Chapter 10—Protecting Your Property
1. Property insurance is meant to protect property owners from two basic types of exposures, physical loss of property and
loss through depreciation.
a. True
b. False
2. A peril is a cause of loss.
a. True
b. False
3. Property inventories are important to identify insurance needs and to substantiate claims.
a. True
b. False
4. Antiques, collections, and boats are adequately protected under a standard homeowner’s policy.
a. True
b. False
5. Personal property floaters provide increased coverage for jewelry and other collectable items at an additional premium.
Chapter 10—Protecting Your Property
a. True
b. False
6. The terms “perils” and “losses” refer to the same thing.
a. True
b. False
7. A trampoline in your back yard is an example of a hazard.
a. True
b. False
8. Liability claims may result from alleged negligent acts.
a. True
b. False
9. Liability insurance generally provides some coverage for legal fees.
a. True
b. False
Chapter 10—Protecting Your Property
10. You would be considered to be negligent when you, a dependent, or another named insured’s action causes harm or
property loss.
a. True
b. False
11. The principle of indemnity states that the insured can be compensated for an amount equal to his economic loss.
a. True
b. False
12. Actual cash value provides coverage at the current market value of your property.
a. True
b. False
13. Actual cash value is defined as replacement cost minus depreciation.
a. True
b. False
Chapter 10—Protecting Your Property
14. The most common definition of actual cash value is purchase price less depreciation.
a. True
b. False
15. The principle of indemnity does not apply to life and health insurance.
a. True
b. False
16. The principle of indemnity generally limits the amount that the insured may collect to the actual cash value of the
property.
a. True
b. False
17. If your insurance company makes a payment to you, subrogation is the right of the company to collect from the person
causing the accident or from his/her insurance company.
a. True
b. False
Chapter 10—Protecting Your Property
18. The “other-insurance clause” helps prevent the violation of the principle of indemnity.
a. True
b. False
19. The right of subrogation allows the insurer to get reimbursed for claims paid.
a. True
b. False
20. Earthquakes are covered under most homeowner’s policies.
a. True
b. False
21. Nancy’s house has been completely destroyed by fire. Prior to the accident, the house had a value of $100,000. Nancy
had two separate policies totaling $60,000 each. She may collect $60,000 from each insurance company.
a. True
b. False
Chapter 10—Protecting Your Property
22. An 80 percent co-insurance clause requires the insured to carry insurance protection equal to 80% of the original cost
of the home.
a. True
b. False
23. A co-insurance clause will cause insurers to proportionately reduce claims payments unless you carry insurance up to
a specific amount, such as 80 percent of the replacement value.
a. True
b. False
24. A house with a replacement value of $110,000 is currently insured for $90,000. The house has suffered a $15,000 loss
from windstorm damage. The insurance company will pay the full $15,000 less the deductible.
a. True
b. False
25. HO-4 and HO-6 are for renters and owners of condominiums, respectively.
a. True
b. False
Chapter 10—Protecting Your Property
26. The HO-3 form is a good policy for first-time buyers because it is a named perils policy.
a. True
b. False
27. An HO-3 form with one insurance company may provide completely different coverage than an HO–3 form with
another insurance company.
a. True
b. False
28. As a tenant, you would purchase an HO–3 policy.
a. True
b. False
29. An HO-1 policy lists more perils for which you are insured than does an HO-3 policy.
a. True
b. False
Chapter 10—Protecting Your Property
30. While you were away on winter vacation, there was a severe snowstorm that caused your roof to cave in causing a
$20,000 loss. Your H0-2 policy will cover this loss.
a. True
b. False
31. Connie rented a hotel room while on vacation. If someone breaks into her room, her HO-4 policy will cover her stolen
property.
a. True
b. False
32. Covered liability perils do not include claims for libel, slander, or character defamation.
a. True
b. False
33. Protection for personal property both at home and away from home is a provision of the homeowners’ policy.
a. True
b. False
Chapter 10—Protecting Your Property
34. Like standard homeowners’ policies, a renters’ policy liability coverage includes coverage away from home.
a. True
b. False
35. Replacement cost and actual cash value is the same thing.
a. True
b. False
36. Limits are normally specified in the homeowners’ insurance contract for some categories of personal property.
a. True
b. False
37. Replacement cost coverage is available for renters but requires an extra premium.
a. True
b. False
Chapter 10—Protecting Your Property
38. To save premium costs, one should decrease her deductible and liability coverage on a homeowners’ policy.
a. True
b. False
39. Automobile liability claims could potentially be more costly to you than car damage claims.
a. True
b. False
40. Careful drivers have limited need for liability protection, because they are not likely to be at fault in an accident.
a. True
b. False
41. A $100,000/$300,000 bodily injury liability automobile policy could pay up to $100,000 to one person or up to
$300,000 to several people seeking damages.
a. True
b. False
Chapter 10—Protecting Your Property
42. When you charge your car rental to your credit card, collision insurance may be offered under the umbrella of the
credit card..
a. True
b. False
43. Your automobile liability insurance covers the damage caused to your automobile when you are at fault in an accident.
a. True
b. False
44. The insurance company will provide defense for a covered person against both civil and criminal charges involving
her motor vehicle.
