Question 1

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

Accepted Answer

Coinsurance encourages insureds to insur

Question 2

The HO policy's Mortgage Clause continues to protect the lender (mortgagee) even if the insured/homeowner has committed fraud against the insurer.

Accepted Answer

A) True 
 B)False

Question 3

Adding coverage to the HO contract by endorsement increases the insured's premium.

Accepted Answer

A) True 
 B)False

Question 4

Mr. Xavier has an HO-3 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 5

Ira is a homeowner covered by an HO-3 policy. He lives with his wife and three children, ages 14, 16, and 19. Who in the household is not covered for personal liability by the HO policy?

Accepted Answer

A)  Both the 16 and 19-year old children 
B)  Any of the children 
C)  The 19-year-old child 
D)  All of the persons listed are covered. 
A)  Both the 16 and 19-year old children 
B)  Any of the children 
C)  The 19-year-old child 
D)  All of the persons listed are covered.

Question 6

Which of the following is excluded by the HO-3 Form?

Accepted Answer

A)  Additional living expense and rental value 
B)  Debris removal 
C)  Loss of trees, shrubs and other plants 
D)  Loss caused by ordinance or law 
A)  Additional living expense and rental value 
B)  Debris removal 
C)  Loss of trees, shrubs and other plants 
D)  Loss caused by ordinance or law

Question 7

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 8

In homeowner's insurance, coinsurance is:

Accepted Answer

A)  an agreement between two or more insurance companies to jointly cover a large risk 
B)  a contractual agreement to make the insured bear a portion (usually small) of every loss 
C)  a contractual agreement to prevent over-insurance 
D)  a contractual agreement that penalizes the insured when under-insured 
A)  an agreement between two or more insurance companies to jointly cover a large risk 
B)  a contractual agreement to make the insured bear a portion (usually small) of every loss 
C)  a contractual agreement to prevent over-insurance 
D)  a contractual agreement that penalizes the insured when under-insured

Question 9

The issue of who is a resident of the household, and thus an "insured" under the HO policy, has been litigated many times. Which of the following is a key factor that most courts consider when determining residence?

Accepted Answer

A)  The educational status of the resident in question 
B)  Occupation of the resident in question 
C)  The intent of the individual 
D)  None of the above 
A)  The educational status of the resident in question 
B)  Occupation of the resident in question 
C)  The intent of the individual 
D)  None of the above

Question 10

What is the contractual significance of having high limits of legal liability coverage in the HO contract?

Accepted Answer

If the insured has purchased high limits

Question 11

Britney and Kevin were painting their backyard fence with a spray gun. A strong gust of wind blew paint on the neighbor's house. The neighbor sued them for all the clean-up costs. Which of the following is true about Britney and Kevin's HO policy?

Accepted Answer

A)  This liability is covered by their HO policy. 
B)  This liability is not covered by their HO policy because the damage occurred off their premises. 
C)  This liability is not covered by their HO policy because the damages are not bodily injuries. 
D)  This type of incident is specifically excluded by the HO policy. 
A)  This liability is covered by their HO policy. 
B)  This liability is not covered by their HO policy because the damage occurred off their premises. 
C)  This liability is not covered by their HO policy because the damages are not bodily injuries. 
D)  This type of incident is specifically excluded by the HO policy.

Question 12

Joe owns a house on which he carries a $400,000 HO-3 policy. The replacement cost of the house is $600,000. A fire loss occurs that has a replacement cost of $10,000. How much can Joe collect under his HO-3 policy?

Accepted Answer

A)  $15,462 
B)  $10,000 
C)  $30,000 
D)  $8,333 
A)  $15,462 
B)  $10,000 
C)  $30,000 
D)  $8,333

Question 13

The replacement cost of a home covered under the HO-3 policy is $100,000. Assume the home is insured for $50,000 and a $10,000 loss occurs (replacement cost). Also assume depreciation is set at 10 percent. Assume that there is no deductible. How much will the insured recover if repaired?

Accepted Answer

A)  $9,000 
B)  $10,000 
C)  $8,000 
D)  $6,250 
A)  $9,000 
B)  $10,000 
C)  $8,000 
D)  $6,250

Question 14

All the following are provisions in the HO-3 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 15

Which of the following is not exclusion in a typical HO-3 policy?

Accepted Answer

A)  Catastrophic events 
B)  Coverage where another policy is specifically designed to provide coverage 
C)  Failure of power or another utility 
D)  All of the above are a typical exclusion in a HO-3 policy. 
A)  Catastrophic events 
B)  Coverage where another policy is specifically designed to provide coverage 
C)  Failure of power or another utility 
D)  All of the above are a typical exclusion in a HO-3 policy.

Question 16

All of the following losses are covered in an HO-3 policy except:

Accepted Answer

A)  damage done to the house by neighborhood vandals 
B)  damage done to shrubbery during a fire 
C)  loss of use of the property following a fire 
D)  damage done to the building and contents caused by a flash flood 
A)  damage done to the house by neighborhood vandals 
B)  damage done to shrubbery during a fire 
C)  loss of use of the property following a fire 
D)  damage done to the building and contents caused by a flash flood

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Grave markers are usually covered by HO policies.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following perils is not covered by the HO-3 form?

Accepted Answer

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

Question 20

Which of the following is not a part of the HO-3 policy layout?

Accepted Answer

A)  Definitions 
B)  Exclusions 
C)  Conditions 
D)  All of the above are a part of the HO-3 policy layout. 
A)  Definitions 
B)  Exclusions 
C)  Conditions 
D)  All of the above are a part of the HO-3 policy layout.

Exam 13: Homeowners Insurance

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

The HO policy's Mortgage Clause continues to protect the lender (mortgagee) even if the insured/homeowner has committed fraud against the insurer.

Adding coverage to the HO contract by endorsement increases the insured's premium.

Mr. Xavier has an HO-3 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:

Ira is a homeowner covered by an HO-3 policy. He lives with his wife and three children, ages 14, 16, and 19. Who in the household is not covered for personal liability by the HO policy?

Which of the following is excluded by the HO-3 Form?

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

In homeowner's insurance, coinsurance is:

The issue of who is a resident of the household, and thus an "insured" under the HO policy, has been litigated many times. Which of the following is a key factor that most courts consider when determining residence?

What is the contractual significance of having high limits of legal liability coverage in the HO contract?

Britney and Kevin were painting their backyard fence with a spray gun. A strong gust of wind blew paint on the neighbor's house. The neighbor sued them for all the clean-up costs. Which of the following is true about Britney and Kevin's HO policy?

Joe owns a house on which he carries a $400,000 HO-3 policy. The replacement cost of the house is $600,000. A fire loss occurs that has a replacement cost of $10,000. How much can Joe collect under his HO-3 policy?

The replacement cost of a home covered under the HO-3 policy is $100,000. Assume the home is insured for $50,000 and a $10,000 loss occurs (replacement cost). Also assume depreciation is set at 10 percent. Assume that there is no deductible. How much will the insured recover if repaired?

All the following are provisions in the HO-3 contract that can decrease amounts payable by the insurance company except:

Which of the following is not exclusion in a typical HO-3 policy?

All of the following losses are covered in an HO-3 policy except:

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

Grave markers are usually covered by HO policies.

Which of the following perils is not covered by the HO-3 form?

Which of the following is not a part of the HO-3 policy layout?

Introduction to Enterprise Risk Management and Insurance

Risk Identification

Risk Assessment and Pooling

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Functions

Insurance Markets: Economics and Issues

Insurance Regulation

Insurance Contracts

The Personal Auto Policy

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions and Options

Annuities

Health Insurance and Disability Income

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

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