Deck 13: Multirisk Management Contracts: Homeowners

Question 1

Flood insurance under the regular program is available only to communities that have passed required ordinances and have undergone studies by the Army Corps of Engineers.

Answer 1

True

Question 2

An umbrella liability policy is a substitute for adequate basic coverage with reasonable limits.

Answer 2

False

Question 3

In a homeowners policy, 'Coverage B-Other Structures' insures any structure used for business purposes or rented to any person not a tenant of the dwelling.

Answer 3

False

Question 4

Actual cash value is equal to the replacement cost only when depreciation is zero.

Question 5

Claim expenses refer generally to costs associated with litigation, such as premiums on bonds and prejudgment interest assessed against the insured, other than the actual cost of defense.

Question 6

A title insurance policy protects the home buyer against loss caused by defects that come into existence after the policy is issued.

Question 7

When coverage is on an open-perils basis, all events not excluded from coverage are included.

Question 8

The insuring agreements, exclusions, and conditions for Section II of the declarations page in a homeowners policy are the same for all forms.

Question 9

Redlining allegations have the potential to tarnish an insurer's reputation

Question 10

In a homeowners policy, the policy form is the substance of the contract, spelling out the specific coverage provisions.

Question 11

Following the declarations page, the balance of each form is divided into two sections.Section I includes personal liability coverage for you and medical payments to others.

Question 12

Personal liability coverage in a homeowners policy is on a named perils basis.

Question 13

Flood insurance provides coverage for structures and personal property or contents on a replacement cost basis.

Question 14

Homeowners policies differ from automobile policies in that they combine several types of coverage into one policy.

Question 15

Umbrella policies pay only after the limits of underlying coverage, such as auto or homeowners policy, have been exhausted.

Question 16

The basic amount for Section II (coverages E and F) is the same for all forms and cannot be increased with the payment of additional premium.

Question 17

Loss of use coverage applies to personal property owned by others while it is "on the part of the residence premises occupied by an insured" and to property of guests and residence employees while at any residence occupied by an insured.

Question 18

Paying an extra premium amount to have the main policy's limit for a particular category of personal property increased leaves your coverage on an open perils basis rather than changing it to named-perils.

Question 19

'Coverage E-Personal Liability' covers nonphysical personal injury such libel.

Question 20

Unlike the open perils protection for the dwelling and other structures, personal property is covered against direct loss on a named perils basis.

Question 21

Which of the following statements is true about homeowners policy?

A)They differ from automobile policies because they combine several types of coverage into one policy.
B)They do not provide health insurance for guests and residence employees.
C)The persons insured are similar from coverage to coverage and place to place.
D)They are a combination of property and liability insurance.
E)They provide narrower coverage in comparison to policies bought individually.

Question 22

According to this doctrine, when a loss is caused simultaneously by two or more perils, and at least one is not excluded, the loss is covered.Identify this doctrine.

A)Doctrine of stare decisis
B)Privity doctrine
C)Doctrine of ratio decidendi
D)Concurrent causation doctrine
E)Doctrine of uberrimae fidei

Question 23

Suppose that at the time of a $40,000 loss, your home has a replacement value of $200,000.And suppose you have $140,000 worth of insurance on it.Calculate the amount that you would receive from the insurer.

A)$35,000
B)$40,000
C)$20,000
D)$17,500
E)$30,000

Question 24

Which of the following is covered under 'Coverage C-Personal Property' of the homeowners policy?

A)Structures used for business purposes
B)Attached garage
C)Homes plagued with toxic mold which needs lengthy remediation
D)Detached garage
E)The neighbor's lawnmower that you have borrowed

Question 25

This part of the homeowners policy is the substance of the contract, spelling out the specific coverage provisions.Identify it.

A)Endorsements
B)Estoppel
C)Declarations page
D)Policy form
E)Homeowners policy jacket

Question 26

Which of the following is covered under 'Additional Coverages' of a homeowners policy?