a. True
b. False
45. A rental car could be a covered auto under your personal auto policy collision section.
a. True
b. False
Chapter 10—Protecting Your Property
46. A person need not be occupying an automobile when the accidental injury occurs to be eligible for benefits from a
PAP.
a. True
b. False
47. Automobile medical payments coverage applies to the named insured and family members who are injured while
occupying any automobile.
a. True
b. False
48. Uninsured motorist protection usually provides protection to your car if a hit-and-run incident occurs.
a. True
b. False
49. Collision coverage would pay for damages to your car if a tree falls on it.
a. True
b. False
Chapter 10—Protecting Your Property
50. The type of car you drive has little effect on your auto insurance premiums.
a. True
b. False
51. State financial responsibility laws require only auto liability insurance.
a. True
b. False
52. The automobile insurance policy normally does not cover the theft of personal property left in the insured vehicle.
a. True
b. False
53. Financial responsibility laws in most states are high enough to adequately meet one’s auto liability needs.
a. True
b. False
Chapter 10—Protecting Your Property
54. A personal property floater and a personal liability umbrella policy offer similar coverage.
a. True
b. False
55. A personal liability umbrella policy typically includes coverage for auto related liability losses in excess of the limits
purchased in a personal auto policy.
a. True
b. False
56. The personal liability umbrella policy typically includes coverage for liability losses that are in excess of the limits of
the comprehensive personal liability coverage provided in the homeowner’s policy.
a. True
b. False
57. Personal umbrella policies are intended primarily for wealthy families who are often viewed as targets for large
liability claims.
a. True
b. False
Chapter 10—Protecting Your Property
58. A captive agent represents many insurance companies.
a. True
b. False
59. One should never admit fault at the scene of an accident.
a. True
b. False
60. Uninsured motorist coverage covers passengers in your car from losses caused by your negligence.
a. True
b. False
61. Collision insurance pays for damage to your automobile regardless of who is at fault.
a. True
b. False
Chapter 10—Protecting Your Property
62. You are single and age 35. Getting married will lower your auto insurance premiums.
a. True
b. False
63. The federal government subsidizes the flood insurance program.
a. True
b. False
64. Age of home affects insurance premiums the most.
a. True
b. False
65. The advisable dollar limit for any one auto accident is $250,000.
a. True
b. False
66. Lenders typically require collision coverage on cars they finance.
Chapter 10—Protecting Your Property
a. True
b. False
67. Section I of a homeowner’s insurance policy covers medical payments.
a. True
b. False
68. Section I of a homeowner’s insurance policy covers the insured’s dwelling, accompanying structures, and personal
property.
a. True
b. False
69. Section II of a homeowner’s insurance policy covers personal property.
a. True
b. False
70. All property insurance companies require you to show the following when making a claim:
a. Proof of loss
b. Personal property inventory
c. Values at the time of inventory
d. All of the above.
Chapter 10—Protecting Your Property
71. The basic principles of property and liability insurance pertain to:
a. types of exposure
b. the principles of indemnity
c. coinsurance
d. all of the above
72. Some common liability risks include:
a. driving a car
b. entertaining guests at home
c. being careless in performing professional duties
d. all of the above
73. The asset most likely to be specifically itemized in a personal property floater is
a. sofa.
b. clothing.
c. jewelry.
d. garden equipment.
e. all of these.
Chapter 10—Protecting Your Property
74. Your standard HO policy will not include coverage for damage done by
a. flood.
b. windstorm.
c. falling objects.
d. fire.
e. theft.
75. A standard HO policy covers damage from most weather-related perils except
a. snow and freezing.
b. windstorms and earthquakes.
c. earthquakes and floods.
d. floods and volcanic eruption.
e. Freezing and volcanic eruption.
76. A liability suit could result when
a. lightning strikes your home.
b. your son falls down the stairs of your home.
c. your auto is stolen.
d. your dog bites the neighbor.
e. smoke from the fireplace fills your house.
77. Which Homeowners’ policy is best suited for a resident of a rented apartment to cover that person’s personal property?
a. HO-3
b. HO-4
c. HO-5
d. HO-8
Chapter 10—Protecting Your Property
e. A Homeowners’ policy will not apply since the real estate involved is not owned by the insured.
78. Negligence results when a person
a. is not insured.
b. acts as a “reasonable person.”
c. fails to act as a “reasonable person.”
d. admits it.
e. is more than 18 years old.
79. The 80 percent co-insurance clause in a homeowner’s policy would cause a reduction in the claim payment for a
covered loss to the dwelling of $30,000 in which of the following cases?
a. Policy dwelling limit of $75,000, replacement cost of dwelling $90,000, actual cash value of dwelling $85,000
b. Policy dwelling limit of $75,000, replacement cost of dwelling $100,000, actual cash value of dwelling $90,000
c. Policy dwelling limit of $90,000, replacement cost of dwelling $90,000, actual cash value of dwelling $90,000
d. Policy dwelling limit of $110,000, replacement cost of dwelling $110,000, actual cash value of dwelling $90,000
e. Policy dwelling limit of $120,000, replacement cost of dwelling $100,000, actual cash value of dwelling $90,000
80. The principle of ____ states that an insured should not be compensated by an insurance company in an amount
exceeding the economic loss.
a. subrogation
b. insurable interest
c. coinsurance
d. indemnity
e. none of these