Which statement about property coverages provided by Homeowners policies is incorrect

Generally, a homeowners insurance policy includes at least six different coverage parts. The names of the parts may vary by insurance company, but they typically are referred to as Dwelling, Other Structures, Personal Property, Loss of Use, Personal Liability and Medical Payments coverages. They are usually presented as policy sections and are often labeled Coverages A through F.

Coverage Parts A, B, and C protect property.

Coverage A, Dwelling

The homeowner policy's first coverage section protects your house and any attached structures, such as garages, decks or fences. The typical policy covers your home when it is damaged by many perils (also known as causes of loss) including fires or storms. However, the following causes of loss are usually excluded from coverage under the homeowners policy:

• Earthquake
• Flood
• Faulty maintenance
• Damage from insects or vermin
• Wear and tear, gradual damage or deterioration

Coverage B, Other Structures

This coverage section protects structures that are not attached to the home, such as a detached (separate) garage, storage or utility shed playground equipment and swimming pools.

Coverage C, Personal Property

This covers your possessions, whether they are at your home or away with you on vacation. Personal property is often covered on a named peril basis. This means that only the causes of loss listed in the policy section are covered. The coverage is also subject to limitations and exclusions. Types of property having significant value, such as jewelry, fine arts, collectibles, etc., may require special protection. Talk to your agent about scheduling (adding) coverage on a floater which broadens and extends coverage for high-valued possessions.

Actual Cash Value vs. Replacement Cost

Commonly, protection under sections A and B is provided on either an actual cash value or a replacement cost basis. Actual cash value is defined as replacement cost minus depreciation. Replacement cost is the actual cost to replace the structure, regardless of depreciation. Check your policy to see which type of coverage you have. Coverage under section C is usually provided on an actual cash basis. However, your agent may be able to add replacement cost to your possessions just like that found in Coverage A.

Coverage D, Loss of Use

This coverage handles the cost of additional living expenses while your home is being repaired. The coverage also applies if the home is unusable. However, the loss or loss of access has to be the result of an event that is covered by the policy. For instance, if your home was damaged during a war and you had to abandon it, Coverage D would not be available because war is excluded. Additional expenses normally include food, housing, and transportation. However, the expenses must exceed what your family normally incurs.

Coverage Parts E and F address coverage for injuries to persons or damage to property that belongs to others.

Coverage E, Personal Liability

This Coverage Part responds if you are legally responsible for causing property damage or physical injury. Protection includes paying for your defense costs and any financial judgment for covered incidents. Naturally the coverage would not apply for excluded situations, such as intentional injuries. Example: Joe is sued by a guy he injured after tackling and repeatedly punching him during a pickup basketball game. The injuries from this incident are not accidental and would not be covered.

Coverage F, Medical Payments

This Part provides rapid reimbursement for minor injuries, such as a guest who trips and falls while visiting your home. This coverage does not apply to a family member. For example, if your child and your neighbor's child are both injured while playing and need to go to the emergency room, this coverage will pay for your neighbor's expenses but not for your own child.

This is a brief overview of homeowners insurance. All of the coverage provided by the homeowners policy is subject to limitations such as exclusions, policy limits, and deductibles. It's important that you discuss the details of coverage and any other insurance questions with your insurance agent.

Homeowners insurance is a form of property insurance that covers losses and damages to an individual's residence, along with furnishings and other assets in the home. Homeowners insurance also provides liability coverage against accidents in the home or on the property.

Key Takeaways

• Homeowners insurance is a form of property insurance that covers losses and damages to an individual's house and assets in the home. 
• The policy usually covers interior damage, exterior damage, loss or damage of personal assets, and injury that arises while on the property.
• Every homeowners insurance policy has a liability limit, which determines the amount of coverage the insured has should an unfortunate incident occur.
• Homeowners insurance should not be confused with a home warranty or with mortgage insurance. 

Understanding Homeowners Insurance

A homeowners insurance policy usually covers four kinds of incidents on the insured property: interior damage, exterior damage, loss or damage of personal assets/belongings, and injury that occurs while on the property. When a claim is made on any of these incidents, the homeowner will be required to pay a deductible, which in effect is the out-of-pocket costs for the insured.

For example, say a claim is made to an insurer for interior water damage that has occurred in a home. The cost to bring the property back to livable conditions is estimated by a claims adjuster to be $10,000. If the claim is approved, the homeowner is informed of the amount of their deductible, say $4,000, according to the policy agreement entered into. The insurance company will issue a payment of the excess cost, in this case, $6,000. The higher the deductible on an insurance contract, the lower the monthly or annual premium on a homeowners insurance policy.

Every homeowners insurance policy has a liability limit, which determines the amount of coverage the insured has should an unfortunate incident occur. The standard limits are usually set at $100,000, but the policyholder can opt for a higher limit. In the event that a claim is made, the liability limit stipulates the percentage of the coverage amount that would go toward replacing or repairing damage to the property structures, personal belongings, and costs to live somewhere else while the property is worked on.

Acts of war or acts of God such as earthquakes or floods are typically excluded from standard homeowners insurance policies. A homeowner who lives in an area prone to these natural disasters may need to get special coverage to insure their property from floods or earthquakes. However, most basic homeowners insurance policies cover events like hurricanes and tornadoes.

Home Insurance

Homeowners Insurance and Mortgages

When applying for a mortgage, the homeowner usually is required to provide proof of insurance on the property before the financial institution will loan any funds. The property insurance can be acquired separately or by the lending bank. Homeowners who prefer to get their own insurance policy can compare multiple offers and pick the plan that works best for their needs. If the homeowner does not have their property covered from loss or damages, the bank may obtain one for them at an extra cost.

Payments made toward a homeowners insurance policy are usually included in the monthly payments of the homeowner's mortgage. The lending bank that receives the payment allocates the portion for insurance coverage to an escrow account. Once the insurance bill comes due, the amount owed is settled from this escrow account.

Homeowners Insurance vs. Home Warranty

While the terms sound similar, homeowners insurance is different from a home warranty. A home warranty is a contract taken out that provides for repairs or replacements of home systems and appliances such as ovens, water heaters, washers/dryers, and pools. These contracts usually expire after a certain time period, usually 12 months, and are not mandatory for a homeowner to buy in order to qualify for a mortgage. A home warranty covers issues and problems that result from poor maintenance or inevitable wear-and-tear on items—situations in which homeowners insurance doesn't apply.

Homeowners Insurance vs. Mortgage Insurance

A homeowners insurance policy also differs from mortgage insurance. Mortgage insurance is typically required by the bank or mortgage company for homebuyers making a down payment of less than 20% of the cost of the property. The Federal Home Administration also requires it of those taking out an FHA loan. It's an extra fee that can be figured into the regular mortgage payments, or be a lump sum charged when the mortgage is issued.

Mortgage insurance covers the lender for taking on the extra risk of a home buyer who doesn't meet the usual mortgage requirements. If the buyer should default on payments, the mortgage insurance would compensate. Basically, while both deal with residences, homeowners insurance protects the homeowner and mortgage insurance protects the mortgage lender.

Which of the following would not be covered under a standard homeowners policy?

Which of the following would be covered by a homeowners policy?

Which of the following is not eligible for a homeowners policy quizlet?

Which of the following are coverages provided by Section II of the homeowner's policy?