P&C Homeowners Insurance Policies 2 — Questions and Answers

Question 1: Under a standard HO-3 policy, Section I (Property) Coverage A protects:

Personal property of the insured
The dwelling building and attached structures (Correct answer)
Detached garages and fences only
Medical expenses of guests

Correct answer: The dwelling building and attached structures

Coverage A of the HO-3 covers the dwelling (the main residence building) and structures attached to it, such as an attached garage, on an open-perils basis.

Under the HO-3, Coverage A (Dwelling) provides open-perils (all-risk) protection for the dwelling building and any attached structures, subject to listed exclusions. Coverage B covers other structures on the premises (such as detached garages and fences, typically up to 10% of Coverage A). Coverage C covers personal property on a named-perils basis. Coverage D pays for additional living expenses if the home is uninhabitable.

Question 2: Which homeowners form provides the broadest coverage, insuring both the dwelling and personal property on an open-perils basis?

HO-2
HO-3
HO-4
HO-5 (Correct answer)

Correct answer: HO-5

The HO-5 (Comprehensive Form) covers both the dwelling and personal property on an open-perils basis, making it the broadest standard homeowners form available.

While the HO-3 covers the dwelling on open-perils and personal property on named-perils, the HO-5 extends open-perils protection to personal property as well. This means that unless a loss is specifically excluded, it is covered. The HO-5 is generally more expensive and is typically offered to well-maintained, higher-value homes. The HO-4 is for renters (personal property and liability only; no dwelling coverage).

Question 3: Under Section II (Liability) of a homeowners policy, 'medical payments to others' coverage is designed to pay:

The insured's own medical bills after an accident
Medical expenses of third parties injured on the insured's property, regardless of fault (Correct answer)
Lost wages of guests injured in the home
Liability judgments against the insured

Correct answer: Medical expenses of third parties injured on the insured's property, regardless of fault

Medical payments to others (Coverage F) pays medical expenses of guests or others injured on the insured's property without requiring proof that the insured was negligent — it is a no-fault coverage.

Medical payments to others is a goodwill coverage with limits typically ranging from $1,000 to $5,000. It pays the reasonable medical expenses of a third party who is injured on the insured's premises or by the insured's activities, without requiring the injured party to prove negligence. It is not the same as personal liability coverage (Coverage E), which responds to legal liability claims and carries much higher limits.

Question 4: Which HO form is designed for renters (tenants) who do not own the building they occupy?

HO-2
HO-3
HO-4 (Correct answer)
HO-6

Correct answer: HO-4

HO-4 (Renters Form) is designed for tenants; it covers personal property and provides liability coverage but does not cover the building, since the renter does not own it.

The HO-4 (Renters/Tenants Form) covers the insured's personal property on a named-perils basis and provides Section II liability coverages, but it does not include Coverage A or B because the renter does not own the building. The building owner is responsible for insuring the structure. HO-6 is the condominium form, which covers the interior unit improvements and personal property for condo unit owners.

Question 5: The 'other structures' coverage (Coverage B) in a homeowners policy typically provides coverage equal to:

50% of the Coverage A (dwelling) limit
10% of the Coverage A limit (Correct answer)
100% of the Coverage A limit
An amount separately scheduled by the insured

Correct answer: 10% of the Coverage A limit

Coverage B automatically provides coverage for other structures on the premises (detached garages, fences, sheds) at 10% of the Coverage A dwelling limit, without the need to schedule them separately.

The standard HO-3 automatically includes Coverage B at 10% of the Coverage A limit. For example, if Coverage A is $300,000, Coverage B provides $30,000 for detached structures. This default amount can often be increased by endorsement if the insured has large or valuable outbuildings. Structures used for business purposes are generally excluded or require separate coverage.

Question 6: Under a homeowners policy, which of the following perils is typically covered under Section I (Property) for a standard HO-3?

Flood
Earthquake
Vandalism (Correct answer)
Gradual deterioration

Correct answer: Vandalism

Vandalism is a covered peril under the HO-3 (and many other homeowners forms) as long as the home has not been vacant for more than a specified period, typically 60 days.

The HO-3 covers the dwelling under open perils (all risks except those excluded), and vandalism is not among the standard exclusions. Flood and earthquake are specifically excluded from all standard homeowners forms and require separate policies or endorsements. Gradual deterioration, wear and tear, and inherent vice are also excluded because they are predictable and controllable by the insured — not accidental losses.

P&C Homeowners Insurance Policies 2

Under a standard HO-3 policy, Section I (Property) Coverage A protects: