Alaska Personal Lines Insurance License Exam — All Questions

The most commonly purchased Homeowners form, which covers the dwelling on an open-perils basis and personal property on a named-perils basis, is the:

• a.HO-8
• b.HO-3✓
• c.HO-2
• d.HO-4

The HO-3 (special form) is the most widely purchased Homeowners policy. It insures the dwelling and other structures on an open-perils basis while covering personal property on a named-perils basis. HO-2 covers both on named-perils, HO-4 is the renters form, and HO-8 is a modified form for older homes. The HO-5 comprehensive form extends open-perils coverage to personal property as well.

A tenant who rents an apartment and wants to insure personal belongings and obtain personal liability coverage should purchase:

• a.HO-6
• b.HO-8
• c.HO-4✓
• d.HO-3

The HO-4 form is the renters (tenants) policy. It covers the tenant's personal property and provides personal liability and loss-of-use coverage, but not the building, which is the landlord's responsibility. HO-6 is for condominium unit owners who own the interior, and HO-3 and HO-8 are owner-occupied dwelling forms that include structural coverage the renter does not need.

A condominium unit owner who needs to insure the interior of the unit and personal property should buy:

• a.HO-3
• b.HO-8
• c.HO-6✓
• d.HO-4

The HO-6 form is designed for condominium unit owners. It covers the unit owner's personal property and the portions of the building the owner is responsible for (typically interior walls, fixtures, and improvements), along with personal liability and loss of use. The condo association's master policy covers the building structure and common areas, so HO-6 fills the gap for the individual unit owner.

Under a Homeowners policy, which coverage provides additional living expense when a covered loss makes the home temporarily uninhabitable?

• a.Coverage D – Loss of Use✓
• b.Coverage E – Personal Liability
• c.Coverage A – Dwelling
• d.Coverage F – Medical Payments to Others

Coverage D (Loss of Use) pays additional living expenses, the reasonable extra costs of maintaining a normal standard of living, when a covered loss makes the residence uninhabitable, such as hotel and increased meal costs. Coverage A insures the dwelling structure, while Coverages E and F are the Section II liability coverages. Loss of use addresses the insured's indirect costs, not the physical damage.

Coverage F (Medical Payments to Others) under a Homeowners policy pays medical expenses for an injured guest:

• a.Only for members of the insured's own household
• b.Only after a lawsuit is filed against the insured
• c.On a no-fault basis, regardless of the insured's liability✓
• d.Only if the insured is legally at fault

Medical Payments to Others (Coverage F) is a no-fault, goodwill coverage that pays reasonable medical expenses for a non-resident injured on the insured premises or by the insured's activities, whether or not the insured is legally liable. It does not cover the insured or regular household residents. Paying small medical claims quickly helps preserve goodwill and can prevent larger liability lawsuits.

Under a Homeowners policy, categories such as jewelry, watches, and firearms are subject to:

• a.Special dollar sublimits that cap the amount payable✓
• b.Replacement cost settlement without any dollar cap
• c.A total exclusion unless the items are scheduled
• d.The full Coverage C limit with no internal cap

Homeowners policies apply special limits (sublimits) to certain high-value or high-theft categories such as jewelry, watches, furs, firearms, cash, and silverware. These items are covered, but only up to a stated dollar cap that is lower than the overall Coverage C limit. To fully protect valuable items, the insured can schedule them on a personal articles (scheduled property) endorsement for broader, itemized coverage.

The HO-8 modified Homeowners form is intended for:

• a.Renters who insure their contents but not the building
• b.Older homes whose replacement cost exceeds market value✓
• c.New luxury homes needing the broadest available coverage
• d.Condominium owners insuring interior building items

The HO-8 modified form is designed for older or historic homes where replacing with identical materials would cost far more than the home's market value. It settles losses on a functional replacement or actual cash value basis rather than full replacement cost, keeping the policy affordable and insurable. Renters use HO-4, condo owners use HO-6, and the broadest coverage is the HO-5 comprehensive form.

Eligibility for an owner-occupied Homeowners form such as the HO-3 requires that:

• a.the dwelling be leased to a tenant year round
• b.the dwelling be under a written one-year lease
• c.the named insured own and live in the dwelling✓
• d.the named insured hold the mortgage on the home

A Homeowners policy is a package written for an owner who occupies the dwelling as a residence, which is why it can bundle building, contents and liability in one contract. The answer about holding the mortgage confuses the lender's interest with occupancy; a mortgagee is simply named on the declarations and is not the person who must be eligible.

