Hawaii Property & Casualty Insurance License Exam — All Questions
32 questions
A key difference between a Dwelling policy and a Homeowners policy is that the Dwelling policy:
- a.Covers personal property but not the structure itself
- b.Does not automatically include personal liability coverage✓
- c.Includes broader theft and liability coverage as standard
- d.Can be written only on an owner-occupied family home
Dwelling (DP) policies are designed primarily for property coverage on residences, including rentals and non-owner-occupied homes, and they do not automatically include personal liability or medical payments coverage; liability must be added by endorsement. Homeowners policies package property and personal liability together. This makes the Dwelling form flexible for landlords and situations that do not fit a standard Homeowners eligibility.
Which Dwelling policy form provides the broadest coverage by insuring the dwelling on an open-perils basis?
- a.A liability-only endorsement
- b.The Special form (DP-3)✓
- c.The Basic form (DP-1)
- d.The Broad form (DP-2)
The Dwelling Special form (DP-3) is the broadest, insuring the dwelling and other structures on an open-perils (all-risk) basis while covering personal property on a named-perils basis. The Basic form (DP-1) is the narrowest, covering a short list of named perils, and the Broad form (DP-2) adds more named perils but is still not open-perils. Broader coverage generally means higher premium.
Under a Dwelling policy, coverage for the physical house structure is provided under:
- a.Coverage E – Additional Living Expense
- b.Coverage A – Dwelling✓
- c.Coverage D – Fair Rental Value
- d.Coverage C – Personal Property
In the Dwelling program, Coverage A insures the dwelling structure itself. Coverage B insures other structures, Coverage C insures personal property, Coverage D provides fair rental value if a rented dwelling becomes uninhabitable, and Coverage E provides additional living expense for an owner-occupant. Knowing the standardized coverage letters is essential and is consistent across the country.
A landlord who rents out a house wants to insure the loss of rent if the home becomes uninhabitable after a covered fire. This need is met by:
- a.Coverage C – Personal Property
- b.Coverage E – Additional Living Expense
- c.Coverage D – Fair Rental Value✓
- d.Coverage B – Other Structures
Fair Rental Value (Coverage D) reimburses a landlord for lost rental income when a covered peril makes the rented dwelling unfit to live in, limited to the time reasonably required to repair. Additional Living Expense (Coverage E) instead pays the extra costs an owner-occupant incurs to maintain a normal standard of living elsewhere. The two coverages address different insureds: a landlord versus a resident owner.
A homeowner moves out of her house, rents it to a family, and asks to keep her homeowners policy on it. Her producer must move the risk to a dwelling policy because:
- a.a homeowners policy may not insure a one-family house
- b.rented dwellings can be insured only at market value
- c.the homeowners program excludes fire at a rented home
- d.homeowners forms require the insured to live there✓
Homeowners forms are eligible only while the named insured occupies the dwelling as a residence, so once the owner moves out and rents the house to others the risk belongs in the dwelling program. The notion that a homeowners policy cannot insure a one-family house is backwards, since that is the risk it was built for. Renting does not limit recovery to market value either.
Which of these buildings could NOT be insured under a dwelling policy?
- a.A home still under construction
- b.A twelve-unit apartment house✓
- c.A house rented to a single family
- d.A cabin lived in only in summer
Dwelling forms are written for residences holding a small number of family units, so a twelve-unit apartment building is a commercial habitational risk that belongs on a commercial property or package policy. Seasonal dwellings, rented dwellings, and dwellings under construction are all ordinary dwelling-program risks. Owner occupancy is not required by the dwelling forms.
A builder needs coverage on a house he is putting up, including the lumber and fixtures stored on the site. The usual answer is:
- a.an inland marine floater on the finished home
- b.a builders risk policy on the job✓
- c.a dwelling policy bought by the future buyer
- d.a commercial general liability policy
Builders risk insures a structure while it is being built along with the materials and supplies at the site that will become part of it. General liability answers third-party injury and damage claims, not damage to the builder's own work in progress. A floater written on a finished home responds to nothing during the construction period.
A dwelling policy is written on a house being built for the owner who will live in it. The Coverage A limit should be set at:
- a.the price of the lot plus the permits
- b.the builder's profit on the whole job
- c.the value of the work finished so far
- d.the completed value of the dwelling✓
A building under construction is written to its completed value, because the amount at risk climbs toward that figure as the work goes on and the form measures any loss against the work actually in place. Setting the limit at the work finished so far would leave the insured short within weeks. Land, permits, and the builder's profit are not covered property.
