ANSWERS TO THE QUESTIONS IN THE COURSE GUIDE. Property and Liability Coverages AIC nd Edition CONTENTS. Assignment Title Page

Transcription

1 ANSWERS TO THE QUESTIONS IN THE COURSE GUIDE Property and Liability Coverages AIC 43 2 nd Edition CONTENTS Assignment Title Page 1 Homeowners Property Coverage 7 2 Homeowners Liability Coverage 34 3 Other Personal Lines Coverages 56 4 Commercial Property Coverage, Part I 86 5 Commercial Property Coverage, Part II Commercial General Liability Coverage, Part I Commercial General Liability Coverage, Part II Other Commercial Lines Coverages 162 Published by: KEIR EDUCATIONAL RESOURCES 4785 Emerald Way Middletown, OH FAX customerservice@keirsuccess.com Keir Educational Resources

2 Assignment 1 Homeowners Property Coverage Educational Objective 1 The Insurance Services Office (ISO) has developed a series of policy forms to meet the needs of personal risk management needs of individuals and families. Each policy is a package of both property and liability coverage. The liability and medical payments coverages provided by all of the following forms are the same and will be developed later. The property coverage aspects of the six policy forms in the ISO 2011 program are described below: HO-2 Broad Form This form provides named perils coverage for dwellings, other structures, and personal property. The named perils coverage, which lists the causes of loss in the policy, is narrow and therefore carries a lower cost as compared to one of the broader coverage policies such as the HO-3 or HO-5 described below. HO-3 Special Form This form of insurance provides broader coverage for owner-occupants on dwellings and other structures. This special form coverage applies to all causes of loss that are not specifically excluded. Personal property, as in the HO-2, is subject to the broad form or named perils coverage. HO-4 Contents Broad Form This coverage is also known as renter s insurance and is designed to meet the needs of tenants who need personal property protection. Contents Broad Form does not cover the dwellings, but just the personal property of the tenant on a named perils basis. This type of insurance is ideal for the young working professional who is no longer living under their parent s roof. HO-5 Comprehensive Form Open perils coverage on dwellings, personal property, and other structures is provided under the Comprehensive Form. This type of coverage is designed to meet the risk management needs of owner-occupants who would like the broadest possible coverage. HO-6 Unit Owners Form Designed primarily for the owners of condominium units and cooperative apartments, this type of insurance provides coverage for personal property on a named perils basis and limited dwelling coverage for unit improvements and betterments. HO-8 Modified Coverage Form This form is designed to meet the needs of owner occupants when the replacement cost of a dwelling significantly exceeds the dwelling s market value. The functional replacement cost basis states that similar property that performs the same function, but might not be identical to the original property, would be used to replace the original property. This form includes coverage on a limited, named perils basis. Key Word or Phrase 1. Functional replacement cost is the cost of replacing damaged property with similar (but perhaps not exactly identical) property that performs the same function. Review Questions 1-1. The three classes of eligible parties under the ISO 2011 Homeowners program are: Those who own and occupy eligible one- to four-family dwellings. Endorsement is available for mobile homes, 2016 Keir Educational Resources

3 and dwelling and mobile home coverage is available for residences not eligible for homeowners policies. Those who rent or lease the premises where they live. Those who own a condominium unit and either live there or rent the unit to a family or one or two tenants The HO-2 provides broad form named perils coverage for dwellings, other structures, and personal property. The text does not provide a list of the broad form perils In the HO-3, special form (open perils) coverage applies to dwelling and other structures, where in the HO-2 only the broad form named perils coverage is provided. Personal property, as in the HO-2, is subject to the broad form or named perils coverage. The special form approach is always subject to policy exclusions The HO-4 provides broad form named perils coverage for contents only. No structural coverage is provided The HO-5 provides the broadest available coverage openperils coverage for everything dwelling/other structures, and personal property The HO-6 is purchased by those who have condominiums or cooperative apartment shares. It provides the same level of named perils coverage for contents as is found in the HO-2, 3, or 4, but also provides coverage for special property needs faced by this type of property ownership The coverage provided by the HO-8 is described by the text as a limited named perils approach. The text does not list the perils covered. Important to note as part of coverage provided is that the form contains a special valuation clause that allows loss settlement on a functional replacement cost basis. This accommodates the needs of a home whose market value is far below what replacement cost would be Keir Educational Resources

