Canadian Accredited Insurance Broker (CAIB) One Practice Exam

What is typically excluded in homeowners forms concerning impact by aircraft or land vehicles?

1. Damage caused by insureds

2. Damage caused by third parties

3. Damage resulting from natural disasters

4. All types of property damage

The correct answer is: Damage caused by insureds

Homeowners forms generally include coverage for damage caused by aircraft or land vehicles but often exclude specific types of damage related to the insured's own actions. The reason damage caused by insureds is typically excluded is due to the principle of moral hazard; insurers aim to mitigate the risks associated with individuals intentionally damaging their own property or acting recklessly. This exclusion encourages responsible behavior among policyholders and reinforces the insurability principle, where insurance is meant to cover unforeseen circumstances rather than actions taken by the policyholder that lead to damage. Damage caused by third parties, on the other hand, is usually covered since it falls under the scope of unexpected incidents that the homeowner cannot control. Natural disasters are commonly addressed under specific peril definitions in a homeowner's policy and may also be covered. Lastly, while property damage may take many forms, the inclusion of losses from third-party actions or natural disasters highlights the intention of homeowners' coverage to protect against unforeseeable events rather than those arising from the insured's own actions.