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CISR Personal Residential practice questions

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Question 1Personal Residential Concepts

Under a standard HO-3 special form homeowners policy, which coverage applies to direct physical loss to the dwelling and attached structures, subject to the policy exclusions?

  1. Coverage C - Personal Property, written on an open perils basis
  2. Coverage B - Other Structures, written on a named perils basis
  3. Coverage A - Dwelling, written on an open perils basis Correct answer.
  4. Coverage D - Loss of Use, written on a named perils basis

Explanation

The HO-3 is called the special form because Coverage A and Coverage B are written on an open perils (risk of direct physical loss) basis, meaning the insurer must demonstrate that an exclusion applies. Coverage C and Coverage D are written on a named perils basis under this form.

Question 2Personal Residential Concepts

A homeowner's HO-3 policy shows Coverage A of $400,000. What is the standard default limit for Coverage B - Other Structures?

  1. $80,000 Correct answer.
  2. $40,000
  3. $200,000
  4. $100,000

Explanation

Under the standard HO-3, Coverage B defaults to 10 percent of the Coverage A limit unless the policy declares a different amount. Ten percent of $400,000 is $40,000, so that is the Coverage B limit.

Question 3Personal Residential Concepts

Under the HO-3, what is the default limit for Coverage C - Personal Property, and how does it apply to property usually located at another residence?

  1. 50 percent of Coverage A, with the full Coverage C limit available anywhere worldwide
  2. 70 percent of Coverage A, with no limit applying away from the residence premises
  3. 80 percent of Coverage A, with 25 percent of the Coverage C limit available at another residence
  4. 50 percent of Coverage A, with 10 percent of the Coverage C limit available at another residence Correct answer.

Explanation

The HO-3 sets Coverage C at 50 percent of the Coverage A limit by default. A special limit of 10 percent of the Coverage C amount applies to property usually located at another residence, which limits exposure for secondary homes and dormitories.

Question 4Personal Residential Concepts

A homeowner's dining room set is destroyed by fire. The policy is an HO-3 with no replacement cost endorsement on contents. How is the loss to personal property settled?

  1. At an agreed value stated on the declarations page
  2. At replacement cost with no deduction for depreciation
  3. At market value as determined by a licensed appraiser
  4. At actual cash value, meaning replacement cost less depreciation Correct answer.

Explanation

Without a replacement cost endorsement, personal property under the HO-3 is settled at actual cash value. Actual cash value is generally defined as replacement cost less physical depreciation, so the insured receives a depreciated amount rather than the cost of a new set.

Question 5Personal Residential Concepts

Which loss of use expenses are covered under Coverage D of a homeowners policy?

  1. Only the cost of permanent replacement housing
  2. Additional living expenses, fair rental value, and prohibited use expenses Correct answer.
  3. Only food and lodging for the first thirty days after a loss
  4. Only mortgage payments while the home is uninhabitable

Explanation

Coverage D reimburses three distinct exposures: additional living expenses incurred to maintain a normal standard of living, fair rental value lost when rented space is uninhabitable, and prohibited use expenses when a civil authority bars access to the premises.

Question 6Personal Residential Concepts

A homeowners policy contains a $500 all perils deductible and a $2,500 windstorm deductible. A covered windstorm causes $9,000 in dwelling damage. How much does the insured collect, ignoring any other adjustments?

  1. $9,000
  2. $2,500
  3. $8,500
  4. $6,500 Correct answer.

Explanation

When a peril-specific deductible applies, it replaces the all perils deductible for that loss. The $2,500 windstorm deductible is subtracted from the $9,000 covered loss, leaving $6,500 payable to the insured.

Question 7Personal Residential Concepts

Under the HO-3, which of the following is a Coverage C special limit rather than a fully covered item?

  1. Household furniture, covered up to the Coverage C limit
  2. Clothing, covered up to the Coverage C limit
  3. Refrigerated food spoilage, covered up to $500
  4. Money, banknotes, and coins, limited to $200 Correct answer.

Explanation

The HO-3 imposes a $200 special limit on money, banknotes, bullion, and numismatic property. Ordinary household furniture and clothing are not subject to special dollar sublimits and are covered to the Coverage C limit.

