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Practice test · 30 questions
Homeowners Insurance Practice Test (Part 2 of 2)
Part 2 continues the homeowners insurance question bank with 30 new questions. Answer each one to see the correct choice and a full explanation; your progress is saved in this browser.
Questions
30
Suggested time
36 min
Difficulty mix
10 / 13 / 7
Passing target
70%
Subtopics in this part: Additional coverages, Perils insured against, Section I exclusions, Loss settlement, Section I conditions, Section II liability, Section II exclusions, Endorsements.
0 of 30 answered
Additional coverages · Application
Under the ISO 2011 HO-3 Additional Coverage for collapse, which of the following situations is covered?
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Correct answer: D. A floor abruptly caves in from hidden termite damage unknown to the insured
Collapse coverage applies only to an abrupt falling down or caving in of a building or part of a building, and hidden insect damage unknown to an insured is a listed cause. Sagging, bulging or cracking of a part that is still standing, or merely in danger of falling, is not collapse. A deck is not covered for hidden decay unless its loss directly results from the collapse of a building.
After a covered fire, the city requires Chen to install upgraded wiring and sprinklers while rebuilding, adding $30,000 to the cost. Her ISO 2011 HO-3 has a $250,000 Coverage A limit. How does the policy handle these code-upgrade costs?
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Correct answer: B. Up to $25,000 is available as additional insurance under Ordinance or Law
The Ordinance or Law additional coverage lets the insured use up to 10% of the Coverage A limit for increased costs caused by enforcement of building codes after a covered loss. Ten percent of $250,000 is $25,000, and the coverage is additional insurance, so it does not reduce the dwelling limit. Chen pays the remaining $5,000 unless she bought HO 04 77 for a higher amount.
Under the ISO 2011 HO-3, each of the following Section I Additional Coverages is paired with its correct limit EXCEPT:
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Correct answer: C. Grave markers, including mausoleums: up to $1,000
Grave markers, including mausoleums, are covered up to $5,000, on or away from the residence premises, for loss by a Coverage C named peril. The other pairings are correct: fire department service charge and credit card coverage each pay up to $500 with no deductible, and landlord's furnishings pay up to $2,500 per loss in a rented apartment for named perils other than theft.
Under the ISO 2011 HO-3, personal property is insured against 16 named perils. Which of the following is NOT one of those named perils?
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Correct answer: A. Collapse
The 16 Coverage C perils are fire or lightning, windstorm or hail, explosion, riot, aircraft, vehicles, smoke, vandalism, theft, falling objects, weight of ice, snow or sleet, accidental discharge of water or steam, sudden tearing apart of heating or cooling systems, freezing, artificially generated electrical current, and volcanic eruption. Collapse is handled separately as an Additional Coverage, not as a named peril.
During a thunderstorm, wind-driven rain pours through a bedroom window that Ayesha left open, soaking a mattress and a rug. The wind did not damage the building. How does her ISO 2011 HO-3 treat the damage to these contents?
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Correct answer: C. Not covered, unless wind or hail first creates an opening in a roof or wall
The Windstorm or Hail peril does not cover loss to property inside a building caused by rain, snow, sleet, sand or dust unless the direct force of wind or hail damages the building and creates an opening in a roof or wall through which the rain enters. An open window is not such an opening. Accidental discharge applies to plumbing systems and appliances, and not all water damage is excluded.
Lin, a full-time college student and an insured under her parents' ISO 2011 HO-3, left her dorm room for an off-campus internship. Her laptop, left in the room, is stolen 75 days after she was last there. How does the policy treat the theft?
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Correct answer: B. Covered, because she was at her school residence within 90 days before the loss
The theft peril excludes theft at another residence owned, rented or occupied by an insured unless the insured is temporarily living there. A special rule covers a student's property at the residence occupied to attend school if the student has been there at any time during the 90 days immediately before the loss. At 75 days, Lin's laptop is covered. The 60-day period relates to vacancy, not student theft.
Moses moved into a care facility, and his house has been vacant for 75 consecutive days. Vandals break in, spray-paint the walls and smash the windows. Under the open perils dwelling coverage of his ISO 2011 HO-3, how is the damage treated?
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Correct answer: A. Not covered, because vandalism is excluded after more than 60 consecutive days of vacancy
The HO-3 does not cover vandalism and malicious mischief, or ensuing loss from the wrongful act, if the dwelling has been vacant for more than 60 consecutive days immediately before the loss. The Glass or Safety Glazing Material coverage also excludes breakage after 60 consecutive days of vacancy, except breakage caused by earth movement. A dwelling under construction is not considered vacant.
