Free Utah Property and Casualty Practice Exam Online

Correct answer: B. Named-peril coverage

Correct. Named-peril coverage pays only for a loss caused by a peril the policy specifically lists; a cause of loss not on the list is not covered.

• A: Open-peril coverage insures against all causes of loss except those the policy specifically excludes, the reverse of a named-peril list.
• C: Guaranteed replacement coverage is a valuation approach that pays to fully rebuild regardless of the stated limit, not a description of how perils are listed.
• D: Blanket coverage means a single limit applies across multiple locations or items; it does not describe how covered perils are defined.

Correct answer: C. HO-3 (Special Form)

Correct. HO-3, the most commonly sold homeowners form, covers the dwelling on an open-peril basis subject to policy exclusions, while personal property is typically covered on a named-peril basis.

• A: HO-1 covers only a short named-peril list and has largely been phased out of most markets.
• B: HO-2 broadens the named-peril list compared to HO-1 but still names specific perils rather than using an open-peril approach for the dwelling.
• D: HO-8 is designed for older homes where replacement cost would exceed market value, and it uses a more limited named-peril, actual-cash-value approach, not an open-peril dwelling form.

Correct answer: C. A condominium unit owner's interior improvements and personal property

Correct. HO-6 is the condominium unit-owners form, covering the unit owner's interior improvements, betterments, and personal property, since the condo association's master policy generally covers the building structure.

• A: A single-family detached home is typically insured under HO-2 or HO-3, not HO-6.
• B: A mobile or manufactured home is typically insured under a specialized mobile home form, not HO-6.
• D: A landlord's rented dwelling is typically insured under a dwelling fire policy or a landlord-specific form, not HO-6.

Correct answer: D. Replacement cost value

Correct. Replacement cost valuation pays to repair or replace damaged property with new property of similar kind and quality, without a depreciation deduction, subject to the policy limit and any coinsurance requirement.

• A: Actual cash value deducts depreciation from replacement cost, the opposite of the method described.
• B: Market value reflects what a property would sell for, factoring in land value and market conditions, a different concept from a repair-cost-based claim payment.
• C: Agreed value is a valuation method, often used for classic cars or scheduled items, where insurer and insured fix a value in advance; it is not the general repair-cost-with-no-depreciation method described.

Correct answer: A. Replacement cost minus depreciation

Correct. The most common formula for actual cash value is replacement cost minus depreciation, reflecting the property's reduced value due to age, wear, and condition at the time of loss.

• B: Adding depreciation to replacement cost would increase, not reduce, the payout, the opposite of how ACV works.
• C: Using the unadjusted original purchase price ignores depreciation and does not reflect how ACV is typically determined.
• D: ACV is not calculated as market value plus depreciation; that combination does not match the standard formula used in property claims.