the policy’s limit of liability.

Answer 12

The correct answer is: the policy’s limit of liability.

Question 13

An HO-3 covers each of these EXCEPT:

Select one:

a. Freezing.
b. Flooding.
c. Falling objects.
d. Vandalism.

Answer 13

The correct answer is: Flooding.

Question 14

In the evenings, Nancy runs a baby-sitting service in her home. She cheerfully babysits neighborhood kids because she loves the kiddies. She never charges for this service. If a child is injured in her home, Nancy’s HO policy’s Section II coverage limit for such a claim is:

Select one:

a. $0.
b. $100,000.

Answer 14

Because this is a personal activity, not a business activity, Nancy’s HO policy will pay up to $100,000.

The correct answer is: $100,000.

Question 15

Section II of the HO will cover each of these EXCEPT:

Select one:

a. The insured’s accidental fire damage to a neighbor’s living room.
b. A person injured by the Insured’s fireworks display.
c. A tenant who slips on the driveway.
d. Injury to the insured’s employee covered by Worker Compensation.

Answer 15

A very key point with the Homeowner policy is that Section I covers property and Section II covers liability. Each of these is covered except the Work Comp issue (which requires a separate Work Comp policy).

The correct answer is: Injury to the insured’s employee covered by Worker Compensation.

Question 16

A Mobile Home policy covers a detached garage:

Select one:

a. to 10% of A (with at least $2,000 coverage)
b. to 20% of A
c. with no limit
d. only by a rider, endorsement, separate policy

Answer 16

The correct answer is: to 10% of A (with at least $2,000 coverage)

Question 17

The HO policy which provides the best coverage for an owner who occupies a single-family home is the:

Select one:

a. HO-3
b. HO-4
c. HO-5
d. HO-6

Answer 17

The correct answer is: HO-5

Question 18

The HO-3 covers which of the following?

Select one:

a. Smoke from a smudging factory
b. Damage caused by an animal kept by the Insured
c. Damage caused by birds
d. None of the above

Answer 18

See Page 13-27.

The correct answer is: None of the above

Question 19

Vandalism damage to the exterior walls of a home won’t be covered if the home has met the policy’s definition of vacancy which is how many days?

Select one:

a. 10
b. 60
c. 90
d. 120

Answer 19

The correct answer is: 60

Question 20

The insured’s 14 year-old child intentionally damaged the neighbor’s house. The Additional Coverages section of the HO policy will pay:

Select one:

a. $0
b. $250
c. $500
d. up to $1,000

Answer 20

The correct answer is: $0

Question 21

Molly’s HO-00-03 has a $250 deductible and $1,500 limit for theft of jewelry.

Molly’s jewelry is also covered by a Scheduled Personal Property Endorsement (that is, an Inland Marine floater) with a $2,500 limit of liability.

If $4,000 worth of Molly’s jewelry is stolen, she will recover a maximum of how much?

Select one:

a. $2,250
b. $2,500
c. $3,750
d. $4,000

Answer 21

A Scheduled Personal Property Endorsement has no deductible and eliminates any coverage the HO policy would have provided. Thus, Molly collects the $2,500 under the floater without applying a deductible. The HO policy pays nothing because Molly had the floater.

The correct answer is: $2,500

Question 22

A DP-1 (Dwelling Policy -1) covers each of the following EXCEPT:

Select one:

a. earth movement
b. explosion
c. hail
d. fire and smoke

Answer 22

The correct answer is: earth movement

Question 23

The wind blows the Insured’s tree over, resulting in damage to the Insured’s home and car. The Insured’s HO-3 will cover the damage to the Insured’s:

Select one:

a. tree
b. home
c. car
d. All of the above

Answer 23

The HO forms don’t cover damage to the Insured’s autos. There is no coverage for damage to trees if the cause of loss is wind. However, if wind causes the tree to fall on the Insured’s dwelling, the policy will cover the dwelling and the removal of the tree.

The correct answer is: home

Question 24

Section II of the HO policy covers:

Select one:

a. Damage to the insured’s property.
b. Medical Payments
c. Intentional acts.
d. Damage caused by the insured’s auto.

Answer 24

The correct answer is: Medical Payments

Question 25

A Mobile Home policy covers the Insured’s personal property:

Select one:

a. only on a replacement cost basis
b. with no limit
c. to 40% of A
d. only if the Insured has Special coverage on the personal property

Answer 25

The correct answer is: to 40% of A

Question 26

To be eligible for a mobile home endorsement, the dwelling must be at least:

Select one:

a. 10 feet wide and 40 feet long
b. 8 feet wide and 20 feet long
c. 24 feet wide and 50 feet long
d. 12 feet wide and 60 feet long

Answer 26

Or, sometimes this is stated as 400 square feet.