An investor buys a house solely to rent out and does not live there. A Homeowners policy cannot be written because:

• a.a tenant's liability cannot be insured under any form
• b.the owner does not occupy the house as a residence✓
• c.an investor has no insurable interest in the house
• d.a rented house can only be written on open perils

Owner-occupancy is the eligibility test for a Homeowners form, so a pure rental property is written on a Dwelling policy instead, with rental income insured as fair rental value. The insurable-interest answer is wrong because an owner plainly stands to lose money if the rental house burns.

A tenants form (HO-4) differs from the owner-occupied forms mainly because it:

• a.covers the landlord's building for its full value
• b.carries no Coverage A limit on the building itself✓
• c.leaves out personal liability for the renting party
• d.insures personal property on an open-perils basis

A renter does not own the structure, so the tenants form insures contents and loss of use and carries no dwelling limit; the landlord insures the building separately. The open-perils answer describes the HO-5, since contents on a tenants form are written on the broad list of named perils.

A unit-owner buys a standard HO-6. Before any endorsement, the built-in Coverage A limit for building property is:

• a.$5,000✓
• b.$1,000
• c.$25,000
• d.$10,000

The unit-owners form carries a small built-in Coverage A of $5,000 for building property such as interior fixtures, cabinets and floor coverings that the association's master policy does not insure. That limit is routinely raised by endorsement when the unit has costly built-ins, so the $25,000 answer describes a bought-up limit rather than the standard one.

Which Homeowners form covers both the dwelling and the personal property on an open-perils basis?

• a.HO-8
• b.HO-5✓
• c.HO-3
• d.HO-2

The comprehensive form applies open perils to the dwelling and to contents, so the insurer must name an exclusion in order to deny either kind of loss. The HO-3 answer is the common trap: it writes the dwelling open perils but leaves contents on the broad list of named perils, and the HO-8 is the modified form for an older home.

On the HO-2 broad form, the dwelling and the personal property are insured:

• a.on an open-perils basis with few exclusions
• b.for fire and lightning and smoke only
• c.against the broad form list of named perils✓
• d.on an open-perils basis for the dwelling alone

The broad form runs both the building and the contents off the same list of named perils, so a loss is paid only if the insured can point to a peril on that list. The answer that puts open perils on the dwelling alone describes the HO-3, and the fire-and-lightning answer describes a much narrower basic form.

A covered dwelling loss under the HO-8 modified form is settled on the basis of:

• a.repair cost using common construction materials✓
• b.the original purchase price plus improvements
• c.full replacement cost with no depreciation taken off
• d.the home's market value on the day of the loss

The modified form exists for an older home whose replacement cost far exceeds its market value, and it pays the cost to repair or replace using common construction materials and methods rather than reproducing ornate original work. The full-replacement-cost answer describes the dwelling settlement on an HO-3, which is exactly what the modified form is designed to avoid.

Under an open-perils dwelling form, the burden of proof at claim time works this way:

• a.the insured must name the peril that caused it
• b.the insurer must point to an exclusion to deny✓
• c.the insured must show the peril is on a list
• d.the insurer may deny it without citing the policy

Open perils covers direct physical loss unless the cause is excluded, so the insured shows a loss occurred and the burden shifts to the insurer to identify the exclusion it relies on. The answer that makes the insured prove the peril is on a list states the named-perils rule, which is how contents are handled on an HO-3.

A home carries Coverage A of $280,000. A detached garage is destroyed and costs $34,000 to rebuild. On an unendorsed form, Coverage B pays at most:

• a.$34,000
• b.$56,000
• c.$28,000✓
• d.$14,000

Coverage B is provided at 10% of Coverage A, and 10% of $280,000 is $28,000, so the owner absorbs the remaining $6,000 of rebuilding cost. The $34,000 answer assumes other structures are paid up to their full rebuilding cost; the limit is a stated percentage, and it is an additional amount of insurance rather than a slice carved out of Coverage A.

Which of these is insured under Coverage B rather than under Coverage A?

• a.a detached garage separated by clear space✓
• b.a second-story addition on the dwelling
• c.an attached garage that shares a house wall
• d.a screened porch built onto the dwelling

Coverage B picks up structures set apart from the dwelling by clear space, or joined to it only by a fence, utility line or similar connection, so a free-standing garage, a storage shed or an in-ground pool belongs there. The attached-garage answer is wrong because a structure sharing a wall with the house is part of the dwelling and draws on Coverage A.