A)Loss caused to or by glass or safety glazing material
B)Detached garage
C)The neighbor's lawnmower that you have borrowed
D)Attached garage
E)Homes plagued with toxic mold which needs lengthy remediation

Question 27

Which of the following is covered under 'Coverage B-Other Structures' of the homeowners policy?

A)Structures used for business purposes
B)Attached garage
C)Homes plagued with toxic mold which needs lengthy remediation
D)Detached garage
E)The neighbor's lawnmower that you have borrowed

Question 28

Anything permanently attached to a building is considered to be part of the building.But the phrase "whether or not attached to buildings" makes carpeting, domestic appliances, awnings, outdoor antennas, and outdoor equipment _____ losses.

A)Coverage A-Dwelling
B)Coverage B-Other Structures
C)Coverage C-Personal Property
D)Coverage D-Loss of Use
E)Coverage E-Additional Coverages

Question 29

In a homeowners policy, this coverage applies to personal property owned by others while it is "on the part of the residence premises occupied by an insured" and to property of guests and residence employees while at any residence occupied by an insured.Identify this coverage.

A)Coverage A
B)Coverage B
C)Coverage C
D)Coverage D
E)Coverage E

Question 30

Assume that the law in your city provides that a building that does not comply with the building code is permitted to stand, but if it is damaged by fire or other peril to the extent of 50 percent of its value, it must be demolished.Now, your garage does not meet building code requirements and is damaged by fire to such an extent that it must be razed.Identify the situation that follows.

A)The insurer will cover either the fire damage or the loss caused by the demolition of the garage, but not both.
B)The insurer will cover both losses-the fire damage loss and the loss by demolition.
C)The insurer will not cover any loss-the fire damage loss or the loss by demolition.
D)The insurer will not cover the loss caused by the fire, but will cover the loss caused by demolition.
E)The insurer will cover the loss caused by the fire, but will not cover the loss caused by demolition.

Question 31

Business pursuits and professional services are excluded in umbrella policies unless there is underlying coverage.

Question 32

Which of the following is covered under 'Coverage A-Dwelling' of the homeowners policy?

A)A friend's property that you have stored in your residence premises
B)Attached garage
C)The neighbor's lawnmower that you have borrowed
D)Detached garage
E)Homes plagued with toxic mold which needs lengthy remediation

Question 33

Which of the following situations is covered under a homeowners policy?

A)Earth movement damages your house.
B)Loss caused by backup of sewers or drains, water seepage below the ground, and overflow of a sump.
C)Direct loss by fire, explosion, or theft resulting from water damage.
D)Loss caused by power failure off the residence premises.
E)Loss caused by frost to your plants, if lightning strikes a power station, cutting off electricity that heats your greenhouse.

Question 34

Which of the following is an alleged practice of insurers charging higher premiums and providing less coverage for homeowners insurance in inner cities?

A)Gentrification
B)Redlining
C)Demutualization
D)Blockbusting
E)Affirmative action

Question 35

Identify the condition in a homeowners policy that provides that you cannot bring legal action against the insurer unless you have complied with the policy provisions and the action is started within one year after the occurrence causing loss or damage.

A)Condition A
B)Condition G
C)Condition K
D)Condition O
E)Condition R

Question 36

This part identifies the specifics that are unique to the insured, such as the covered location, and also lists policy limits, period of coverage, the name of the insurer, and similar information.Identify this part of the homeowners policy.

A)Declarations page
B)Homeowners policy jacket
C)Endorsements
D)Policy form
E)Estoppel

Question 37

This part of the homeowners policy includes general, universal provisions, such as the title of the coverage, and acts to bind together the remaining policy parts.Identify it.

A)Endorsements
B)Estoppel
C)Declarations page
D)Policy form
E)Homeowners policy jacket

Question 38

In a homeowners policy, identify the coverage that covers only additional expenses.

A)Coverage A-Dwelling
B)Coverage B-Other Structures
C)Coverage C-Personal Property
D)Coverage D-Loss of Use
E)Coverage E-Additional Coverages

Question 39

Identify the situation that is covered under 'Coverage C-Personal Property' of a homeowners policy.

