State Farm Fire Independent Policy Practice Exam

What type of loss does an HO-3 policy generally cover?

1. Only fire damage.

2. Only weather-related damage.

3. Accidental direct physical loss.

4. Negligence-related losses.

The correct answer is: Accidental direct physical loss.

An HO-3 policy, which is a type of homeowners insurance, generally covers accidental direct physical loss to the structure of the insured home and personal property, while also providing liability protection. This broad coverage is designed to address a wide range of potential risks that a homeowner might face. Accidental direct physical loss means any unforeseen damage that occurs to the premises or personal items, except for exclusions specified in the policy. For example, it would cover damages from theft, vandalism, and various types of disasters, like fire, excluding only certain limited circumstances. The other types of losses listed are too narrow or specific. For instance, only covering fire damage would not account for other risks that homeowners face under typical circumstances. Similarly, only focusing on weather-related damage overlooks other critical causes of loss. Negligence-related losses also do not fall under the typical coverage of an HO-3 since liability insurance and property damage protection are distinctly different aspects of a homeowners' policy. Thus, "accidental direct physical loss" encapsulates the comprehensive nature that an HO-3 policy seeks to provide.