A homeowner rents a detached backyard cottage to a stranger who runs a salon there. Under Coverage B the cottage is:

• a.covered in full up to the Coverage B limit
• b.covered under Coverage A as part of the home
• c.covered, but only for fire and lightning
• d.not covered, as it is a business rental✓

Coverage B drops a structure that is rented to someone who is not a tenant of the dwelling, and it also drops any structure held for business use; a detached garage rented to a tenant of the home is the narrow exception. The answer paying the full Coverage B limit ignores both the rental and the business use, and the structure is detached, so Coverage A never reaches it.

A dwelling is written with Coverage A of $240,000. On an unendorsed Homeowners form, the Coverage C limit is:

• a.$240,000
• b.$120,000✓
• c.$96,000
• d.$24,000

Personal property is written at 50% of the dwelling limit on the standard form, so 50% of $240,000 gives $120,000 of Coverage C. The $24,000 answer applies the 10% figure that belongs to other structures, and the $240,000 answer would insure contents to the full value of the building.

The 50% relationship between Coverage C and Coverage A is best described as:

• a.a default the insured may raise or lower✓
• b.a percentage that applies only to tenant forms
• c.a fixed limit that no endorsement can change
• d.a cap the insurer sets after the loss occurs

The 50% figure is the amount built into the form, and a household with heavy furnishings can buy the limit up for extra premium while a sparsely furnished home can have it reduced by endorsement. The answer calling it unchangeable misreads a standard starting point as a hard cap, and the limit is set when the policy is written, not after a loss is reported.

Personal property usually kept at an insured's other residence, such as a vacation cabin, is limited to:

• a.10% of Coverage A or $1,000, whichever is larger
• b.10% of Coverage C or $1,000, whichever is more✓
• c.50% of Coverage C, the same as at the home
• d.$1,000 flat, with no percentage option used

Contents are covered anywhere in the world, but property usually located at a residence of an insured other than the residence premises is capped at the greater of 10% of Coverage C or $1,000. The version built on Coverage A uses the dwelling limit, which is not the base for contents, and the flat answer throws away the greater-of test that protects a large contents limit.

Coverage D pays fair rental value instead of additional living expense when:

• a.a rented part of the home is unfit to use✓
• b.the loss comes from a peril that is excluded
• c.the insured picks the larger of two amounts
• d.the insured's own family moves to a motel

Loss of use has two halves: additional living expense keeps the insured's own household at its normal standard of living, while fair rental value replaces the rent lost on a portion of the premises held for rental, less any expenses that stop. The motel answer describes the additional living expense side, and neither half responds when the underlying peril is excluded.

A fire makes a home unlivable. Coverage A is $310,000 and the HO-3 provides loss of use at 30% of Coverage A. The most payable under Coverage D is:

• a.$31,000
• b.$93,000✓
• c.$62,000
• d.$155,000

Coverage D on an owner-occupied form is written at 30% of the dwelling limit, and 30% of $310,000 is $93,000. The $31,000 answer applies the 10% figure that belongs to other structures, and the $155,000 answer applies the 50% contents relationship to the wrong coverage.

On an HO-4, the Coverage D limit is stated as a percentage of:

• a.Coverage A, at 10% of the dwelling limit
• b.Coverage A, at 30% of the dwelling limit
• c.Coverage C, at 50% of the contents limit
• d.Coverage C, at 30% of the contents limit✓

A tenant has no dwelling limit to work from, so loss of use on the tenants form is pegged to contents at 30% of Coverage C. The answer using 50% of Coverage C is the unit-owners relationship, and both answers built on Coverage A assume a dwelling limit the tenants form does not carry.

A unit-owner carries Coverage C of $60,000 on an HO-6. The loss of use limit on that form is:

• a.$5,000
• b.$60,000
• c.$18,000
• d.$30,000✓

The unit-owners form writes Coverage D at 50% of Coverage C, so 50% of $60,000 gives $30,000 for additional living expense and fair rental value combined. The $18,000 answer applies the 30% relationship used on the tenants form, and $5,000 is the small built-in building-property limit, not a loss of use figure.

