Deck 20: Homeowners Insurance,section I

Question 1

The Homeowners 3 policy limits the amount of coverage provided on certain personal property (e.g.coin collections and silverware).This personal property can be adequately insured by

A)lowering the deductible which applies to personal property losses.
B)storing the property away from the home at another location.
C)adding a schedule to the policy listing the property with specific amounts of insurance.
D)adding an appraisal clause to the policy.

Answer 1

C

Question 2

Which of the following statements about the Homeowners 3 policy is (are)true?
I.Losses to the dwelling are always settled on an actual cash value basis.
II.Coverage on personal property is limited to $5,000.

A)I only
B)II only
C)both I and II
D)neither I nor II

Answer 2

D

Question 3

Section I of the Homeowners 3 policy provides coverage for all of the following EXCEPT

A)loss of use.
B)personal property.
C)other structures.
D)medical payments.

Answer 3

D

Question 4

Which of the following statements is (are)true regarding renters insurance?
I.Renters insurance is needed if you rent a house,but is not needed if you rent an apartment.
II.The ISO renter's policy provides "all-risks" coverage on the insured's personal property.

A)I only
B)II only
C)both I and II
D)neither I nor II

Question 5

Which of the following losses to a dwelling would be covered under an unendorsed Homeowners 3 policy?

A)smoke damage resulting from agricultural operations of a neighboring farmer
B)damage to the structure caused by a flash flood
C)damage to the structure caused by the weight of heavy snow
D)damage to a floor caused by water backing up through a sewer pipe

Question 6

Which homeowners policy is designed for the tenants of rented premises?

A)Homeowners 2
B)Homeowners 4
C)Homeowners 6
D)Homeowners 8

Question 7

Which of the following types of water damage is covered under an unendorsed Homeowners 3 policy?

A)damage from flood
B)damage from water backing up through a drain
C)damage from water below the surface of the ground that seeps into a basement
D)damage from water that overflows from a malfunctioning washing machine

Question 8

All of the following are general exclusions under Section I of the Homeowners 3 policy EXCEPT

A)losses due to earthquake.
B)losses due to the failure of the insured to use all reasonable means to save and preserve property after the time of a loss.
C)losses resulting from a power failure caused by an insured peril at the residence premises.
D)losses due to radiation from a nuclear power plant.

Question 9

Which of the following statements about the appraisal clause in the Homeowners 3 policy is (are)true?
I.It is used to determine a value for personal property when the policy is issued.
II.It is used to help settle disputes over the amount of a loss after a loss has occurred.

A)I only
B)II only
C)both I and II
D)neither I nor II

Question 10

Which of the following statements about the replacement cost provision of the Homeowners 3 policy is true?

A)It applies to personal property losses only.
B)Except for small losses,the insured must repair or replace the damaged property in order to receive full replacement cost.
C)The insured is required to carry an amount of insurance equal to 100 percent of the replacement value of the insured property.
D)Loss settlements are equal to 50 percent of the value of the loss if the insured is carrying less than the required amount of insurance.

Question 11

David has a Homeowners 3 policy that provides $280,000 of insurance on his dwelling,which has a current replacement value of $400,000.Ignoring any deductible,how much will David collect if a kitchen with a replacement value of $24,000 but an actual cash value of $18,000 is destroyed in a fire?

A)$18,000
B)$20,000
C)$21,000
D)$24,000

Question 12

Which of the following statements about eligibility requirements for homeowners insurance is (are)true?
I.A contract can be written on a twenty-unit apartment complex as long as the tenants are families.
II.Separate forms are available for renters and condominium owners.

A)I only
B)II only
C)both I and II
D)neither I nor II

Question 13

Which of the following statements about the additional coverages under Section I of the Homeowners 3 policy is true?

A)There is coverage for the reasonable cost incurred to protect property from further damage after a covered loss occurs.
B)There is unlimited coverage for furnishings of the landlord in an apartment on the premises that is rented to others.
C)Property removed from the premises because it is endangered by an insured peril is covered on a named-perils basis while it is outside the insured premises.
D)Damage caused by the settling of the insured structure is covered as a collapse.

Question 14

All of the following statements about the Homeowners 6 (unit-owners form)policy are true EXCEPT

A)It includes personal liability coverage.
B)It covers personal property on an "all-risks" basis.
C)It provides limited coverage for improvements and alterations.
D)It provides limited coverage for loss assessments.

