Study guide
4.5 Homeowners Exclusions
Property & Casualty Insurance Exam
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1 Introduction
0.1 About the Property & Casualty Exam 0.2 How to Use This Course
2 Chapter 1: Insurance Fundamentals
1.1 Risk and Risk Management 1.2 Types of Risk 1.3 Principles of Insurance 1.4 The Insurance Contract 1.5 Policy Structure and Components
3 Chapter 2: Property Insurance Concepts
2.1 Property Coverage Basics 2.2 Perils, Hazards, and Exclusions 2.3 Valuation Methods 2.4 Coinsurance and Insurance to Value 2.5 Deductibles and Policy Limits
4 Chapter 3: Dwelling Policies
3.1 Dwelling Policy Overview 3.2 Dwelling Policy Forms (DP-1, DP-2, DP-3) 3.3 Dwelling Property Coverages 3.4 Dwelling Exclusions and Conditions
5 Chapter 4: Homeowners Policies
4.1 Homeowners Policy Overview 4.2 Homeowners Policy Forms (HO-2 through HO-8) 4.3 Section I: Property Coverages 4.4 Section II: Liability Coverages 4.5 Homeowners Exclusions 4.6 Homeowners Conditions 4.7 Common Homeowners Endorsements
6 Chapter 5: Personal Auto Policy
5.1 Personal Auto Policy Overview 5.2 Part A: Liability Coverage 5.3 Part B: Medical Payments Coverage 5.4 Part C: Uninsured/Underinsured Motorists 5.5 Part D: Physical Damage Coverage 5.6 PAP Exclusions 5.7 No-Fault Insurance and PIP
7 Chapter 6: Liability Insurance Concepts
6.1 Liability Insurance Basics 6.2 Negligence and Tort Law 6.3 Types of Legal Liability 6.4 Personal Umbrella Policies
8 Chapter 7: Commercial Property Insurance
7.1 Commercial Package Policy (CPP) 7.2 Building and Personal Property Coverage Form 7.3 Causes of Loss Forms 7.4 Business Income Coverage 7.5 Businessowners Policy (BOP)
9 Chapter 8: Commercial General Liability
8.1 CGL Policy Overview 8.2 Coverage A: Bodily Injury and Property Damage 8.3 Coverage B: Personal and Advertising Injury 8.4 Coverage C: Medical Payments 8.5 CGL Exclusions 8.6 CGL Limits and Conditions
10 Chapter 9: Commercial Auto Insurance
9.1 Business Auto Policy Overview 9.2 Covered Auto Designation Symbols 9.3 BAP Liability Coverage 9.4 BAP Physical Damage Coverage 9.5 Garage and Truckers Coverage Forms
11 Chapter 10: Workers Compensation
10.1 Workers Compensation Overview 10.2 Part One: Workers Compensation Insurance 10.3 Part Two: Employers Liability 10.4 Workers Compensation Exclusions 10.5 Other States and USL&H Coverage
12 Chapter 11: Other Commercial Lines
11.1 Inland Marine Insurance 11.2 Ocean Marine Insurance 11.3 Commercial Crime Insurance 11.4 Surety Bonds 11.5 National Flood Insurance Program 11.6 Professional Liability Insurance 11.7 Commercial Umbrella and Excess Liability 11.8 Boatowners and Personal Watercraft Insurance 11.9 Farm and Ranch Insurance 11.10 Mobile Home and Manufactured Housing Insurance 11.11 Title Insurance
13 Chapter 12: Insurance Regulations and Ethics
12.1 Producer Licensing 12.2 Producer Authority and Responsibilities 12.3 Unfair Trade Practices 12.4 Claims Settlement Practices 12.5 State Insurance Department 12.6 Penalties and Disciplinary Actions
4.5 Homeowners Exclusions
Key Takeaways Explain This Topic AI
FLOOD is never covered by a homeowners policy regardless of cause; coverage requires a separate National Flood Insurance Program (NFIP) policy
EARTHQUAKE and earth movement (landslide, mudflow, sinkhole) are excluded and need a separate endorsement or DIC policy; ensuing fire is typically still covered
The anti-concurrent causation clause denies a loss when an excluded peril (like flood) combines with a covered peril (like wind) to cause damage
Section II liability excludes motor vehicles, business pursuits, professional services, intentional injury, and workers' compensation obligations
Many 'maintenance' losses are excluded: wear and tear, rust, mold/wet/dry rot, vermin, settling, and mechanical breakdown are the owner's responsibility
Last updated: June 2026
Knowing what is excluded is as important as knowing what is covered — exam writers favor exclusion questions because they separate candidates who memorized coverages from those who understand the contract. Exclusions exist for three reasons: the peril is catastrophic/correlated (flood, earthquake, war), the loss is a maintenance problem the owner controls, or the exposure belongs on another policy (auto, business).
