Level 3 chapter 3

Question 1

Why might specialized boat insurance be necessary?

Answer 1

Because homeowners insurance provides minimal coverage, specialized policies give comprehensive property and liability protection. Larger vessels may require yacht insurance.

Question 2

How are small boats usually valued for insurance purposes?

Answer 2

Based on Actual Cash Value (value minus depreciation).

Question 3

How are larger boats insured for partial damage?

Answer 3

Often on a Replacement Cost basis (repairs/replacement without depreciation).

Question 4

How are larger boats insured for total loss?

Answer 4

They may use Agreed Value, which locks in the boat’s worth at the time the policy is purchased.

Question 5

What are common exclusions in personal watercraft insurance?

Answer 5

War, nuclear reactions, normal wear and tear, inherent vice (natural rust/decay), business use, intentional acts, and racing.

Question 6

Yacht Insurance

Answer 6

Insurance specifically designed for personal watercraft longer than 26 feet.

Question 7

What does Hull Insurance cover under a yacht policy?

Answer 7

Property coverage for the vessel itself.

Question 8

How can insurance for mobile homes be handled?

Answer 8

By adding an endorsement to an HO-2 or HO-3 policy, or by purchasing a separate HO-7 policy.

Question 9

Will an unendorsed dwelling or homeowners policy cover mobile homes?

Answer 9

No, only the HO-7 form or an endorsed policy provides coverage.

Question 10

What coverage options are typically available for mobile homes?

Answer 10

Dwelling protection, contents coverage, and personal liability protection.

Question 11

Does mobile home insurance usually apply while the home is in transit?

Answer 11

No, coverage usually does not apply while the home is being moved.

Question 12

What type of water damage is excluded from standard property insurance?

Answer 12

Weather-related flooding (covered separately by flood insurance).

Question 13

Who administers the National Flood Insurance Program (NFIP)?

Answer 13

FEMA (Federal Emergency Management Agency).

Question 14

What must communities do to qualify for NFIP coverage?

Answer 14

Implement federal flood risk mitigation measures.

Question 15

Who typically sells and services NFIP flood policies?

Answer 15

Private insurers called “Write Your Own” companies.

Question 16

Private insurers called “Write Your Own” companies.

Answer 16

Anyone buying a home in a special flood hazard area with a federally regulated lender.

Question 17

What is a Special Flood Hazard Area?

Answer 17

An area with at least a 1% annual chance of flooding (a 100-year floodplain).

Question 18

What buildings cannot be covered by federal flood insurance?

Answer 18

Buildings and contents primarily below ground level.

Question 19

WHAT IS COVERED BY FLOOD INSURANCE?

Answer 19

Overflow of inland or tidal waters.

Rapid accumulation of surface water.

Mudflow (not mudslides).

Question 20

What is not covered by flood insurance?

Answer 20

Burst pipes.

Sewer backups.

Sump pump overflow.

Leaks.

Mudslides.

While homeowners insurance might

Question 21

What types of buildings does the NFIP offer separate flood policies for?

Answer 21

Residential dwellings, commercial buildings, and condominiums (for condo associations).

Question 22

When can a single-family dwelling receive replacement cost coverage under NFIP?

Answer 22

If it is the family’s primary residence and insured for at least 80% of its replacement cost at the time of loss.

Question 23

What type of coverage is provided if a home doesn’t meet replacement cost conditions?

Answer 23

Actual cash value coverage.

Question 24

How much does the policy provide for storage expenses if contents need to be relocated to protect from flood damage?

Answer 24

Up to $1,000.

Question 25

How long does relocated property remain covered at the new location?

Answer 25

Up to 45 days, against nearly all perils.

Question 26

Does contents coverage apply to all basement items?

Answer 26

: No, only to limited items like washers, dryers, freezers, and portable/window AC units.

Question 27

Why is there usually a 30-day waiting period before flood insurance becomes effective?

Answer 27

To guard against adverse selection, such as buying coverage right before a flood.

Question 28

When can the 30-day waiting period for flood insurance be waived?

Answer 28

If the purchase is connected to making, increasing, extending, or renewing a mortgage loan.

Question 29

How are earthquake deductibles calculated, and how do they work?

Answer 29

Unlike flat-dollar deductibles, earthquake deductibles are usually a percentage of the dwelling’s insured value (e.g., 5% of $100,000 = $5,000). They apply per occurrence, not per policy period.

Question 30

What is considered one “occurrence” for earthquake deductibles?

Answer 30

For homes, all quakes within 3 days are treated as one occurrence; for businesses, the timeframe extends to 7 days.

Question 31

What living expenses are typically covered by earthquake insurance if a home is uninhabitable?

Answer 31

Temporary housing, clothing costs, meals, and laundry services.

Question 32

What is a personal articles floater, and why is it used?

Answer 32

It’s a type of inland marine insurance that provides specialized coverage for valuables and collections not adequately covered by homeowners insurance. The term “floater” comes from the idea that valuables often move from place to place, exposing them to unique risks.

Question 33

What are the main benefits of personal articles floaters?

Answer 33

They generally provide: Open-peril coverage Higher limits than homeowners insurance First-dollar coverage (no deductible) Worldwide protection Broader peril protection (including flood, earth movement, mysterious disappearance for small items).

Question 34

How are claims paid under floater insurance?

Answer 34

The insurer pays the lowest of repair cost, replacement cost, or actual cash value—never exceeding the policy’s dollar limit.

Question 35

What is personal effects insurance, and when is it used?

Answer 35

It insures luggage and belongings while traveling. Although homeowners insurance often provides worldwide coverage for personal property, personal effects insurance can still be useful because it often offers broader, open-peril protection.

Question 36

How do personal effects differ from personal articles?

Answer 36

personal effects are lower-value items like luggage, while personal articles are higher-value items (like jewelry or art) typically insured through floater policies.