Registered Insurance Brokers of Ontario (RIBO) Practice Exam

If a Homeowners Comprehensive policy does not include a special endorsement, what does it cover regarding a destroyed house that must be rebuilt with more expensive materials?

1. The cost to rebuild with premium materials

2. The cost to rebuild in the same manner and with the same general materials

3. Only the original value of the house

4. No coverage will be provided

The correct answer is: The cost to rebuild in the same manner and with the same general materials

In a Homeowners Comprehensive policy without a special endorsement, the coverage is primarily based on the principle of indemnity, which means it is designed to restore the homeowner to the same financial position they were in prior to the loss. Therefore, if a house is destroyed, the policy typically covers the cost to rebuild using the same general materials and in the same manner as the original construction. This ensures that the homeowner is not penalized for the destruction of their property and can rebuild a similar home without incurring additional costs that arise from more expensive materials or upgrades. Choosing other options would not accurately reflect how standard coverage operates under a Homeowners Comprehensive policy. Since the intent is to replace the lost property with a similar construction, the coverage does not extend to premium materials or additional enhancements unless explicitly stated in an endorsement. Therefore, it is essential to review the specifics of one's policy and any endorsements to understand the exact coverage.