Question 1

In fire insurance,the purpose of coinsurance clauses is to prevent over-insurance.

Accepted Answer

A) True 
 B)False

Question 2

You have an HO policy with the following limits:
A=$50,000 (dwelling)B=$5,000 (other structures)C=$25,000 (personal property).
A tornado strikes your property. You lose your house,which is worth $40,000 at the time of the loss. You also lose an unattached shed worth $8,000,and personal property worth $30,000.You will collect:

Accepted Answer

A) $78,000 
B) $70,000 
C) $58,000 
D) None of the above 
A) $78,000 
B) $70,000 
C) $58,000 
D) None of the above

Question 3

Why is there a "special limits of liability" section in the personal property section of the HO-2 contract?

Accepted Answer

Special limits are imposed on various ty

Question 4

Which of the following perils is not covered by the HO-2 form?

Accepted Answer

A) Windstorm or hail 
B) Riot or civil commotion 
C) Sudden and accidental smoke damage 
D) Volcanic earthquakes 
A) Windstorm or hail 
B) Riot or civil commotion 
C) Sudden and accidental smoke damage 
D) Volcanic earthquakes

Question 5

No consequential or loss of use losses are covered by the standard homeowners' policy.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following perils is NOT covered by the HO-2 form?

Accepted Answer

A) Aircraft & vehicles 
B) Flood 
C) Theft 
D) Falling objects 
A) Aircraft & vehicles 
B) Flood 
C) Theft 
D) Falling objects

Question 7

Alberto has an HO-2 contract with $100,000 of Liability Coverage. He is ordered by a judge to pay his neighbor $162,000 because of bodily injuries the neighbor suffered while he and Alberto were fishing in Alberto's old,undeclared 35 horse-power outboard motor boat. How will the contract respond?

Accepted Answer

A) nothing is paid because liability arising out of this boat is excluded 
B) $61,500 is paid because of the deductible 
C) $62,000 is paid to the injured party 
D) $100,000 is paid to the neighbor 
A) nothing is paid because liability arising out of this boat is excluded 
B) $61,500 is paid because of the deductible 
C) $62,000 is paid to the injured party 
D) $100,000 is paid to the neighbor

Question 8

Which of the following is not an exclusion from the HO policy's Liability coverage?

Accepted Answer

A) liability assumed under any unwritten contract 
B) property damage to property owned by the insured 
C) damage to property in the care, custody or control of the insured by all perils 
D) liability arising out of the ownership or maintenance of the residence premises 
A) liability assumed under any unwritten contract 
B) property damage to property owned by the insured 
C) damage to property in the care, custody or control of the insured by all perils 
D) liability arising out of the ownership or maintenance of the residence premises

Question 9

All the following are provisions in the HO-2 contract that can decrease amounts payable by the insurance company except:

Accepted Answer

A) deductibles 
B) coinsurance/replacement cost provisions 
C) special limits on certain types of property 
D) mortgage clause 
A) deductibles 
B) coinsurance/replacement cost provisions 
C) special limits on certain types of property 
D) mortgage clause

Question 10

The term "named insured" includes spouses and children (if any are living at home)in the homeowners (HO)insurance policy.

Accepted Answer

A) True 
 B)False

Question 11

Joe has an HO-2 policy. He also has an unattached converted garage that he has turned into an apartment,and he rents it to a full-time college student.The apartment is destroyed by fire.What will happen with the claim according to the HO-2 contract?

Accepted Answer

A) all damage to rented property is specifically excluded no matter what the peril 
B) the peril of fire is not covered when it damages unattached structures 
C) there will be no payment because a rented other structure is excluded from coverage 
D) because it was unattached, the HO-2 does not cover that type of property 
A) all damage to rented property is specifically excluded no matter what the peril 
B) the peril of fire is not covered when it damages unattached structures 
C) there will be no payment because a rented other structure is excluded from coverage 
D) because it was unattached, the HO-2 does not cover that type of property

Question 12

Explain why there is a coinsurance clause applied to the building structures. How does it work?

Accepted Answer

Coinsurance encourages insureds to insur

Question 13

The Liability coverage in the HO policy does all the following except:

Accepted Answer

A) defends a suit against the insured even if the allegations of the suit are groundless, false or fraudulent 
B) covers the insured's own property destroyed by another's negligence 
C) pays for immediate medical and surgical expenses incurred by other(s) 
D) reimburses the insured for all reasonable expenses incurred at the request of the company 
A) defends a suit against the insured even if the allegations of the suit are groundless, false or fraudulent 
B) covers the insured's own property destroyed by another's negligence 
C) pays for immediate medical and surgical expenses incurred by other(s) 
D) reimburses the insured for all reasonable expenses incurred at the request of the company

Question 14

Explain the concept of concurrent causation as it applies to collapse.

