Homeowners Insurance CA

Question 1

Which of the following would cover “unattached structures” under a Homeowners policy?

Answer Choices: Select the Correct Answer
Coverage A.
Coverage C.
Coverage D.
Coverage B.

Answer 1

Coverage B. is correct.

EXPLANATION:
Coverage B - Other Structures covers structures that are unattached to the covered dwelling.

Question 2

Which of the following is not eligible for coverage under any of the Homeowners forms?

Answer Choices: Select the Correct Answer
A tenant living in an apartment building.
A condominium unit-owner.
A residence located on a farm.
A mobile home used as a permanent residence.

Answer 2

A residence located on a farm. is correct.

EXPLANATION:
Farm dwellings are not eligible for coverage under a Homeowners form. Separate Farm insurance coverage is available.

Question 3

All of the following are eligible for a Homeowners policy, EXCEPT:

Answer Choices: Select the Correct Answer
A couple that have purchased a hunting cabin to be used by them each year during the fall season.
An individual who owns and lives in a condominium.
A couple in the process of apply for a mortgage for the purposes of buying a house in which to live.
An individual who purchases a duplex in order to rent out both units.

Answer 3

An individual who purchases a duplex in order to rent out both units. is correct.

EXPLANATION:
The owner must occupy one side of the duplex in order to be eligible for a Homeowners policy.

Question 4

Which of the following is eligible to be a named insured under a Homeowners policy?

Answer Choices: Select the Correct Answer
A trust.
A corporation.
A partnership.
An estate.

Answer 4

A trust. is correct.

EXPLANATION:
A trust is eligible to be a named insured under a Homeowners policy. A corporation, a partnership, nor an estate is eligible to be a “named insured” under a Homeowners policy.

Question 5

Which of the following is NOT a type of “incidental business occupancy” permitted with a Homeowners policy?

Answer Choices: Select the Correct Answer
A home-based part-time medical billing office.
Violin lessons provided by the owner of the home to individuals.
A home-based freelance writing office.
An “Arts & Crafts” studio open to the public for the purposes of selling the items created.

Answer 5

An “Arts & Crafts” studio open to the public for the purposes of selling the items created. is correct.

EXPLANATION:
An “Arts & Crafts” studio open to the public for the purposes of selling the items created would NOT be a type of “incidental occupancy” that would be covered under a Homeowners policy. This is because of the liability created by conducting an open-to-the-public business on the residence premises.

Question 6

A standardized Homeowners policy is best described as:

Answer Choices: Select the Correct Answer
A property policy that offers optional liability insurance.
A package policy that provides both property and liability insurance.
A personal insurance policy for anyone who owns property.
A personal insurance contract between the insured and the agent.

Answer 6

A package policy that provides both property and liability insurance. is correct.

EXPLANATION:
The Homeowners policy provides both property and liability coverage.

Question 7

A Homeowners policy is a personal package policy. All of the following are advantages of a personal package policy, EXCEPT:

Answer Choices: Select the Correct Answer
Package policies allow for lower deductibles.
Fewer gaps in coverage exist with package policies.
Insureds enjoy lower premiums with package policies.
Package policies simplify the billing process for insurance companies.

Answer 7

Package policies allow for lower deductibles. is correct.

EXPLANATION:
Insureds select their deductible amounts, package policies do not allow for lower deductibles. All of the other answer choices are advantages to package policies.

Question 8

Homeowners policies provide personal liability coverage that follows an insured anywhere in the world under:

Answer Choices: Select the Correct Answer
Coverage E.
Coverage A.
Coverage F.
Coverage D.

Answer 8

Coverage E. is correct.

EXPLANATION:
Personal liability coverage for the insured under a Homeowners policy is found in Section II - Coverage E of the Homeowners policy.

Question 9

An “insured” under an unendorsed Homeowners policy can be all of the following, EXCEPT:

Answer Choices: Select the Correct Answer
A 14-year-old niece of whom the named insured has custody.
A childhood friend of the named insured who is visiting for a month from England.
The named insured’s 22-year-old daughter who is a full-time graduate student.
The spouse of the named insured who is also a resident of the insured location.

Answer 9

A childhood friend of the named insured who is visiting for a month from England. is correct.