Under the open perils coverage for the dwelling in the ISO 2011 HO-3, which of these losses is covered?
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Correct answer: D. A water heater supply line suddenly bursts, soaking drywall and flooring
Open perils coverage for Coverages A and B carries listed exclusions, including wear and tear, deterioration, settling and resulting cracking, and damage by birds, rodents or insects. However, an exception covers accidental discharge of water from a plumbing system or household appliance on the residence premises, so the drywall and flooring are covered. The policy does not pay to repair the system or appliance itself.
An earthquake cracks the foundation of Ana's home and ruptures a gas line, and the resulting fire destroys the kitchen. She has an unendorsed ISO 2011 HO-3. How are the two parts of the loss treated?
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Correct answer: B. The fire damage is covered; the earthquake cracking is excluded
The Earth Movement exclusion removes earthquake damage regardless of any other contributing cause, but it states that direct loss by fire, explosion or theft resulting from earth movement is covered. So the ensuing fire is covered while the foundation cracking is not. Earthquake coverage for the dwelling itself requires the HO 04 54 Earthquake endorsement.
Under the ISO 2011 HO-3, which of these water losses to the dwelling is excluded?
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Correct answer: C. A nearby river overflows its banks and fills the basement
The Water exclusion removes flood, surface water, waves, tides and overflow of any body of water, whether or not driven by wind, along with sewer backup, sump overflow and water below the ground surface. River overflow is flood, usually insured through the National Flood Insurance Program. Accidental discharge from an appliance, rain through a wind-created opening, and freezing when heat was maintained are covered.
During a bitter divorce, Victor deliberately sets fire to the home he owns jointly with his wife, Elena, who is also a named insured and had no part in the act. Under the ISO 2011 HO-3 form language, what coverage is available?
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Correct answer: A. No insured is entitled to coverage under the Intentional Loss exclusion
The Intentional Loss exclusion applies to any loss arising out of an act an insured commits or conspires to commit with the intent to cause a loss, and it states that no insured is entitled to coverage, even insureds who did not commit or conspire in the act. Some states protect innocent co-insureds by statute or case law, but the ISO form itself denies coverage to every insured.
An ice storm downs utility lines two miles from Gabriel's home, cutting his power for four days. All the food in his freezer spoils. Under his ISO 2011 HO-3, how is the spoiled food treated?
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Correct answer: D. Excluded, because the power failure took place off the residence premises
The Power Failure exclusion removes loss caused by failure of power or other utility service when the failure takes place off the residence premises. The food was not damaged by a named peril on the premises, so it is not covered. If the outage caused an insured peril on the premises, such as a fire, that resulting loss would be covered. Endorsement HO 04 98 can add refrigerated property coverage.
Priya's dwelling has a full replacement cost of $400,000 and a Coverage A limit of $320,000 under an ISO 2011 HO-3. Hail causes roof damage costing $50,000 to replace (actual cash value $35,000), and she completes the repairs. With a $1,000 deductible, what does the insurer pay?
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Correct answer: B. $49,000
When the Coverage A limit is at least 80% of full replacement cost at the time of loss, the HO-3 pays replacement cost without deduction for depreciation, up to the limit. Here $320,000 is exactly 80% of $400,000, so Priya receives $50,000 minus the $1,000 deductible, or $49,000. The $39,000 answer wrongly measures the insurance against 100% of replacement cost.
Marcus insures his home for $240,000 under an ISO 2011 HO-3, but its full replacement cost is $400,000. A fire causes damage with a replacement cost of $40,000 and an actual cash value of $28,000, and he repairs it. Before the deductible, what does the insurer owe?
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Correct answer: D. $30,000
Because $240,000 is less than 80% of replacement cost ($320,000), the HO-3 pays the greater of actual cash value ($28,000) or the proportion of replacement cost that the insurance carried bears to the insurance required: $240,000 divided by $320,000, times $40,000, equals $30,000. The greater amount, $30,000, applies. Dividing by full replacement cost instead of 80% produces the wrong $24,000.
Esther's dwelling is insured for $300,000 under an ISO 2011 HO-3, more than 80% of its replacement cost. A windstorm causes siding damage that will cost $2,000 to replace, but she decides not to repair it yet. How is the claim settled?
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Correct answer: C. At replacement cost now, because the loss is under 5% of the insurance and under $2,500
Normally the HO-3 pays no more than actual cash value until repair or replacement is complete. However, if the cost to repair or replace is both less than 5% of the amount of insurance on the building and less than $2,500, the loss is settled at replacement cost whether or not repairs are done. A $2,000 loss meets both tests, since 5% of $300,000 is $15,000.
