South Carolina Personal Lines Practice Exam

Which form provides coverage for personal property at actual cash value?

1. HO-2

2. HO-3

3. HO-4

4. HO-6

The correct answer is: HO-4

The correct answer is associated with the HO-4 form, commonly known as the Tenant’s Form. This insurance type specifically covers personal property owned by renters or tenants, and it provides coverage on an actual cash value basis. Actual cash value means that when a covered loss occurs, the insurer will reimburse the policyholder for the current value of the property, considering depreciation. This approach means that the payout will account for wear and tear, rather than may not equate to the original purchase price. The other forms mentioned have different scopes of coverage. The HO-2 and HO-3 forms are designed for homeowners and typically cover structures and personal property on a replacement cost basis, meaning they cover the cost to replace the items without deducting for depreciation. The HO-6 form, primarily for condominium owners, often provides coverage for both the interior personal property and certain aspects of the building itself, but it doesn’t align with the actual cash value concept applicable to renters under the HO-4 form. Therefore, the HO-4 is distinctly positioned to provide the defined coverage for personal property at actual cash value.