State Farm Fire Independent Policy Practice Exam

Which choice accurately describes the treatment of a deductible under the HO-3 policy?

1. The deductible may be partially absorbed.

2. The deductible is not applied to Fire Department Service Charges.

3. The deductible may be completely absorbed.

4. All the above are true.

The correct answer is: All the above are true.

In the context of an HO-3 policy, which is a common form of homeowners insurance, each part of the question addresses specific scenarios involving deductibles, demonstrating the complexities of how deductibles are treated under this policy type. The first point indicates that a deductible may be partially absorbed. This scenario can occur in certain situations where, for example, an insurer may choose to waive a portion of the deductible. This might be relevant in cases of significant loss or in situations where the insurer wants to provide added value or encouragement for policyholders not to file claims for small amounts. The second point refers to Fire Department Service Charges. Under an HO-3 policy, the deductible is typically not applied to these charges. Therefore, if a fire department responds to a claim, the insured would not have to pay the deductible for these specific costs, which supports quicker recovery and assistance for the insured. The third point mentions that the deductible may be completely absorbed in certain circumstances, indicating that a policyholder could benefit from a policy provision that waives the deductible entirely in specific situations or under certain conditions. The acknowledgment that all these statements are true encapsulates the flexibility of how deductibles are applied under the HO-3 policy. This flexibility is designed to protect the policyholder