DC Homeowners Insurance 2 — Questions and Answers
Question 1: Which section of a standard homeowners policy (HO-3) covers the policyholder's personal property worldwide?
- Coverage A – Dwelling
- Coverage B – Other Structures
- Coverage C – Personal Property (Correct answer)
- Coverage D – Loss of Use
Correct answer: Coverage C – Personal Property
Coverage C in the HO-3 form covers the insured's personal property anywhere in the world, subject to policy limits.
Under Coverage C of the HO-3, personal property belonging to the insured or household residents is covered against named perils worldwide (e.g., theft of luggage while traveling). Special limits apply to jewelry, fine art, and other high-value categories.
Question 2: An HO-3 policy's Coverage A covers the dwelling on an open-perils basis. What does 'open perils' mean?
- Only named perils are covered
- All perils except those specifically excluded are covered (Correct answer)
- Only perils listed in a schedule are covered
- Coverage applies only during declared disasters
Correct answer: All perils except those specifically excluded are covered
Open perils (also called all-risk) means coverage applies to all causes of loss except those specifically excluded in the policy.
The HO-3 insures the dwelling (Coverage A) on an open-perils basis, meaning any cause of loss not specifically excluded is covered. Common exclusions include flood, earthquake, and neglect. This is broader than named-perils coverage.
Question 3: Under a standard homeowners policy, which coverage pays for additional living expenses if the home becomes uninhabitable due to a covered loss?
- Coverage A
- Coverage B
- Coverage C
- Coverage D (Correct answer)
Correct answer: Coverage D
Coverage D – Loss of Use pays for additional living expenses (hotel, meals) when the insured cannot live in the home because of a covered peril.
Coverage D covers the difference between the insured's normal living expenses and the additional costs incurred while the home is being repaired after a covered loss (e.g., hotel bills, restaurant meals). It also covers lost rental income if part of the home was rented.
Question 4: What DC-specific peril is NOT covered under a standard homeowners policy and typically requires a separate federal policy?
- Fire
- Windstorm
- Flood (Correct answer)
- Theft
Correct answer: Flood
Flood damage is excluded from standard homeowners policies and is typically covered through the National Flood Insurance Program (NFIP).
Standard homeowners policies universally exclude flood, defined as surface water inundation from outside the home. DC homeowners in flood zones can purchase NFIP coverage through licensed agents. Private flood insurance is also available.
Question 5: Which homeowners policy form provides the broadest coverage and is typically used for owner-occupied dwellings?
- HO-1 (Basic Form)
- HO-2 (Broad Form)
- HO-3 (Special Form) (Correct answer)
- HO-4 (Renters Form)
Correct answer: HO-3 (Special Form)
HO-3 is the most commonly sold homeowners policy and provides the broadest coverage—open perils on the dwelling and named perils on personal property.
The HO-3 Special Form is the standard policy for owner-occupied single-family homes. It covers the dwelling and other structures on an open-perils basis and personal property on a named-perils basis, making it broader than HO-1 or HO-2.
Question 6: What is the purpose of an umbrella liability policy that a DC homeowner might purchase?
- To replace the homeowners policy with broader coverage
- To provide excess liability coverage above the limits of underlying home and auto policies (Correct answer)
- To cover flood and earthquake losses excluded from the homeowners policy
- To insure scheduled personal property at agreed value
Correct answer: To provide excess liability coverage above the limits of underlying home and auto policies
An umbrella policy provides additional liability protection above and beyond the limits of the homeowners and auto liability policies.
A personal umbrella policy (PUP) provides an additional layer of liability coverage—typically $1 million or more—that kicks in when the underlying homeowners or auto liability limits are exhausted. It also often covers some claims not covered by underlying policies.
DC Homeowners Insurance 2
Which section of a standard homeowners policy (HO-3) covers the policyholder's personal property worldwide?