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Homeowners Insurance Answers

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1
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Ben just purchased a house in an older neighborhood. After talking to several neighbors across the street, he found that he is paying much more in homeowners insurance than other homeowners in the neighborhood. Ben’s house is about 30 years old. It is made of wood framing and stucco texture. It has all of it’s original plumbing and electrical work. The brick wall at the back of his back yard separates his yard from a drainage wash. Which of the following is not a reasonable argument for the insurance company to use to justify Ben’s higher homeowners insurance premium?

A
The age and outdated structural design of the house implies that remodeling is likely. This warrants a higher premium.
B
Knowing that old plumbing has a tendency to break, there is a real possibility of internal flooding. This warrants a higher premium.
C
Since Ben is right next to a drainage wash, there is a certain danger of flood damage should the wash overflow. This warrants a higher premium.
D
Considering that the house is made of flammable materials and has the original wiring, there is a certain danger of fire. This warrants a higher premium.
2
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Susan is paying $0.30 per $100 on her $483,000 home in homeowners insurance annually. If her annual homeowners insurance premium is divided into twelve equal monthly installments to be included on each of her monthly mortgage payments of $2128.00, what is her total monthly payment?

A
$2,248.75
B
$2,409.75
C
$3,381.00
D
$3,577.00
3

Which of the following is a cost homeowners insurance does not protect?

A
The cost of repair or replacement of a home lost in a natural disaster.
B
Additional living expenses required while your home is repaired after a disaster.
C
Replacement costs for all contents in your home, including high cost electronics.
D
The cost of medical expenses incurred by somebody getting injured on your property.
4

Which of the following is something that will not affect your homeowners insurance premium?

A
the distance of the home from a school
B
the distance of the home from a flood plain
C
the distance of the home from a fire station
D
the distance of the home from a fire hydrant
5

In many cases, lenders allow homeowners to include their homeowners insurance premium with their monthly mortgage payment. Tim’s home is worth $279,500. If his homeowners insurance premium is $0.33 per $100, how much is added to his monthly mortgage payment for insurance?

A
$7.69
B
$76.86
C
$92.35
D
$922.35
6

Rachel just purchased a homeowners insurance policy for her new home that costs $0.43 per $100. Her home is worth $387,500. What is Rachel’s annual homeowners insurance premium?

A
$1,666.25
B
$2,208.75
C
$8,802.33
D
$9,011.63
7

Renters insurance is different than homeowners insurance in that _____.

A
unlike homeowner’s insurance, renter’s insurance will not cover items lost in a burglary.
B
homeowner’s insurance protects the building of residence while renter’s insurance does not.
C
renter’s insurance only applies to apartments when homeowner’s insurance only applies to houses.
D
additional living expenses are covered by renter’s insurance but not by homeowner’s insurance.
8

Tara and Levi are trying to decide between homeowners insurance policies offered by two different agencies. AAA Insurance has offered to insure their home for an annual premium of $0.38 per $100 with a $500 deductible. Thompson’s Insurance has offered to insure the same home for an annual premium of $0.26 per $100 with an deductible of $1,000.Insurance CompanyAnnual Premium (per $100)DeductibleAAA Insurance$0.38 $500 Thompson's Insurance$0.26 $1,000 The house Tara and Levi purchased is valued at $425,000. Which of the following statements accurately describes the difference between the two plans?

A
AAA Insurance is cheapest if Tara and Levi experience an incident that results in severe damage or loss to their home.
B
AAA Insurance would be cheapest if Tara and Levi can avoid any incidents that result in severe damage or loss to their home.
C
Thompson’s Insurance is cheaper even if Tara and Levi experience an incident that results in severe damage or loss to their home.
D
Thompson’s will be more expensive whether or not Tara and Levi experience an incident that results in severe damage or loss to their home.
9

Which of the following will not help Robert lower his homeowners insurance premium?

A
Increase the deductible on his policy.
B
Remove replacement cost from his policy.
C
Reduce the number of riders on his policy.
D
Increase the total coverage of his home on his policy.
10

Sally just purchased a beautiful home on a riverbank for what she thought was a very good deal. She later learned that her house was very susceptible to flood damage during the rainy season. Which of the following statements best describes the effect the location of Sally’s new home will have on her homeowners insurance premium?

A
Financial loss due to flood damage is likely. Her insurance premiums will be higher than homes not on the waterfront.
B
Since floods are likely, the value of the home decreases significantly, lowering the insurance premium at the same time.
C
Since floods happen so infrequently, they are not considered a real threat to the value of the home. Sally’s insurance premium will not be affected.
D
While extremely annoying, flood damage is usually inexpensive and will not affect the value of the home. Sally’s insurance premium should not be affected.

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