4 MULTIPLE CHOICE QUESTIONS WORKBOOK AIC 43 Property and Liability Coverages 2 nd Edition CONTENTS Assignment Title Que. Ans. 1 Homeowners Property Coverage Homeowners Liability Coverage Other Personal Lines Coverage Commercial Property Coverage, Part I 5 Commercial Property Coverage, Part II 6 Commercial General Liability Coverage, Part I 7 Commercial General Liability Coverage, Part II 8 Other Commercial Lines Coverages Published by: KEIR EDUCATIONAL RESOURCES 4785 Emerald Way Middletown, OH FAX customerservice@keirsuccess.com Keir Educational Resources

5 Assignment 1 Homeowners Property Coverage 1. The parties eligible for coverage under the ISO Homeowners program fall into three basic categories. Which example below does NOT fit one of those categories? (Text 1.3) (A) The owner of a two-family owner-occupied home (B) The owner of a condominium that is rented to others (C) A tenant renting an apartment (D) The owner of a mobile home 2. Which of the following ISO Homeowners program forms provides coverage for personal property only? (Text 1.5) (A) HO-2 (B) HO-3 (C) HO-4 (D) HO-5 3. The owner of an historic home in an urban area where local property values are below replacement cost should insure using what kind of coverage? (Text 1.6) (A) Functional replacement cost basis (B) Special form coverage (C) Comprehensive form coverage (D) Market Value Unit Owners coverage 4. Coverage A of the HO-3 applies to which of the following categories of property located on the insured premises? (Text ) (A) A building connected by fence to the dwelling (B) The land on which the dwelling is located (C) Supplies at the dwelling for its construction (D) All of the above 5. Which of the following properties would be covered under Coverage A Dwelling of the HO-3? (Text ) (A) A detached building (B) An unattached fence used to restrain a child s pony (C) (D) A fence around a pool, and attached to the residence A flower garden with expensive plantings and a hedge encircled with a cyclone fence 6. Which of the following is true of the HO-3 homeowners policy? (Text ) (A) The limits for Section I Coverages B, C, and D are a percentage of the limit for Coverage A. (B) An insured cannot receive payment under more than one policy part for a single loss. (C) The term residence premises is limited to a onefamily dwelling. (D) Coverage A applies to structures connected to the dwelling by only a fence or a utility line. 7. Which of the following is covered under Coverage A of the homeowners policy HO-3? (Text ) (A) A five-family dwelling in which the insured lives (B) A garage attached to the insured s dwelling (C) (D) Land at the insured s residence A guest house connected to the dwelling by a stone path 8. Which of the following losses is fully covered under a homeowners HO-3? (Text ) (A) Loss of a $2,000 ring while swimming (B) The fire loss of a lawn mower borrowed from a neighbor (C) Windstorm damage to a motorboat left overnight at a lakeside landing (D) The $1,000 loss resulting from the theft of a credit card 2016 Keir Educational Resources

6 Assignment 1 Homeowners Property Coverage 1. D is the answer. Mobile homes are ineligible for coverage under the basic homeowners program. A would qualify, for homes of one to four families. B would qualify because many insurers do provide HO-6 program coverage for rented to others situations. C would be an HO-4 situation. 2. C is the answer. The HO-2, HO-3, and HO-5 Forms provide coverage for dwellings as well as contents. The HO-4 provides coverage only for a tenant s personal property on a named perils basis. 7. B is the answer. A garage attached to the insured s dwelling is an attached structure that would be covered under the Dwelling Coverage A. A guest house that is not attached and is only connected by a stone path (i.e., clear space) would be covered under the Coverage B for Other Structures. A and C, also are not covered. 8. B is the answer. If the insured has adequate coverage, he or she is covered for a borrowed lawnmower. A is covered to a maximum of $1,500. C is not covered. The motorboat would be covered for windstorm damage only if it is stored under cover. D is not fully covered. Credit card loss is only covered up to $ A is the answer. An owner of an historic home in an area where property values are low should insure under an HO-8 Modified coverage Form that will pay on a functional replacement cost basis. The replacement cost will exceed the dwelling s market value so replacement cost coverage is not economical. The special form and comprehensive form will provide replacement cost coverage. 4. C is the answer. Supplies and materials at the dwelling that are used to construct or repair it are insured under Coverage A. A and B are not correct. Land is specifically excluded from coverage under the HO C is the answer. A is not covered. There is no coverage for a detached building. B is not covered. There is no coverage for an unattached fence. D is not covered. There is no coverage for a detached fence. 6. A is the answer. Section I limits for Coverages B, C, and D are a percentage of the limit for Coverage A. C is not correct. A two-family dwelling may be insured under an HO-3. D is not correct. Such structures are covered under Coverage B Keir Educational Resources