Registered Insurance Brokers of Ontario (RIBO) Practice Exam

What is a common limitation placed on personal property coverage in homeowners insurance?

1. Coverage is limited to specific items

2. Coverage is limited to in-home only

3. Coverage is based on total home value

4. Coverage does not apply to valuable items

The correct answer is: Coverage is limited to specific items

The correct answer indicates that personal property coverage in homeowners insurance often has limitations that apply specifically to certain items. This is known as "named perils" coverage, where specific items such as jewelry, collectibles, or art might have coverage limits that differ from the general property coverage. For example, a policy may cover general household items up to a certain amount but may only cover jewelry up to a much smaller limit due to the high value of these items relative to standard household goods. Other options do not accurately reflect common limitations. Coverage being limited to in-home only can be misleading since homeowners insurance often extends to personal property even when outside the home, though there may be exceptions. Claims being based on the total home value could misrepresent how coverage is actually structured, as personal property coverage typically exists apart from the home's structure value. Lastly, the idea that coverage does not apply to valuable items is inaccurate; instead, valuable items are usually covered but may require additional coverage or special endorsements due to their specific high value.