Question 8Personal Residential Concepts

A homeowner operates a licensed day care business out of the residence caring for six children. How does the standard HO-3 respond to liability arising from that activity?

  1. It is covered in full because day care is a permitted incidental occupancy
  2. It is excluded because the policy excludes liability arising out of business activities Correct answer.
  3. It is covered only if the children are relatives of the insured
  4. It is covered up to the Coverage E limit with no endorsement required

Explanation

The HO-3 excludes bodily injury and property damage arising out of business pursuits of an insured. Home day care is treated as a business exposure, so a permitted incidental occupancy endorsement or a separate commercial policy is needed to restore protection.

Question 9Personal Residential Concepts

Which statement correctly describes the insured's duties after a loss under the homeowners policy?

  1. Obtain three contractor bids before the insurer will assign an adjuster
  2. Wait for the insurer to inspect before taking any steps to protect the property
  3. Repair or replace all damaged property before notifying the insurer
  4. Give prompt notice, protect property from further damage, and submit a signed proof of loss when required Correct answer.

Explanation

The duties after loss condition requires prompt notice to the insurer or its agent, reasonable steps to protect covered property from further damage, and cooperation including a signed sworn proof of loss when requested. Failing these duties can prejudice the claim.

Question 10Personal Residential Concepts

An HO-3 insured intentionally sets fire to her own home to collect insurance money. What is the effect on the claim?

  1. The claim is paid minus the deductible because the loss was caused by an insured
  2. Only the personal property portion is denied while the dwelling portion is paid
  3. The entire claim is denied because intentional loss caused by an insured is excluded Correct answer.
  4. The claim is paid because fire is a covered peril under Coverage A

Explanation

The intentional loss exclusion bars coverage for loss resulting from any act committed by or at the direction of an insured with intent to cause a loss. Arson by the insured voids the claim rather than merely reducing it.

Question 11Personal Residential Concepts

What is the purpose of the mortgage clause in a homeowners policy?

  1. To protect the mortgagee's interest by paying the mortgagee to the extent of its interest in a covered loss Correct answer.
  2. To require the mortgagor to maintain flood insurance as a condition of coverage
  3. To extend Coverage A to structures the insured does not occupy
  4. To transfer the deductible obligation from the insured to the lender

Explanation

The mortgage clause recognizes the lender's financial interest in the property. In a covered loss the insurer pays the mortgagee to the extent of its interest, and the mortgagee receives notice of cancellation or nonrenewal.

Question 12Personal Residential Concepts

A homeowners policy is cancelled by the insurer for nonpayment of premium. How many days' written notice is the insurer generally required to give under the policy conditions?

  1. 30 days
  2. 45 days
  3. 10 days Correct answer.
  4. 20 days

Explanation

The standard cancellation condition requires at least 10 days' written notice when cancellation is for nonpayment of premium. Longer notice, commonly 30 days, applies to cancellation for other reasons.

Question 13Personal Residential Concepts

An insured's home is damaged by a covered fire, and the insurer and insured cannot agree on the amount of loss. Which policy provision resolves the dispute over value?

  1. The salvage condition, which lets the insurer take the damaged property
  2. The appraisal condition, which allows each party to select a competent appraiser Correct answer.
  3. The subrogation condition, which transfers the claim to a third party
  4. The liberalization condition, which applies broader coverage automatically

Explanation

The appraisal condition addresses disputes solely about the amount of loss. Each party selects a competent appraiser, and an umpire chosen by the appraisers resolves differences, with agreement in writing binding on the amount.

Question 14Personal Residential Concepts

After paying a covered claim for a kitchen fire caused by a defective toaster, what right does the insurer have against the manufacturer?

  1. Appraisal, allowing the insurer to force the manufacturer into arbitration
  2. Abandonment, allowing the insurer to transfer the claim to the manufacturer
  3. Salvage, allowing the insurer to sell the damaged appliances to the manufacturer
  4. Subrogation, allowing the insurer to pursue the manufacturer to recover the amount paid Correct answer.

Explanation

Subrogation gives the insurer the right to step into the insured's shoes and pursue a negligent third party after paying the loss. The insured must not impair that right, for example by releasing the manufacturer.

