South Carolina Personal Lines Practice Exam

Which of the following is NOT true about earthquake coverage?

1. Coverage is commonly provided through a federally funded program

2. Coverage is excluded by most property forms

3. May be added by endorsement

4. May be written in a difference in conditions policy

The correct answer is: Coverage is commonly provided through a federally funded program

The statement that earthquake coverage is commonly provided through a federally funded program is not true. In the context of standard insurance practices, earthquake coverage is typically not included in most property insurance policies and is often considered a separate type of coverage that needs to be obtained intentionally. Most homeowners and property forms do not automatically include coverage for earthquakes; rather, this coverage is usually offered as an additional option or can be added via an endorsement. Furthermore, some insurers might offer earthquake coverage through specific policies designed to cover perils not included in standard homeowners' policies, like a difference in conditions policy, which is intended to fill gaps in coverage. This inconsistency with federally funded programs highlights the need for individuals to actively seek earthquake coverage, particularly in areas prone to seismic activity, rather than relying on a government-backed program to provide this essential protection.