Question 1

The replacement value of the house less accumulated depreciation (which is the decline in value over time due to wear and tear) is known as ________.

Accepted Answer

The replacement value of the house minus the accumulated depreciation is known as the actual cash value.

Question 2

When you purchase a(n) ________, you are obtaining an extension to a homeowner's insurance policy that provides coverage for all personal property regardless of where it is located.

Accepted Answer

A personal articles floater is a type of insurance policy that provides coverage for valuable personal property that is not covered under a typical homeowner's insurance policy, such as jewelry, antiques, or artwork. This policy is also sometimes referred to as a "floater" because it "floats" with the insured item, providing coverage regardless of where it is located. A personal articles floater can be purchased as an extension to a homeowner's insurance policy, providing coverage for all personal property regardless of location.

Question 3

If you wanted to obtain an endorsement that automatically updates the level of property coverage based on an index of replacement costs that continually updates the cost of building a home, you would ask for a(n)

Accepted Answer

An inflation guard endorsement automatically increases the amount of insurance on a property to keep up with inflation and changes in the cost of rebuilding. It uses an index of replacement costs that continually updates the cost of building a home, ensuring that the insured amount is always sufficient to cover the cost of rebuilding.

Question 4

On your home owners policy ________ protects any personal property that's owned or used by the policyholder, regardless of the location of this property. In other words, if you're on a vacation in Hawaii and someone hits you with a pineapple and steals your suitcase, your personal property is still covered.

Accepted Answer

Coverage C, also known as personal property coverage, protects any personal property owned or used by the policyholder, regardless of its location. This includes items such as clothing, furniture, electronics, and other personal belongings, which are covered against loss or damage from perils such as fire, theft, and vandalism. The scenario described in the question, where personal property is stolen while on vacation, would be covered under Coverage C of the home owners policy.

Question 5

Alfred lost his 3 year old camera. It cost him $200 three years ago and had a life expectancy of 6 years. Alfred has actual cash value insurance on this camera which means his insurance company will issue him a check for ________ for his loss. A new camera costs $500.

Accepted Answer

The actual cash value insurance pays the depreciated value of the item. The camera has depreciated by half its life expectancy (3 out of 6 years), so its value is now $100.

Question 6

Explain Section I: Property Coverage for HO-2 and HO-3 policies.

Accepted Answer

The answer of Explain Section I: Property Coverage for HO-2...

Question 7

Reggie was hosting a BBQ when the deck fell off his house. Several of his friends were hurt in the accident. Luckily for Reggie he has ________ coverage on his home owner's insurance.

Accepted Answer

Personal liability coverage on a home owner's insurance policy would cover injuries sustained by Reggie's friends in the accident.

Question 8

Suppose burglars trashed your apartment and stole your personal property. Your rent is $350 per month and you had to live in another apartment house for two months while the landlord had the apartment put back into livable condition. Under which section of an HO policy would you be covered and how much would you recover because of the move?

Accepted Answer

Section I coverage D (Additional Living Expenses) would cover the cost of living elsewhere while the apartment was being fixed. The coverage limit is usually a percentage of the coverage limit for the home's structural coverage. Assuming a $100,000 limit for the home's structural coverage, the Additional Living Expenses limit would typically be around 20% or $20,000. Therefore, $700 ($350 x 2 months) would be covered.

Question 9

Amy Lambert's home is insured for $85,000 and her detached garage is destroyed by a windstorm. She hopes to collect $11,850 under her homeowner's policy. What will happen?

Accepted Answer

Coverage A applies to the actual dwelling, while Coverage B applies to other structures on the property, such as detached garages. However, the policy may have a limit on the coverage amount for other structures, which is often a percentage of the dwelling coverage amount. In this case, $11,850 may exceed the limit for Coverage B, resulting in a lower payout of $8,850.

Question 10

What is the main difference between replacement cost coverage and actual cash value coverage?

Accepted Answer

The answer of What is the main difference between replacement...

Question 11

Supplemental coverage for homeowner's insurance is available through endorsements. Which one of the following is not a common form of additional coverage?

Accepted Answer

Medical payments are typically included in standard homeowner's insurance policies and are not considered a supplemental coverage option. Personal articles floaters, earthquake coverage, flood protection, and inflation guard are all common forms of additional coverage that can be added to a homeowner's insurance policy through endorsements.

Question 12

You have the most popular house on the block for the neighborhood children to play at. You have a trampoline, tree fort and jungle gym. Your family also has two large German shepherd dogs. What should you consider given the described situation?

Accepted Answer

With having a popular house on the block for the neighborhood children to play, there is a higher risk of accidents occurring on your property, especially with the trampoline, tree fort, and jungle gym. Additionally, having two large German shepherd dogs increases the risk of dog bites and other accidents. To protect against potential liability claims, purchasing an umbrella policy is a wise choice. This policy provides additional liability coverage beyond the limits of your primary home and auto insurance policies.

Question 13

Provide an explanation of Section II: Personal Liability Coverage.

Accepted Answer

The answer of Provide an explanation of Section II: Personal...

Question 14

Describe each of the six HO packaged policies. Which one is the most common?

Accepted Answer

The answer of Describe each of the six HO packaged...

Question 15

The disadvantage of actual cash value coverage of personal property compared to replacement cost coverage is that it

Accepted Answer

Actual cash value coverage takes depreciation into account when reimbursing for lost or damaged items, whereas replacement cost coverage does not. This means that actual cash value coverage will provide less reimbursement than replacement cost coverage for the same item.

Question 16

Wilber Robinson found out that his homeowner's coverage comes in handy when a neighbor steps on a garden rake and it flips up and causes a concussion. Josh did just that and spent two weeks in the hospital running up a $23,000 bill. Josh was covered under

Accepted Answer

Section II personal liability covers bodily injury or property damage caused by the policyholder or their family members, even outside of the home. In this case, Wilber's neighbor was injured on his property, so it would fall under personal liability coverage.

Question 17

Insurers in California are required to offer ________ coverage to consumers due to the substantial risk factors in that state.

Accepted Answer

California is prone to earthquakes, and therefore, insurers in the state are required to offer earthquake coverage to consumers.

Question 18

Your best friend's apartment has just been robbed, and he had no insurance. What would you suggest to your friend to better protect himself from such losses in the future?

Accepted Answer

A) Purchase renter's insurance and add a personal articles floater: Renter's insurance is an affordable way to provide coverage for damaged or stolen possessions. A personal articles floater can be added to insure specific high-value items that might be excluded from a standard insurance policy.

B) Take out personal property replacement cost coverage: This coverage ensures that if some of the items are damaged and need to be replaced, the coverage will provide for the full cost of the replacement.

C) Take a written and video tape inventory of your property: Keeping an inventory of all your possessions can help in case of theft, natural disaster, or any other incident that may cause damage to your property. By documenting all your belongings, including their condition and value, you can speed up the insurance claims process and ensure that you are properly compensated for your losses.

Therefore, all three options are important for ensuring proper protection against losses in the future.

Question 19

Coverage A: Dwelling protects

Accepted Answer

Coverage A specifically protects your home and any attachments to it, such as a garage or porch. It does not cover personal property or unattached structures. Therefore, the best choice is E, which includes both of these items.

Question 20

Antoine LaDuke suffered a major loss on his older home due to mud from a flood. Although he had homeowner's insurance, what was the probable reason he was not covered?

Accepted Answer

Many homeowner's insurance policies exclude flood-related damages, and it is likely that this was the case for Antoine LaDuke's policy. It is important for homeowners to carefully read and understand the details of their insurance coverage to ensure they are adequately protected.

Quiz 10: Property and Liability Insurance