Chapter 3 Property - A: Personal Lines

TX P&C Insurance Exam Prep

What is the primary purpose of a Dwelling Property (DP) policy?

Property coverage for the dwelling, contents, or both. Liability is not included but may be added.

What are the three Dwelling Property forms?

DP-1 Basic; DP-2 Broad; DP-3 Special.

Which DP forms are named-peril forms?

DP-1 Basic and DP-2 Broad.

Which DP form is open-peril for the dwelling and other structures?

DP-3 Special. Personal property is covered for broad named perils.

What common property risk is a DP policy used to insure?

Rental dwellings.

How many roomers or boarders may a DP policy allow?

Up to 5.

How many residential units may a DP policy allow?

Up to 4.

Which DP form may cover a mobile home under the chapter's eligibility rules?

DP-1 Basic only, for a mobile home with no more than one apartment at a permanent location listed in the policy.

Can a DP policy cover a seasonal dwelling unoccupied for 3 or more months in a 12-month period?

Yes, under the chapter's stated eligibility rules.

What conditions apply to an incidental business occupancy under a DP policy?

It must be incidental, conducted by the insured on the dwelling premises, and have no more than 2 people working at any time.

What is the DP policy form structure?

Agreement; definitions; deductible; coverages/other coverages; perils insured against; general exclusions; conditions.

What is the standard DP deductible?

$250 for property coverages, except Fair Rental Value and Additional Living Expense.

What perils are included in the DP-1 base form?

Fire, lightning, and internal explosion.

What must be true for a fire to qualify as a covered hostile fire?

It must not be intentional or contained within its intended boundaries. A friendly fire that escapes its boundaries becomes hostile.

Are extended coverage perils automatically active on DP-1?

No. They require the additional premium and must be shown on the declarations page.

What does WHARVES help you remember?

DP-1 extended coverage perils: Windstorm, Hail, Aircraft/vehicles, Riot/civil commotion, Volcanic eruption, Explosion, Smoke.

What does W.C.SHAVER help you remember?

The chapter's alternate mnemonic for extended coverage perils: Windstorm, Civil commotion, Smoke, Hail, Aircraft, Vehicle and volcano, Explosion, Riots.

Under DP-1 windstorm or hail, when is interior damage from rain, snow, sleet, sand, or dust covered?

Only if wind or hail first damages the roof or a wall and creates an opening.

Under DP-1, is vehicle damage covered if the vehicle is owned or operated by an insured or resident?

No. Vehicle damage to fences, driveways, or walks is also excluded.

What smoke damage is covered under DP-1 extended coverage?

Sudden and accidental smoke damage, including furnace or boiler emission/puffback. Agricultural smudging, industrial operations, and fireplace smoke are excluded.

What does DP-1 vandalism or malicious mischief (VMM) cover?

Willful and malicious destruction of insured property, if VMM is purchased.

Under DP-1 VMM, is the stolen property itself covered?

No. Building damage resulting from theft or burglary is covered, but the property stolen is not.

How does DP-2 coverage build on DP-1?

DP-1 basic perils + extended coverage perils + VMM + broad-form perils.

What does B.B. BICE-GOLF help you remember?

Broad perils: Bursting of heating systems; Burglary damage; Breaking of water heaters; Ice/snow/sleet weight; Collapse; Electrical damage from artificially generated current; Glass breakage; Objects falling from outside; Leakage of water/steam; Freezing of plumbing.

Does DP-2 burglary coverage pay for property stolen by burglars?

No. It covers damage to covered property caused by burglary, not the theft of property.

Under DP-2 falling objects, when is interior damage covered?

Only if the roof or an outside wall is damaged first. The falling object itself is not covered.

Which items are excluded from DP-2 falling-object damage?

Awnings, fences, outdoor equipment, outdoor radio/TV antennas or aerials, masts, and towers.

What property damage from the weight of ice, snow, or sleet is covered under DP-2?

Damage to the building or contents. Piers, wharves, docks, awnings, fences, swimming pools, foundations, retaining walls, pavement, and patios are excluded.

What water or steam damage does DP-2 cover?

Accidental discharge or leakage from plumbing, heating, air-conditioning, or automatic sprinkler systems, including necessary tear-out to access the appliance.

Does DP-2 pay to repair the appliance that leaked?

No. It may pay necessary tear-out and replacement of building parts, but not repair or replacement of the appliance itself.

What repeated water seepage is excluded under DP-2?

Continuous or repeated seepage over weeks, months, or years.

Is damage from an off-premises storm drain, steam, or sewer pipe covered under DP-2 water discharge?

