Homeowners Insurance (HO-3) Policy Coverage, Exams of Corporate Finance

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AINS 102 Ch 3 Questions Latest Review 2023

Steve and Amy were about to purchase their first home. During the process, they were advised that they needed to purchase a HO-3 insurance policy. The HO-3 policy would provide Steve and Amy with coverage for all of the following, EXCEPT:

Select one:

A. Their cars

B. Personal Liability

C. The house

D. The contents of the house - Correct Ans-A. Their cars

David and Colleen insure their house under a HO-3 policy. One evening, while they were entertaining some friends at their home, the railing of the deck collapsed and one of their guests fell to the ground below. The individual suffered a serious leg injury which required surgery and two days in the hospital. Which one of the following coverages under David and Colleen's HO-3 policy would cover the expenses for the injured individual?

Select one:

A. Coverage A—Dwelling

B. Coverage B—Other Structures

C. Coverage D—Loss of Use

D. Coverage E—Personal Liability - Correct Ans-D. Coverage E—Personal Liability

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. Any of the structures used by Nicholas, Laura, or any family member as a residential dwelling.

B. None of the structures.

C. The cottage, which is the structure that is their residence premises and is listed as such on the policy's declarations.

D. All of the structures. - Correct Ans-C. The cottage, which is the structure that is their residence premises and is listed as such on the policy's declarations.

Larry owns and occupies a home with a detached garage that is insured under an HO-3 policy. Due to the cold winters, Larry has decided to connect the garage to his home with an enclosed breezeway, permanently connecting the dwelling and the garage with a connected roof, to avoid going outside to get to and from his automobile. Which one of the following is true regarding Larry's homeowner policy coverage?

Select one:

A. Larry should reduce his Coverage B limit for the value of the garage.

B. Larry may need to increase his Coverage A limit for the value of the garage and breezeway.

C. Larry should consider the breezeway a "fixture" to be covered under Coverage A of the policy.

D. Larry should include the cost of the land the garage is on for the Coverage A limit. - Correct Ans-B. Larry may need to increase his Coverage A limit for the value of the garage and breezeway.

Tomas has an HO-3 policy covering his home. A neighbor jumped Tomas's fence to use his yard as a shortcut to a store, tripped over a small shovel left on the lawn, and was injured. The neighbor sued Tomas. Tomas's insurer defended and won the lawsuit on the theory that the neighbor was a trespasser to whom no duty was owed by Tomas. The insurer's defense included $20,000 in legal fees. Who is responsible for these fees?

Select one:

A. Tomas and the insurer share responsibility for the legal fees.

B. Tomas's HO-3 insurer is responsible for the legal fees.

C. Tomas is, because liability coverage is not triggered absent a finding of liability.

D. The insurer is responsible for the legal fees only if Tomas is not able to pay them. - Correct Ans-B. Tomas's HO-3 insurer is responsible for the legal fees.

Under Coverage E—Personal Liability of the HO-3 policy, the insurer's obligation to defend ends

Select one:

A. When the costs of defense limits are exhausted.

B. When the cost of defense exceeds the personal liability limits.

C. When policy limits are exhausted by the claim expenses.

D. When the liability limit for the occurrence is exhausted by payment of a settlement or judgment. - Correct Ans-D. When the liability limit for the occurrence is exhausted by payment of a settlement or judgment.

Coverage F—Medical Payments to Others in the homeowners policy applies to bodily injury to a residence employee in all of the following situations, EXCEPT:

Select one:

A. The residence employee is on the insured location and is working

B. The residence employee is away from the insured location and is not working

C. The residence employee is on the insured location but is not working

D. The residence employee is away from the insured location but is working - Correct Ans-B. The residence employee is away from the insured location and is not working

The medical payments coverage in a homeowners policy covers certain medical expenses incurred by

Select one:

A. Nonresidents of the insured's household.

B. A person uninvited to the insured's home.

C. Regular household residents other than residence employees.

D. Insureds. - Correct Ans-A. Nonresidents of the insured's household.

The Millers insure their dwelling under an HO-3 policy. They recently purchased a shed for their back yard where they will store tools, bicycles, and other sporting equipment. Which one of the following property coverages under Section I of the HO-3 policy would apply to the shed?

Select one:

A. Coverage A—Dwelling

B. Coverage B—Other Structures

C. Coverage C—Personal Property

D. Additional Coverage - Correct Ans-B. Coverage B—Other Structures

The insuring agreement of a homeowners policy specifies that

Select one:

A. The insurer will provide policy coverage in return for the premium and compliance with policy provisions.

B. Defined words have special meanings when they are used within the policy.

C. Five property coverages are provided by the policy.

D. Endorsements are available to modify the contract. - Correct Ans-A. The insurer will provide policy coverage in return for the premium and compliance with policy provisions.

