South Carolina Personal Lines Practice Exam

What is an example of an exclusion found in all three Dwelling Property forms?

1. Water damage

2. Intentional loss

3. Earth movement

4. Power failure

The correct answer is: Earth movement

An exclusion found in all three Dwelling Property forms is earth movement. This means that policies under the Dwelling Property coverage typically do not cover damages that result from earth movements such as earthquakes, landslides, or sinkholes. This exclusion is significant because it highlights a fundamental limitation within these insurance policies, which are designed to protect against specific risks associated with the dwelling itself and the immediate threats posed to it. Earth movement is consistently excluded across these forms because it is often difficult to mitigate/manage and can result in substantial losses that exceed what most homeowners can afford. As a result, to control underwriting risks, insurers have established these exclusions in the policies. This helps keep the cost of coverage lower for policyholders while allowing insurers to avoid potentially devastating claims related to significant geological events. Thus, if a property suffers damage from such earth movement, the policyholder would not be eligible for coverage under their Dwelling Property insurance.