EXPLANATION:
A childhood friend of the named insured would not be considered an “insured” under a Homeowners policy.

Question 10

Homeowners policies cover all of the following, EXCEPT:

Answer Choices: Select the Correct Answer
Owner-occupied residences with up to 2 boarders permitted.
Incidental business occupancies.
A 2-family dwelling occupied by tenants who are renting the covered premises from the named insured.
A dwelling owned by a life estate.

Answer 10

A 2-family dwelling occupied by tenants who are renting the covered premises from the named insured. is correct.

EXPLANATION:
A 2-family dwelling occupied by tenants who are renting from the named insured would not be covered under a Homeowners policy. Rental property is covered under the Dwelling policies.

Question 11

Which of the following statements is TRUE regarding the peril of theft under the Homeowners policies?

Answer Choices: Select the Correct Answer
Theft from a dwelling being rented is covered.
The HO-8 form specifies a limit of $1,000 for theft.
Theft of watercraft off the insured premises is covered for up to $5,000.
All of the HO forms provide coverage for the broader definition of theft known as “mysterious disappearance”.

Answer 11

The HO-8 form specifies a limit of $1,000 for theft. is correct.

EXPLANATION:
The only true statement in the answer choices is: “The HO-8 form specifies a limit of $1,000 for theft.” Theft from any part of the dwelling that is being rented is not covered, theft of watercraft is not covered except with a special limit of liability under Coverage C, which is less than $5,000. Only the HO-5 provides coverage for mysterious disappearance.

Question 12

If an insured is covered under an HO-2 policy, damage caused by wind to his/her personal property would be covered if:

Answer Choices: Select the Correct Answer
The wind created an opening in the structure, blowing the personal property outside, where it incurred damage.
The wind created an opening in the structure, allowing the wind to damage the personal property inside.
The insured accidentally left the upstairs windows open during a thunderstorm, allowing the wind to blow into the structure, causing damage to the personal property.
The insured’s TV antenna falls on the roof, creating an opening that allowed wind to cause damage to the personal property inside.

Answer 12

The wind created an opening in the structure, allowing the wind to damage the personal property inside. is correct.

EXPLANATION:
The HO-2 provides coverage for the broad form perils on personal property. However, for loss due to wind, the wind would first have to damage the structure, create an opening, and then damage the personal property inside the building. If the wind creates the opening in the structure, the damage to the person property is covered. If the insured creates the opening, such as leaving a door or window open, the damage to the person property will be excluded.

Question 13

Sebastian puts a roast in the oven and decides to go to the movies, thinking that he has plenty of time before roast will be fully cooked. After the movie, he is caught behind a car accident and it takes him several hours to get home. When Sebastian finally arrives home, the roast is completely blackened and the contents of his home are thoroughly covered in soot from the smoke. Which of the following statements is true regarding how this claim would be handled under a Homeowners policy?

Answer Choices: Select the Correct Answer
The loss would be covered under the peril of fire.
The loss would not covered because the peril of smoke is excluded.
The loss would be covered under the peril of smoke.
The smoke was not caused by an unfriendly fire and therefore, the loss is excluded.

Answer 13

The loss would be covered under the peril of smoke. is correct.

EXPLANATION:
Even though the cause of this loss was not a fire, the loss is still covered under the peril of smoke. Property forms include the peril of smoke. This is a separate peril and the smoke damage does not have to occur as a result of a fire under a Homeowners policy.

Question 14

Which of the following Homeowners forms is intended to cover the possessions of the insured who is leasing an apartment?

Answer Choices: Select the Correct Answer
HO-8
HO-5
HO-3
HO-4

Answer 14

HO-4 is correct.

EXPLANATION:
The HO-4 was designed to cover the personal property of insured’s who are renting their place of residence.

Question 15

Sarah is purchasing a 100-year-old home that hasn’t had significant renovations. She has contacted her insurance company and requested coverage under an HO-3 form. Her insurance company has refused to place the coverage but offered to cover the home under an HO-8 form instead. All of the following statements provide a reasonable explanation for the insurance company’s choice of the HO-8 form, EXCEPT?