Alicia's house is insured under a HO-3 policy. When a fire damaged her garage, the claims representative told her that it would be covered under Coverage B—Other Structures. Under the HO-3 policy, Coverage B—Other Structures applies to structures

Select one:

A. On the residence premises and attached to the residence premises by permanent structures.

B. Not on the residence premises but owned by the insured.

C. On the residence premises that are not attached to the dwelling and are separated from the dwelling by clear space.

D. On the residence premises and more than 100 feet from the dwelling. - Correct Ans-C. On the residence premises that are not attached to the dwelling and are separated from the dwelling by clear space.

Josh has just built a large kennel in his backyard for his pet dogs. The kennel includes a heated shed and access to a large fenced area. Josh wants to make sure he has adequate insurance limits under his homeowners policy so that he can replace the kennel if it is damaged. Which one of the coverage limits should Josh check on his homeowners policy to determine whether his coverage on the kennel is adequate?

Select one:

A. Coverage A—Dwelling

B. Coverage B—Other Structures

C. Coverage C—Personal Property

D. Coverage D—Loss of Use - Correct Ans-B. Coverage B—Other Structures

Sammy and Sally Oshua insure their home with an HO-3 policy. They own a cocker spaniel puppy. While a neighboring couple and their five-year-old daughter were visiting, the puppy bit the girl as she was playing with it. The child suffered a serious wound and the neighbors sued the Oshuas. Which one of the following statements is true?

Select one:

A. Defense costs are not covered for the Oshuas if the lawsuit is found to be groundless.

B. Because the child is a minor, the insurer will pay the damages regardless of legal liability.

C. Because the dog was on the Oshuas' property, they are not covered for injury to the child.

D. In addition to paying up to the limit of liability, the insurer will pay defense costs associated with the lawsuit. - Correct Ans-D. In addition to paying up to the limit of liability, the insurer will pay defense costs associated with the lawsuit.

Under Section II—Liability Coverage of a homeowners policy all of the following are the insured's duties after an occurrence, EXCEPT:

Select one:

A. Submit a sworn statement of loss for damage to property of others if making a claim under that coverage

B. Make voluntary payments to the claimant

C. Forward legal documents to the insurer

D. Provide claims assistance to the insurer - Correct Ans-B. Make voluntary payments to the claimant

The medical payments coverage in a homeowners policy covers certain medical expenses incurred by

Select one:

A. Insureds.

B. A person uninvited to the insured's home.

C. Regular household residents other than residence employees.

D. Nonresidents of the insured's household - Correct Ans-D. Nonresidents of the insured's household.

Richard insures his house under a HO-3 policy. During a recent windstorm, a tree fell on the attached garage causing structural damage. Which one of the following Section I coverages of Richard's homeowners policy would cover the damage to the attached garage?

Select one:

A. Coverage A—Dwelling

B. Coverage B—Other Structures

C. Coverage C—Personal Property

D. Coverage D—Loss of Use - Correct Ans-A. Coverage A—Dwelling

The HO-3 policy Coverage D provides coverage for

Select one:

A. Loss of Use.

B. The dwelling.

C. Other Structures.

D. Personal property. - Correct Ans-A. Loss of Use.

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. Additional living expense.

D. Structures separated by a clear space. - Correct Ans-B. Structures attached to the dwelling.

Which one of the following statements is correct regarding coverage under Section I, Coverage D—Loss of Use of an HO-3 policy.

Select one:

A. Coverage is provided only when civil authority prohibits use of the premises.

B. A claim may be filed when the residence premises are unlivable because of a covered cause of loss and there has been an increase in living expenses.

C. Additional Living Expenses and Fair Rental Value have separate coverage limits.

D. Coverage is limited to 30 days or the time required to repair or replace the residence premises, whichever is shorter. - Correct Ans-B. A claim may be filed when the residence premises are unlivable because of a covered cause of loss and there has been an increase in living expenses.

The HO-3 policy provides open perils coverage rather than named perils coverage for which one of the following?

Select one:

A. Coverage A—Dwelling only

B. Coverage A—Dwelling and Coverage B—Other Structures

C. Coverage C—Personal Property

D. Coverage D—Loss of Use - Correct Ans-B. Coverage A—Dwelling and Coverage B—Other Structures