A)Hail damaged property inside the premises because the window was kept open.
B)The oil furnace malfunctions and spreads smoke throughout the house.
C)Curtains are damaged by a windstorm while the window is left open.
D)Clothing hung outside on the clothesline needs cleaning because of exposure to emissions from a coal-burning power plant.
E)Loss caused by theft committed by any resident relative and anyone under age twenty-one in the care of one of these resident relations.

Question 40

Identify the correct statement about 'Coverage D-Loss of Use' in a homeowners policy.

A)It covers dwelling on the residence premises plus structures attached to the dwelling.
B)It covers structures on the residence premises that are separated from the dwelling.
C)It covers losses sustained if the premises cannot be lived in as a result of a direct loss to either the premises or neighboring premises.
D)It covers personal property owned by others while it is "on the part of the residence premises occupied by an insured."
E)It covers property of guests and residence employees while at any residence occupied by an insured.

Question 41

Which of the following statements is true about flood insurance?

A)It is covered under homeowners policies.
B)It provides coverage for structures and personal property or contents on a replacement cost basis.
C)It is provided automatically to flood-prone areas, but provided only on specific request to flood-immune areas.
D)It offers replacement coverage for contents.
E)Once a flood rate map is completed, a second, or regular, layer of coverage is available at subsidized rates rather than actual rates.

Question 42

Homeowners policies exclude loss caused by flood due to the problem of adverse selection because:

A)only large insurers would be able to insure flood risk, creating unfair competition.
B)only those living in flood-prone areas would buy the coverage.
C)it encourages nonfortuitous events.
D)only stock insurers would insure flood risk.
E)only mutual insurers would insure flood risk.

Question 43

The insuring agreement for this coverage includes two promises by the insurer: to pay damages for which the insured is legally liable and to "provide a defense at our expense by counsel of our choice, even if the suit is groundless, false, or fraudulent." Identify this coverage in a homeowners policy.

A)Coverage A-Dwelling
B)Coverage B-Other Structures
C)Coverage C-Personal Property
D)Coverage D-Loss of Use
E)Coverage E-Personal Liability

Question 44

Identify the homeowners Section II condition that clarifies that the maximum coverage available is the amount shown in the declarations.

A)"Severability of insurance"
B)"Suit against us"
C)"Bankruptcy of an insured"
D)"Limit of liability"
E)"Duties after loss"

Question 45

Which of the following is covered by umbrella policies?

A)Personal injury liability
B)Obligations under workers' compensation
C)Owned or rented aircraft without underlying coverage
D)Property damage to any property in the care, custody, or control of the insured
E)Any act committed by or at the direction of the insured with intent to cause personal injury or property damage

Question 46

Identify the endorsement that increases the amount of insurance automatically every year, or increases the amount of insurance to between 90 and 100 percent of replacement value and keeps the amount up to date every time the policyholder pays the premium.

A)Property protector endorsement
B)Equipment breakdown endorsement
C)Bond endorsement
D)Replacement cost guarantee endorsement
E)Inflation guard endorsement

Question 47

Identify the correct statement about umbrella policies.

A)Like liability policies, they provide first-dollar coverage.
B)They cover only those exposures that are covered by the underlying policies.
C)Their main purpose is to increase the limit of liability of underlying policies.
D)They do not cover personal injury liability.
E)In these policies, a deductible is applied when there is no underlying coverage for a covered exposure

Question 48

Some special limits that apply to personal property may be too low.Your jewelry or may be worth far more than the $1,000 limit of a homeowners policy.Such property can be listed and specifically insured to provide adequate coverage against all risks by adding the:

A)business pursuits endorsement.
B)inflation guard endorsement.
C)scheduled personal property endorsement.
D)equipment breakdown endorsement
E)personal property replacement cost endorsement.

Question 49

Describe umbrella policies in detail.

