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.

Accepted Answer

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

Question 2

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

Accepted Answer

An umbrella liability policy is designed to provide additional coverage above the limits of underlying policies, not to replace them. It kicks in when the limits of the basic coverage are exhausted.

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.

Accepted Answer

'Coverage B-Other Structures' typically does not cover structures used for business purposes or those rented to someone who is not a tenant of the dwelling, unless the rental is for garage purposes only.

Question 4

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

Accepted Answer

Actual cash value is calculated by subtracting depreciation from the replacement cost. Therefore, if depreciation is zero, the actual cash value equals the replacement cost.

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.

Accepted Answer

Claim expenses typically include various costs associated with handling and settling claims, such as court costs, investigation expenses, and other related fees, beyond just the costs of legal 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.

Accepted Answer

A title insurance policy protects the home buyer against loss caused by defects in the title that existed at or before the policy was issued, not defects that arise after.

Question 7

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

Accepted Answer

In an open-perils insurance policy, all causes of loss are covered except for those specifically excluded in the policy document.

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.

Accepted Answer

The insuring agreements, exclusions, and conditions for Section II of the declarations page in a homeowners policy are the same for all forms because they are standardized by the insurance industry.

Question 9

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

Accepted Answer

Redlining allegations suggest discriminatory practices, which can harm public perception and trust in an insurer, negatively affecting its reputation.

Question 10

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

Accepted Answer

The policy form in a homeowners policy indeed constitutes the substance of the contract, detailing the specific coverage provisions, including what is and isn't covered, the limits of coverage, and any conditions or exclusions.

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.

Accepted Answer

The balance of an insurance form is typically divided into sections, but Section I usually covers property insurance (dwelling, other structures, personal property, loss of use), not personal liability or medical payments to others. Those are typically covered under Section II.

Question 12

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

Accepted Answer

Personal liability coverage in a homeowners policy is on an open perils basis, meaning it covers all perils unless specifically excluded.

Question 13

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

Accepted Answer

Flood insurance typically provides coverage for structures on a replacement cost basis, but personal property or contents coverage is usually on an actual cash value basis, not replacement cost.

Question 14

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

Accepted Answer

The answer of Homeowners policies differ from automobile policies in...

Question 15

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

Accepted Answer

Umbrella policies are designed to provide additional liability coverage beyond the limits of the insured's homeowners, auto, or watercraft insurance policies. They kick in only after the primary insurance policy's limits are 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.

Accepted Answer

The basic amount for Section II (coverages E and F) in an insurance policy can often be increased beyond the standard limits by paying an additional premium, allowing policyholders to tailor coverage to their specific needs.

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.

Accepted Answer

Loss of use coverage typically applies to additional living expenses and loss of rental income when a residence becomes uninhabitable, not to personal property owned by others or guests.

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.

Accepted Answer

Increasing the policy limit for a category of personal property does not change the type of coverage from named-perils to open perils; it only increases the coverage amount.

Question 19

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

Accepted Answer

The answer of 'Coverage E-Personal Liability' covers nonphysical personal injury...

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.

Accepted Answer

Personal property coverage typically operates on a named perils basis, meaning it only covers losses specifically listed in the policy, unlike dwelling coverage which often uses an open perils approach, covering all risks except those explicitly excluded.

Quiz 13: Multirisk Management Contracts: Homeowners