On a dwelling policy carrying vandalism coverage, letting the building stand empty matters because vandalism is:
- a.paid at half the loss while the building is empty
- b.replaced by open-perils wording during a vacancy
- c.unaffected, since vacancy reaches only theft losses
- d.suspended once vacancy runs past the stated period✓
Vandalism or malicious mischief is suspended once the dwelling has been vacant beyond the period the form allows, because an empty building is a far easier target; the other perils keep running. The policy does not cut the payment in half. Vacancy is not limited in its effect to theft, which the unendorsed dwelling policy does not insure in the first place.
Gas that leaked inside a dwelling insured on an unendorsed basic form ignites and blows out a kitchen wall. The loss is:
- a.covered, as an explosion inside the dwelling✓
- b.denied, until a wider explosion peril is added
- c.covered, but only for the kitchen appliances
- d.denied, because gas leaks are excluded events
Fire, lightning, and internal explosion are the three perils the unendorsed basic form insures, so an explosion occurring inside the described dwelling is covered as the form stands. The endorsement answer confuses this with the broader explosion peril that reaches blasts originating outside the building. The form pays the resulting building damage, not merely appliances.
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A propane tank standing in the yard explodes and cracks the wall of a dwelling. A basic form pays nothing for this, but the loss is covered once the insured adds:
- a.a personal liability endorsement
- b.a vandalism and mischief endorsement
- c.a theft coverage endorsement
- d.the extended coverage endorsement✓
The basic form's explosion peril reaches only an explosion occurring inside the described dwelling, while extended coverage substitutes a broader explosion peril that includes a blast originating outside the building. Vandalism, liability, and theft endorsements each add something else entirely and would leave this wall unpaid. Extended coverage also brings windstorm or hail, riot, aircraft, vehicles, smoke, and volcanic eruption.
Which peril is NOT part of the extended coverage group added to a dwelling policy?
- a.Vandalism or malicious mischief✓
- b.Riot or civil commotion damage
- c.Ash from a volcanic eruption
- d.Damage caused by an aircraft
Extended coverage adds windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, and volcanic eruption. Vandalism or malicious mischief is a separate endorsement bought after extended coverage is already on the policy, and it carries its own vacancy condition. Riot, aircraft damage, and volcanic ash all sit inside the extended coverage group itself.
Under the smoke peril added by extended coverage, which loss to a dwelling is covered?
- a.Years of staining from a fireplace
- b.Fumes from a factory two blocks away
- c.Haze drifting from farm field smudging
- d.A sudden puff-back from the furnace✓
The smoke peril covers sudden and accidental smoke damage, so a furnace puff-back that coats the interior is paid. Smoke from agricultural smudging and smoke from industrial operations are written out of the peril itself. Staining that builds up over years is neither sudden nor accidental, so the wording decides all four of these situations the same way.
Wind drives rain through a window the family left open, soaking the carpet and the wall below it. Under the windstorm peril the loss is:
- a.not covered; carpet is real property
- b.covered, since the storm caused it
- c.not covered; wind made no opening✓
- d.covered as interior water damage
The windstorm peril reaches rain, snow, or sleet driven inside only when the wind or hail first makes an opening in the roof or an outside wall. A window the occupants left open is not an opening the storm created, so the water damage stays with the family. Calling carpet real property is not the reason; the missing element is the storm-made opening.
An insured backs his own pickup into the fence at the described location. Under the vehicles peril the damage to the fence is:
- a.covered, because a vehicle struck it
- b.covered, but only above the deductible
- c.excluded, since a resident drove it✓
- d.excluded, because fences are not covered
The vehicles peril does not pay for damage to fences, driveways, or walks caused by a vehicle owned or operated by someone living at the described location, so the owner's own pickup puts this loss outside the peril. A fence is covered property as another structure; it is the identity of the driver that removes the coverage. The deductible never becomes the issue here.
The volcanic eruption peril on a dwelling policy pays for damage caused by:
- a.airborne ash, dust, and blast✓
- b.settling of soil after ash falls
- c.tremors that shake the ground
- d.flooding from melted ice and snow
Volcanic action covers the airborne blast and shock waves of an eruption together with the ash, dust, and particulate matter it throws out, and a lava flow. The earth movement wording keeps out the tremors and land shock waves that accompany an eruption, and settling of soil is excluded earth movement as well. Flood stays excluded whatever set it off.