A covered fire destroys one of a matched pair of antique table lamps in Yuki's home. The pair had an actual cash value of $1,800, and the surviving lamp alone is worth $500. Under the ISO 2011 HO-3 Loss To A Pair Or Set condition, what may the insurer elect to do?
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Correct answer: A. Pay $1,300, the drop in actual cash value, or restore the pair
For a loss to a pair or set, the insurer may elect to repair or replace any part to restore the pair or set to its value before the loss, or pay the difference between the actual cash value of the property before and after the loss. That difference is $1,800 minus $500, or $1,300. Paying half the pair's value ignores the extra value lost when a matched set is broken.
Under the ISO 2011 HO-3 Appraisal condition, after one party makes a written demand for appraisal, how are the appraisers selected and paid?
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Correct answer: B. Each party chooses an appraiser within 20 days, pays its own appraiser, and shares the umpire and other costs equally
Either party may demand appraisal when they disagree on the amount of loss. Each chooses a competent and impartial appraiser within 20 days of the written request, and the two appraisers choose an umpire; if they cannot agree within 15 days, a judge may choose. A decision agreed to by any two sets the loss. Each party pays its own appraiser and shares the umpire and other expenses equally.
Carmen's insurer denies her fire claim after finding that she misrepresented material facts. Her mortgage lender is named in the ISO 2011 HO-3 and has met all of its own obligations under the policy. How does the mortgage clause affect the lender's claim?
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Correct answer: C. The lender's valid claim is paid, and the insurer may be subrogated to the lender's rights
The mortgage clause says denial of the insured's claim does not apply to a valid claim of the mortgagee if the mortgagee reports known changes in ownership, occupancy or risk, pays any premium due on demand, and submits a sworn statement of loss within 60 days after notice. When the insurer pays the mortgagee but denies the insured, it is subrogated to the mortgagee's rights under the mortgage.
Which of the following time periods is correctly stated under the Section I Conditions of the ISO 2011 HO-3?
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Correct answer: D. Any suit against the insurer must be started within two years after the date of loss
Under Section I Conditions, a suit must be started within two years after the date of loss. The insured must send a sworn proof of loss within 60 days after the insurer's request, and loss is payable 60 days after the insurer receives proof of loss and an agreement, final judgment or filed appraisal award. The insurer's option to repair requires written notice within 30 days after receiving proof of loss.
A deck at Rafael's home collapses during a party, injuring three guests whose combined damages total $240,000. His ISO 2011 HO-3 carries the basic Coverage E limit of $100,000. What is the most Coverage E pays for these damages?
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Correct answer: A. $100,000 in total, because all of the injuries arose from one occurrence
The Coverage E limit is the most paid for all damages from any one occurrence, regardless of the number of insureds, claims or injured persons, and an occurrence includes all injury from one accident. One deck collapse is one occurrence, so $100,000 is the maximum. Defense costs are paid in addition to the limit. The basic ISO limits are $100,000 for Coverage E and $1,000 per person for Coverage F.
Several people are hurt at the Lindqvist home during a family party. Under the ISO 2011 HO-3, which injured person is eligible for Coverage F, Medical Payments to Others?
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Correct answer: C. A neighbor invited to the party who trips on the patio steps
Coverage F pays necessary medical expenses for a person injured on the insured location with an insured's permission, regardless of fault, but it does not apply to the named insured or regular residents of the household other than residence employees. The invited neighbor qualifies. The son and spouse are residents, and the long-term roomer regularly resides on the insured location.
Hamza borrows his neighbor's camera, which would cost $700 to replace, and accidentally drops it on a hiking trail, destroying it. Under his ISO 2011 HO-3, which provision pays for the camera?
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Correct answer: B. Damage to Property of Others, up to $1,000 at replacement cost
Coverage E excludes property damage to property rented to, occupied or used by, or in the care of an insured, except damage by fire, smoke or explosion. Coverage C does include property used by an insured, but accidental dropping is not one of its named perils. The Damage to Property of Others additional coverage fills this gap, paying up to $1,000 per occurrence at replacement cost without regard to legal liability. Its exclusion for intentional damage by an insured age 13 or older does not apply to an accidental drop.
Under the ISO 2011 HO-3 Section II, which watercraft liability exposure is covered without any endorsement?
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Correct answer: A. A rowboat with a 15-horsepower outboard motor owned by the named insured
The HO-3 covers owned watercraft powered by outboard motors of 25 total horsepower or less, owned sailing vessels under 26 feet, and certain non-owned craft. An owned 30-foot sailboat and an owned outboard over 25 horsepower acquired before the policy period and never declared are excluded. Any watercraft rented to others or used to carry persons for a charge is excluded regardless of size.
