Registered Insurance Brokers of Ontario (RIBO) Practice Exam

What is a common reason for smoke damage not being covered by insurance?

1. Lack of maintenance of a furnace over a period of time

2. Natural disasters

3. Acts of vandalism

4. Inadequate homeowner’s insurance policy

The correct answer is: Lack of maintenance of a furnace over a period of time

The answer points to a situation where smoke damage could be attributed to a lack of maintenance, particularly in the case of a furnace. If homeowners neglect proper maintenance of their heating systems, it can lead to malfunctions that result in smoke damage. Insurance policies often require homeowners to take reasonable care of their property, which includes regular maintenance of appliances like furnaces. If damage occurs due to neglect or a failure to maintain equipment, an insurer may deny the claim on the grounds that the homeowner did not fulfill their responsibility to prevent such damage. In contrast, other scenarios, such as natural disasters or acts of vandalism, typically fall under different coverage clauses. While inadequate homeowner's insurance policies can affect coverage in general, they are not usually the direct cause for smoke damage exclusions, as the policy terms themselves dictate the types of damages covered. Thus, the connection between lack of maintenance and the potential denial of coverage for smoke damage aligns with common practices in insurance underwriting.