EXAMFX - Exam FX Insurance Homeowners Insurance Coverage Questions and Answers 1 — Questions and Answers
Question 1: A standard HO-3 policy provides 'open peril' coverage for the dwelling and 'named peril' coverage for personal property. Which of the following losses to personal property would typically be covered?
- Damage from a flood caused by a nearby river overflowing.
- Theft of jewelry from the home while the insured is on vacation. (Correct answer)
- Damage to a television caused by a power surge originating from the utility company.
- Loss due to the homeowner intentionally damaging their own furniture.
Correct answer: Theft of jewelry from the home while the insured is on vacation.
Theft is a specified 'named peril' in standard homeowners policies. Flood, power surge from an off-premises source, and intentional acts by the insured are all common exclusions.
Question 2: An insured has a Homeowners policy with Coverage A (Dwelling) limit of $300,000. A severe storm causes a large tree to fall, destroying their detached garage. Typically, what is the maximum amount the policy will pay for the garage under Coverage B (Other Structures)?
- $15,000
- $30,000 (Correct answer)
- $60,000
- The full replacement cost of the garage.
Correct answer: $30,000
Coverage B (Other Structures) is typically limited to 10% of the Coverage A (Dwelling) limit. Therefore, 10% of $300,000 is $30,000.
Question 3: A fire in a home makes it uninhabitable for two months while repairs are being made. The homeowner, who normally spends $1,500 per month on housing and food, has to rent an apartment for $1,200 per month and spends an additional $800 per month on meals. Under Coverage D (Loss of Use), how much will their policy reimburse them for each month?
- $2,000
- $1,500
- $500 (Correct answer)
- $800
Correct answer: $500
Coverage D, or Additional Living Expenses, covers the increase in living expenses necessary to maintain the normal standard of living. The total new monthly cost is $2,000 ($1,200 rent + $800 food). The policy pays the difference between the new cost and the normal cost: $2,000 - $1,500 = $500.
Question 4: Which of the following situations would be covered under the Personal Liability section (Coverage E) of a standard homeowners insurance policy?
- The insured's child accidentally breaks a neighbor's window with a baseball. (Correct answer)
- A client is injured while visiting the insured's home-based business office.
- The insured intentionally damages a guest's personal property.
- Bodily injury to the named insured's spouse who lives in the home.
Correct answer: The insured's child accidentally breaks a neighbor's window with a baseball.
Coverage E (Personal Liability) protects the insured against claims for bodily injury or property damage they are legally responsible for. It covers unintentional acts of negligence, like accidentally breaking a neighbor's window. Liability arising from business activities, intentional acts, and injury to an insured person are typically excluded.
Question 5: A standard homeowners policy includes special limits of liability for certain types of personal property. Which of the following categories of items is most likely subject to a special sub-limit for theft?
- Furniture and clothing
- Kitchen appliances
- Jewelry and firearms (Correct answer)
- Lawn and garden equipment
Correct answer: Jewelry and firearms
Homeowners policies place special, lower limits on the amount they will pay for the theft of certain high-value items that are easily stolen, such as jewelry, watches, furs, and firearms.
Question 6: All of the following are common exclusions found in an unendorsed homeowners insurance policy EXCEPT:
- Damage from a flood
- Losses resulting from an earthquake
- Damage caused by a fire resulting from lightning (Correct answer)
- Losses due to wear and tear over time
Correct answer: Damage caused by a fire resulting from lightning
Fire and lightning are standard covered perils in homeowners insurance policies. Flood, earthquake (earth movement), and gradual wear and tear are all common exclusions that typically require separate policies or endorsements for coverage.
EXAMFX - Exam FX Insurance Homeowners Insurance Coverage Questions and Answers 1
A standard HO-3 policy provides 'open peril' coverage for the dwelling and 'named peril' coverage for personal property.
Which of the following losses to personal property would typically be covered?