Question 15Personal Residential Concepts

Which loss would be excluded under the earth movement exclusion of a homeowners policy?

  1. Water damage from a burst interior pipe
  2. Cracking of the foundation caused by a landslide Correct answer.
  3. Fire damage that spread from a neighbor's property
  4. Damage from a windstorm that also toppled a tree

Explanation

Earth movement includes earthquake, landslide, mudflow, and sinkhole collapse, and the exclusion bars coverage for resulting damage such as foundation cracking. Windstorm, burst pipe, and spreading fire are separate perils addressed elsewhere in the policy.

Question 16Personal Residential Concepts

A homeowners policy excludes water damage from certain sources. Which situation falls within the water damage exclusion?

  1. Water from an ice dam that melts onto the interior
  2. Accidental discharge from a broken plumbing supply line
  3. Overflow from a malfunctioning household appliance
  4. Water that backs up through a sewer or drain Correct answer.

Explanation

The water damage exclusion bars loss from water that backs up through sewers or drains, which is why a water backup endorsement is commonly purchased. Accidental discharge from plumbing, appliance overflow, and ice dam damage are covered perils under the form.

Question 17Personal Residential Concepts

Under Coverage E - Personal Liability, when does the insurer's duty to defend end?

  1. When the applicable limit of liability for the claim has been exhausted by payment of judgments or settlements Correct answer.
  2. When the insured's deductible has been satisfied
  3. When the insured retains personal counsel at the insured's own expense
  4. When the claimant files a lawsuit in a court outside the insured's state

Explanation

The insurer's right and duty to defend terminate once the limit of liability for the claim has been exhausted by payment of judgments or settlements. The duty is broader than the duty to pay and is not ended by the insured hiring counsel or by the deductible being met.

Question 18Personal Residential Concepts

A visitor slips on the insured's icy sidewalk and sues for $300,000. Coverage E is $300,000. What is the significance of the Coverage E limit in this claim?

  1. The insurer pays the judgment up to the limit and defense costs in addition to the limit
  2. The most the insurer pays for the judgment plus defense costs combined is the Coverage E limit Correct answer.
  3. The insurer pays nothing until the insured personally pays the first $300,000
  4. The insurer pays defense costs only, because bodily injury is excluded

Explanation

Coverage E is a single limit that includes both the damages paid and the cost of defense and investigation. Once the limit is exhausted by judgments or settlements, the duty to defend ends.

Question 19Personal Residential Concepts

Which loss is payable under Coverage F - Medical Payments to Others without any showing of the insured's legal liability?

  1. A neighbor's child injured while playing on the insured's trampoline Correct answer.
  2. A tenant injured in a separate rental building owned by the insured
  3. The insured's own child injured inside the dwelling
  4. A business customer injured at the insured's home office

Explanation

Coverage F pays reasonable medical expenses for bodily injury to others caused by an accident on the insured location, regardless of fault. It does not apply to the insured or regular residents, to business exposures, or to property the insured owns elsewhere.

Question 20Personal Residential Concepts

Which endorsement should a homeowner add to cover a scheduled diamond ring and a valuable painting against all risks, including mysterious disappearance?

  1. A scheduled personal property endorsement Correct answer.
  2. A replacement cost contents endorsement
  3. A water backup endorsement
  4. An ordinance or law endorsement

Explanation

Scheduled personal property endorsements list specific items and provide broader, typically open perils coverage, often without a deductible. They also avoid the special dollar sublimits that would otherwise cap jewelry and similar valuables.

Question 21Personal Residential Concepts

A homeowner's policy has been in force for two years when a covered total loss occurs. How does the replacement cost provision for the dwelling typically apply?

  1. Replacement cost applies because the insured has met the requirement to insure to at least 80 percent of replacement cost Correct answer.
  2. Replacement cost applies only after the insured has occupied the home for five years
  3. Replacement cost applies only if the home was purchased within the last twelve months
  4. Replacement cost never applies to a total loss, only to partial losses

Explanation

The replacement cost condition for Coverage A generally requires the insured to carry insurance equal to at least 80 percent of the dwelling's full replacement cost. When that threshold is met, a total loss is settled on a replacement cost basis up to the policy limit.

