South Carolina Personal Lines Practice Exam

Which homeowners policy forms provide replacement cost if coinsurance of 80% is maintained?

1. HO-1, HO-2, HO-3

2. HO-2, HO-3, HO-5

3. HO-4, HO-5, HO-6

4. HO-6, HO-8, HO-2

The correct answer is: HO-2, HO-3, HO-5

The correct answer is based on the details provided in homeowners insurance policies regarding replacement cost coverage and coinsurance requirements. Homeowner policies HO-2, HO-3, and HO-5 are designed to provide broader coverage for property, including the potential for replacement cost on the dwelling and personal property when the insured maintains a coinsurance percentage of at least 80%. In particular, HO-2 is a broad form that covers specified risks, while HO-3 is the standard form providing open perils coverage on the dwelling and named perils on personal property. HO-5 offers even more extensive protection, covering open perils for both the dwelling and its contents, which also applies to the replacement cost provided that the coinsurance requirement is met. The other types of homeowners policies mentioned in the other options do not universally offer replacement cost coverage under these conditions. For instance, HO-6 is typically intended for condominium owners and does not automatically include full replacement cost coverage unless specific provisions are met. HO-1 and HO-8 have limited coverage scopes and often do not provide for replacement costs at all, especially under the coinsurance clause. Understanding these distinctions is essential for determining which policies will adequately protect a homeowner's investment under certain circumstances.