A family displaced by a covered fire pays $2,600 a month for a hotel while their normal monthly living cost is $1,700. Additional living expense pays about:

• a.$4,300 a month, the two added
• b.$900 a month, the rise in cost✓
• c.$1,700 a month, the usual cost
• d.$2,600 a month, the hotel bill

Additional living expense reimburses the increase in living costs needed to keep the household at its normal standard, so $2,600 minus $1,700 leaves $900 a month. Paying the whole hotel bill would hand the family the grocery and utility money they were already spending anyway, which is more than indemnity allows.

Which of these is a named peril insured against on a broad form Homeowners policy?

• a.rust on an outdoor metal railing
• b.gradual seepage from a supply pipe
• c.settling of the foundation footing
• d.weight of ice, snow, or sleet✓

Weight of ice, snow or sleet sits on the broad list alongside fire, windstorm, explosion, riot, aircraft, vehicles, smoke, vandalism, theft, falling objects, freezing and volcanic eruption. Seepage that continues over a period of time, settling and rust are all maintenance conditions the form treats as the owner's problem rather than sudden accidental losses.

Vandalism or malicious mischief is a named peril, but that coverage is suspended when:

• a.the insured has filed a vandalism claim in the past
• b.the police make no arrest for the damage
• c.the dwelling has been vacant past a set period✓
• d.the damage is done by a tenant of the insured

The form withdraws the vandalism peril once the dwelling has stood vacant for more than the stated number of consecutive days immediately before the loss, because an empty house is a far easier target. Whether the police make an arrest has nothing to do with coverage, and a prior claim does not remove a peril from the policy.

A homeowner leaves for the winter, shuts the heat off, and the pipes burst. The freezing loss is covered only if the insured:

• a.carries a higher limit on the dwelling
• b.shut the water off and drained the system✓
• c.had the pipes inspected before leaving home
• d.told the insurer about the trip in advance

Freezing of plumbing, heating or sprinkler systems is excluded while the dwelling is vacant, unoccupied or under construction unless the insured used reasonable care either to maintain heat in the building or to shut off the water supply and drain the system. With the heat deliberately off, draining is the only route left, so notifying the insurer or buying a larger limit changes nothing.

One house has a supply line burst and flood a kitchen; another has a pipe that dripped inside a wall for two years. On a broad form:

• a.both losses are covered as water damage
• b.neither loss is covered by a water peril
• c.the burst is covered and the slow leak is not✓
• d.the slow leak is covered but the burst is not paid

The peril is accidental discharge or overflow of water or steam, and the word that decides these two claims is sudden: a line that lets go without warning qualifies, while constant or repeated seepage over a period of time is treated as a maintenance failure and excluded. Reading both as covered water damage ignores the sudden-and-accidental requirement built into the peril.

A landslide shifts the ground under a house and cracks the foundation. Under Section I the loss is:

• a.excluded under earth movement✓
• b.excluded as a water damage loss
• c.covered as a falling-object loss
• d.covered under the collapse peril

The earth movement exclusion sweeps in earthquake, landslide, mudflow, sinkhole collapse and the settling or shifting of the ground, which is why quake coverage has to be bought back separately. Calling it a water damage loss picks the wrong exclusion, and the falling-object peril is about something striking the building from outside, not the ground moving beneath it.

Heavy rain overloads a public sewer and water backs up into a basement. On an unendorsed Homeowners policy the damage is:

• a.excluded, and no endorsement can cover it
• b.covered because rain fell in a storm
• c.excluded without a back-up endorsement✓
• d.covered as accidental discharge of water

The water damage exclusion covers three ideas at once: flood and surface water, water below the surface of the ground, and water that backs up through sewers or drains, so the unendorsed policy pays nothing here. A water back-up endorsement can be added for a stated limit, which is why treating the loss as permanently uninsurable is wrong.

Fire destroys most of an older home and the current code requires the rest be rebuilt to new standards. That extra cost is:

• a.treated as an additional living expense
• b.paid under the other structures limit
• c.excluded by the ordinance or law rule✓
• d.paid in full under the Coverage A limit

Section I excludes the increased cost of construction, demolition and repair that comes from enforcing a building ordinance or law, so the dwelling limit responds to the fire damage but not to the upgrade the code demands. Other structures covers detached buildings, and loss of use pays living costs, so neither reaches a code-driven construction cost.

An off-premises transformer fails, a freezer thaws, and the food spoils. On a standard form the food loss is:

• a.covered as an additional living expense
• b.not covered, since food is excluded property
• c.covered, since the freezer sits on site
• d.not covered, as the failure was off site✓

The power failure exclusion applies when the failure of power or another utility service takes place away from the residence premises; had the failure happened on the premises and led to a covered peril there, the ensuing loss would be paid. Food is ordinary personal property and is not excluded, so the answer blaming the property type identifies the wrong reason.

