Insurance MCQ

The HO-3—Special Form (HO-3) provides A. Open perils coverage on dwellings. B. Named perils coverage on dwellings. C. Open perils coverage on personal property. D. Named perils coverage on other structures. Answer: A

Under the HO-3—Special Form (HO-3) Section I—Conditions, the Loss Settlement condition A. Establishes the process for determining the amount to be paid for a property loss. B. Outlines a method for resolving disagreements between the insured and the insurer. C. Provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it. D. States that the insurer will adjust all losses with the insured or the insured's spouse, if a resident in the same household. Answer: A

One of the main factors used in developing a base premium for a homeowners policy is A. The public protection class. B. The effect of endorsements on the premium. C. A change in the deductible from $500. D. The construction date. Answer: A

Mike and Leona own a single-family home insured to value under an HO-3—Special Form (HO-3) with a limit of $350,000 for the Coverage A—Dwelling. While they were out to dinner one evening, an electrical fire started in the kitchen, destroying the kitchen and part of their bedroom on the second floor. The fire destroyed the contents of the bedroom and the clothing in their closets, as well as Leona's jewelry valued at $5,000 and a fur coat valued at $2,000. Ignoring any deductible that may apply, how much coverage is provided for the jewelry and fur coat? A. $1,500 B. $2,000 C. $5,000 D. $7,000 Answer: D

Under an HO-3—Special Form (HO-3), Section I—Exclusions contains an additional three exclusions that apply only to Coverage A—Dwelling and Coverage B—Other Structures. These exclusions include all of the following, EXCEPT: A. Weather B. Fraud C. Acts or decisions D. Damage that results from faulty construction, planning, or materials Answer: B

Russ and Roberta own a single-family home insured to value under an unendorsed HO-3—Special Form (HO-3) with a limit of $350,000 for the Coverage A—Dwelling with a $500 deductible. They also have a two-car detached garage on the premises with a second floor apartment. The garage apartment is rented to a local college student. Lightning strikes the garage and it burns to the ground. The replacement cost of the garage is $45,000. This loss to the detached garage is A. Covered up to the Coverage B limit of $34,500. B. Covered up to the replacement cost of $44,500. C. Not covered since a Coverage B exclusion applies. D. Not covered since lightning is not a covered peril. Answer: B

Ralph has an unendorsed HO-3—Special Form (HO-3) policy. While coming home from a coin show, Ralph discovers that his automobile was broken into and a package containing $2,000 in coins, some tools, and groceries was stolen. Disregarding any deductible that may apply, will Ralph's HO-3 insurer pay for the loss of the coins? A. No, theft of money is an excluded peril. B. No, leaving money in an unattended vehicle is negligent behavior, which is excluded. C. Yes, the coins are covered up to a specified limit D. Yes, the coins are covered up to the limit of Coverage C as long as they are of a collectible nature. Answer: C

Jill and Tom have a home with a $300,000 replacement cost and an HO-3—Special Form (HO-3) policy with a Coverage A limit of $270,000. Lightning strikes the central air conditioning unit and destroys it beyond repair. The unit has a replacement cost of $5,000, is five years old, and has a useful life of 10 years. Ignoring any deductible that might apply, how much will the insurer pay to replace the air conditioning unit? A. $2,500 B. $3,000 C. $4,500 D. $5,000 Answer: D. $5,000.

Sue and Rich are under contract to purchase a historic home in a city where local property values, including the value of the historic home, are far below replacement cost. Which one of the following ISO homeowners policies would likely be most suitable for Sue and Rich? A. HO-2—Broad Form B. HO-4—Contents Broad Form C. HO-6—Unit-Owners Form D. HO-8—Modified Coverage Form Answer: D. HO-8—Modified Coverage Form

Sam and Sophia insure their house with an unendorsed HO-3—Special Form (HO-3) policy. Sam stores a small fishing boat and trailer behind the house. While they are out for the evening, a fire destroys most of their kitchen and completely destroys the boat and trailer. Assuming Sam's boat and trailer are valued at $4,000 and ignoring any deductible that may apply, what amount will their HO-3 insurer pay for the loss of the boat and trailer? A. $0 B. $1,000 C. $1,500 D. $4,000 Answer: C. $1500