Property and Casualty Insurance Practice Exam

Which peril is specifically excluded from Basic Form coverage?

1. Lightning

2. Smoke

3. Water damage

4. Vandalism

The correct answer is: Water damage

Basic Form coverage, often referred to as a package policy or basic property insurance, typically includes a limited set of covered perils. Water damage, particularly from sources like flooding or roof leaks, is specifically excluded from this coverage. This exclusion is important because it highlights the limitations of Basic Form coverage, prompting policyholders to consider additional coverage or specific endorsements if they want protection against water damage. In contrast, perils such as lightning, smoke, and vandalism are usually included within the scope of Basic Form policies, providing coverage against those specific risks. Understanding these exclusions helps policyholders make informed decisions regarding their insurance needs and ensures they are adequately covered against potential risks.