Answer Choices: Select the Correct Answer
The HO-8 form provides higher limits of coverage to replace items such as antique building materials to allow the home to remain true to its original design.
Covering an older home on a form that would provide a higher limit of liability than the market value of the dwelling, would create a moral hazard.
To cover an older home with an HO-3 that provides replacement cost coverage on the dwelling, would require a prohibitively high premium rate.
The insurance company can settle losses under the HO-8 at “repair cost” instead of the much higher replacement cost settlement.

Answer 15

The HO-8 form provides higher limits of coverage to replace items such as antique building materials to allow the home to remain true to its original design. is correct.

EXPLANATION:
Because this question ends in “EXCEPT”, you are looking for the answer that is NOT TRUE. The HO-8 form DOES NOT provide higher limits of coverage to replace items such as antique building materials. The other three answer choices are correct regarding the HO-8 form.

Question 16

The insured is covered under a standard HO-5 policy. What coverage does the insured have for personal property?

Answer Choices: Select the Correct Answer
Open perils.
The broad form perils.
Named perils.
Replacement cost.

Answer 16

The correct answer is: Open perils.

EXPLANATION:
The HO-5 form provides open peril coverage on both the dwelling and personal property.

Question 17

All of the following are “open-peril” exclusions of the HO-3 and HO-5 form, EXCEPT:

Answer Choices: Select the Correct Answer
Flood.
Neglect, deterioration, and general wear and tear.
Theft.
Mold, fungus, and wet rot.

Answer 17

The correct answer is: Theft.

EXPLANATION:
Theft is included under the open perils of Coverage A & B included on both the HO-3 and HO-5 forms. The other three answer choices are excluded by the open peril forms.

Question 18

Which of the following statements is NOT TRUE regarding the HO-3 form?

Answer Choices: Select the Correct Answer
It provides named peril coverage for personal property.
It provides coverage for the basic and broad perils for personal property.
It provides coverage for the basic and broad perils for the Dwelling & Other Structures.
It provides open peril coverage for the Dwelling & Other Structures.

Answer 18

It provides coverage for the basic and broad perils for the Dwelling & Other Structures. is correct.

EXPLANATION:
The HO-3 does NOT provide coverage for the basic and broad perils for the Dwelling & Other Structures.

Question 19

Tom rents half of a duplex. During a severe storm, lightning strikes a tree in the front yard and it falls, causing damage on Tom’s side of the duplex. Which of the following losses will be covered by Tom’s HO-4 policy?

Answer Choices: Select the Correct Answer
The removal of the tree and debris costing hundreds of dollars.
Tom’s TV and entertainment system that were damaged when the tree fell through the roof.
Tom’s attached carport that was damaged when the tree ripped it from the side of the house.
Tom’s roof and front wall that were damaged when the tree fell on the house.

Answer 19

Tom’s TV and entertainment system that were damaged when the tree fell through the roof. is correct.

EXPLANATION:
An HO-4 covers personal property if damaged by a covered peril. There is no coverage for real property under an HO-4 policy.

Question 20

Which of the following statements is TRUE regarding the sections of a Homeowners policy?

Answer Choices: Select the Correct Answer
Section II coverages vary greatly between the different HO forms.
Section I coverages are identical on all the different HO forms.
Section I coverages vary greatly between the different HO forms.
The additional coverages provided by all the HO forms is identical in Sections I & II.

Answer 20

Section I coverages vary greatly between the different HO forms. is correct.

EXPLANATION:
The only answer choice that is true is: “Section I coverages vary greatly between the different HO forms.” This is because of the different perils insured against. Section II of the forms is identical on all forms and the additional coverage provided by Section I and Section II are different.

Question 21

The insured is wearing a diamond ring while on vacation in Europe. Her ring is valued at $1,500 is stolen. What coverage would apply under her Homeowners policy?

Answer Choices: Select the Correct Answer
The claim will be denied because they were out of the United States.
The loss has exceeded the theft limit.
Theft is not covered for jewelry valued in excess of $1,000.
The policy will pay the loss less the deductible.

Answer 21

The policy will pay the loss less the deductible. is correct.

EXPLANATION:
Personal property is covered anywhere in the world. The theft limit for jewelry is $1,500. The amount of the loss, less the deductible is covered.

Question 22

All of the following items are given a “special limit of liability” under Coverage C of the Homeowners policies, EXCEPT:

Answer Choices: Select the Correct Answer
Motorized land vehicles.
Trailers.
Jewelry.
Watercraft.