Accepted Answer

Collapse currently is not an insured per

Question 15

Replacement cost is most closely synonymous with:

Accepted Answer

A) original purchase price 
B) actual cash value less depreciation 
C) accounting book value 
D) reconstruction cost 
A) original purchase price 
B) actual cash value less depreciation 
C) accounting book value 
D) reconstruction cost

Question 16

Which of the following is not an available endorsement to the HO policy?

Accepted Answer

A) Professional Liability Coverage Endorsement 
B) Home Day Care Coverage Endorsement 
C) Business Pursuits Endorsement 
D) Scheduled Personal Property Endorsement 
A) Professional Liability Coverage Endorsement 
B) Home Day Care Coverage Endorsement 
C) Business Pursuits Endorsement 
D) Scheduled Personal Property Endorsement

Question 17

Mr.Xavier has an HO-2 contract with $100,000 dwelling coverage,$50,000 personal property coverage,and a $500 deductible. The dwelling is 50% depreciated. Sewage backs up into the basement and destroys the furnace,which will cost $8,000 to replace. The policy will pay:

Accepted Answer

A) nothing because of the water damage exclusion 
B) nothing because the property is not covered 
C) $7,500 because of replacement cost coverage 
D) $3,500 because of actual cash value and the deductible 
A) nothing because of the water damage exclusion 
B) nothing because the property is not covered 
C) $7,500 because of replacement cost coverage 
D) $3,500 because of actual cash value and the deductible

Question 18

The value of a home is $50,000,and the homeowner policy covering it contains an 80% coinsurance clause.Assume the home is insured for $30,000 and a $12,000 loss occurs. How much will the insured recover? (Ignore the ACV calculation and assume there is no fraud or other unusual circumstances surrounding the loss.)

Accepted Answer

A) $12,000 
B) $ 9,000 
C) $16,000 
D) The answer cannot be determined by the facts given. 
A) $12,000 
B) $ 9,000 
C) $16,000 
D) The answer cannot be determined by the facts given.

Question 19

All of the following are rights extended to mortgagees (banks)under the mortgage clause in the HO contract except:

Accepted Answer

A) to sue under the policy in its own name 
B) to foreclose on property if the insured homeowner tries to defraud the insurer 
C) to submit proof of loss if the insured fails to do so 
D) has an additional 5 days over the insured for notice of cancellation 
A) to sue under the policy in its own name 
B) to foreclose on property if the insured homeowner tries to defraud the insurer 
C) to submit proof of loss if the insured fails to do so 
D) has an additional 5 days over the insured for notice of cancellation

Question 20

One purpose of the immediate notice provision in the HO policy is to give the insurer a complete inventory of damaged property.

Accepted Answer

A) True 
 B)False

Exam 10: Homeowners Insurance

In fire insurance,the purpose of coinsurance clauses is to prevent over-insurance.

Why is there a "special limits of liability" section in the personal property section of the HO-2 contract?

Which of the following perils is not covered by the HO-2 form?

No consequential or loss of use losses are covered by the standard homeowners' policy.

Which of the following perils is NOT covered by the HO-2 form?

Alberto has an HO-2 contract with $100,000 of Liability Coverage. He is ordered by a judge to pay his neighbor $162,000 because of bodily injuries the neighbor suffered while he and Alberto were fishing in Alberto's old,undeclared 35 horse-power outboard motor boat. How will the contract respond?

Which of the following is not an exclusion from the HO policy's Liability coverage?

All the following are provisions in the HO-2 contract that can decrease amounts payable by the insurance company except:

The term "named insured" includes spouses and children (if any are living at home)in the homeowners (HO)insurance policy.

Joe has an HO-2 policy. He also has an unattached converted garage that he has turned into an apartment,and he rents it to a full-time college student.The apartment is destroyed by fire.What will happen with the claim according to the HO-2 contract?

Explain why there is a coinsurance clause applied to the building structures. How does it work?

The Liability coverage in the HO policy does all the following except:

Explain the concept of concurrent causation as it applies to collapse.

Replacement cost is most closely synonymous with:

Which of the following is not an available endorsement to the HO policy?

Mr.Xavier has an HO-2 contract with $100,000 dwelling coverage,$50,000 personal property coverage,and a $500 deductible. The dwelling is 50% depreciated. Sewage backs up into the basement and destroys the furnace,which will cost $8,000 to replace. The policy will pay:

All of the following are rights extended to mortgagees (banks)under the mortgage clause in the HO contract except:

One purpose of the immediate notice provision in the HO policy is to give the insurer a complete inventory of damaged property.

Fundamentals and Terminology

Defining the Insurable Event

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Financial Services Companies

Insurance Occupations

the Insurance Market: the Economic Problem

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the Personal Auto Policy

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Advanced Topics in Risk Management

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