- Section I (Property) Exclusions
- Catastrophic Exclusions
These perils could bankrupt an insurer because they hit thousands of policies at once:
- Exclusion Reason Where to Get Coverage
- Flood (surface water, storm surge, overflow) Correlated, severe NFIP flood policy
- Earthquake / earth movement (landslide, mudflow, sinkhole) Regional catastrophe Earthquake endorsement / DIC
- War Uninsurable None
- Nuclear hazard Catastrophic None
- Government / ordinance action Police power Ordinance or Law endorsement (partial)
Exam Alert: Flood is the #1 tested exclusion. It is excluded even when a covered peril (a hurricane) brings the water. The hurricane's wind damage is covered; the flood water is not.
Maintenance and Gradual-Loss Exclusions
The insured must maintain the property; the policy is not a maintenance contract:
- Excluded Why
- Wear and tear, deterioration Normal aging
- Rust, corrosion, dampness of atmosphere Maintenance
- Mold, wet rot, dry rot Preventable / gradual
- Insects, vermin, rodents, birds Pest control duty
- Settling, cracking, shrinking, bulging Normal building movement
- Mechanical breakdown Warranty matter
- Water Damage — The Covered/Excluded Split
Water questions hinge on the source and on "sudden and accidental" versus gradual :
- Excluded Water Covered Water
- Flood / surface water / storm surge Sudden burst pipe
- Sewer or drain backup Accidental overflow of plumbing
- Seepage or continuous leakage over time Rain entering through a wind-damaged roof
- Groundwater / hydrostatic pressure Water used to extinguish a fire
Rule of thumb: Sudden and accidental internal water = covered. Surface/ground/backup or gradual water = excluded.
Other Property Provisions
Intentional loss by or at the direction of an insured — never covered.
Neglect to use reasonable means to save property after a loss.
Vacancy: if the dwelling is vacant more than 60 consecutive days before a loss, vandalism and glass breakage are excluded and certain other losses may be limited.
- Section II (Liability) Exclusions
- Motor Vehicle Exclusion
Motor vehicle liability belongs on the auto policy. Excluded: cars, trucks, motorcycles, and recreational vehicles off the insured premises.
NOT excluded (still covered):
- A golf cart used on a golfing facility
- A motorized wheelchair / mobility device
- A riding mower or garden tractor used to service the premises
- Vehicles not subject to motor vehicle registration used on the insured location
- Business and Professional Exclusion
- Excluded Alternative
- Business pursuits liability Commercial General Liability (CGL)
- Professional services (errors) Professional Liability (E&O)
- Renting the dwelling to others Dwelling / commercial policy
Exception: truly incidental activities (occasional babysitting, a part-time hobby) may remain covered.
Other Section II Exclusions
Intentional injury caused by an insured.
Contractual liability the insured assumed.
Workers' compensation obligations.
Aircraft and large/fast watercraft liability.
Property the insured owns, rents, or controls (that is a first-party, not third-party, loss).
Anti-Concurrent Causation
When an excluded peril and a covered peril combine to cause one loss, the anti-concurrent causation language excludes the loss even if the covered peril contributed . Example: a hurricane brings both wind (covered) and storm-surge flood (excluded); a court applying anti-concurrent causation will deny the portion of damage caused by the flood and may deny inseparable damage entirely. Always separate the wind loss (paid) from the flood loss (denied).
Ensuing Loss — the Exception Inside Exclusions
Many exclusions contain an ensuing loss (or 'resulting loss') exception that the exam tests. Even though a peril is excluded, the policy may still pay for a covered peril that results from the excluded event. The classic example is earthquake: earthquake damage to the structure is excluded, but if the quake ruptures a gas line and a fire follows, the fire damage is generally covered because fire is a separate covered peril. The same logic applies to a defective-construction exclusion that nevertheless covers an ensuing fire or water-discharge loss.
How These Exclusions Drive Sales of Endorsements
Producers translate exclusions into recommendations. Because flood is excluded, the producer recommends an NFIP policy in flood-prone areas. Because sewer backup is excluded, they recommend the Water Backup endorsement. Because earth movement is excluded, they recommend an earthquake endorsement in seismic regions. And because business pursuits are excluded, they recommend either a home-business endorsement or a separate commercial policy for a client running an enterprise from home. Knowing the exclusion is only half the job; matching it to the correct solution is what the licensing exam — and the real client — expects.