Answer 22

Motorized land vehicles. is correct.

EXPLANATION:
Motorized land vehicles are not given a special limit of liability under Coverage C of the Homeowners forms.

Question 23

Which of the following would NOT be covered under Coverage B of the Homeowners forms?

Answer Choices: Select the Correct Answer
A separate building on the insured premises used for business.
A building connected to the main dwelling only by a fence.
A private garage rented to a non-tenant.
An in-ground swimming pool.

Answer 23

A separate building on the insured premises used for business. is correct.

EXPLANATION:
A building used for business purposes is not covered as an “other structure”. However, there is an exception for buildings that are rented out as private garages. Buildings connected to the dwelling only by a fence are considered detached, and therefore are “other structures”. An in-ground swimming pool would also be considered a structure.

Question 24

Coverages A, B, C, and D of Section I of a Homeowners policy are (in order):

Answer Choices: Select the Correct Answer
Personal Property (Contents); Loss of Use; Dwelling; Other Structures.
Dwelling; Personal Property (Contents); Other Structures; Loss of Use.
Dwelling; Other Structures; Personal Property (Contents); Loss of Use.
Personal Property (Contents); Dwelling; Other Structures; Loss of Use.

Answer 24

Dwelling; Other Structures; Personal Property (Contents); Loss of Use. is correct.

EXPLANATION:
In order, the coverage of the Homeowners policy are: Coverage A - Dwelling; Coverage B - Other Structures; Coverage C - Personal Property; Coverage D - Loss of Use. You can view this as a simple list on the Introduction screen of Module C of the Homeowners chapter.

Question 25

All of the following items have a special limit of liability for Coverage C of the Homeowners forms, EXCEPT:

Answer Choices: Select the Correct Answer
Securities.
Gold.
Outdoor furniture.
Watercraft.

Answer 25

Outdoor furniture. is correct.

EXPLANATION:
Coverage C of the Homeowners forms has a lengthy list of items that have a special limit of liability that includes securities, gold, and watercraft. There is no special limit for outdoor furniture.

Question 26

Coverage A - Dwelling of a standard Homeowners policy provides coverage for all of the following, EXCEPT:

Answer Choices: Select the Correct Answer
Structures attached to the dwelling.
The dwelling described on the Declarations page.
Materials and supplies located next to the dwelling used to construct, alter, or repair the dwelling or other structures.
The land where an insured structure is being built.

Answer 26

The land where an insured structure is being built. is correct.

EXPLANATION:
Land is NOT covered under the Coverage A insuring agreement of a standard Homeowners policy.

Question 27

The primary amount of insurance on an HO-2 policy is:

Answer Choices: Select the Correct Answer
Coverage A.
Coverage B.
Coverage C.
Coverage D.

Answer 27

Coverage A. is correct.

EXPLANATION:
The primary amount of insurance on an HO-2 policy is Coverage A.+

Question 28

Perry has his home covered under an HO-5 policy. He borrows a friend’s expensive camera and takes it on vacation, where it is stolen. Coverage for the stolen camera is:

Answer Choices: Select the Correct Answer
Excluded by the care, custody & control rule.
More appropriately claimed under the friend’s policy because he was the owner of the camera.
Included for up to $500.
Included anywhere in the world.

Answer 28

Included anywhere in the world. is correct.

EXPLANATION:
The Homeowner policy provides coverage for the insured’s items of personal property anywhere in the world. The policy covers personal property “owned or used” by the insured.

Question 29

Coverage D - Loss of Use on the Homeowners forms provides coverage for “Civil Authority Prohibits Use” for:

Answer Choices: Select the Correct Answer
For as long as it takes to find another location for the insured to temporarily reside.
No more than four weeks.
For as long as it takes for the civil authority to declare the area fit for habitation.
No more than two weeks.

Answer 29

No more than two weeks. is correct.

EXPLANATION:
The indirect loss coverage for “Civil Authority Prohibits Use” under the Homeowners forms, coverage is provided for additional living expenses and fair rental value for no more than two weeks.

Question 30

Blake is covered by a Homeowners policy with a $50,000 Coverage C limit. Disregarding any deductibles, what is the most Blake can collect if his $1,500 boat is stolen from the insured premises?