Question 15

Which of the following is (are)included among the duties of an insured following a loss covered under the Homeowners 3 policy?
I.To file a proof of loss within a specified time period after the insurer's request.
II.To prepare an inventory of damaged personal property.

A)I only
B)II only
C)both I and II
D)neither I nor II

Question 16

All of the following are additional coverages under Section I of the Homeowners 3 policy EXCEPT

A)the reasonable expenses of removing debris of covered property after an insured loss.
B)fire department service charges for which the insured is liable by contract or agreement.
C)damage to trees and shrubs caused by a windstorm.
D)losses incurred from the unauthorized use of a stolen credit card.

Question 17

All of the following losses are subject to special limits of liability under the Homeowners 3 policy EXCEPT the

A)theft of firearms.
B)destruction by fire of property used for business purposes.
C)storm damage to a boat at a marina.
D)destruction of jewelry by fire.

Question 18

The major difference between the Homeowners 2 policy and the Homeowners 3 policy is the

A)insured perils for the dwelling.
B)insured perils for personal property.
C)type of liability coverage provided.
D)amount of coverage for other structures.

Question 19

Which of the following statements about the Homeowners 8 policy is (are)true?
I.Losses to the dwelling are settled on a replacement cost basis if the dwelling is insured for its full market value.
II.It is designed primarily for expensive,newer,dwellings.

A)I only
B)II only
C)both I and II
D)neither I nor II

Question 20

Persons insureds under Section I of the Homeowners 3 policy include which of the following?
I.A spouse of the named insured if living in the same household
II.The named insured's children who are under age 24 and who are full-time college students

A)I only
B)II only
C)both I and II
D)neither I nor II

Question 21

Following catastrophic hurricane losses,South Coast Insurance Company changed its deductible provision.Rather than using a specified dollar value,$250 for example;the dollar value of the deductible increases with the size of the loss.The type of deductible that South Coast changed to is called a(n)

A)calendar-year deductible.
B)corridor deductible.
C)straight deductible.
D)percentage deductible.

Question 22

All of the following are additional coverages provided under Section I of the Homeowners 3 policy EXCEPT

A)reasonable repairs.
B)debris removal.
C)personal liability.
D)property removal.

Question 23

Ted purchased a home.To finance the purchase,he borrowed $140,000 from ABC Bank,pledging the home as collateral for the loan.Shortly after purchasing the home,Ted lost his job.He could not find another job and could not pay the mortgage each month.Ted set fire to the home.The claims adjuster suspected arson,and an investigation proved that Ted intentionally caused the loss.Under the mortgage clause of the Homeowners 3 policy,how will this loss be settled?

A)The insurer has no liability because the loss was intentional.
B)The insurer will pay Ted the actual cash value of the loss as intentional loss is not excluded.
C)The insurer will pay ABC the value of its insurable interest and pay Ted the value of his insurable interest.
D)The insurer will pay ABC the value of its insurable interest and then attempt to recoup the loss payment from Ted.

Question 24

Cal is renting an apartment.Which homeowners policy is specially designed to insure renters?

A)HO-2
B)HO-3
C)HO-4
D)HO-6

Question 25

Shauna purchased a condominium unit.Which homeowners policy is specially designed for condominium unit owners?

A)HO-2
B)HO-3
C)HO-4
D)HO-6

Question 26

All of the following statements about the cancellation of a Homeowners 3 policy are true EXCEPT

A)The insurer may cancel a new policy for any reason if it has been in force for less than 60 days and is not a renewal policy.
B)At least 100 days notice of cancellation must be given if an insurer cancels a policy for nonpayment of premium.
C)A policy written for longer than 1 year can be cancelled for any reason on the anniversary date by giving the insured at least 30 days notice of cancellation.
D)After a policy has been in force for at least 60 days,it can be cancelled by the insurer if the risk has increased substantially since the policy was issued.

Question 27

A dwelling with a replacement cost of $150,000 was insured under a Homeowners 3 policy for $100,000 at the time the roof was destroyed by a windstorm.The actual cash value of the loss was $9,000,but it will cost $12,000 to replace the roof.Assuming no deductible,what will the insurer pay to settle this loss?

A)$8,000
B)$9,000
C)$10,000
D)$12,000

Question 28

All of the following statements about covered perils and loss settlement under an unendorsed Homeowners 3 policy are true EXCEPT

A)The dwelling is covered on an all-risk basis.
B)Personal property losses are settled on a replacement cost basis.
C)Losses to the dwelling may be settled on an actual cash value basis.
D)Personal property is covered on a named-perils basis.

