P&C Homeowners Insurance Policies 3

Question 1

A homeowners policy's 'loss of use' coverage (Coverage D) pays for:

Accepted Answer

Temporary housing and extra living expenses when the home is uninhabitable due to a covered loss

Answer

The cost to replace stolen personal property

Answer

Liability judgments when a guest is injured

Answer

Damage to a detached garage

Question 2

Which of the following is correct about the homeowners policy's 'personal liability' coverage (Coverage E)?

Accepted Answer

It covers the insured's liability for bodily injury and property damage to third parties, subject to an exclusion for intentional acts

Answer

It pays only for bodily injury, not property damage

Answer

It pays regardless of whether the insured is legally liable

Answer

It covers liability arising from auto accidents

Question 3

What is the significance of the '80% coinsurance rule' in homeowners insurance?

Accepted Answer

The insured must insure the dwelling to at least 80% of its replacement cost to collect full replacement cost on a partial loss without a penalty

Answer

The insurer pays 80% of any loss and the insured pays 20%

Answer

Premiums must be paid 80% upfront

Answer

Coverage applies only to the first 80% of the dwelling's value

Question 4

An HO-6 policy is designed for owners of:

Accepted Answer

Condominium units

Answer

Mobile homes

Answer

Rental properties

Answer

Historic homes

Question 5

Under a homeowners policy, personal property is typically covered on a 'worldwide' basis, meaning:

Accepted Answer

The insured's personal property is covered anywhere in the world, subject to sublimits away from the residence

Answer

Coverage applies only within the home

Answer

Coverage applies only in the United States and Canada

Answer

Coverage is unlimited for items away from home

Question 6

What effect does the 'vacancy clause' in a homeowners policy have on coverage?

Accepted Answer

Certain perils such as vandalism and glass breakage are excluded if the home has been vacant beyond a specified period, usually 60 days

Answer

Coverage is automatically doubled if the home is vacant

Answer

The policy is automatically cancelled after 30 days of vacancy

Answer

Coverage is unaffected by vacancy at any time