Answer Choices: Select the Correct Answer
$1,000.
$1,500.
$1,400.
$2,000.

Answer 30

$1,500. is correct.

EXPLANATION:
The insured can collect up to $1,500 because of the “special limits of liability” for Coverage C that apply to watercraft.

Question 31

Lucy has insured her one-family home under a standard HO-3 form with a Coverage A limit of $100,000. If she suffered a $100,000 loss to her covered dwelling, how much coverage would be provided under Coverage B for her unattached garage on the premises?

Answer Choices: Select the Correct Answer
$5,000.
$15,000.
$10,000.
$7,500.

Answer 31

$10,000. is correct.

EXPLANATION:
The HO-3 form provides 10% of the Coverage A - Dwelling limit for Coverage B - Other Structures. The most the insurance company will pay is $10,000 ($100,000 multiplied by 10%).

Question 32

Which of the following is NOT a typical deductible amount found in Section I of a standard Homeowners policy?

Answer Choices: Select the Correct Answer
$500.
$1,000.
$1,500.
$2,500.

Answer 32

$1,500. is correct.

EXPLANATION:
$1,500 is NOT considered a typical deductible amount found in Section I of a standard Homeowners policy.

Question 33

Lightning strikes a 50-foot oak tree in an insured’s yard splitting the tree in half. The tree falls hitting several small trees causing extensive damage to the trees and scattering debris in the yard. The HO-2 Homeowners Policy will pay:

Answer Choices: Select the Correct Answer
A maximum of $250 per tree.
$500 per tree plus the cost of debris removal.
A maximum of $500 per tree.
$250 per tree plus the cost of debris removal.

Answer 33

The correct answer is: A maximum of $500 per tree.

EXPLANATION:
The standardized Homeowners policies provide a maximum limit of 5% of coverage A and a maximum of $500 for any one tree, shrub or plant.

Question 34

An insured has her dwelling covered by an HO-3 form, with a $500,000 limit of liability for Coverage A. A fire breaks out and the dwelling is a total loss. The entire $500,000 limit is used to cover the direct physical damage to the dwelling. However, there is a large amount of debris from the burned structure covering the insured’s property that will need to be removed. In this situation, how will the cost of the debris removal be paid?

Answer Choices: Select the Correct Answer
5% of the Coverage A limit is set aside to cover debris removal. This means that the insured must pay $25,000 out-of-pocket to cover the direct physical damage to the dwelling itself.
When the entire Coverage A limit is used to cover the direct physical damage to the dwelling, an additional 5% of the Coverage A limit will be added to cover debris removal.
The policy will only pay its Coverage A limit and the insured must pay for the debris removal out-of-pocket.
An unlimited additional amount of insurance is covered on all of the Homeowners forms for debris removal because the insured cannot begin to rebuild until the debris is removed.

Answer 34

When the entire Coverage A limit is used to cover the direct physical damage to the dwelling, an additional 5% of the Coverage A limit will be added to cover debris removal. is correct.

EXPLANATION:
Coverage for debris removal is included in the Coverage A limit of liability, it is not an additional amount of insurance, except if the entire Coverage A limit is used to cover the damage or destruction to the dwelling. In that case, there is an additional amount of insurance that will be added for debris removal. This additional amount is 5% of the Coverage A limit.

Question 35

An insured does not carry enough insurance to comply with the coinsurance clause of his Homeowners policy. If this insured would have a loss to his covered home, how will the insurer settle the loss?

Answer Choices: Select the Correct Answer
The insurer will settle the loss at replacement cost value and charge the insured an additional premium over time to cover the loss settlement.
The insurer will either settle the loss at ACV, or pay the proportion of the cost to repair or replace the part of the building that was damaged, based on the amount of insurance the insured carried.
The insurer will return the premiums paid by the insured so that he can use it to repair his dwelling.
The insurer will refer the insured to his state’s Guarantee Fund to have his loss settled as replacement cost.

Answer 35

The insurer will either settle the loss at ACV, or pay the proportion of the cost to repair or replace the part of the building that was damaged, based on the amount of insurance the insured carried. is correct.

EXPLANATION:
The insurer can choose to either settle the loss at ACV, or pay the proportion of the cost to repair or replace the part of the building that was damaged, based on the amount of insurance the insured carried.

