In the HO-3 policy, Coverage A—Dwelling coverage applies to three broad categories of covered property. One of these broad categories is
Select one:
A. Personal property that is owned.
B. Structures attached to the dwelling.
C. Structures separated by a clear space.
D. Additional living expense.
Correct. Coverage A—Dwelling coverage applies to structures attached to the dwelling.
The HO-3 policy Coverage D—Loss of Use limit
Select one:
A. Applies separately for Additional Living Expenses and Fair Rental Value.
B. Includes a time frame limit of 30 days.
C. Is 10% of the Coverage A limit.
D. Applies in addition to Coverage A limits.
Correct. The Loss of Use limit applies in addition to Coverage A limits.
Which one of the following Additional Coverages under the HO-3 policy provides defense coverage for the insured if needed?
Select one:
A. Credit Card, Electronic Fund Transfer Card or Access Device, Forgery, and Counterfeit Money
B. Ordinance or Law
C. Fire Department Service Charge
D. Loss Assessment
Correct. Credit Card, Electronic Fund Transfer Card or Access Device, Forgery, and Counterfeit Money provides defense coverage for the insured if needed.
Cristal owns a residential premises insured under an HO-3 policy. The property includes Cristal’s residence and four other structures that are separated from the dwelling by clear space. Cristal’s Coverage B limit
Select one:
A. Applies to all the other structures collectively, not to each structure individually.
B. Applies separately to each structure. Each structure is separately insured up to the Coverage B limit.
C. Does not apply to the other structures.
D. Applies separately for a maximum of two detached structures. Additional structures need to be covered separately by endorsement.
Correct. Coverage B essentially resembles blanket insurance. The Coverage B limit applies to all covered detached structures collectively, not to each structure individually.
Under the HO-3 policy, a structure that is attached to the dwelling on the insured’s residence premises, but only by a fence, utility line, or similar connection is
Select one:
A. Not considered to be covered property.
B. Considered personal property.
C. Considered part of the dwelling.
D. Not considered part of the dwelling, but is a separate structure.
Correct. Structures that are attached to the dwelling but only by a fence, utility line, or similar connection are not considered part of the dwelling, but are “other structures.” They are not considered personal property. They are covered by Coverage B—Other Structures.
Steve owns a home insured under the HO-3 policy. While Steve was painting his living room, he accidentally dropped an open paint can from his ladder which spilled onto his wall-to-wall carpet and sofa. The carpet and sofa were damaged beyond repair and needed to be replaced. What damage to Steve’s property is covered under his HO-3?
Select one:
A. None of the damage is covered.
B. The damage to the carpet is covered; the damage to the sofa is not covered.
C. Damage to the carpet and sofa are both covered.
D. The damage to the sofa is covered; the damage to the carpet is not covered.
Correct. The HO-3 provides special form coverage to the dwelling, and wall-to-wall carpet is considered part of the dwelling. The carpet damage was due to “direct physical loss to property described in Coverages A and B” and thus is covered. The sofa is not covered because Coverage C—Personal Property provides named perils coverage and a paint spill by the insured does not come within any Coverage C named peril.
Under the HO-3 policy, property losses that result from war, including the discharge of nuclear weapons, are
Select one:
A. Covered in excess of a large deductible.
B. Excluded.
C. Covered, but subject to a special sublimit.
D. Covered.
Correct. Under the HO-3 policy, property losses that result from war, including the discharge of nuclear weapons, are excluded.
Which one of the following is an excluded peril under Section I—Coverages A and B of the HO-3 policy?
Select one:
A. Settling of the dwelling
B. Accidental leak of water from plumbing
C. Hail
D. Unintentional loss
Correct. An excluded peril under Section I of the HO-3 policy is settling of the dwelling.
The water damage exclusion in the HO-3 policy eliminates coverage for losses caused by
Select one:
A. Flood caused by heavy rains, but not waves or tidal flooding.
B. Flood, surface water, waves, and water or water-borne material such as sewage that backs up through sewers and drains.
C. Flood, surface water, and waves, but not water-borne material such as sewage that backs up through sewers and drains.
D. Waves and tidal flooding, but not flood caused by heavy rains.
Correct. Flood, surface water, waves, and water or water-borne material such as sewage that backs up through sewers and drains.
In Section I—Exclusions of the HO-3 policy, three perils are excluded for Coverages A and B only. The three perils that are excluded for these coverages are
Select one:
A. War, neglect, and power failure.
B. Weather, acts or decisions, and faulty workmanship.
C. Water damage, earth movement, and ordinance or law.
D. Government action, intentional loss, and nuclear hazard.
Correct. The three perils that are excluded for these coverages are weather, acts or decisions, and faulty workmanship.
Jim purchased an HO-3 policy with a $270,000 Coverage A—Dwelling limit. Unaware that Jim had purchased a policy, his wife Sue Ellen also purchased an HO-3, with a $330,000 Coverage A—Dwelling limit. A fire destroys the couple’s home, which has a $300,000 replacement cost. How will the two insurers share the loss?
