Texas General Lines — Property and CasualtyPersonal LinesMedium
A client has an HO-3 Special Form policy with a Coverage C limit of $100,000. During a covered theft, a collection of rare stamps valued at $3,500 and a laptop valued at $2,000 were stolen from their home. The policy has a special limit of liability for theft of jewelry, furs, and precious and semi-precious stones at $1,500. What is the maximum amount the policy will pay for this loss, assuming no deductible applies?
- A$5,500
- B$100,000
- C$3,500
- D$2,000
Show answer & explanationAnswer & explanation
Correct answer: C. $3,500
The HO-3 policy has specific special limits for certain categories of personal property. While the stamps are valuable, they do not fall under the 'jewelry, furs, and precious and semi-precious stones' category, so the full $3,500 for the stamps is covered. The laptop is also covered for its full value of $2,000. Therefore, the total payout is $3,500 (stamps) + $2,000 (laptop) = $5,500.
Why the other options are wrong
- A. This is the correct calculation: $3,500 for stamps (no special limit applies to stamps) + $2,000 for the laptop = $5,500.
- B. This is the overall Coverage C limit, but specific items may be subject to lower special limits or full value if no special limit applies.
- D. This incorrectly applies the special limit to the stamps, which are not covered by that specific limit.
HO-3 Special Limits of Liability (Theft)
Homeowners policies, including HO-3, have specific dollar limits for certain types of personal property, especially for theft, to control exposure for highly valuable and easily portable items.
- Limits vary by item category (e.g., jewelry, firearms, silverware).
- The limit applies per occurrence, not per item.
- These limits are often much lower than the overall Coverage C limit.
Memory trick: Remember 'JETS' for Jewelry, Electronics, Theft-prone items, and Silverware, as these often have special limits.