South Carolina Personal Lines Practice Exam

HO-5 covers contents on what basis?

1. Named perils

2. Open peril

3. Actual cash value

4. Replacement cost

The correct answer is: Open peril

The HO-5 policy, also known as the Comprehensive Homeowners Policy, provides coverage for personal property on an open peril basis. This means that all risks of loss to personal property are covered except for those specifically excluded in the policy. Unlike named perils coverage, which only covers specific risks listed in the policy, open peril coverage offers broader protection and is more beneficial for homeowners looking for extensive coverage. In this case, the correct answer emphasizes the comprehensive nature of the HO-5 policy, as it protects against a wide array of potential losses. Homeowners choosing this policy enjoy peace of mind knowing that many unforeseen events that could damage or destroy their possessions are covered, as long as they are not specifically excluded. This level of coverage contrasts sharply with other forms of policies that may limit protection to named perils only or have stipulations regarding cash value or replacement costs on different bases.