Question 22Personal Residential Concepts

What does the pair or set clause provide when one item of a matched set is lost or damaged?

  1. The insurer must pay the full replacement cost of the entire set in every case
  2. The insurer may repair or replace the item, or pay the difference in value between the set and the remaining items Correct answer.
  3. The insurer pays the full Coverage C limit for the remaining items
  4. The insurer pays nothing because the set is considered a single item

Explanation

The pair or set clause prevents the insured from recovering for a whole set when only part is lost. The insurer may repair or replace the damaged item to restore the set, or pay the difference between the value of the set and the value of the remaining items.

Question 23Personal Residential Concepts

Which statement best describes the difference between the HO-3 and the HO-5 homeowners forms?

  1. The HO-5 is a flood policy, while the HO-3 is a fire policy
  2. The HO-5 excludes liability coverage, while the HO-3 includes it
  3. The HO-5 covers only rental dwellings, while the HO-3 covers owner-occupied dwellings
  4. The HO-5 covers both dwelling and personal property on an open perils basis, while the HO-3 covers personal property on a named perils basis Correct answer.

Explanation

The HO-5 comprehensive form broadens Coverage C to open perils, matching the open perils treatment of the dwelling. The HO-3 keeps personal property on a named perils basis, so the difference lies in how contents losses are covered.

Question 24Personal Residential Concepts

An insured rents out a room in her home and the tenant's furniture is damaged by a covered fire. Whose property does the HO-3 cover?

  1. Neither party's property, because rental income makes the exposure commercial
  2. The insured's personal property, while the tenant's property is covered under the tenant's own HO-4 policy Correct answer.
  3. Both the insured's and the tenant's personal property under Coverage C
  4. The tenant's personal property, because it is located on the insured location

Explanation

Coverage C insures the named insured's personal property and, in limited situations, property of others such as guests, but a tenant's belongings are the tenant's insurable interest. The tenant should carry an HO-4 renters policy for those contents.

Question 25Personal Residential Concepts

Which condition allows an insured to recover under a broadened coverage provision added to the policy form after the policy was issued, without additional premium?

  1. The waiver of subrogation clause
  2. The salvage clause
  3. The liberalization clause Correct answer.
  4. The appraisal clause

Explanation

The liberalization clause provides that if the insurer adopts a revised form that broadens coverage without an increase in premium during the policy period, the broader coverage applies automatically. It protects the insured from being stuck with older, narrower wording.

Question 26Personal Residential Concepts

Under the HO-3 homeowners form, which coverage part pays to repair or replace the dwelling structure itself after a covered loss?

  1. Coverage A - Dwelling Correct answer.
  2. Coverage C - Personal Property
  3. Coverage E - Personal Liability
  4. Coverage F - Medical Payments to Others

Explanation

Coverage A insures the dwelling and structures attached to it, and it also covers building materials and supplies on the premises intended for use in construction or repair. Coverage C handles personal property, while Coverages E and F respond to third-party liability and injury claims rather than direct damage to the home.

Question 27Personal Residential Concepts

Which homeowners coverage protects the insured against lawsuits for bodily injury or property damage caused to others by the insured's negligence?

  1. Coverage B - Other Structures
  2. Coverage F - Medical Payments to Others
  3. Coverage E - Personal Liability Correct answer.
  4. Coverage D - Loss of Use

Explanation

Coverage E provides personal liability protection and a defense obligation when a third party claims the insured is legally responsible for bodily injury or property damage. It responds to legal liability, unlike Coverage F, which pays medical expenses without regard to fault.

Question 28Personal Residential Concepts

An HO-3 policy shows Coverage A of $400,000. Absent an endorsement changing the limit, what is the standard Coverage B limit for other structures?

  1. $400,000
  2. $200,000
  3. $80,000 Correct answer.
  4. $40,000

Explanation

The HO-3 sets Coverage B at 10 percent of the Coverage A limit unless another amount is shown on the declarations. Ten percent of $400,000 is $40,000, so the other choices do not match the standard ratio.

Question 29Personal Residential Concepts

A covered fire destroys the insured's furniture, clothing, and television. Which homeowners coverage responds to this loss?

