Chapter 8 Flashcards
Which one of the following statements regarding personal liability coverage is CORRECT?
A) It is added by endorsement to the homeowners policy.
B) It is automatically included in both the dwelling and homeowners policies.
C) It is added by endorsement to both the dwelling and homeowners policies.
D) It is added by endorsement to the dwelling policy but automatically included in the homeowners policy.
Answer: D
Personal liability coverage must be added to the dwelling policies if desired. It is automatically included in the homeowners policy.
Which one of the following is NOT a factor in determining eligibility for coverage under a particular homeowners form?
A) Intended use.
B) Occupancy.
C) Square footage.
D) Dwelling type.
Answer: C
Dwelling type, intended use, and occupancy are used to determine eligibility for coverage under each homeowners form. The square footage of the dwelling is not relevant in determining eligibility.
Which of the following is NOT an eligibility requirement for a homeowners policy?
A) Named insured is owner-occupant of dwelling or a renter who maintains a residential occupancy.
B) Dwelling may contain an incidental occupancy.
C) Dwelling is used as a primary residence.
D) No more than 4 families occupy the dwelling.
Answer: C
Secondary or seasonal residences may be insured under a homeowners policy.
All of the following properties can be insured under an unendorsed homeowners policy EXCEPT a:
A) townhouse that is owner occupied.
B) mobile home that is owner occupied.
C) home under construction that the owner intends to occupy.
D) duplex that is owner occupied.
Answer: B
All of the types of property described can be insured under a homeowners policy, but only mobile homes require a special endorsement.
Which of the following individuals is NOT an insured under Section I of the homeowners policies?
A) Person hired by the insured to perform work on the insured premises.
B) The spouse of the named insured.
C) Person younger than 21 who is in the care of the named insured.
D) Resident relative of the insured.
Answer: A
The definition of who is an insured under homeowners policies, while quite broad, is not all inclusive and would not be extended to include people hired by the insured to perform work on the insured’s premises. Those individuals should look to their own commercial policies for protection.
For personal property coverage, who is NOT insured by a homeowners policy?
A) A 20 year-old resident.
B) A live-in housekeeper requested by the named insured.
C) A nonresident uncle.
D) The named insured.
Answer: C
A homeowners policy insures the personal property of the named insured, all relatives of the named insured who live in the same household, and any other residents who are under the age of 21 and in the care of any member of the insured’s family. On request of the named insured, the personal property of guests or a residence employee may be covered.
Under the homeowners policy, what is the maximum number of roomers, boarders permitted in residential structures eligible for homeowners coverage?
A) 3
B) 5
C) 2
D) 1
Answer: C
Under the Homeowners policy, eligible residences may contain two roomers or boarders per family. Notice that this differs from dwelling policy eligibility, which allows up to five roomers or boarders.
Which one of the following homeowners forms is used to cover tenants or renters?
A) HO-2.
B) HO-5.
C) HO-6.
D) HO-4.
Answer: D
The HO-4 is the coverage form for tenants and renters. The HO-2 is the broad form of homeowners insurance. The HO-6 provides coverage for condominium owners and town home owners. The HO-5 is the comprehensive form.
Robert wants open perils coverage on his dwelling and named perils coverage for his personal property. Which homeowners form should he choose?
A) HO-3.
B) HO-2.
C) HO-4.
D) HO-6.
Answer: A
The homeowners HO-3 Special Form provides open perils coverage on the dwelling and named perils coverage on personal property. HO-2 is the Broad Form and HO-6 is the condominium unit-owners form.
Which homeowners policy would be written to cover personal property only?
A) HO-5.
B) HO-4.
C) HO-2.
D) HO-3.
Answer: B
The HO-2, HO-3, and HO-5 all provide coverage on both the dwelling and personal property. HO-4 (referred to as the Renters or Tenants Form) does not provide coverage on the dwelling because the insured does not own it.
Which one of the following homeowners forms provides open perils coverage?
A) HO-8.
B) HO-2.
C) HO-4.
D) HO-3.
Answer: D
The HO-2, HO-4, and HO-8 are all named perils policies. HO-3 provide open perils coverage on the dwelling (Coverage A) and named perils coverage on personal property.
Who would use a HO-6 homeowners form?
A) Owner of a rental house.
B) Owner of a duplex.
C) Tenant of a rental house.
D) Owner of a condominium.
Answer: D
Most of the homeowners forms were created for owner-occupants of dwellings. Typically, neither tenants nor condominium owners own the entirety of the dwellings they occupy, so other policy forms had to be designed for them. For tenants, the HO-4 is available, and for condominium owners the HO-6 form is used.
Which one of the following dwellings would a Homeowner Form HO-3 cover?
A) Condominium.
B) Apartment building.
C) Office building.
D) Single family home.
Answer: D
Homeowner Form HO-3 covers owner-occupied, single family dwellings. Condominiums are covered by the HO-6. Office and apartment buildings would be covered by a commercial policy.
In homeowners policies, what does Coverage A insure?
A) Dwelling.
B) Personal property.
C) Other structures.
D) Extra expenses.
Answer: A
Coverage A provides dwelling coverage, Coverage B covers other structures, Coverage C insures personal property, and Coverage D covers loss of use.
Which one of the following is NOT an appurtenant structure for purposes of a homeowners policy?
A) Storage shed.
B) Tree.
C) Fence.
D) Swimming pool.
