Can You Pass Our Home Insurance Quiz?

Get out your pencils and put away your textbooks! It's time for a home insurance pop quiz. See how much you know about a standard home insurance policy. And no cheating!

1. Standard home insurance typically covers your house in the event that it’s damaged from which of the following:

1.          Meteors
2.          Riots
3.          Fire
4.          Airplanes

Answer: We started with a trick question. All of the above – no matter how improbable – likely are covered by your policy.

2. Which of the following is NOT covered by a standard policy?

1.          Volcanoes
2.          Sinkholes
3.          Explosions

Answer: No trick to this one. The correct answer is B. Sinkholes, like earthquakes, are excluded from protection. If you live in an area where they are common, such as Texas, Alabama, Missouri, Kentucky, Tennessee, Pennsylvania or Florida, ask your agent about adding a sinkhole endorsement to your existing coverage or a stand-alone policy to cover you in case of a loss.

3. Home insurance also covers your home business.

1.          True
2.          False

Answer: False, except for very limited coverage for your supplies and equipment. You'll need a business owners policy to get the benefit of liability and other essential coverages.

4. Your neighbor's tree falls on your house. Whose insurance pays for the damage?

1.          His/Hers
2.          Yours
3.          Neither
4.          Your homeowners association

Answer: The answer is B. You should file a claim with your insurance company. In some cases, particularly if the tree was in poor health, your provider may seek to recover the cost of the claim from the neighbor.

5. All insurance companies charge the same premium for home coverage.

1.          True
2.          False

Answer: False. Premiums can vary greatly from provider to provider, because companies judge risk differently. In general, all other factors being equal, the lower your risk, the lower your premium.

6. A powerful hurricane is brewing in the Caribbean and forecasters say it could be headed in the direction of your home on the East Coast. Should you buy flood insurance immediately?

1.          Yes
2.          No

Answer: Another trick question. If you live in an area likely to be threatened by hurricanes, you already should have flood insurance. Once you hear about a storm forming, it's too late: A flood policy typically doesn't go into effect until 30 days after you purchase it.

7. Which of the following plays a factor in how much you pay for home insurance?

1.          Your ZIP code
2.          Your credit report
3.          The age of your roof
4.          The nearest fire hydrant
5.           All of the above

Answer: All of the above. The outlier in the list is credit, but most insurance companies believe your credit report delivers some insight into your likelihood of filing claims. The greater that likelihood, the more you'll pay for coverage. A few states bar the use of credit information in setting premiums.

8. It's always a good idea to set your deductible as low as possible so you don't have to pay much when you file an insurance claim.

1.          True
2.          False

Answer: For most policyholders, the answer to this question should be false. That's because your deductible has an inverse relationship with your premium – the lower the deductible, the higher the premium, all other factors being equal. However, you should never set your deductible so high that you'd have trouble paying it if necessary.

9. You should insure your house for its purchase price.

1.          True
2.          False

Answer: False. You should insure your house for its replacement cost – the amount it would cost to rebuild it from the ground up should it be destroyed by fire or another covered peril. Why would the replacement cost differ from the purchase price? Several reasons. Because you won't have to rebuy the lot, you might pay less. However, if building codes have changed, you might have to pay more to rebuild a comparable structure. Check out our home insurance calculator to get an estimate of how much it would cost to rebuild your house.

10. Your wife loses her diamond ring. Is it covered by standard home insurance?

1.          Yes
2.          No

Answer: This one is simple and complicated. Losing a ring would not be covered under standard home insurance. If the ring is stolen, it would be covered – up to a point. High-value items such as jewelry, furs and artwork often aren't fully covered; to get full coverage, you'd need to either schedule an endorsement or buy a separate policy – often called a personal articles floater. If you buy the personal articles floater to cover the ring, it not only would be fully protected in case of theft but in many cases it would be covered if – here it comes back around – you (or your wife) lose it. Simple and complicated!

So what lesson should you take from our quiz? Simply this: Insurance can be difficult to understand, and the consequences of confusion can be costly. No matter how insurance-savvy you might be, a licensed agent is always the best resource when it comes to understanding what's in your policy and what else you might need to add.

Arthur Murray writes for SafecoInsurance.com and HomeInsurance.com, an online resource for homeowners and drivers across the country. Offering comparative automobile and home insurance quotes, consumers rely on HomeInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeInsurance.com blog provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.