Question 36

Which of the following statements is TRUE regarding the Homeowners “additional coverage” known as Landlord’s Furnishings?

Answer Choices: Select the Correct Answer
Extends Coverage A.
Provides up to $2,000 to cover landlord’s furnishings such as appliances, carpeting and other household furnishings.
This additional coverage includes the theft of the landlord’s furnishings.
The coverage is not additional insurance and does not increase the limits of the policy.

Answer 36

The correct answer is: The coverage is not additional insurance and does not increase the limits of the policy.

EXPLANATION:
The only answer choice that is true is: “The coverage is not additional insurance and does not increase the limits of the policy”. The other three answer choices are not true of this additional coverage.

Question 37

A deductible applies to all of the following additional coverages under the standard Homeowners forms, EXCEPT:

Answer Choices: Select the Correct Answer
Fire Department Service Charge.
Loss Assessment.
Reasonable Repairs.
Debris Removal.

Answer 37

Fire Department Service Charge. is correct.

EXPLANATION:
The policy deductible does not apply to the Fire Department Service Charge. It does apply to all the other additional coverages listed.

Question 38

An insured has received actual cash value payment from the adjuster for a covered loss. At the time he is satisfied with the payment. He later changes his mind and wants the full replacement value. How many days does he have to submit the receipts to get the replacement cost payment under a HO-3 form?

Answer Choices: Select the Correct Answer
30 days.
60 days.
180 days.
365 days.

Answer 38

180 days. is correct.

EXPLANATION:
The homeowner forms that provide for replacement cost coverage contain a clause which allows the insured to accept “actual cash value” for the loss. If the insured wants to pursue replacement cost for his damaged property, he must notify the insurance company of his intent to do so within 180 days after the date of the loss.

Question 39

Section I of the Homeowners forms provides up to ________ when the insured is assessed by a corporation or property owner’s association for damage to property owned collectively, but only if it was damaged by a peril insured against under Coverage A of the policy.

Answer Choices: Select the Correct Answer
$250.
$1,500.
$500.
$1,000.

Answer 39

$1,000. is correct.

EXPLANATION:
Section I of the Homeowners policy provides as an “additional coverage” $1,000 when the insured is assessed by a corporation or property owner’s association for damage to property owned collectively, but only if it was damaged by a peril insured against under Coverage A of the policy.

Question 40

The Homeowners “additional coverages” includes coverage up to __________ for grave markers including mausoleums on or away from the residence premises by a peril insured against.

Answer Choices: Select the Correct Answer
$5,000.
$1,000.
$2,500.
$1,500.

Answer 40

$5,000. is correct.

EXPLANATION:
The Homeowners policies provide as an additional coverage, up to $5,000 for this coverage. The perils insured against are listed in Coverage C.

Question 41

The definition of “collapse” as defined in the additional coverage of the Homeowners forms includes:

Answer Choices: Select the Correct Answer
A gradual leaning and falling down of the structure.
Damage caused by vermin known to exist by the insured when the structure collapsed.
An abrupt falling down or caving in of the structure or a part of the structure.
A gradual caving in and sinking of the structure or a part of the structure.

Answer 41

An abrupt falling down or caving in of the structure or a part of the structure. is correct.

EXPLANATION:
The definition defines collapse as an “abrupt falling down or caving in of the structure or a part of the structure.”

Question 42

The limit of liability for the additional coverage under the standardized Homeowners forms for “Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money” is:

Answer Choices: Select the Correct Answer
$250.
$500.
$1,000.
$1,500.

Answer 42

The correct answer is: $500.

EXPLANATION:
The standardized Homeowners policies provide $500 of additional coverage for “credit card, electronic fund transfer card or access device, forgery and counterfeit money”. Some states’ statutory forms may increase this coverage, but you are required to know the limits of coverage for both standardized and statutory forms for your state licensing exam.

Question 43

Which of the following would not be excluded under any of the Homeowners forms?

Answer Choices: Select the Correct Answer
Subsidence.
Explosion of a hot water heater that damages carpeting.
Neglect.
The increased cost to repair a dwelling in accordance with newer building codes.

Answer 43

Explosion of a hot water heater that damages carpeting. is correct.

EXPLANATION:
Explosion is a covered peril on all the HO forms. The other three answer choices are exclusions of all the Homeowner forms.