The roof of a detached garage caves in under a heavy snow load. The dwelling policy is a basic form with extended coverage attached. The loss is:
- a.not covered; that is a broad form peril✓
- b.not covered; a garage is not covered property
- c.covered, because windstorm and hail include snow
- d.covered under the falling objects peril instead
Weight of ice, snow, or sleet is one of the perils the broad form adds, so a basic form carrying only extended coverage does not insure it and this collapse goes unpaid. Windstorm or hail answers wind and hailstones, not a static snow load resting on a roof. Falling objects means something striking from outside, not the building's own accumulated load, and a detached garage is covered property as another structure.
A supply pipe splits inside the wall of a dwelling insured on a broad form, ruining plaster and flooring. The policy pays for:
- a.the damage the water did, not the pipe✓
- b.only the plumber's bill to fix the pipe
- c.the pipe and the plaster and the floor
- d.nothing; escaping water is excluded
Accidental discharge or overflow of water is a broad form peril that pays for the damage the escaping water causes, while the system or appliance the water came from is not itself covered under that peril. Replacing the split pipe is therefore the owner's own cost. Treating escaping water as excluded altogether describes the basic form rather than the broad form.
A dwelling sits empty over the winter with the heat shut off and the water lines left full. A pipe freezes and bursts. Under the broad form the loss is:
- a.excluded because the pipe was old
- b.covered as a discharge of water
- c.excluded; heat was not maintained✓
- d.covered, since freezing is listed
The freezing peril applies only where the insured used reasonable care to maintain heat in the building or shut off the water supply and drained the system. Letting an empty house go cold with water still standing in the lines takes the loss outside the peril, even though freezing is otherwise insured on the broad form. The age of the pipe is not what decides it.
A storm drops a tree limb on a dwelling; it dents the roof, and the jolt cracks a ceiling in the room below. Under the falling objects peril:
- a.both the roof and the ceiling are paid✓
- b.only the ceiling inside is paid for
- c.only the tree removal cost is paid
- d.neither is paid; limbs are excluded
Falling objects pays for damage inside the building only when the falling object first damages the roof or an outside wall, and here the limb did damage the roof, so the interior crack is covered as well. Had the ceiling cracked with the roof untouched, the interior damage would not be paid. The peril is not limited to the cost of removing the limb.
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A tenant renting a house installs built-in bookcases at her own expense, and a fire destroys them. On the tenant's own dwelling policy they are:
- a.excluded as a permanent alteration
- b.covered only with the landlord's consent
- c.covered as her personal property✓
- d.not covered; they are part of the house
A tenant may buy a dwelling policy on household goods, and building additions and alterations made at the tenant's own expense are insured under the personal property coverage, subject to a limit the form states. Treating them as part of the landlord's building would leave the tenant nothing for what she paid for. The landlord's consent is not a coverage condition.
An unendorsed dwelling policy pays nothing when a burglar carries off the television. The owner can obtain that coverage by:
- a.raising the Coverage C limit
- b.moving up to the broad form
- c.adding a theft endorsement✓
- d.buying extended coverage
Theft of the insured's property is not a peril any dwelling form insures, so it comes only from a theft endorsement written onto the policy. Moving to the broad or special form adds perils such as weight of ice and snow and accidental discharge of water, and extended coverage adds windstorm, riot, aircraft, and the rest. A bigger limit cannot create a peril that is absent.
A dwelling insured on a special form cracks as the soil beneath the foundation shifts. The claim is:
- a.denied; the form insures contents only
- b.paid as a collapse of the building
- c.denied; earth movement is excluded✓
- d.paid, because the form is open perils
Open perils means every cause of loss except the ones the form excludes, and earth movement is a standard exclusion, so shifting soil is unpaid even on the broadest dwelling form. The error is reading open perils as unlimited. Collapse wording does not restore a cause of loss the policy already excluded, and the special form insures the dwelling, not contents alone.
Which item is insured as personal property under a dwelling policy?
- a.A lawn tractor used on the premises✓
- b.Cash kept in a kitchen drawer
- c.A licensed car kept in the garage
- d.A boarder's sofa in a rented room
Motorized equipment used to service the described location and not licensed for road use, such as a lawn tractor, is insured personal property, while a car licensed for the road is not. Dwelling forms list money and securities as property not covered, which is one place they are narrower than a homeowners form. Property of roomers unrelated to the insured is outside the coverage too.
