South Carolina Personal Lines Practice Exam

In an HO-3 form, how are dwelling and other structures covered?

1. On a named peril basis

2. On an open peril basis

3. On a limited basis

4. On an exclusionary basis

The correct answer is: On an open peril basis

In an HO-3 form, the coverage for dwelling and other structures is provided on an open peril basis. This means that these structures are protected against all risks of physical loss or damage, except for specifically excluded perils outlined in the policy. This comprehensive coverage is one of the key features of the HO-3 policy, making it a popular choice for homeowners. By covering the dwelling and other structures on an open peril basis, homeowners gain significant protection, as the policy doesn't limit coverage to a specific list of risks. Instead, it assumes coverage for any cause of loss unless expressly listed as an exclusion. This offers policyholders considerable peace of mind and better safeguards their investments. Conversely, named peril bases, limited bases, or exclusionary bases would offer far less comprehensive coverage. Named peril coverage only protects against specific perils explicitly stated in the policy, while limited basis coverage significantly narrows down the scope of protection. Exclusionary coverage would mean the policy is primarily focused on denying coverage unless specifically stated, which contrasts with the open peril approach that HO-3 forms use for dwellings and other structures.