Select one:
A. Jim’s insurer will pay $270,000; Sue Ellen’s insurer will pay $30,000
B. Jim’s insurer will pay $150,000; Sue Ellen’s insurer will pay $150,000
C. Jim’s insurer will pay $135,000; Sue Ellen’s insurer will pay $165,000
D. Jim’s insurer will pay $165,000; Sue Ellen’s insurer will pay $135,000
Correct. The loss will be shared proportionately by both policies. 270,000 + 330,000 = 600,000; Jim’s policy will pay 270,000 ÷ 600,000, or 45%, and Sue Ellen’s policy will pay 330,000 ÷ 600,000, or 55%. Jim’s insurer will pay 45% X 300,000 or $135,000; Sue Ellen’s insurer will pay 55% X 300,000 or $165,000.
Under the HO-3 policy Section I—Conditions, the Abandonment of Property Condition
Select one:
A. Outlines a method for resolving disagreements between the insured and the insurer.
B. Provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it.
C. Establishes how the amount to be paid for a property loss will be determined.
D. States that the insurer will adjust all losses with the insured or the insured’s spouse, if a resident in same household.
Correct. Under the HO-3 Section I—Conditions, the Abandonment of Property Condition provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it.
Adam and his insurer disagree on the amount of a loss covered by his homeowners policy. Adam wants the insurer to pay $10,000 toward the loss. The insurer’s representative feels that the loss should be valued at $5,000. How could the appraisal process resolve this situation?
Select one:
A. Adam is forced to litigate the loss since agreement cannot be reached.
B. Adam’s loss will be valued at $7,500 which is an equitable compromise.
C. Both Adam and the insurer will jointly select an acceptable appraiser to set the value.
D. Adam and the insurer will each select an appraiser, and the two appraisers will submit their differences to an impartial umpire who will reach a resolution.
Correct. Adam and the insurer will each select an appraiser, and the two appraisers will submit their differences to an impartial umpire who will reach a resolution.
Under the HO-3 policy Section I—Conditions, the Loss Settlement condition
Select one:
A. Outlines a method for resolving disagreements between the insured and the insurer.
B. Establishes the process for determining the amount to be paid for a property loss.
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.
Correct. Under the HO-3 policy Section I—Conditions, the Loss Settlement condition establishes the process for determining the amount to be paid for a property loss.
The deductible, which appears on the declarations pages of a homeowners policy, is deducted from
Select one:
A. All loss payments.
B. The total of all losses during the policy period.
C. Section I (property) losses.
D. Section II (liability) losses.
Correct. The deductible, which appears on the declaration pages of a homeowners policy, is deducted from Section I (property) losses.
Martina is the named insured under an HO-3 policy. Martina’s residence sustained damage due to a fire and she moved into a local hotel for one month while her residence was uninhabitable and being repaired. Martina’s hotel bill for the month was $2,500. Martina normally spent $500 on meals monthly, but eating out at local restaurants for the month, Martina spent $1,500. How much will Martina receive from her HO-3 insurer under Coverage D—Loss of Use?
Select one:
A. $0
B. $2,500
C. $3,500
D. $4,000
Correct. Martina will receive her full hotel bill ($2,500) and the extra cost of her meals ($1,500 – $500). Martina is entitled to costs for lodging and the extra cost of meals during the time her house was uninhabitable due to a covered loss.
Nicholas and Laura own property in the country which is insured under an HO-3 policy. There is a cottage, where they reside, and several detached structures on the property including a greenhouse, a pool house, and a storage shed. Under the HO-3, Coverage A—Dwelling applies to
Select one:
A. All of the structures.
B. The cottage, which is the structure that is their residence premises and is listed as such on the policy’s declarations.
C. Any of the structures used by Nicholas, Laura, or any family member as a residential dwelling.
D. None of the structures.
Correct. Coverage A—Dwelling applies to the insured’s residence premises and is listed as such in the declarations.
Tom and Martha insure their house with an unendorsed HO-3 policy with a Coverage A—Dwelling limit of $300,000, which is the replacement cost of the house. A thief breaks into the house while Tom and Martha are on vacation and steals the following items:
$500 cash
$50,000 stock certificates
Ignoring any deductible that may apply, how much, if any, will Tom and Martha’s insurer pay for the loss of the items?
Select one:
A. $0
B. $200
C. $1,700
D. $50,500
Correct. The insurer will pay $200 for the cash and $1,500 for the stock certificates. The HO-3 policy has special sublimits within Coverage C that apply to money ($200) and securities ($1,500). The sublimits for these items apply to all named perils.
Bert and Maggie insure their house with an unendorsed HO-3 policy with a Coverage A—Dwelling limit of $300,000, which is the replacement cost of the house. A fire destroys their detached garage. The cost to replace the garage is $35,000. Ignoring any deductible that may apply, how much will Bert and Maggie’s insurer pay to replace the detached garage?
Select one:
A. $20,000
B. $25,000
C. $30,000
D. $35,000
Correct. The insurer will pay $30,000. Coverage for other structures is automatically provided under the HO-3 with a limit that is 10% of the limit for Coverage A. This 10% limit applies collectively to all “other structures” at the residence premises.
Sarah’s home is covered with an unendorsed HO-3 policy with a $500 deductible. Sarah suffered a kitchen fire causing $35,750 in damage to her home. In addition to the damage to the home various items in the home were also destroyed. Damaged items included various kitchen utensils and goods, her fish in an aquarium, clothing belonging to a roomer in the home, and a stamp collection that Sarah owned. Which one of the following is true regarding the property lost in the home?
Select one:
A. There would be no coverage for the stamps.
B. There would be no coverage for the fish.
C. The deductible would apply separately to the dwelling and contents.
D. The roomers clothing would be covered.
Correct. There would be no coverage for the fish.
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