Insurance Policy Quiz

What must a policyholder do to reject UM/UIM coverage?

• Reject in writing and sign the document

• Call the insurance company

• Send an email

• Do nothing

Answer explanation

To reject UM/UIM coverage, a policyholder must reject in writing and sign the document. This formal process ensures that the rejection is documented and acknowledged by the insurance company.

Which endorsement provides coverage for theft of personal property on and off premises?

• Dwelling Under Construction

• Broad Theft Coverage

• Personal Liability Supplement

• Automatic Increase in Insurance

Answer explanation

Broad Theft Coverage provides protection for theft of personal property both on and off the premises, making it the correct choice for this question.

What is the primary purpose of the 'Automatic Increase in Insurance' endorsement?

• To provide coverage for theft

• To adjust the coverage limit based on inflation

• To decrease the coverage limit annually

• To cover liability for home-based businesses

Answer explanation

The 'Automatic Increase in Insurance' endorsement primarily adjusts the coverage limit based on inflation, ensuring that the policy remains adequate over time. This is crucial for maintaining proper coverage levels.

Which coverage form is suitable for older homes with functional replacement cost?

• HO-2

• HO-8

• HO-4

• HO-6

Answer explanation

The HO-8 form is specifically designed for older homes, providing coverage based on functional replacement cost, which is ideal for properties that may not be easily replaced with modern materials.

What is the purpose of the 'Limited Fungi, Wet or Dry Rot, or Bacteria' endorsement?

• To provide unlimited coverage for mold-related damage

• To add limited coverage for mold-related damage

• To cover earthquake damage

• To extend coverage for home-based businesses

Answer explanation

The 'Limited Fungi, Wet or Dry Rot, or Bacteria' endorsement is designed to add limited coverage for mold-related damage, not unlimited coverage, making the correct choice the second option.

What does the 'Personal Property Replacement Cost' endorsement change?

• Coverage D from ACV to replacement cost

• Coverage A from ACV to replacement cost

• Coverage B from ACV to replacement cost

• Coverage C from ACV to replacement cost

Answer explanation

The 'Personal Property Replacement Cost' endorsement changes Coverage C from Actual Cash Value (ACV) to replacement cost, ensuring that personal property is covered for its full replacement value rather than its depreciated value.

What does the 'Personal Injury' endorsement cover?

• Personal injury liability including defamation

• Bodily injury only

• Property damage only

• Medical payments to others

Answer explanation

The 'Personal Injury' endorsement covers personal injury liability, which includes claims like defamation. This is distinct from bodily injury, property damage, or medical payments, making the first option the correct choice.

What does Coverage D — Loss of Use cover?

• Detached structures

• Bodily injury to others

• Additional living expenses and fair rental value

• Personal property theft

Answer explanation

Coverage D — Loss of Use covers additional living expenses incurred when a home is uninhabitable due to a covered loss, as well as fair rental value for property that cannot be rented out.

Which endorsement adds coverage for earthquake damage?

• Scheduled Personal Property

• Home Day Care

• Permitted Incidental Occupancies

• Earthquake

Answer explanation

The Earthquake endorsement specifically adds coverage for damage caused by earthquakes, making it the correct choice. The other options do not provide this specific coverage.

Which coverage form provides open peril coverage for dwelling and named peril for personal property?

• HO-3

• HO-5

• HO-2

• HO-4

Answer explanation

The HO-3 form provides open peril coverage for the dwelling, meaning it covers all risks except those specifically excluded. For personal property, it offers named peril coverage, covering only specified risks.