Answer: B
Appurtenant structures for purposes of a homeowner’s policy are any structures that are set apart from the dwelling by clear space. This includes detached garages, fences, swimming pools, and storage sheds. Structures connected to the dwelling by only a fence, utility wire, or similar connection are considered unattached.
Which one of the following could be insured under Coverage B of a homeowners policy?
A) A detached garage rented to a neighbor to store his sports car during the winter.
B) A detached garage with a second-floor room rented by a travel agent for several representatives to book cruises over the telephone.
C) A detached garage rented to a friend to change the oil for neighbors at a discounted price.
D) A garage next to the house with only the roof connecting them
Answer: A
Other Structures–Coverage B covers structures on the premises set apart from the dwelling by clear space, such as a detached garage. The policy does not cover other structures rented to others for other than use as a private garage. A detached garage used for business is also not covered.
Which of the following items could be insured under Coverage C of a homeowners policy?
A) Motorized go cart.
B) Snowmobile.
C) Personal property usually located in a secondary residence.
D) Exotic birds.
Answer: C
Coverage C covers personal property under a homeowners policy. Personal property usually located in a secondary residence may be insured under Coverage C. In addition, the following personal property is covered: personal property the insured owns or uses that is located anywhere in the world; personal property of others while it is in the portion of the residence the insured occupies; and personal property of a guest or employee while it is located in any resident the insured occupies. Animals and motorized vehicles are excluded.
Bill and Marge have a HO-2 policy insuring their main residence for $150,000. How much coverage do they have for personal property kept at their summer cottage?
A) $7,500.00
B) $15,000.00
C) $30,000.00
D) $75,000.00
Answer: A
The HO-2 policy provides an additional 50% of the amount of coverage on the dwelling for loss of personal property, but only 10% of the personal property limit can be applied to property not located at the insured’s primary residence.
Which of the following items may be covered under Coverage C-Personal Property of a homeowners policy?
A) Animals.
B) Property belonging to the insured’s boarder.
C) Aircraft parts.
D) Personal property of the insured located anywhere in the world.
Answer: D
Personal property the insured owns or uses that is located anywhere in the world is covered under a homeowners policy, as is personal property of others at the insured’s request while it is in the portion of the residence premises the insured occupies, property of a guest or residence employee when it is located in any residence the insured occupies, and personal property usually located in a secondary residence (limited to 10% of Coverage C). Animals, birds, fish, aircraft, aircraft parts, and property belonging to boarders are not covered property.
For a homeowners policy, which one of the following statements about insuring personal property normally kept at a residence other than the residence premises is CORRECT?
A) It is covered only if the insured has paid an additional premium.
B) It is covered for up to 10% of the coverage C limit.
C) It is not covered when located off the residence premises.
D) It is covered for the full limit worldwide, whether on or off premises.
Answer: B
Unscheduled personal property kept at a location other than the main residence is covered up to a limit of 10% of the coverage C limit. Personal property on the described premises is always covered.
An insured owns a personal auto policy and a homeowners policy. He purchases a new TV and puts it in the trunk of his car. On the way home he hits another car, and the crash totally destroys the TV. The damage to the TV is covered by which insurance policy?
A) auto.
B) umbrella.
C) medical expense.
D) homeowners.
Answer: D
Under homeowners policies, Coverage C–Personal Property covers all personal property of the insured, including televisions. A television is not part of the insured’s automobile, and therefore would not be covered under his auto policy.
Under Coverage C-Personal Property, the homeowners policy (HO-3) covers property owned or used by an insured. When jewelry valued at $5,000 is stolen from the residence, the policy will pay:
A) $1,000.00
B) $5,000.00
C) $1,500.00
D) $0.00
Answer: C
The HO-3’s insuring agreement contains the obligation of the insurer to pay covered claims, subject to specified conditions and exclusions. Under the special limits of liability section, the policy limits loss by theft of jewelry, watches, furs, and precious and semiprecious stones to $1,500. If the insured needs additional coverage, the property may be scheduled, and an additional premium will be charged.
Coverage D in homeowners insurance is for what type of loss?
A) Personal property.
B) Personal liability.
C) Loss of use.
D) Dwelling.
Answer: C
The 6 insuring agreements in the homeowners forms are Coverage A–Dwelling, Coverage B–Other Structures, Coverage C–Personal Property, Coverage D–Loss of Use, Coverage E–Personal Liability, and Coverage F–Medical Payments.
After a fire damages a home, how much is the insured entitled to recover for buying materials to board up the windows under the homeowners policy?
A) No coverage is available.
B) Whatever it will reasonably cost.
C) 5% of the Coverage A limit.
D) $500.00
Answer: B
The additional coverage of reasonable repairs will pay the reasonable costs incurred by the insured for necessary repairs made solely to protect covered property from further damage.
All of the following statements about debris removal coverage under the homeowners policy are correct EXCEPT:
A) the homeowners policy allows 5% of the limit of liability applying to the damaged property for reimbursement for debris removal.
B) the insurer will pay the reasonable expenses associated with the removal of remaining debris following a covered loss.
C) debris (e.g., ash, dust, or particles) from a volcanic eruption that caused direct loss to a building or property contained in a building is covered.
D) reimbursement for debris removal is included in the limit of liability applying to the damaged property.
Answer: A
Reasonable expenses for the removal of property damaged under Coverages A through D are covered as an additional coverage under the homeowners policy. This expense is included in the limit of liability for the damaged property. An additional 5% of the policy limits may be used for removal if the policy limits are exceeded by the loss.