Question 29

Betty's personal property is insured for $100,000 under her Homeowners 3 policy.If she usually keeps some personal property at a mountain cabin that she owns,how much coverage for this property is available under her homeowners policy?

A)$10,000
B)$20,000
C)$40,000
D)$50,000

Question 30

If there is a conflict between state law and a provision in a homeowners policy

A)the policy wording takes precedence.
B)the state law takes precedence.
C)the policyowner is entitled to whichever provides broader coverage.
D)the policy is null and void.

Question 31

All of the following statements about conditions under a homeowners policy are true EXCEPT

A)If an insurer broadens coverage without an additional premium during the policy period,the broadened coverage applies immediately to the present policy.
B)A waiver or change in any policy provision must be approved in writing by the insurer to be valid.
C)The insurer must give written consent for an assignment of the policy to be valid.
D)If the named insured dies,coverage automatically ceases with respect to any property of the deceased.

Question 32

Darla purchased an unendorsed Homeowners 3 policy.While the policy was in force,a fire occurred that destroyed a living room set.The living room set cost $4,000 new,but was 25 percent depreciated when the loss occurred.Replacement furniture will cost $4,400.Assuming no deductible,how much will Darla receive from her insurer?

A)$3,000
B)$3,300
C)$3,400
D)$4,400

Question 33

Jose and Maria would like "all-risks" coverage on their home and their personal property.Which unendorsed homeowners form provides this coverage?

A)Homeowners 2
B)Homeowners 3
C)Homeowners 4
D)Homeowners 5

Question 34

All of the following are duties of the mortgagee under the standard mortgage clause EXCEPT

A)to reimburse the insurer for any loss payments.
B)to notify the insurer of any change in ownership of the property of which the mortgagee is aware.
C)to provide a proof of loss form if the insured fails to do so.
D)to pay the premium if the insured fails to do so.

Question 35

Michelle had four matching end tables in her home.A fire damaged the home,destroying two of the end tables.Michelle's home was covered by an unendorsed Homeowners 3 policy.Which of the following is true with regard to the settlement for the end tables in this case?

A)Loss to a pair or set is excluded under the policy.
B)The insurer will pay the difference in actual cash value of the property before and after the loss.
C)The insurer will pay the replacement cost of the loss.
D)If a partial loss to a pair or set occurs,the insurer is liable for replacement of the entire pair or set.

Question 36

Which of the following statements is (are)true regarding how the Homeowners 3 policy handles the peril of collapse?
I.Collapse is specifically excluded,and there are no exceptions to the exclusion.
II.Collapse that is caused by a Coverage C peril is covered.

A)I only
B)II only
C)both I and II
D)neither I nor II

Question 37

Mike and Susan built their "dream home." They insured their home for its full replacement cost.They also added an endorsement that will pay up to an additional 20 percent of the policy limit in case the cost of rebuilding the home after a loss is greater than the policy limit.The basis under which Mike and Susan insured their home is called

A)actual cash value.
B)valued policy coverage.
C)extended replacement cost.
D)guaranteed replacement cost.

Question 38

Under the Homeowners 3 policy,all of the following are options of the insurer for settling claims EXCEPT

A)paying the claim in cash.
B)replacing the property.
C)repairing the property.
D)paying the claim with insurance company stock.

Question 39

Ellen believes the value of the loss to her home is $30,000.The insurer has offered $18,000 to settle the loss.If Ellen and the insurer cannot agree on the value of the loss,which homeowners policy provision specifies how this dispute will be settled?

A)insurer's option
B)appraisal clause
C)loss payment clause
D)mortgage clause

Question 40

Linda wants to purchase a homeowners policy,but she has some valuable personal property to which internal policy limits apply.Her agent said that she could obtain coverage under her homeowners policy by attaching a list of this valuable property with specific amounts of insurance.Such a listing is called a(n)

A)binder.
B)schedule.
C)application.
D)warranty.

Question 41

A fire destroyed the home next door to Brad's home.The fire department chief was concerned that the damaged home would collapse on to Brad's home,so he ordered Brad to evacuate his home.Which of the following statements is true concerning the cost of Brad's hotel room while he is complying with the fire chief's order?

A)The cost of the hotel room is not covered as Brad's home was not directly damaged.
B)The cost of the hotel room is covered under the "fair rental value" coverage of Part D.
C)The cost of the hotel room is covered under the "prohibited use" coverage of Part D.
D)The cost of the hotel room is covered under the dwelling coverage of Part A.