After a small kitchen fire, the owner leaves the roof open to rain for weeks and the damage spreads. The added damage is:

• a.excluded, since rain is not a peril
• b.covered as ensuing water damage
• c.covered as a spread of the original fire
• d.excluded under the neglect exclusion✓

Neglect means the insured's failure to use all reasonable means to save and preserve property at and after the time of a loss, and it is a Section I exclusion, so the damage that spreads while the building sits open is not paid even though the original fire is covered. Calling the later damage an ensuing water loss ignores that the insured's own inaction let it in.

A city condemns and demolishes a house for a zoning violation. On a Homeowners policy this loss is:

• a.excluded as governmental action✓
• b.covered under the ordinance rule
• c.covered as a collapse of the building
• d.excluded as neglect by the owner

Governmental action means the destruction, confiscation or seizure of property by order of a public authority, and it is one of the standard Section I exclusions, so a demolition ordered by the municipality is not an insured loss. The collapse answer describes an abrupt structural failure from a listed cause, not a deliberate teardown carried out under a public order.

Which of these is excluded from Coverage C on a Homeowners policy?

• a.a riding mower used at the home
• b.a motorcycle with plates✓
• c.a bicycle stored in the shed
• d.a laptop taken to a coffee shop

Coverage C leaves out motor vehicles and their equipment, along with aircraft, animals, and the property of roomers and boarders, because those exposures belong on an auto or specialty policy. A riding mower is not treated as an excluded motor vehicle when it is used to service the residence and is not licensed for road use, and a bicycle is ordinary personal property.

A homeowner rents a spare bedroom to an unrelated boarder. The boarder's furniture and clothes are:

• a.covered up to 10% of the Coverage C limit
• b.covered for the theft and fire perils only
• c.not covered, as they belong to a roomer✓
• d.covered up to the full Coverage C limit

Coverage C insures property owned or used by an insured and by household residents related to the insured, and it specifically excludes property of roomers and boarders who are not related, along with property in an apartment regularly rented to others. The boarder needs a tenants policy of his own, so answers paying any part of Coverage C for his goods are wrong.

A dwelling would cost $400,000 to replace and carries Coverage A of $340,000. A covered fire causes $50,000 of repair cost, whose depreciated value is $38,000. The policy pays:

• a.$50,000✓
• b.$38,000
• c.$44,000
• d.$42,500

The dwelling settles at replacement cost with no deduction for depreciation when the amount of insurance is at least 80% of full replacement cost, and $340,000 divided by $400,000 is 85%. That clears the test, so the full $50,000 repair cost is paid. The $38,000 answer is the actual cash value, which is how contents rather than the dwelling would settle.

A home has a replacement cost of $300,000 and Coverage A of $210,000. A covered loss costs $30,000 to repair and has an actual cash value of $18,000. Before the deductible, the settlement is:

• a.$18,000
• b.$30,000
• c.$21,000
• d.$26,250✓

Because $210,000 is only 70% of replacement cost, the insured falls under the 80% requirement and the policy pays the greater of actual cash value or the proportion the limit bears to 80% of replacement cost. Eighty percent of $300,000 is $240,000, and $210,000 divided by $240,000 is 0.875, so 0.875 times $30,000 gives $26,250, which beats the $18,000 actual cash value.

A six-year-old sofa would cost $2,400 to replace and has depreciated by half. On an unendorsed Homeowners form the contents claim settles at:

• a.$2,400, the replacement cost
• b.$1,200, the actual cash value✓
• c.$1,800, three quarters of the new cost
• d.$2,400 with no deductible due

Personal property settles at actual cash value on the unendorsed form, which is replacement cost minus depreciation, so $2,400 less half its value leaves $1,200. Paying the full $2,400 is what a personal property replacement cost endorsement would buy, and the deductible still comes off whichever settlement basis applies.

A windstorm causes $8,400 of covered damage to a dwelling and the Section I deductible is $1,500. The insurer pays:

• a.$1,500
• b.$6,900✓
• c.$8,400
• d.$9,900

The deductible is retained by the insured and comes off the amount otherwise payable for a Section I loss, so $8,400 minus $1,500 leaves $6,900. The $9,900 answer adds the deductible instead of subtracting it, and paying the full $8,400 would ignore the retention the insured accepted in exchange for a lower premium.

