State Farm Fire Independent Policy Practice Exam

Which type of loss is covered under a standard HO-3 policy?

1. Structural damage due to an earthquake

2. A landslide causing damage

3. Flood water damage in a non-flood area

4. None of the situations are covered

The correct answer is: None of the situations are covered

A standard HO-3 policy, often referred to as a homeowners insurance policy, primarily covers the dwelling and personal property of the insured against specific perils. It utilizes an all-risk or open-peril approach for the dwelling, meaning it covers all causes of loss except for those specifically excluded in the policy. In contrast, losses due to earthquakes, landslides, or flood damage are typically not covered under a standard HO-3 policy. Earthquake damage requires a separate earthquake endorsement or policy, and landslides are generally excluded as well. Flood damage usually necessitates a distinct flood insurance policy through the National Flood Insurance Program (NFIP), as standard homeowners insurance does not cover this type of loss. Therefore, since all the situations presented in the question—structural damage from earthquakes, landslide damage, and flood damage—are not covered under a standard HO-3 policy, the assertion that none are covered is correct. This detail is essential for policyholders to understand in order to ensure they have appropriate coverage for these risks.