The correct answer is: 10 feet wide and 40 feet long

Question 27

Under a Homeowner policy, abandonment is:

Select one:

a. not permitted
b. permitted

Answer 27

The correct answer is: not permitted

Question 28

Which of the following is an insured under Section II of the HO policy?

Select one:

a. A resident minor in the insured’s care, custody and control.
b. The named insured’s spouse who no longer resides in the home.
c. A resident employee.
d. A neighbor who is a guest for dinner.

Answer 28

The HO policy will insure the negligent acts of any “Insured.” To be an “Insured,” one must be a resident. Thus, we exclude the neighbor and the spouse who aren’t residents. The policy specifically excludes coverage for a resident employee but will cover any minor in the Insured’s care, custody, and control (such as a foster child or foreign exchange student).

The correct answer is: A resident minor in the insured’s care, custody and control.

Question 29

A Dwelling policy may be used if the structure has a maximum of how many boarders?

Select one:

a. 2
b. 4
c. 5
d. 10

Answer 29

The correct answer is: 5

Question 30

The HO’s Personal Liability section covers:

Select one:

a. Damage to the insured’s home.
b. A tenant’s suit for wrongful eviction.
c. Medical expenses of the Insured’s children.
d. Damage to the property of other persons.

Answer 30

So, the HO Personal Liability section (Section II) will cover damage to the property of other persons.

The correct answer is: Damage to the property of other persons.

Question 31

Which Homeowners policy is used when the cost to rebuild the home would cost more than the market value of the home?

Select one:

a. HO-1
b. HO-3
c. HO-5
d. HO-8

Answer 31

See Page 13-8 and 13-25. Homes like “the old mansion” could cost more to rebuild than their market values, so the HO-8 covers the structures not on a replacement cost basis, but on an ACV basis.

The correct answer is: HO-8

Question 32

Which of the following boats owned by the Insured would be covered under the Insured’s Homeowners policy?

Select one:

a. a boat with a 50 horsepower inboard engine
b. 28 foot sailboat
c. a boat with a 20 horsepower outboard engine
d. a boat with a 50 horsepower outboard engine

Answer 32

See Page 13-29.

The correct answer is: a boat with a 20 horsepower outboard engine

Question 33

Section II of the HO policy provides liability coverage for:

Select one:

a. Malicious prosecution
b. Accidents
c. Wrongful eviction
d. Embezzlement

Answer 33

Section II of the HO policy doesn’t cover personal injury, so it won’t cover wrongful eviction or malicious prosecution. An umbrella might cover personal injury, but the umbrellas may vary on that point. Embezzlement won’t be covered because that is an intentional act. So, Section II Liability will cover plain old accidents.

The correct answer is: Accidents

Question 34

The HO forms have a special limit (aka inside limit) for which of the following?

Select one:

a. Couch
b. TV
c. Silverware
d. All of the above

Answer 34

The correct answer is: Silverware

Question 35

The insured’s 15 year-old child negligently rode her bike into the neighbor’s house causing $1,800 damage. The HO policy will pay:

Select one:

a. $0
b. $1,000
c. $1,800
d. $100,000

Answer 35

The correct answer is: $1,800

Question 36

With a mobile home endorsement, personal property is covered to:

Select one:

a. 20% of A.
b. 30% of A.
c. 40% of A.
d. 50% of A.

Answer 36

The correct answer is: 40% of A.

Question 37

Under Section II of the HO policy, Med Pay will cover a claim:

Select one:

a. regardless of liability.
b. for pain and suffering.
c. only if the insured is negligent and liable.
d. for medical expenses of the insured.

Answer 37

The correct answer is: regardless of liability.

Question 38

Which of the following residents would be considered an Insured under the HO policy?

Select one:

a. A resident employee.
b. An unrelated roommate.
c. The insured’s child.
d. None of the above.

Answer 38

To be an Insured, one must be a resident, and (1) a relative or (2) a minor under the age of 21 in the care of an Insured. Thus, the employee is not a relative, nor is the former spouse. So, the child is both a resident and a relative of the Insured - the child is an Insured.

The correct answer is: The insured’s child.

Question 39

While on vacation, an insured suffered a fire loss to his personal property which he had taken with him on the vacation. His DP-3 will cover this loss in which manner?

Select one:

a. The loss will not be covered.
b. ACV to 50% of A.
c. Full replacement cost to 50% of coverage A.
d. Up to the stated value of Coverage C less the deductible.

