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

Coverage D (Additional Living Expenses / Loss of Use) pays the extra costs the insured incurs to maintain their normal standard of living while their home is being repaired after a covered loss.

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

Coverage E pays on behalf of the insured all sums they become legally obligated to pay as damages for bodily injury or property damage, subject to exclusions including intentional acts and auto liability.

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 80% coinsurance requirement means the insured must carry insurance equal to at least 80% of the dwelling's replacement cost; if underinsured, partial losses are paid on a proportional basis.

Question 4

An HO-6 policy is designed for owners of:

Accepted Answer

Condominium units

Answer

The HO-6 (Unit-Owners Form) is designed for condominium owners; it covers their personal property, interior improvements to the unit, and personal liability.

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

Most homeowners policies cover personal property anywhere in the world, but property located away from the residence is often subject to a sublimit (typically 10% of Coverage C) and still subject to the same named perils.

Property & Casualty Insurance License Test Practice Test

Property & Casualty Insurance License Test Practice Test

P&C Homeowners Insurance Policies 3