Question 44

James has purchased a 20-year-old home for $120,000. He covers it with an HO-5 form for $100,000 with a deductible of $500. The roof of the home needs to be replaced and James has this work performed and purchases a service agreement on the roof before moving into the home. The service agreement covers $1,000 for roof damage from any cause that occurs within 5 years of the installation of the new roof. Two years after moving into the home, a heavy thunderstorm hits James’ neighborhood and large sections of his roof are damaged, totaling $3,000 in damage. How will this claim be paid?

Answer Choices: Select the Correct Answer
The insurance company pays $3,000 minus the $500 deductible. The service agreement does not pay anything because it is considered excess and only pays when the Homeowners policy limits are exhausted.
The service agreement pays $1,000 first, leaving the remaining $2,000 minus the deductible ($1,500) for the insurance company to pay.
The insurance company pays the entire $3,000 and adds the deductible amount to the insured’s premium bill. The service agreement will then pay the insured $1,000 to cover the additional living expenses incurred while the roof was being repaired.
The service agreement will pay $500 for the damage and $500 to meet the insured’s deductible. Then, the insurance company will pay $2,000 minus the deductible ($500) on the damage.

Answer 44

The service agreement pays $1,000 first, leaving the remaining $2,000 minus the deductible ($1,500) for the insurance company to pay. is correct.

EXPLANATION:
The service agreement ALWAYS pays first because the Homeowners policies are considered EXCESS when there is a home warranty or service agreement in place. Therefore in the situation posed by the question, the service agreement pays $1,000, leaving the remaining $2,000 minus the deductible ($500) for the insurance company to pay.

Question 45

Under the “additional coverages” contained in Section II of the Homeowners forms, damage to “property of others” will not be covered if that damage was caused intentionally by an insured who is at least:

Answer Choices: Select the Correct Answer
13 years of age.
15 years of age.
16 years of age.
18 years of age.

Answer 45

13 years of age. is correct.

EXPLANATION:
If the child is under age 13 the policy will cover the intentional acts. This coverage is only for property damage and not bodily injury.

Question 46

The Section II - Additional Coverages of Homeowners policies, damage to the property of others (whether or not in the insured’s custody and regardless of fault) is covered up to:

Answer Choices: Select the Correct Answer
$1,500 per occurrence.
$5,000 per occurrence.
$1,000 per occurrence.
$2,500 per occurrence.

Answer 46

The correct answer is: $1,000 per occurrence.

EXPLANATION:
The limit is $1,000.

Question 47

Which of the following watercraft would be covered under Section II - Liability of the Homeowners forms?

Answer Choices: Select the Correct Answer
Watercraft with a 40-horsepower outboard motor.
A 28-foot sailboat.
Watercraft with a 100-horsepower inboard motor.
A watercraft in storage.

Answer 47

A watercraft in storage. is correct.

EXPLANATION:
A watercraft is storage is an exception to the exclusion for watercraft and is, therefore covered.

Question 48

Sally’s home is covered under an HO-3 policy. Coverage F of that policy will pay medical expenses for which of the following?

Answer Choices: Select the Correct Answer
Sally’s son or daughter, while they are away at college.
Sally and all her resident relatives.
Sally’s roomers and/or boarders.
Anyone who is invited onto Sally’s property and is injured while there.

Answer 48

Anyone who is invited onto Sally’s property and is injured while there. is correct.

EXPLANATION:
Coverage F – Medical Payments to Others under a Homeowners policy provides coverage for an injury occurring on the insured premises, to a non-resident invitee.

Question 49

What is the standard minimum limit of liability for Coverage E – Personal Liability coverage on Homeowners policies?

Answer Choices: Select the Correct Answer
$100,000 per occurrence.
$50,000 per occurrence.
$1,000 per person.
$1,000,000 per occurrence.

Answer 49

$100,000 per occurrence. is correct.

EXPLANATION:
Coverage E – Personal Liability coverage of the Homeowner policies, has a standard minimum limit of $100,000 per occurrence. An insured can request a higher limit if desired.

