Chapter 20 - Homeowners Insurance, Section I

Question 1

A homeowners insurance can cover what six things?

Answer 1

• dwelling
• other structures
• personal property
• additional living expenses
• personal liability claims
• medical payments to others

Question 2

HO-2 (Broad form) covers what?

Answer 2

Covers the dwelling, other structures, and personal property on a named perils basis
Covered perils include fire, lightning, windstorm, hail, explosion, and other perils.
The perils must be the proximate cause of the loss

Question 3

HO-3 (Special form) covers what?

Answer 3

Covers the dwelling and other structures on a risk-of-direct-physical loss basis.
All direct physical losses are covered except those losses specifically excluded

Question 4

HO-4 (Contents broad form) covers what?

Answer 4

covers a tenant’s personal property on a named perils basis. Ex: tenants who rent apartments, houses, or rooms

Question 5

HO-5 (Comprehensive form) covers what?

Answer 5

Provides open perils coverage (“all-risks coverage”) on the dwelling, other structures and personal property
All direct physical losses are covered except those losses specifically excluded

Question 6

HO-6 (Unit owners form) covers what?

Answer 6

covers personal property on a named perils basis. Designed for condominium units and cooperative apartments. A minimum of $5,000 of insurance is also provided on the condominium unit that covers improvements and additions

Question 7

HO-8 (Modified coverage form) covers what?

Answer 7

designed for older homes. Dwelling and other structures are based on the amount required to repair or replace using common construction materials and methods

Question 8

What are the four basic coverages in section I of the homeowner 3 policy?

Answer 8

Coverage A: Dwelling
Coverage B: Other Structures
Coverage C: Personal Property
Coverage D: Loss of Use

Question 9

What four persons are considered “insureds” under the HO-3 policy?

Answer 9

Named insured and spouse
resident relatives
other persons under age 21
full-time student away from home

Question 10

Section II coverage, in addition to the HO-3 coverage what are the other two persons covered?

Answer 10

Any person legally responsible for covered animals or watercraft
With respect to a motor vehicle covered by the policy (riding mower), persons employed by the named insured.

Question 11

Coverage A covers the dwelling on the residence premises and any structure attached to the dwelling. What is also included with this coverage? Excluded?

Answer 11

Materials intended for construction or repair of the dwelling or other structures are included
The coverage specifically excludes land

Question 12

Coverage B insures other structures on the residence premises. The amount of coverage is based on the amount of insurance in Coverage A. What is also included in this coverage? Excluded?

Answer 12

Includes a detached garage, tool shed, horse stable

structures that are rented out or used for a business are excluded

Question 13

Coverage C insures personal property owned or used by an insured. What are the four characteristics of this coverage?

Answer 13

• personal property is covered anywhere in the world, both on and off the premises
• the amount of coverage is 50% of Coverage A, but can be increased if desired
• Coverage for personal property at another residence, such as a vacation home, is limited to 10% of Coverage C or $1000, whichever is greater
• Certain types of personal property have maximum dollar limits on the amount paid for nay loss.

Question 14

What is the maximum dollar limit on the loss for Money,bank notes, bullion, gold, silver, platinum, coins, medals, stored value cards, and smart cards?

Answer 14

$200

Question 15

What is the maximum dollar limit on the loss for:

• securities, valuable papers, manuscripts, personal records, passports, tickets, and stamps
• watercraft of all types
• trailers not used with watercraft of all types
• theft of jewelry, watches, furs, and precious and semiprecious stones
• Property away from the residence premises used primarily for business purposes
• Portable electronic equipment that reproduces, receives, or transmits audio, visual, or data signals.

Answer 15

$1,500

Question 16

What is the maximum dollar limit on the loss for antennas,taps, wires, records, disks, and other media that are used with electronic equipment that reproduces, receives, or transmits audio or visual signals and is in or upon a motor vehicle.

Answer 16

$250

Question 17

What is the maximum dollar limit on the loss for:

• theft of firearms and related equipment
• theft of silverware, goldware, platinumware, and pewterware
• property on the residence premises used primarily for business purposes.

Answer 17

$2,500

Question 18

An insured can use a ______ to insure certain personal property for a specific amount

Answer 18

schedule

Question 19

Coverage C excludes what six types of property?

Answer 19

• Animals, birds, and fish
• motor vehicles
• aircraft and parts
• hovercraft and parts
• property of roomers, boarders, and other tenants
• property in a regularly rented apartment

Question 20

Coverage D provides protection when the residence premises cannot be used because of a covered loss. What are the four characteristics of this coverage?

