Lesson 5: Dwelling and Homeowners Coverage

Question 1

Types of fire policies

Answer 1

Homeowners and Dwelling

Question 2

Conditions excluding a property from eligibility for homeowners’ policy

Answer 2

low-valued; old; undesirable location; rental property

Question 3

Homeowners

Answer 3

a form of property ins that covers losses and damages to an individuals house and assets in the home; cover your belongings

Question 4

Dwellers

Answer 4

offer property owners protection against hazards like explosions, vandalism and some weather related occurrence such as wind and lightning; little to no contents coverage; doesn’t cover theft of contents typically

Question 5

Elements of a fire dwelling policy

Answer 5

This coverage is for property damage to a personal dwelling and requires liability coverages to be added by endorsement.

• Owner or Tenant Occupied one to four-family unit dwelling with no more than five roomers
• Vacant one to four-family unit dwelling
• Personal Property for Renters
• Personal Property and Improvements, Modifications, and Additions for Condominium Unit Owners

Question 6

Examples of Permitted Incidental Occupancies that Occur Within the Dwelling

Answer 6

professional office; beauty salon; photography studio; music lessons

Question 7

Dwelling fire policy major coverages

Answer 7

Dwelling protection includes damage to the home and surrounding attached structures, like decks and garages, as well as non-attached structures, like fences or sheds.

Question 8

What is usually covered under a typical dwelling policy?

Answer 8

A, C, D

Question 9

Dwelling coverage A

Answer 9

Loss of property value

Question 10

Dwelling coverage B

Answer 10

other structures (shed, etc.)

Question 11

Dwelling coverage C

Answer 11

personal property - i.e. furnished house

Question 12

Dwelling coverage D

Answer 12

loss of rental value - house fire and a tenant has to move out, loss of rental income

Question 13

Dwelling coverage E

Answer 13

Addt’l living expenses

Question 14

Other coverages under dwelling policy

Answer 14

Removal of items: Removal of salvaged items from a fire damaged house to a storage facility.

Debris removal expenses: Removal of ash, dust and mold.

Reasonable cost of repairs.

Fire department expenses are covered

rebuild of building collapse - If a building collapses due to defective material, the cost to rebuild is covered.

Replacement cost for damaged trees, plants or lawn.

Question 15

Fire and removal against loss coverage

Answer 15

All forms provide 30 days coverage for removal against loss by Any Cause for property removed from a premises endangered by a Peril Insured against. Consider this example, a fire is coming towards the insured property and the insured runs into the house and removes valuable items and takes them to a neighbors house; later a flood comes and damages the neighbor’s house and the property of the insured. Flood, which normally would not be a covered loss is now covered because of removal. Conversely, if the insured removed the same property and took it to the same neighbor’s house because of a flood coming, there would no coverage for the insured, because Flood is not a Peril insured against, but Fire was.

Question 16

Dwelling policy forms: name the 3

Answer 16

the basic, broad, and special form. There are three primary forms used in a dwelling policy, the basic, broad, and special form. The special form is the only dwelling form that has all-risk coverage making it the better of the three policies. The second-best form is the broad form, as it is a named peril form with the most named perils for creating a policy. The third best form is the Basic form, as it has the fewest number of named perils. Dwelling forms also provide us with loss information regarding Dwelling Fire Coverage Options.

Question 17

Basic fire form

Answer 17

DP1 - The basic form is a “named perils” policy that explicitly names which perils are covered. It covers losses due to: Fire, lightning, Internal explosions, such as a stove or water heater bursting

The DP-1 form is usually the form of choice for vacant homes or properties. It may be the only option for these dwellings.

10% contents coverage is applied to contents away from the premises under the dwelling building and contents under all three DP forms.

Question 18

Broad fire form

Answer 18

The DP2 (broad form), is a named peril policy and includes all of the coverages of DP1 but also includes Coverage E, additional living.

