Property & Casualty Insurance Exam (National Portion)Property InsuranceEasy
A homeowner's policy includes a special limit of liability for theft of jewelry. If the policy has a standard $1,500 sub-limit for jewelry theft, and a thief steals $2,500 worth of jewelry, how much will the policy pay for the jewelry loss, assuming no deductible applies to this specific loss?
- A$0
- B$2,500
- C$1,000
- D$1,500
Show answer & explanationAnswer & explanation
Correct answer: D. $1,500
Homeowners policies have special limits of liability for certain types of property, such as jewelry, firearms, and furs. These limits apply regardless of the total coverage amount for personal property. In this case, the policy will pay up to its special limit.
Why the other options are wrong
- A. This is incorrect; the policy will pay up to its special limit.
- B. This is incorrect; the policy's special limit for jewelry theft caps the payout at $1,500.
- C. This is incorrect; the difference between the loss and the sub-limit is not the payout.
Special Limits of Liability (Homeowners)
Specific dollar limits applied to certain categories of personal property in a homeowners policy, restricting the maximum payout for loss of these items, regardless of the overall personal property coverage.
- Apply to items like jewelry, firearms, furs, and money.
- Are typically much lower than the overall personal property coverage.
- Can often be increased by endorsement for an additional premium.
Memory trick: Jewels and Guns have their own little 'caps' in your home policy.