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Homeowners Policies

Practice questions on homeowners policies for the property exam, each with an answer and explanation.

Study questions and answers

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1. Which homeowners form covers the dwelling on an open perils basis and personal property on a broad named perils basis?

  1. HO-3 (special form)
  2. HO-2 (broad form)
  3. HO-4 (contents broad form)
  4. HO-8 (modified coverage form)
Show answer
A. HO-3 (special form)
In the HO-3, the dwelling and other structures are covered for any direct physical loss not excluded, while personal property is covered only for the broad named perils.

2. A tenant renting an apartment wants coverage for her belongings and personal liability. Which homeowners form fits her needs?

  1. HO-2
  2. HO-4
  3. HO-5
  4. HO-6
Show answer
B. HO-4
The HO-4 is the renters or contents form. It has no dwelling coverage and covers personal property, loss of use, and liability.

3. Which homeowners form is designed for the owner of a condominium unit?

  1. HO-3
  2. HO-4
  3. HO-6
  4. HO-8
Show answer
C. HO-6
The HO-6 unit-owners form covers the owner's personal property, the parts of the unit the owner is responsible for, loss of use, and liability.

4. Which homeowners form covers both the dwelling and personal property on an open perils basis?

  1. HO-2 (broad form)
  2. HO-3 (special form)
  3. HO-8 (modified coverage form)
  4. HO-5 (comprehensive form)
Show answer
D. HO-5 (comprehensive form)
The HO-5 provides open perils coverage on the dwelling, other structures, and personal property, making it the broadest standard homeowners form.

5. An older home has a replacement cost far above its market value because of ornate construction. Which homeowners form is designed for this situation?

  1. HO-5 (comprehensive form)
  2. HO-8 (modified coverage form)
  3. HO-6 (unit-owners form)
  4. HO-4 (contents broad form)
Show answer
B. HO-8 (modified coverage form)
The HO-8 settles dwelling losses based on repair with common, functionally equivalent materials rather than full replacement cost, which suits older homes.

6. Under an HO-3, Coverage B (Other Structures) is automatically provided at what amount?

  1. 50 percent of Coverage A
  2. 30 percent of Coverage A
  3. 10 percent of Coverage A
  4. 20 percent of Coverage C
Show answer
C. 10 percent of Coverage A
Other structures, such as a detached garage or fence, are covered for 10 percent of the dwelling limit as an additional amount of insurance.

7. Under an HO-3, Coverage C (Personal Property) is generally set at what percentage of Coverage A?

  1. 50 percent
  2. 10 percent
  3. 30 percent
  4. 100 percent
Show answer
A. 50 percent
Personal property is commonly provided at 50 percent of the dwelling limit, and the insured can usually increase or reduce it.

8. Under an HO-3, Coverage D (Loss of Use) is provided at what amount?

  1. 10 percent of Coverage A
  2. 50 percent of Coverage C
  3. 20 percent of Coverage A
  4. 30 percent of Coverage A
Show answer
D. 30 percent of Coverage A
Loss of use pays additional living expenses or fair rental value and is 30 percent of the dwelling limit in the HO-3.

9. A detached garage is rented to a neighbor who stores his business inventory there. How does Coverage B of an HO-3 treat this garage?

  1. It is fully covered up to 10 percent of Coverage A
  2. It is covered only for fire and lightning
  3. It is not covered because it is rented to a non-tenant for business use
  4. It is covered under Coverage A instead
Show answer
C. It is not covered because it is rented to a non-tenant for business use
Coverage B excludes other structures used for business or rented to someone who is not a tenant of the dwelling, unless used solely as a private garage.

10. A homeowner keeps a winter coat at a vacation cabin she owns. Under the HO-3, personal property usually located at another residence is limited to:

  1. 10 percent of Coverage C or $1,000, whichever is greater
  2. 5 percent of Coverage A
  3. $500 per item
  4. 50 percent of Coverage C
Show answer
A. 10 percent of Coverage C or $1,000, whichever is greater
Property usually kept at a residence other than the residence premises is limited to the greater of 10 percent of Coverage C or $1,000.

11. Under the special limits of liability in a standard HO-3, money and bank notes are limited to:

  1. $1,500
  2. $2,500
  3. $500
  4. $200
Show answer
D. $200
Money, bank notes, coins and similar items have a special limit of $200 in the standard homeowners form.

12. A thief steals $4,000 worth of jewelry from an HO-3 insured's home. Without any endorsement, the most the policy will pay is:

  1. $4,000
  2. $1,500
  3. $2,500
  4. $200
Show answer
B. $1,500
Theft of jewelry, watches and furs is subject to a $1,500 special limit. Higher limits require scheduling the items.

13. Which of the following is NOT covered as personal property under Coverage C of a homeowners policy?

  1. Clothing
  2. Furniture
  3. A laptop computer
  4. A car the insured drives to work
Show answer
D. A car the insured drives to work
Motor vehicles are excluded from Coverage C and should be insured under an auto policy. Animals, birds and fish are also excluded.

14. Under an HO-3, damage to trees, shrubs and plants is covered for certain named perils up to what amount per tree?

  1. $500
  2. $250
  3. $1,000
  4. $2,500
Show answer
A. $500
Trees, shrubs and plants are covered up to $500 per item, with a total of 5 percent of Coverage A. Windstorm is not one of the covered perils for this coverage.

15. A homeowners policy pays up to $500 for a fire department's charge to save the home, when the charge is assumed by contract or agreement. This is an example of:

  1. A special limit of liability
  2. An additional coverage
  3. A Section II exclusion
  4. A conditions clause
Show answer
B. An additional coverage
Fire department service charge is one of the Section I additional coverages and is paid on top of the policy limits with no deductible.