Icludes Fire; Lightning; Falling Objects; Vandalism & Malicious Mischief; Burglar Damage (not property theft); Weight of ice, snow & Sleet; Sudden & Accidental discharge of water; E C ( Extended Coverage); Freeze Damage such as frozen pipes; Tearing Apart; Artificially Generated Electrical Current; Volcanic Eruption

Question 19

Special fire form

Answer 19

The DP3 form is a named and open peril policy, the only dwelling form that provides coverage for all risk and named perils on dwelling and additional structures, except those expressly excluded. It covers personal property for named perils or contents covered in DP-2, and Coverage C, for named perils. These policies are issued for non-owner occupied and owner-occupied dwellings but are not available for vacant homes or properties.

Note: Plumbing and Light Fixtures are covered. Collapse is an additional coverage provided in DP3.

Covers everything that is not excluded or limited for the dwelling or “other structures”: All Risk (Open Peril - Dwelling & Structures); Broad Form Named Perils (Personal Property)

Question 20

DPs don’t typically include

Answer 20

overage for personal liability, such as robbery or theft, or medical payment exposures. However, there are two different ways to get coverage for personal items and exposures:

Endorsement
Coverage under a Homeowners policy

Question 21

Comprehensive personal liability endsmt to a dwelling fire policy

Answer 21

This coverage can be added by endorsement to a dwelling fire policy and provides coverage for personal liability exposures. This protection includes two core areas of coverage.

Covers liability for other parties’ bodily injury (BI) and property damage (PD) and defense cost. Personal injury is excluded.
Covers medical expenses for others and is payable regardless of legal liability or regardless of fault.

Question 22

The dwelling must be insured for a minimum of ___% of its value to maintain replacement coverage.

Answer 22

80%

Question 23

Loss paid on fire dwelling policies

Answer 23

For the loss of DP1, the loss is paid on actual cash value for the dwelling, other structures and personal property. DP2 covers the named perils and is the replacement cost for dwelling and other detached structures such as a shed or poolhouse. DP3 covers open perils also known as all risk and covers replacement costs for the dwelling and other detached structures. Unscheduled personal property or contents are covered at an actual cash value for DP1, DP2, and DP3.

Simply:
Dwelling - DP1 (ACV); Dp2 and Dp3 replacement
Personal Prop: ACV all 3

Question 24

Coinsurance

Answer 24

Coinsurance requires insurers to carry a higher face amount of the policy. If the insured purchases 80% of insurance to value the insurer pays 100% of a partial loss up to the face amount of the policy.

Question 25

Unoccupancy

Answer 25

If the home is immediately suitable for occupation, it’s considered unoccupied. The owner’s personal property remains inside, the utilities are on and appliances are functioning. If a home renovation is limited enough that the furniture and other personal property can be left behind, the home is unoccupied. If you’re on vacation or in the hospital, your property is also unoccupied.

Question 26

Vacancy

Answer 26

If a home is vacant, the owners have removed their personal property. The utilities may be shut off. This is more
common when the property is on the market or being rented. Vacant homes pose significantly higher risk to insurers, and the price and coverage of vacant home insurance reflects this.

Question 27

Pair or set provision

Answer 27

Insuring a pair or a set as if it is one item. For example, a pair of sconces, bookends or earrings would be
considered one item

Question 28

Appraisal

Answer 28

When there is a dispute between the insurer and the policy holder on the amount of the loss, the insurer or the
policyholder can demand an appraisal to determine the loss settlement.

Question 29

Salvage

Answer 29

property taken over by the ins co that reduces loss

Question 30

Abandonment

Answer 30

Abandonment is a clause in property insurance policies prohibiting the insured from abandoning damaged
property to the insurer for repair or disposal. Arranging for repair or disposal is the insured’s responsibility, unless the insurer elects otherwise

Question 31

Personal Articles Floater

Answer 31

A Personal Articles Floater (PAF) covers all risks from physical loss or damage to specified classes of property that are high-valued items, like silverware, fine arts, camera and golf equipment.

The PAF may be written as a separate policy or attached to an existing policy.
The policyowner must provide a detailed appraisal of insured items.