  1. Coverage B - Other Structures
  2. Coverage D - Loss of Use
  3. Coverage C - Personal Property Correct answer.
  4. Coverage A - Dwelling

Explanation

Coverage C insures personal property owned or used by the insured anywhere in the world, subject to special limits for certain categories. Furniture, clothing, and electronics are ordinary personal property and fall within Coverage C rather than the building coverages.

Question 30Personal Residential Concepts

A covered fire makes the insured's home uninhabitable for three months while repairs are made. Which coverage pays the insured's extra cost of renting a comparable apartment?

  1. Coverage B - Other Structures
  2. Coverage E - Personal Liability
  3. Coverage D - Loss of Use Correct answer.
  4. Coverage C - Personal Property

Explanation

Coverage D reimburses additional living expenses, meaning the increase in living costs necessary to maintain the household's normal standard of living while the residence is being repaired or replaced. It also can pay fair rental value if a rented portion of the premises becomes uninhabitable.

Question 31Personal Residential Concepts

Which statement describes the valuation basis used for Coverage A dwelling losses under the HO-3 when the insured carries at least 80 percent of the dwelling's replacement cost?

  1. Replacement cost without deduction for depreciation, subject to policy limits Correct answer.
  2. Market value of the home at the time of loss
  3. Original purchase price of the home
  4. Actual cash value, meaning replacement cost less depreciation

Explanation

The HO-3 pays replacement cost on the dwelling when the insured carries at least 80 percent of the full replacement cost of the dwelling at the time of loss. If that threshold is not met, settlement shifts to actual cash value for the damaged portion.

Question 32Personal Residential Concepts

An HO-3 insured has Coverage C of $100,000. A covered theft results in the loss of $3,000 in cash. What is the maximum the policy will pay for the cash, absent an endorsement?

  1. $1,500
  2. $500
  3. $200 Correct answer.
  4. $3,000

Explanation

The standard homeowners form imposes a $200 special limit on money, including cash, bank notes, and coins. Amounts above that special limit are not payable unless the insured purchases an endorsement increasing the limit.

Question 33Personal Residential Concepts

A homeowner runs a business from the residence and stores inventory in an attached garage. How does the unendorsed HO-3 treat business personal property on the residence premises?

  1. Covered as Coverage B other structures
  2. Covered only up to a small on-premises business property limit Correct answer.
  3. Fully covered up to the Coverage C limit
  4. Excluded entirely with no coverage for any business property

Explanation

The HO-3 provides only a modest special limit for business personal property while it is on the residence premises, and broader coverage applies to business property in transit or off premises. Larger business exposures require a commercial policy or an endorsement.

Question 34Personal Residential Concepts

A homeowners insured accidentally breaks a neighbor's window while mowing the lawn. Which coverage is designed to pay the neighbor's medical expenses regardless of the insured's legal liability?

  1. Coverage F - Medical Payments to Others Correct answer.
  2. Coverage E - Personal Liability
  3. Coverage C - Personal Property
  4. Coverage D - Loss of Use

Explanation

Coverage F pays reasonable medical expenses to persons other than the insured and household members when injury occurs on the insured location or arises from the insured's activities, without any finding of negligence. Coverage E would require legal liability.

Question 35Personal Residential Concepts

A homeowners insured lends a ladder to a neighbor, who is injured using it. Which homeowners exclusion is most likely to bar coverage for the neighbor's claim?

  1. The aircraft exclusion
  2. The business pursuits exclusion Correct answer.
  3. The watercraft exclusion
  4. The intentional loss exclusion

Explanation

The business pursuits exclusion bars coverage for bodily injury arising out of the business activities of an insured, which can extend to products or equipment furnished in connection with a business. The other exclusions listed address aircraft, watercraft, or deliberately caused loss and do not fit a lending scenario.

Question 36Personal Residential Concepts

Under the HO-3, which is a Coverage C special limit rather than an item insured to the full Coverage C limit?

  1. A living room sofa
  2. A dining room table
  3. A washing machine
  4. A set of golf clubs Correct answer.

Explanation

The standard form caps theft coverage for items such as jewelry, furs, silverware, and a stated amount for golf clubs and similar sporting equipment. Ordinary furniture and appliances are paid up to the Coverage C limit without those special sub-limits.