A burglar takes $600 in cash and $4,000 of jewelry from an insured home. On a standard unendorsed homeowners form, before any deductible, how much is payable for these two items?

• a.$1,500
• b.$4,600
• c.$1,700✓
• d.$4,200

On a standard unendorsed form the special limit for money and coins is $200 and the limit for theft of jewelry, watches and furs is $1,500, so the payment is $200 + $1,500 = $1,700 before any deductible. The $4,600 figure ignores both special limits and simply pays the full loss. The $4,200 figure caps the cash but forgets that stolen jewelry carries its own $1,500 cap.

Thieves take a firearm collection worth $6,000 from an insured's home. The unendorsed homeowners policy carries a $60,000 Coverage C limit. What is the most it pays for the guns?

• a.$6,000
• b.$1,500
• c.$2,500✓
• d.$60,000

Theft of firearms and related equipment is subject to a $2,500 special limit on a standard unendorsed form, so the large Coverage C limit does not help and the policy pays $2,500 toward the $6,000 collection. The $1,500 figure is the theft limit for jewelry, watches and furs, not firearms. Paying the full $6,000 ignores the special limit entirely.

A theft loss includes a sterling silver flatware service valued at $9,000. On a standard unendorsed homeowners form, the amount payable for the silverware is:

• a.$5,000
• b.$9,000
• c.$1,500
• d.$2,500✓

Theft of silverware, goldware and pewterware carries a $2,500 special limit on the standard form, so $2,500 of the $9,000 loss is paid. The $1,500 figure belongs to theft of jewelry, watches and furs. Paying the full $9,000 would ignore the class limit, which is why owners of a large service schedule it separately.

Two rings worth $2,000 each are stolen in one burglary. Under the special limit for theft of jewelry, watches and furs, the unendorsed policy pays:

• a.$3,000, being two $1,500 caps
• b.$1,500 for each of the rings
• c.$1,500 for the pair of rings✓
• d.$4,000, the full value lost

A Coverage C special limit caps the whole class of property in one loss, not each article, so a single $1,500 limit applies to all jewelry taken in the burglary and the pair brings $1,500. Treating the cap as per item would produce $3,000, and paying $4,000 ignores the special limit. Scheduling each ring is the way to insure them for full value.

On a standard unendorsed homeowners form, the special limit that applies to securities, deeds, manuscripts and similar valuable papers is:

• a.$500
• b.$2,500
• c.$1,500✓
• d.$200

Securities, accounts, deeds, evidences of debt, manuscripts, tickets and stamps share a $1,500 special limit on the standard form, and that limit applies to loss by any covered peril rather than theft alone. The $200 figure is the limit for money and coins. The $2,500 figure is the theft limit for firearms or for silverware and goldware.

A homeowner's small sailboat, its trailer and its outboard motor are damaged by a covered peril. Under Coverage C on an unendorsed form, the most payable for the boat, trailer and equipment together is:

• a.$1,000
• b.$2,500
• c.$1,500✓
• d.$5,000

Watercraft, together with their trailers, furnishings, equipment and outboard motors, share one $1,500 special limit under Coverage C on the standard form. That single limit covers the boat and everything that goes with it, so a real boat needs its own watercraft policy. The $2,500 figure belongs to firearms, silverware or business property, not watercraft.

A homeowner runs a side business from the house and keeps $7,000 of stock and equipment there. Under Coverage C on a standard unendorsed form, business property on the residence premises is limited to:

• a.$500 for that property
• b.$7,000, the full amount
• c.$2,500 for that property✓
• d.$1,500 for that property

Business property on the residence premises carries a $2,500 special limit on the standard form, so $4,500 of the $7,000 exposure is uninsured. The $1,500 figure is the jewelry-theft and watercraft limit, and $500 is the credit card and forgery amount. A home business of this size belongs on a business owners policy or an endorsement.

A house fire destroys $9,000 of silverware. How does the $2,500 special limit for silverware apply to this loss?

• a.It is voided once a fire report is filed
• b.It is a theft limit, so Coverage C applies✓
• c.It applies to any peril, so $2,500 is paid
• d.It applies, but doubles for fire losses

The $2,500 special limit on silverware, goldware and pewterware is written for loss by theft, so a fire loss is settled under the ordinary Coverage C limit instead of the sublimit. The answer applying $2,500 to any peril confuses a theft sublimit with a class limit that runs across all perils. No special limit doubles because the peril happened to be fire.