Idaho Property and Casualty Practice Exam 2026 - Free Practice Questions and Study Guide

The correct choice indicates that Section I of the Boatowners policy offers open perils coverage, with losses settled on an actual cash value basis. Open perils coverage means that risks are covered unless specifically excluded in the policy. This broadens the coverage, making it beneficial for policyholders, as it addresses a wide array of potential damages or losses to the boat.

Settling losses on an actual cash value basis takes into account depreciation, meaning that the amount paid to the insured is the replacement cost minus depreciation. This provides a fair financial settlement reflecting the true value of the boat at the time of the loss. It contrasts with replacement cost coverage, which would cover the full cost to replace the item without taking depreciation into account, often resulting in a higher payout.

In the context of boat policies, many insurers tend to lean toward open perils for comprehensive protection, and using actual cash value offers a more economical settlement term for both the insurer and the insured. This blend of coverage and settlement method aligns with common practices within marine insurance, providing a balance of protection and fair compensation.