Question 37Personal Residential Concepts

A homeowners policy has a $1,000 deductible. A covered loss causes $4,000 in damage. How much will the insurer pay, assuming no other applicable deductible or limit issue?

  1. $4,000
  2. $5,000
  3. $1,000
  4. $3,000 Correct answer.

Explanation

The deductible is subtracted from the covered loss before payment, so $4,000 minus the $1,000 deductible yields a $3,000 payment. The deductible is the insured's retained portion of the loss.

Question 38Personal Residential Concepts

An HO-3 insured's home suffers a covered total loss. The dwelling limit is $300,000 and the replacement cost is $340,000. What is the maximum the policy will pay for the dwelling?

  1. $360,000
  2. $340,000
  3. $300,000 Correct answer.
  4. $320,000

Explanation

The policy limit on the declarations caps the amount payable for the dwelling, even when replacement cost exceeds that limit. The insured would need to increase Coverage A to avoid bearing the shortfall.

Question 39Personal Residential Concepts

Which homeowners form is designed for a tenant who rents an apartment and needs coverage for personal property and liability but not for the building?

  1. HO-4 Correct answer.
  2. HO-3
  3. HO-6
  4. HO-8

Explanation

The HO-4 contents broad form is written for tenants and insures personal property, loss of use, liability, and medical payments without insuring the building itself. The HO-6 serves condominium unit owners, and the HO-3 and HO-8 are owner-occupied dwelling forms.

Question 40Personal Residential Concepts

A homeowner insures a home for $250,000 when its replacement cost is $400,000. A covered partial loss causes $80,000 in damage. What consequence does the 80 percent replacement cost requirement have on the claim?

  1. The claim is paid in full because the loss is under the limit
  2. The deductible is waived because of the shortfall
  3. Settlement is reduced because the insured did not carry 80 percent of replacement cost Correct answer.
  4. The claim is denied entirely for underinsurance

Explanation

The insured carried $250,000 against a required $320,000 (80 percent of $400,000), so the replacement cost condition is not met. The form then settles the damaged portion on an actual cash value basis, reducing the payment.

Question 41Personal Residential Concepts

Under the HO-3, which structure on the residence premises is insured under Coverage B rather than Coverage A?

  1. An attached garage connected to the house by a common roof
  2. A room added onto the main house
  3. A built-in swimming pool enclosure attached to the dwelling
  4. A detached tool shed used only for household storage Correct answer.

Explanation

Coverage B insures structures separated from the dwelling by clear space, such as a detached garage or shed, subject to its own limit. Structures connected to the dwelling by a fence, utility line, or similar link are treated as part of the dwelling under Coverage A.

Question 42Personal Residential Concepts

An insured's scheduled diamond ring is insured under a homeowners endorsement. The ring is lost with no evidence of theft or other cause. How does the scheduled jewelry endorsement generally respond?

  1. It pays only if the insured proves the ring was stolen
  2. It excludes all losses occurring away from the residence
  3. It limits recovery to the Coverage C special limit for jewelry
  4. It pays for direct physical loss, including mysterious disappearance Correct answer.

Explanation

Scheduled personal property endorsements typically insure listed items on an open perils basis, including mysterious disappearance, and pay the scheduled amount without applying the Coverage C theft sub-limit. This closes the gap left by the standard form's limited jewelry coverage.

Question 43Personal Residential Concepts

A homeowners insured hires a contractor to reroof the house. During the work, a fire starts and damages the dwelling. Which exclusion may affect coverage for the loss arising from the contractor's operations?

  1. The intentional loss exclusion
  2. The neglect exclusion Correct answer.
  3. The water damage exclusion
  4. The ordinance or law exclusion

Explanation

The neglect exclusion bars coverage for loss caused by the insured's failure to use all reasonable means to save and preserve property after a loss, and related provisions address the insured's own conduct. Intentional loss requires the insured to have acted with intent to cause the loss, which does not fit a contractor's accidental fire.

Question 44Personal Residential Concepts

A homeowner's dog bites a visitor in the front yard. The visitor incurs $6,000 in medical bills and does not sue. Which coverage part most directly responds to the medical bills without a liability determination?

