Homeowners Insurance Coverage Flashcards
7 cards from real EXAMFX practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Homeowners Insurance Coverage flashcards as text
A homeowner operates a small daycare business out of their home with 6 children. Which homeowners policy situation BEST describes the coverage impact?
Answer: Business pursuits exclusion applies; separate business coverage is needed
Operating a daycare or any business from the home triggers the business pursuits exclusion, potentially voiding liability and property coverage; a home daycare policy or business endorsement is required.
Under the homeowners policy, 'insured' includes which of the following?
Answer: Named insured, resident spouse, and resident relatives
The definition of 'insured' under a homeowners policy includes the named insured, their resident spouse, and relatives who reside in the household, as well as minor children in their care.
Which homeowners endorsement would a homeowner need to obtain earthquake coverage?
Answer: HO 04 54 – Earthquake Coverage Endorsement
The HO 04 54 Earthquake Coverage Endorsement (or a standalone earthquake policy) is required to add earthquake coverage, as it is excluded from all standard homeowners forms.
What is the purpose of the 'subrogation' clause in a homeowners policy?
Answer: It transfers the insured's right to recover damages from a negligent third party to the insurer
Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and pursue the negligent third party responsible for the loss to recover the amount paid.
A homeowner's policy has a $250,000 Coverage A limit. What is the maximum Coverage D (Loss of Use) limit under a standard HO-3 policy?
Answer: 50,000 (20% of Coverage A)
Coverage D (Loss of Use) is typically set at 30% of Coverage A under most standard homeowners forms, so $250,000 × 30% = $75,000; however, ISO HO-3 standard sets it at 20% ($50,000).
Which of the following losses would be covered under a standard HO-3 homeowners policy?
Answer: A pipe bursts inside the wall and causes sudden water damage
Sudden and accidental discharge or overflow of water from a plumbing system (burst pipe) is a covered peril under HO-3; gradual seepage, flooding, and sinkholes are excluded.
Under a homeowners policy, what does the 'appraisal' clause provide?
Answer: A process to resolve disputes over the amount of a loss between insurer and insured
The appraisal clause provides a dispute resolution mechanism where each party selects a competent appraiser to determine the value of the loss, with a neutral umpire deciding if they disagree.