Answer 39

One of the quirks in the DP is that it will only cover personal property when on the Insured’s premises. The HO, on the other hand, covers personal property anywhere in the world. I remember this by saying that today we travel all over the place, but back in the 1940’s folks didn’t
travel so didn’t need the coverage.

The correct answer is: The loss will not be covered.

Question 40

A mobile home policy:

Select one:

a. will pay $500 of the cost of transporting the mobile home to a new permanent location.
b. May be used if the mobile home has at least 200 square feet.
c. Provides Replacement Cost coverage.
d. May be used if the mobile home has at least 300 square feet.

Answer 40

All of the HO policies provide Replacement Cost coverage on the structure if it is insured to at least 80% of replacement cost. The Mobile Home endorsement will only pay $500 to move the mobile home to protect it from a covered peril. The Mobile Home endorsement can only be used
if the mobile home is at least 40’ by 10’ feet (400 square feet).

Note: The Replacement Cost answer is the “best” answer although we know that the personal property would be covered on an ACV basis.

The correct answer is: Provides Replacement Cost coverage.

Question 41

Which HO coverage does NOT have a deductible?

Select one:

a. Additional Living Expense
b. Personal Liability
c. Dwelling
d. Appurtenant Structures

Answer 41

The correct answer is: Personal Liability

Question 42

The HO-3 may cover which of the following?

Select one:

a. Dwelling under construction
b. Theft from a dwelling under construction
c. Both A and B
d. None of the above

Answer 42

A homeowners policy can be used to cover a dwelling under construction. However, there is no coverage for theft from a dwelling under construction (See page 12-27).

The correct answer is: Dwelling under construction

Question 43

If the insured is injured in her home, she will be compensated under:

Select one:

a. Section I of the HO
b. Her health insurance policy, but not under the HO at all
c. Section II of the HO
d. Medical Payments under the HO

Answer 43

The correct answer is: Her health insurance policy, but not under the HO at all

Question 44

Under the pair or set rule:

Select one:

a. In no event will the loss of one item in the pair or set be considered to be the loss of all items in the pair or set.
b. Both items in the pair or set must be insured for full replacement or actual cash value.

Answer 44

The correct answer is: In no event will the loss of one item in the pair or set be considered to be the loss of all items in the pair or set.

Question 45

The HO-3 covers which of the following

Select one:

a. Theft while the dwelling is under construction.
b. Wear and tear.
c. Damage cause by birds.
d. Vandalism if the structure has been vacant for 60 consecutive days.

Answer 45

See Page 13-27. Vandalism is covered if the structure has been vacant for 60 consecutive days or less. If it is vacant for more than 60 consecutive days, vandalism is not covered.

The correct answer is: Vandalism if the structure has been vacant for 60 consecutive days.

Question 46

While playing with fireworks, Smith’s 16-year-old child negligently destroyed the neighbor’s $250,000 home. Smith’s homeowner’s policy will cover the liability up to:

Select one:

a. $0
b. $1,000
c. $100,000
d. $250,000

Answer 46

The HO covers negligence of the Insured’s children up to the standard $100,000 limit of liability. If this had been an intentional act, however, it would have not been covered at all because the child was 13 or older.

The correct answer is: $100,000

Question 47

Which is true regarding the HO-8?

Select one:

a. It allows the insured to operate a small business in the home and still have both liability and property coverage as well as work comp coverage for employees.
b. It was created because replacement cost is too costly for some homes.
c. It is only designed for multi-family dwellings.
d. There is no liability coverage.

Answer 47

The correct answer is: It was created because replacement cost is too costly for some homes.

Question 48

Section I of the HO covers each of these EXCEPT?

Select one:

a. Unscheduled personal property
b. Appurtenant structures
c. Bodily Injury Liability
d. Additional Living Expenses

Answer 48

The correct answer is: Bodily Injury Liability

Question 49

Section II of a Homeowner Policy provides coverage for:

Select one:

a. damage to an appurtenant structure caused by hail.
b. damage to the home caused by a fire.
c. acts of the homeowner’s dog.
d. intentional acts of the insured’s spouse.

Answer 49

The correct answer is: acts of the homeowner’s dog.

Question 50

While at the lake, my boat could be destroyed by fire, striking another boat, lightning, sinking, etc. If the boat is destroyed, my HO Insurer will pay a maximum of:

Select one:

a. the policy limit.
b. $250.
c. $500.
d. $1,000.

Answer 50

The policy limit, which is actually $1,500 under a Homeowner policy.

The correct answer is: the policy limit.

Question 51

The HO’s Medical Payments pays:

Select one:

a. only up to the limit of liability.
b. in addition to the limits of liability.
c. only after the limit of liability is reached.
d. after the deductible is satisfied.