No.

What must the insured do for DP-2 freezing coverage to apply?

Take reasonable steps to maintain heat, or shut off the water and drain the pipes and appliances.

What electrical damage does DP-2 cover, and what is excluded?

Sudden and accidental damage from artificially generated electrical current is covered, but damage to tubes, transistors, or electronic components/circuitry within appliances, fixtures, computers, and home entertainment units is excluded.

What is the key peril difference between DP-2 and DP-3?

DP-2 is named peril; DP-3 is open peril for dwelling and other structures, while personal property remains covered for broad named perils.

Does DP-3 cover theft of property that is part of the dwelling or another structure?

Yes, as described in the chapter.

How does DP-3 broaden accidental discharge/overflow of water or steam?

It includes discharge or overflow from water or steam pipes occurring off the insured premises.

What falling-object limitations from DP-2 are removed in DP-3?

The exclusions for antennas, outdoor equipment, fences, and awnings.

What ice-dam damage does DP-3 cover according to the chapter?

Damage to a roof caused by freezing or thawing of water under roof shingles.

What is the civil-authority time limit for DP Fair Rental Value/Additional Living Expense?

Up to 2 weeks, when a civil authority prohibits use because of qualifying direct damage to neighboring property.

What is the DP limit for fire department service charge?

$500.00

How long can property be removed from the premises under DP-1 versus DP-2/DP-3?

5 days under DP-1; 30 days under DP-2 and DP-3.

What is the DP limit for improvements, alterations, and additions?

Up to 10% of Coverage C.

What is the DP worldwide personal-property limit described in the chapter?

Up to 10% of Coverage C.

What is the DP limit for rental value/additional living expense?

Up to 20% of Coverage A, as described in the chapter.

Within what period must a suit against a DP insurer be started?

Within 2 years (24 months) of the date of loss, after compliance with policy conditions.

Within how many days may a DP insurer give written notice of its option to repair or replace?

Within 30 days after receiving a signed, sworn proof of loss.

When must a DP loss be paid after proof of loss and agreement on the amount payable?

Within 60 days.

What is the DP cancellation notice rule stated in the chapter?

10 days' advance notice for nonpayment or another reason within the first 60 days; after 60 days, or for nonrenewal, at least 30 days' notice. Midterm cancellation after 60 days is limited to material misrepresentation or substantial risk change.

How are volcanic eruptions grouped under DP conditions?

All eruptions within 72 hours of the initial eruption are one occurrence, with one deductible.

What two broad types of protection are included in a homeowners policy?

Property coverage and personal liability protection.

What are the six homeowners forms listed in the chapter?

HO-2 Broad; HO-3 Special; HO-4 Renters/Tenants; HO-5 Comprehensive; HO-6 Condominium Unit-Owners; HO-8 Modified.

Which HO form is designed for renters/tenants?

HO-4.

Which HO form is designed for condominium unit owners?

HO-6.

Which HO form is intended for older/historic homes where replacement cost is not practical?

HO-8 Modified Form.

Which HO form covers dwelling and other structures on an open-peril basis and personal property on broad named perils?

HO-3 Special Form.

Which HO form covers both dwelling/other structures and personal property on an open-peril basis, subject to the chapter's exception?

HO-5 Comprehensive Form.

What does HO-4 cover, and what does it not cover?

It covers a tenant's personal property for broad perils; it does not cover the dwelling itself.

What residential occupancy limits are stated for HO-2, HO-3, and HO-5?

Owner-occupied private residences; no more than one additional family and no more than 2 roomers or boarders. Incidental office/professional occupancy may be allowed with no retail sales and no more than 2 people working at a time.

What is the homeowners policy form structure?

Agreement; definitions; Section I property coverage, perils, exclusions, conditions; Section II liability coverage, exclusions, additional coverages, conditions; then common Sections I and II conditions.

What replacement-cost threshold is stated for HO-2, HO-3, and HO-5 building coverage?

The building must be insured for 80% or more of replacement cost.

What is HO Coverage A?

Dwelling and attached structures, plus qualifying building materials/supplies; land is excluded. HO-6 has additional condominium-specific property provisions.

Does HO Coverage A cover land?

No.

What is HO Coverage B?

Other structures on the residence premises separated from the dwelling by clear space or connected only by a fence, utility line, or similar connection.

What is the basic HO Coverage B limit?

10% of Coverage A.

What is the general HO Coverage B rule for structures used to conduct a business?

Other structures used to conduct any business are not covered, subject to the chapter's specific exceptions for certain storage structures.

Is HO Coverage C mandatory or optional?