Question 50

Sam and Dan are working to clean out the gutters around the roof on Sam’s house. Sam and Dan are standing at the top of separate ladders that are propped against the side of Sam’s house, when Dan’s ladder begins to wobble and ultimately falls into Sam’s ladder. Both men and their ladders crash to the ground. Whose injuries will be covered by Sam’s Homeowners policy under Coverage E - Personal Liability?

Answer Choices: Select the Correct Answer
Only Dan’s injuries would be covered.
Neither Sam’s nor Dan’s injuries would be covered.
Both Sam and Dan’s injuries would be covered.
Only Sam’s injuries would be covered.

Answer 50

Only Dan’s injuries would be covered. is correct.

EXPLANATION:
The Homeowners policy provides coverage under “Coverage E - Personal Liability” for sums the insured is liable for injuries to “OTHERS”, therefore Dan’s injuries would be covered. No one with the title of “insured” under a Homeowners policy can collect for injuries under the liability section of the policy, so Sam’s injuries are not covered by his Homeowners policy.

Question 51

Which of the following would be covered under Section II - Liability of the Homeowner policy?

Answer Choices: Select the Correct Answer
Damage to rented premises occupied by the insured caused by a fire accidentally set by the insured.
Intentional acts of the insured.
Operating a dirt bike off the insured’s premises.
Operating a 75-HP boat owned by the insured.

Answer 51

Damage to rented premises occupied by the insured caused by a fire accidentally set by the insured. is correct.

EXPLANATION:
Damage to property rented to, occupied by, used by or in the care, custody or control of an insured for specified perils consisting of fire, smoke and explosion would be covered. An insured would have coverage under an HO-4 if he accidentally sets fire to the apartment where he is residing.

Question 52

Mary intentionally trips her neighbor while the neighbor is trespassing on the insured’s property. Although the neighbor is not injured, Mary gives the neighbor $500 in cash to settle any potential liability claim. How will Mary’s insurance company most likely respond in this situation?

Answer Choices: Select the Correct Answer
The insurer will reimburse Mary for the entire $500.
The insurer will reimburse Mary for $500, less any applicable deductible.
The insurer will sue the neighbor for the return of the $500 because the neighbor was not injured.
The insurer will deny liability coverage because Mary’s action was intentional.

Answer 52

The insurer will deny liability coverage because Mary’s action was intentional. is correct.

EXPLANATION:
Intentional acts are excluded and the company will deny the claim. The only exception to this exclusion is when the insured is attempting to use reasonable force to protect themselves or their property.

Question 53

Which of the following statements is TRUE regarding Coverage F - Medical Payments to Others on the Homeowners policies?

Answer Choices: Select the Correct Answer
Pays the medical expenses of others without regard to whether or not the insured was negligent.
Covers injuries sustained by the insured.
Covers injuries sustained by tenants in the insured’s residence.
Does not cover invitees to the insured’s home.

Answer 53

Pays the medical expenses of others without regard to whether or not the insured was negligent. is correct.

EXPLANATION:
Medical Payments Coverage pays without regard to legal liability on the part of the insured. Coverage does not apply to any resident of the insured’s household or a tenant.

Question 54

Which of the following is NOT an exclusion under Coverage E of a Homeowners policy?

Answer Choices: Select the Correct Answer
Property in the insured’s care, custody, or control that is damaged by fire.
Personal liability for bodily injury caused by one family member against another.
Property damage to property owned by an insured.
Work-related injury or disease.

Answer 54

Property in the insured’s care, custody, or control that is damaged by fire. is correct.

EXPLANATION:
Property in the insured’s care, custody, or control that is damaged by fire is not excluded under Coverage E.

Question 55

Which coverage of a Homeowners policy would pay for damage to a neighbor’s window caused by the insured?

Answer Choices: Select the Correct Answer
Coverage A.
Coverage E.
Additional Coverages.
This is an exception to an exclusion.

Answer 55

Coverage E. is correct.

EXPLANATION:
Coverage E - Personal Liability would pay for the property damage to others caused by the insured under a Homeowners policy.

Question 56

Under Section II of a Homeowners policy, a cemetery plot owned by the insured is considered to be:

Answer Choices: Select the Correct Answer
An excluded location.
An insured location.
A non-insured location.
An additional location.

Answer 56

An insured location. is correct.

EXPLANATION:

Section II - Liability of the Homeowners forms includes a cemetery plot as an “insured location”.