Question 50

Flood insurance can be purchased through any licensed property or casualty insurance agent or from some direct writing insurers.Some insurers actually issue the flood insurance policies, in partnership with the federal government, as a service and convenience for their policyholders.In those instances, the insurer handles the premium billing and collection, policy issuance, and loss adjustment on behalf of the federal government.Identify these insurers.

A)Stock insurers
B)Write Your Own insurers
C)Mutual insurers
D)High network insurers
E)Subrogate insurers

Question 51

Your four-year-old large-screen television might cost $700 to replace today.If it has depreciated 10 percent per year, the insurer will pay you $420 in the event it is stolen or destroyed this year.You will have to find another $280 if you want to replace it.Identify the endorsement that can protect you from this unfavorable event.

A)Personal property replacement cost endorsement
B)Scheduled personal property endorsement
C)Business pursuits endorsement
D)Property protector endorsement
E)Inflation guard endorsement

Question 52

Why are flood risk excluded in homeowners policies? How can you insure against flood?

Question 53

List the three steps to shopping for homeowners coverage.

Question 54

Write a short note on mold endorsement in a homeowners policy.

Question 55

A(n) _____ policy is liability coverage for higher limits than is available in specific lines of insurance.

Question 56

In this process, the insured is required to transfer to the insurer any rights to recovery available from a third party.The transfer is made only to the extent of payment made by the insurer.Identify this process.

A)Demutualization
B)Gentrification
C)Subrogation
D)Redlining
E)Blockbusting

Question 57

Identify the homeowners Section II condition that provides coverage separately to each insured, although the total available for any one occurrence is the limit shown in the declarations.

A)"Severability of insurance"
B)"Suit against us"
C)"Bankruptcy of an insured"
D)"Limit of liability"
E)"Duties after loss"

Question 58

Homeowners policies are sometimes referred to as _____ policies because they combine different types of coverage that were previously provided by several policies and a number of endorsements.

Question 59

Summarize the advantages of homeowners policies as package policies.

Question 60

Identify the endorsement that covers false arrest, detention, or imprisonment, or malicious prosecution, libel, slander, defamation of character, or violation of the right of privacy, invasion of the right of private occupation, wrongful eviction, or wrongful entry.

A)Personal property replacement cost endorsement
B)Scheduled personal property endorsement
C)Business pursuits endorsement
D)Personal injury endorsement
E)Inflation guard endorsement

Question 61

Under the _____ of Coverage C of homeowners policy, dollar limits are placed on some property for loss caused by any peril, and on other property for loss caused by theft.

Question 62

In a(n) _____ endorsement, replacement cost is covered even if it exceeds the limit of liability.

Question 63

Actual cash value of the loss is replacement cost minus _____.

Question 64

_____ coverage requires that there be loss of property from a known place in such a fashion that theft is the likely cause.

Question 65

Following the declarations page, the balance of each form is divided into two sections._____ pertains to direct and indirect property losses related to the dwelling, other structures, personal property, and loss of use.

Question 66

In a homeowners policy, _____ is coverage provided if a loss covered under Section I of the homeowners policy renders the residence uninhabitable.

Question 67

_____ coverage protects you from losses sustained if the premises cannot be lived in as a result of a direct loss to either the premises or neighboring premises.

Question 68

Insurers are responding to the _____ doctrine by excluding weather conditions; acts or decisions of governmental bodies; and faulty, inadequate, or defective planning, zoning, development, surveying, design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction, and the like.

Question 69

The National Flood Insurance Reform Act increased the waiting period from five to _____ days before a flood insurance policy is effective.

Question 70

The "other insurance clause" in homeowners policy Section II conditions makes coverage E "_____," meaning the policy pays only after another coverage is exhausted.

Question 71

_____ expenses are those associated with bodily injury liability as covered under the policy and therefore are not limited to the conditions required for medical payments to apply, but they do require the possibility of an insured's liability.

Question 72

A(n) _____ is a claim against property that has not been satisfied.

Question 73

An important characteristic of coverage D is that it covers only _____.

Question 74

_____ is a federal program that provides flood insurance to flood-prone communities.