  1. Coverage F - Medical Payments to Others Correct answer.
  2. Coverage E - Personal Liability
  3. Coverage D - Loss of Use
  4. Coverage C - Personal Property

Explanation

Coverage F pays reasonable and necessary medical expenses for bodily injury to others caused by the insured's activities or occurring on the insured location, without regard to fault. Coverage E would apply if the visitor pursued a liability claim.

Question 45Personal Residential Concepts

Which homeowners condition obliges the insured to give prompt notice of a loss to the insurer or its agent?

  1. The subrogation condition
  2. The duties after loss condition Correct answer.
  3. The appraisal condition
  4. The mortgage clause

Explanation

The duties after loss condition lists what the insured must do after a loss, beginning with giving prompt notice to the insurer or its agent. Other duties include protecting the property, preparing an inventory, and cooperating in the investigation.

Question 46Personal Residential Concepts

A covered kitchen fire causes smoke damage throughout the house. Which condition requires the insured to protect the property from further damage and keep records of any expenses incurred?

  1. The liberalization condition
  2. The cancellation condition
  3. The assignment condition
  4. The duties after loss condition Correct answer.

Explanation

The duties after loss condition requires the insured to take reasonable steps to protect the property from further damage and to keep records of expenditures made for that purpose. Those reasonable repair costs are typically reimbursed as part of the loss.

Question 47Personal Residential Concepts

An HO-3 insured rents the home to tenants and moves to another state. How does the standard homeowners form treat the rental exposure?

  1. The form covers the rental income but not the building
  2. The form automatically converts to a commercial general liability policy
  3. The form continues to provide full coverage because the named insured still owns the home
  4. The form is designed for owner-occupied dwellings, so renting the home may require a dwelling fire or landlord policy Correct answer.

Explanation

Homeowners forms are built around an owner-occupied residence premises, and a change to a rental exposure materially increases the risk. The insured should notify the insurer and obtain a dwelling fire or landlord policy rather than relying on the homeowners form.

Question 48Personal Residential Concepts

Which loss settlement provision applies to a pair or set of items, such as a matched set of china, when only one piece is damaged?

  1. The insurer pays the special limit for silverware regardless of the item
  2. The insurer may repair or replace the damaged piece or pay the difference in value between the set before and after the loss Correct answer.
  3. The insurer pays nothing because sets are excluded
  4. The insurer pays the full value of the entire set in every case

Explanation

The pair or set clause allows the insurer to repair or replace the damaged part, or to pay the difference between the value of the set before and after the loss. The insured is not automatically entitled to the full value of the complete set.

Question 49Personal Residential Concepts

A homeowner adds a new $15,000 in-ground pool with a fence and equipment. How does the HO-3 treat the pool under Coverage B?

  1. It is fully covered with no sub-limit because pools are considered part of the dwelling
  2. It is subject to the Coverage B limit, which is 10 percent of Coverage A unless the insured increases it Correct answer.
  3. It is covered only under Coverage C as personal property
  4. It is excluded because swimming pools are uninsurable

Explanation

A detached pool and its associated structures fall within Coverage B, which is limited to 10 percent of the Coverage A amount unless the insured purchases a higher limit. The insured should review the limit to ensure the pool and other detached structures are adequately insured.

Question 50Personal Residential Concepts

An HO-3 insured's college-age daughter lives in a dormitory during the academic year and keeps most of her belongings there. How does the unendorsed HO-3 treat her personal property while she is away at school?

  1. It is covered only if the insured adds a scheduled personal property endorsement listing each item before the loss occurs.
  2. It is covered without any sublimit because a full-time student is automatically a named insured under the policy.
  3. It is covered as an insured's personal property, subject to the Coverage C special limit for property usually located at another residence, typically 10% of the Coverage C limit. Correct answer.
  4. It is excluded entirely because the dormitory is not the residence premises and she is not a named insured.

Explanation

Under the HO-3, a student who is a relative and resides away from home to attend school is an insured, and personal property usually located at that other residence is covered subject to a special limit rather than the full Coverage C amount. The standard form caps that property at a stated percentage of the Coverage C limit, commonly 10%, with the student's residence treated as the location. No endorsement or scheduling is needed for the sublimit to apply.