Property And Casualty Insurance License Property Insurance Basics 1

Question 1

What does a standard homeowners insurance policy (HO-3) cover regarding the dwelling?

Accepted Answer

Open perils (all-risk)

Answer

An HO-3 policy covers the dwelling on an open-perils basis, meaning all causes of loss are covered unless specifically excluded.

Question 2

Which of the following is NOT covered by a standard homeowners policy?

Accepted Answer

Flood

Answer

Flood damage is excluded from standard homeowners policies and requires a separate policy, typically through the National Flood Insurance Program (NFIP).

Question 3

What is the purpose of coinsurance in a property insurance policy?

Accepted Answer

To ensure the insured carries adequate coverage relative to property value

Answer

Coinsurance requires policyholders to insure their property to a specified percentage of its value (usually 80%) or face a penalty at the time of a loss.

Question 4

Under a Dwelling Policy (DP-1), coverage is provided on which basis?

Accepted Answer

Named perils

Answer

The DP-1 (Basic Form) covers only the named perils specifically listed in the policy, such as fire, lightning, and internal explosion.

Question 5

What is 'actual cash value' (ACV) in property insurance?

Accepted Answer

Replacement cost minus depreciation

Answer

Actual cash value is calculated by taking the replacement cost of the item and subtracting accumulated depreciation.

Property And Casualty Insurance License Practice Test

Property And Casualty Insurance License Practice Test

Property And Casualty Insurance License Property Insurance Basics 1