16. A homeowner's dwelling has a replacement cost of $300,000 and is insured for $200,000. A covered roof loss has a replacement cost of $30,000 and an actual cash value of $20,000. Ignoring the deductible, the HO-3 will pay:

  1. $30,000
  2. $20,000
  3. $25,000
  4. $24,000
Show answer
C. $25,000
Because the limit is less than 80 percent of replacement cost ($240,000), the insurer pays the greater of ACV or $200,000 / $240,000 x $30,000, which is $25,000.

17. To receive full replacement cost on a dwelling loss under an HO-3, the insured must carry a Coverage A limit of at least what percent of the dwelling's replacement cost?

  1. 80 percent
  2. 50 percent
  3. 90 percent
  4. 100 percent
Show answer
A. 80 percent
If Coverage A is at least 80 percent of replacement cost at the time of loss, the insurer pays the full cost to repair or replace, up to the limit, without deduction for depreciation.

18. In an unendorsed homeowners policy, how are personal property losses settled?

  1. Replacement cost
  2. Agreed value
  3. Actual cash value
  4. Stated value
Show answer
C. Actual cash value
Personal property is settled at actual cash value unless the personal property replacement cost endorsement is added.

19. A home has been vacant for 75 consecutive days when vandals break the windows. Under the HO-3, this loss is:

  1. Covered in full
  2. Not covered, because the home was vacant more than 60 consecutive days
  3. Covered at 50 percent
  4. Covered only if the insurer was notified of the vacancy
Show answer
B. Not covered, because the home was vacant more than 60 consecutive days
Vandalism and malicious mischief and glass breakage are not covered if the dwelling was vacant for more than 60 consecutive days before the loss.

20. Which loss is excluded under Section I of a standard homeowners policy?

  1. A kitchen fire
  2. Wind that tears off shingles
  3. Smoke damage from a furnace malfunction
  4. A flood that enters the basement
Show answer
D. A flood that enters the basement
Water damage from flood, surface water and similar sources is excluded. Flood coverage is available through the NFIP or a private flood policy.

21. What is the standard minimum Coverage E (Personal Liability) limit in a homeowners policy?

  1. $25,000 per occurrence
  2. $300,000 per person
  3. $1,000 per person
  4. $100,000 per occurrence
Show answer
D. $100,000 per occurrence
Coverage E is normally provided at $100,000 per occurrence, and higher limits are available for an added premium.

22. A guest trips on a rug in the insured's home and needs stitches. The insured is not at fault. Which coverage pays the guest's medical bills?

  1. Coverage E (Personal Liability)
  2. Coverage F (Medical Payments to Others)
  3. Coverage D (Loss of Use)
  4. Coverage C (Personal Property)
Show answer
B. Coverage F (Medical Payments to Others)
Medical payments to others pays reasonable medical expenses of injured guests regardless of fault, commonly up to $1,000 per person.

23. The insured's teenage son, who lives at home, is injured falling down the stairs. Coverage F of the homeowners policy will:

  1. Not pay, because medical payments do not cover residents of the household
  2. Pay up to the per-person limit
  3. Pay only if the son was not at fault
  4. Pay only after health insurance pays
Show answer
A. Not pay, because medical payments do not cover residents of the household
Coverage F applies to others. It does not cover the named insured or regular residents of the household, other than residence employees.

24. While visiting a friend, the insured accidentally breaks the friend's $600 lamp. Which Section II additional coverage pays for it regardless of legal liability?

  1. Loss assessment
  2. Claim expenses
  3. Damage to property of others
  4. First aid expenses
Show answer
C. Damage to property of others
Damage to property of others pays up to $1,000 at replacement cost for property of others damaged by an insured, even if the insured is not legally liable.

25. Under Section II of a homeowners policy, the cost of defending the insured in a covered lawsuit is:

  1. Deducted from the Coverage E limit
  2. Paid in addition to the Coverage E limit
  3. Not covered
  4. Split equally between the insured and insurer
Show answer
B. Paid in addition to the Coverage E limit
Claim expenses, including defense costs, are a Section II additional coverage paid on top of the liability limit.

26. Which liability claim is excluded under Section II of an unendorsed homeowners policy?

  1. Injury to a client arising from the insured's accounting business
  2. A dog bite to a neighbor at the insured's home
  3. A guest who slips on the insured's icy sidewalk
  4. A golf ball the insured hits that injures another golfer
Show answer
A. Injury to a client arising from the insured's accounting business
Homeowners liability excludes business pursuits and professional services. Those exposures need a business or professional liability policy.

27. A full-time college student, age 20, is living in a dormitory and was a resident of her parents' home before leaving for school. Under her parents' homeowners policy she is:

  1. Not an insured because she does not live at home
  2. An insured only for liability
  3. An insured only if she is listed by name
  4. An insured
Show answer
D. An insured
The definition of insured includes a full-time student who was a resident before moving out to attend school, if the student meets the policy's age limits.

28. Under Section I additional coverages, the homeowners policy pays an extra amount for debris removal when the debris removal cost plus the loss exceed the limit. That extra amount is:

  1. 10 percent of Coverage A
  2. $500
  3. 5 percent of the limit that applies to the damaged property
  4. $1,000 per occurrence
Show answer
C. 5 percent of the limit that applies to the damaged property
If the loss plus debris removal exceeds the limit, an additional 5 percent of that limit is available for debris removal.
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