Jaylen, 16, lives with his parents and runs a part-time lawn mowing business with no employees. A rock thrown by his mower injures a customer. Under his parents' ISO 2011 HO-3, how does the Section II business exclusion apply?
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Correct answer: D. It does not apply, under the exception for a self-employed insured under 21 with no employees
Section II excludes bodily injury and property damage arising out of a business, but the exclusion does not apply to an insured under age 21 involved in a part-time or occasional, self-employed business with no employees. Jaylen meets each condition, so Coverage E can respond if he is liable. Volunteer activities are those paid only for expenses, which does not describe a paying lawn business.
Under the ISO 2011 HO-3, Coverages E and F exclude each of the following EXCEPT:
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Correct answer: B. Bodily injury caused by an insured using reasonable force to protect persons or property
The Expected or Intended Injury exclusion contains an exception for bodily injury or property damage resulting from the use of reasonable force by an insured to protect persons or property, so that claim is not excluded. Communicable disease, controlled substances and professional services are all Section II exclusions, along with sexual molestation, motor vehicles, watercraft outside the allowed classes, business and war.
Fatima's HO-3 includes an HO 04 61 Scheduled Personal Property endorsement with $24,000 scheduled on jewelry. She buys an $8,000 bracelet, and it is stolen 12 days later, before she reports the purchase. What is the most the endorsement pays for the bracelet?
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Correct answer: C. $6,000
The HO 04 61 automatically covers newly acquired jewelry, furs, cameras and musical instruments, if the class is already scheduled, for the lesser of 25% of the amount scheduled for that class or $10,000, provided the item is reported within 30 days. Here 25% of $24,000 is $6,000, which is less than $10,000. The $1,500 figure is the Coverage C theft limit for unscheduled jewelry.
The ISO 2011 HO-3 excludes water that backs up through sewers or drains or overflows from a sump. Which endorsement adds limited coverage back for that exposure?
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Correct answer: B. HO 04 95, Limited Water Back-up and Sump Discharge or Overflow
The Water exclusion in the HO-3 removes water that backs up through sewers or drains or overflows from a sump, sump pump or related equipment. Endorsement HO 04 95 adds back limited coverage for this exposure, subject to the limit shown. Flood remains excluded. The replacement cost, sinkhole collapse and refrigerated property endorsements do not address water backup.
A neighbor sues Bao for slander over remarks Bao made at a homeowners association meeting. His unendorsed ISO 2011 HO-3 does not respond because the claim is not for bodily injury or property damage. Which endorsement adds coverage for this type of claim?
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Correct answer: D. HO 24 82, Personal Injury
Coverage E applies only to bodily injury and property damage. The HO 24 82 Personal Injury endorsement adds coverage for injury arising out of false arrest, detention or imprisonment; malicious prosecution; libel, slander or defamation of character; invasion of privacy; and wrongful eviction or entry. Identity fraud expense coverage reimburses the insured's own costs of restoring identity and credit, not liability to others.
A covered fire destroys Nadia's eight-year-old sofa. A comparable new sofa costs $2,000, and the old one had an actual cash value of $700. She has an ISO 2011 HO-3 with no endorsements. How is the sofa valued, and what would change that?
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Correct answer: A. At $700 actual cash value; HO 04 90 would provide replacement cost
The HO-3 settles personal property losses at actual cash value, not more than the cost to repair or replace, so Nadia receives $700 before the deductible. The 80% replacement cost provision applies only to buildings under Coverages A and B. The HO 04 90 Personal Property Replacement Cost endorsement changes Coverage C settlement to replacement cost, though items such as antiques and fine arts remain ineligible.
Which pairing of an ISO homeowners endorsement with its purpose is correct?
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Correct answer: A. HO 04 46 Inflation Guard: raises Coverages A, B, C and D by a set annual percentage, pro rata
The Inflation Guard endorsement increases the limits for Coverages A, B, C and D by a selected annual percentage, applied pro rata through the policy term, to help keep insurance to value. HO 07 01 provides, rather than excludes, property and liability coverage for a business run from the residence premises. Identity fraud coverage pays the cost of restoring credit and records, and the earthquake endorsement does not cover flood.
Pick an answer and the correct choice appears with an explanation and the policy form, statute or FEMA document it comes from. Difficulty is labeled on each question: recall items test a definition, application items put the rule into a short claim scenario, and challenging items combine two rules or require a calculation.
Aim for at least 80% before moving on, since the real exam mixes these topics with state law under time pressure. When you are consistently above that line, take a full timed exam or the version for your state: Texas or Florida 6-20.