Answer 51

Med Pay has its own limit of liability but doesn’t have a deductible because this is a Section II Liability coverage. It doesn’t cover the Insured, it covers the victims.

The correct answer is: only up to the limit of liability.

Question 52

Which policy provides special coverage on the dwelling and broad form coverage on personal property?

Select one:

a. HO-1
b. HO-2
c. HO-3
d. HO-5

Answer 52

This is a big deal! Many people buy the HO-3 (also called the HO-03 or HO-00-03) because it is the cheapest policy the mortgagee bank will permit. It provides Special (all-risk, open perils, comprehensive, extended coverage) on the structures but only Broad Form coverage on the personal property. So, the home is covered for such perils as breakage, bears breaking down the doors, and a leaky roof, but the personal property is not covered for these perils.

The correct answer is: HO-3

Question 53

A mobile home policy:

Select one:

a. may provide Replacement Cost coverage for the structure if it is insured to 80% of replacement cost.
b. does not provide Section II liability coverage.

Answer 53

The correct answer is: may provide Replacement Cost coverage for the structure if it is insured to 80% of replacement cost.

Question 54

The liability coverage under a HO is identical to the coverage under the:

Select one:

a. Personal Injury Protection (PIP)
b. CGL
c. Umbrella
d. Personal Liability Policy

Answer 54

The correct answer is: Personal Liability Policy

Question 55

The HO’s Personal Property coverage applies to:

Select one:

a. the insured’s dog.
b. the insured’s clothing.
c. the insured’s automobile.
d. property owned by an unrelated tenant.

Answer 55

The correct answer is: the insured’s clothing.

Question 56

The HO-5 policy provides:

Select one:

a. neither Coverage E (Personal Liability) nor Coverage F (Medical Payments)
b. Coverage E (Personal Liability) only
c. both Coverage E (Personal Liability) and Coverage F (Medical Payments)
d. Coverage F (Medical Payments) only

Answer 56

The correct answer is: both Coverage E (Personal Liability) and Coverage F (Medical Payments)

Question 57

In the evenings, Jack runs a baby-sitting business in his home. Jack charges $380 per hour for babysitting kids. If a child is injured, the HO policy’s Section II coverage limit for such a claim is:

Select one:

a. $0.
b. $100,000.

Answer 57

The HO policies provide no Section II Liability coverage for business activity. Because this is a business activity, Jack’s HO policy won’t pay.

The correct answer is: $0.

Question 58

The HO-2 provides vandalism coverage for a maximum of how many days after the beginning of the vacancy?

Select one:

a. 30 days
b. 60 days
c. 90 days
d. 120 days

Answer 58

The correct answer is: 60 days

Question 59

The insured’s 15 year-old intentionally vandalized the neighbor’s car. Under the Damage to Property of Others coverage, the HO will pay:

Select one:

a. $0
b. $500
c. $1,000
d. $100,000

Answer 59

This would be covered for a limited amount if the child was under the unlucky number 13. Age 12 or younger, the HO will cover intentional acts, but only for a limited amount, usually $1,000 (updated from $5,000).

The correct answer is: $0

Question 60

Of the following, which provides the broadest coverage for the dwelling and contents?
Select one:

a. HO-1
b. HO-3
c. HO-4
d. HO-6

Answer 60

In this list, the HO-3 provides the best (broadest) coverage for the dwelling and contents. The HO-4 doesn’t cover the dwelling at all, the HO-6 provides limited coverage on the dwelling, and the HO-1 provides only basic form coverage. The HO-3 provides Special coverage on the dwelling and Broad form coverage on the personal property, so it provides the best coverage.

The correct answer is: HO-3

Question 61

For the dwelling, Mobile Home policies cover loss settlement:

Select one:

a. on a stated or agreed value basis.
b. on a Replacement Cost basis.
c. without a deductible.
d. on an ACV basis.

Answer 61

On our exam, assume that the mobile home policy uses Replacement Cost for the mobile home (reference video 13.2). Obviously, in the real world, an Insurer would only do this on a relatively new mobile home in good repair. You are right, not a fair question.

The correct answer is: on a Replacement Cost basis.

Question 62

Four trees valued at $200, $500, $700 and $800 were destroyed by fire. The HO-5 will cover this loss to a total of:

Select one:

a. $1,200.
b. $1,250.
c. $1,700.
d. $2,000.

Answer 62

Our test writers love tree questions! Under the HO, each tree is worth $500 to a total max of 5% of the Coverage A amount. So, we get $200 for the $200 tree, $500 apiece for the last 3 threes, for a total of $1,700.

The correct answer is: $1,700.