Alabama Property and Casualty Practice Exam

What is the maximum horsepower allowed for a boat that you own to be covered under the Personal Liability section of a Homeowners?

1. 25

2. 50

3. 100

4. 200

The correct answer is: 25

The correct answer, which indicates a maximum of 25 horsepower for a boat owned by the policyholder to be covered under the Personal Liability section of a Homeowners policy, aligns with standard insurance practices. Homeowners policies typically provide limited coverage for certain types of personal property, including boats, but this coverage often comes with specific restrictions related to size and power. Under many homeowners policies, smaller boats are covered without additional endorsements, while boats exceeding a certain horsepower threshold may not be eligible for the same coverage unless additional insurance is purchased. The rationale behind this limitation is largely based on risk assessment; boats with higher horsepower can lead to more severe accidents or damage, resulting in higher potential claims for the insurance company. Understanding these specifics helps homeowners manage their insurance effectively, ensuring they are aware of coverage limits and necessary adjustments to their policies for assets that fall outside conventional limits.