Mandatory in all homeowners forms.

What is the automatic Coverage C limit in HO-2, HO-3, HO-5, and HO-8?

50% of Coverage A; it may be changed but not below 40% for 1- and 2-family residences.

What is HO Coverage D—Loss of Use?

Coverage for fair rental value and additional living expenses when a covered loss makes the residence premises not fit to live in.

How long does HO Loss of Use generally pay after a covered loss?

For the shortest time required to repair or replace the damage; if the insured permanently relocates, additional living expenses are paid only for the shortest time required to settle elsewhere.

What is the civil-authority time limit for HO Loss of Use?

Up to 2 weeks.

What is HO Coverage E?

Personal Liability.

What is the basic HO Coverage E limit stated in the chapter?

$100,000.00

What does HO Coverage E respond to?

Claims or suits for bodily injury or property damage caused by a covered occurrence; it pays covered legal liability and defense costs.

When does the insurer's duty under HO Coverage E end?

When the applicable limit is exhausted.

What is HO Coverage F?

Medical Payments to Others.

Within what period must necessary medical expenses under HO Coverage F be incurred?

Within 3 years (36 months) of the accident.

What types of expenses can HO Coverage F pay?

Necessary medical, surgical, X-ray, dental, ambulance, and funeral expenses.

Who is generally excluded from HO Coverage F medical payments?

The insured and regular household residents, except residence employees.

When may HO Coverage F apply away from the residence premises?

For injuries arising from the residence or its ways; caused by insured activities; to a residence employee in the course of employment; or caused by an animal owned or cared for by the insured.

What HO Section II additional coverage may reimburse lost income for attending claims proceedings?

Claims expenses, including up to $250 per day for loss of income.

What is the HO additional coverage limit for damage to property of others?

$1,000 per occurrence, on a replacement-cost basis as described in the chapter.

What does HO debris removal generally pay?

Reasonable expenses to remove debris of covered property damaged by a covered cause. The chapter describes an additional 5% of the applicable limit when damage plus debris removal exceeds the limit.

What is the HO limit for covered tree removal?

$1,000 total, with a $500 limit for removal of any one tree.

What happens to DP broad theft coverage for a newly acquired principal residence?

There is no off-premises coverage there, but the on-premises limit applies automatically for 30 days, including transit to the new location.

What is the DP water backup/sump pump endorsement deductible?

$250.00

A landlord wants to insure a rental dwelling and its contents but needs no built-in liability coverage. Which policy type matches the chapter?

A Dwelling Property (DP) policy; liability is not included but can be added.

A home is insured on an open-peril basis for the building, but contents are covered for broad named perils. Which DP form is this?

DP-3 Special.

A tenant wants coverage for belongings in a rented apartment, not the building. Which HO form fits?

HO-4 renters/tenant broad form.

A condo unit owner needs coverage for unit improvements required by the association agreement. Which HO form is designed for this?

HO-6 condominium unit-owners form.

An older home has market value much lower than replacement cost. Which HO form may be useful according to the chapter?

HO-8 Modified Form.

A covered DP-2 loss damages a dwelling insured for 70% of replacement cost. Does it meet the chapter's 80% threshold for replacement-cost settlement?

No. The chapter states the dwelling/other structures must be insured to at least 80% of replacement cost.

A covered HO loss makes the residence unlivable. Which coverage addresses additional living expenses and fair rental value?

Coverage D—Loss of Use.

A visitor is injured in a situation eligible for medical payments under the homeowners policy. Which coverage applies?

Coverage F—Medical Payments to Others, subject to the policy conditions and exclusions.

A liability claim alleges bodily injury or property damage caused by a covered occurrence. Which HO coverage responds?

Coverage E—Personal Liability.

When is DP-1 VMM excluded because of vacancy?

When the premises have been vacant for more than 60 consecutive days immediately before the loss.

When is DP-2 accidental water/steam discharge excluded due to vacancy?

When the dwelling has been vacant for more than 60 consecutive days immediately before the loss.

What is the DP-2 limit for lawns, trees, shrubs, and plants?

$500 per tree/shrub/plant and 5% of the dwelling coverage per loss, for specified covered causes.

When is glass breakage excluded under DP-2 other coverage?

When the building or structure has been vacant for more than 60 consecutive days.

What kinds of collapse are included under DP-2/DP-3 as described in the chapter?

Collapse caused by hidden decay, unknown insect/vermin damage, weight of personal property or roof-collected rain, defective construction materials/methods during construction, or a broad-form peril. Settling, cracking, shrinkage, bulging, and expansion are not collapse.