Answer 20

• Coverage is 30% of Coverage A
• Additional living expenses is the increase in living expenses actually incurred by the insured to maintain the family’s standard of living
• The policy pays the fair rental value for that part of the residence that is rented to others, but is not fit to live in
• Coverage applies if the home is not damaged, but a civil authority prohibits the insured from using the premises

Question 21

Additional coverages in section I include? (12)

Answer 21

• Removal of debris following an insured peril
• Reasonable repairs to protect the property from further damage
• Trees, shrubs, and plants, for a limited set of perils
• Fire department service charge
• Removal of property that is endangered by an insured peril
• Unauthorized use of credit card, electronic funds transfer card or access device; forgery and counterfeit money
• Loss assessment charged against the named insured by a corporation or association of property owners because of the direct loss of property collectively owned by all members.
• Collapse of a building, for certain perils
• Breakage of glass or safety glazing material
• Landlord’s furnishings
• Increased costs of construction or repair because of a law
• Grave markers

Question 22

What are the Section I Exclusions? (8)

Answer 22

• Concurrent causation losses
• Any loss due to an ordinance or law, except as described in the Additional Coverages
• Losses due to earth movement
• Certain water losses
• Losses due to neglect, power failure, or faulty design
• Losses which are intentional
• Losses due to war, government action, failure to act, or nuclear hazard
• Losses due to certain weather conditions

Question 23

What are the deductions of section I

Answer 23

A deductible of $250 applies to any loss covered by section I coverages
premiums can be reduced by increasing the deductible
instates that are vulnerable to natural catastrophes, insurers can use percentage deductibles

Question 24

What are the five duties that the insured must perform after a lose?

Answer 24

• Give prompt notice to insurer
• Protect the property from further damage
• Prepare an inventory of damaged personal property
• Exhibit damaged personal property
• File a proof of loss with 60 days after the insurer’s request

Question 25

Losses to personal property are paid on the basis of actual cash value. if the insured purchases a replacement cost endorsement, what happens?

Answer 25

There is no deduction for depreciation

Question 26

What must the insurer do first before he has the right to repair or replace any part of damaged property with like property?

Answer 26

give notice to the insured

Question 27

Losses to the dwelling and other structures are paid on the basis of ______ ____ with no deduction for depreciation

Answer 27

Replacement cost
If the dwelling is insured for at least 80% of replacement cost at the time of loss, partial losses are paid in full
replacement cost is the amount necessary to repair or replace the dwelling with material of like kind and quality at current prices

Question 28

If the dwelling is insured for less than 80% of the replacement cost, the insured receives the larger of:

Answer 28

1. The actual cash value of that part of the building damaged, or
2. (Amount of insurance carried/ 80%Replacement cost)Loss

Question 29

Some insurers offer an extended replacement cost endorsement. What is this?

Answer 29

Pays 20% or more above the policy limits

Question 30

What is a guaranteed replacement cost policy?

Answer 30

The insurer agrees to replace the home exactly as it was before the loss even if the replacement cost exceeds the amount of insurance stated in the policy

Question 31

What is a loss to a pair or set?

Answer 31

the insurer can elect either repair or replace any part of the pair or set or to pay the difference between the actual cash value of the property before and after the loss.

Question 32

What is the appraisal clause?

Answer 32

-Is used when the insured and insurer agree that the loss is covered, but the amount of loss is dispute
-If other insurance covers a Section I loss, the insurer will only pay the proportion of the loss that is limit of liability bears to the total amount of insurance covering the loss
-No legal action can be brought against the insurer unless all policy provisions have been met
legal action must be stated within two years

Question 33

Only losses that occur during the ___ ____ are covered.

Answer 33

Policy period

Question 34

What does the mortgage clause do?

Answer 34

This is designed to protect the mortgagee’s insurable interest. the mortgagee usually is a savings and loan institution, commercial bank, or other lending institution that makes a loan to the mortgagor (home buyer). If the mortgagee is entitled to receive a loss payment from the insurer to the extent of its interest, regardless of any policy violation by the insured.

Question 35

Conditions that apply to both section I and section II include: (7)

Answer 35

• A liberalization clause to address issues with broadening coverage
• A waiver or change of policy provisions
• Terms and conditions for cancellation
• Terms for non-renewal of the policy
• Assignment of the policy to another party
• A subrogation clause to address recoveries from third parties
• Extension of policy terms to a legal representative upon the death of the named insured or spouse