A homeowner rents her detached backyard cottage to a student who is not a tenant of the main house. Fire destroys the cottage. Other structures coverage pays:
- a.the loss, less the rent collected
- b.nothing; it is rented to another✓
- c.the loss, as another structure
- d.half, since it houses a tenant
Other structures coverage does not apply to a structure rented or held for rental to anyone who is not a tenant of the described dwelling, unless the structure is used only as a private garage. A cottage let to an unrelated student is exactly that excluded use, so the fire loss falls outside the coverage. Rent collected is not netted against a building loss.
A rented dwelling is unlivable for three months after a covered fire. The rent was $1,800 a month, and $200 a month of expenses stop while it is empty. Fair rental value pays:
- a.$4,500
- b.$4,800✓
- c.$6,000
- d.$5,400
Fair rental value pays the rent the dwelling would have earned less the expenses that do not continue while it stands empty: $1,800 minus $200 is $1,600 a month, and three months of that is $4,800. Paying the full $5,400 ignores the saved expenses and hands the owner more than the actual loss. The coverage runs for the time reasonably required to repair.
A family normally spends $2,400 a month on housing and food. Living elsewhere after a covered fire, they spend $3,900 a month. Additional living expense pays them:
- a.$6,300 a month
- b.$2,400 a month
- c.$3,900 a month
- d.$1,500 a month✓
Additional living expense pays the increase in living costs rather than the whole bill, so $3,900 less the $2,400 the family would have spent anyway leaves $1,500 a month. Paying the full $3,900 would leave them better off than before the fire, which indemnity does not allow. The coverage runs for the shortest time needed to repair or to settle elsewhere.
Fire damages a dwelling insured on a basic form. Rebuilding the damaged portion costs $60,000, depreciation on it is $18,000, and the deductible is $1,000. The insurer pays:
- a.$42,000
- b.$41,000✓
- c.$60,000
- d.$59,000
The basic form settles building losses at actual cash value, which is replacement cost minus depreciation: $60,000 less $18,000 is $42,000. The deductible then comes off that settlement, leaving a check for $41,000. Taking the deductible off replacement cost and ignoring depreciation would produce $59,000, which is not how the basic form settles a loss.
A dwelling costing $250,000 to replace is insured on a broad form for $150,000, under a loss settlement condition asking for 80%. A $40,000 building loss is settled at:
- a.$32,000
- b.$40,000
- c.$24,000
- d.$30,000✓
The condition asks for insurance of at least 80% of $250,000, which is $200,000. Only $150,000 was carried, so the replacement cost settlement is cut to the ratio of $150,000 to $200,000, or 75%, and 75% of the $40,000 loss is $30,000. The insured absorbs the difference for carrying less than the form asks, with actual cash value available as the alternative measure.
Unlike a homeowners policy, a dwelling policy lets the applicant:
- a.skip the deductible on building losses
- b.insure contents at their resale market value
- c.insure the building with no contents coverage✓
- d.collect for theft with no endorsement
Dwelling coverages are written separately, so an owner living elsewhere can buy dwelling coverage alone while a tenant buys personal property coverage alone; a homeowners policy packages the coverages and requires an amount on the dwelling. Contents are settled at actual cash value, not resale market value, and theft comes only by endorsement. Deductibles apply under either policy.
A dwelling policy owner wants protection against a claim brought by a visitor injured on her steps. She obtains it by:
- a.buying a vandalism endorsement
- b.attaching the extended coverage endorsement
- c.raising her Coverage E limit
- d.adding a personal liability endorsement✓
The dwelling forms are property forms with no liability section, so personal liability and medical payments to others must be endorsed onto the policy before a visitor's injury claim can be paid. Coverage E on a dwelling policy is additional living expense rather than liability, so raising it does nothing for this claim. Vandalism and extended coverage add property perils only.
A fire in a rented house destroys the tenant's furniture. The landlord's dwelling policy pays:
- a.half of it, as property of others
- b.for it, and recovers from the tenant
- c.for it under the landlord's contents limit
- d.nothing for it; the tenant insures it✓
A landlord's dwelling policy insures the landlord's building and the landlord's own personal property kept at the location, such as appliances and furnishings supplied with the house, while the tenant's belongings are the tenant's to insure. The contents limit on that policy belongs to the landlord. An insurer cannot create coverage by paying and then pursuing the tenant.