Exam 2

$30,000

A $100,000 house insured on a policy with a 80% coinsurance requirement has a fire that caused $40,000 of damage; the owner has a policy with $60,000 coverage. How much can the owner collect for his loss?

coercion

A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan.

vacant

A building is insured, but no one has lived or worked in it for 10 years. The building Is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered

premiums would go down

A contractor who builds homes has never made a claim on his business insurance policy. His agent discovers that his policy is written on a scheduled rating. If the contractor changes to an experience rating policy, which is most likely?

assumption of risk

A couple bought tickets to a college hockey tournament. At the game, a stray puck flies into the stands and hits the wife in the face, breaking her nose. Which legal defense may bar her from recovering damages for the injury she received at the hockey game?

pay to defend the policy owner in the lawsuit because liability coverage contains a duty-to-defend provision

A deli owner has a businessowners liability policy. When a customer slipped and hurt herself at the deli, the liability policy paid for medical expenses. The customer, however, is not suing the business owner because she claims there was no caution sign warning her that the floor was wet. What is the insurer obligated to do?

$2,500/$5,000

A licensed producer may be fined for nonwillful and for willful violations of insurance laws with the following respective fines:

the loss is payable to the insured and the mortgagee

A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true?

additional insured

A person who is not named as an insured on the declarations page of a policy but is protected by the policy is known as

it applies to both real and personal property

All are true of the SC Valued Policy law EXCEPT

provisions

All of the following are considered parts of the policy structure EXCEPT

insurance premium paid

All of the following are factors in the determination of actual cash value EXCEPT

the coinsurance formula will also be applied to total losses

All of the following statements concerning coinsurance are true EXCEPT

it is imposed on defendants engaged in hazardous activities

All of the following statements describe the concept of strict liability EXCEPT

indirect loss

An additional loss that results from a direct loss of property is called a/an

fraud

An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act?

conditional

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What characteristic does this describe?

combined single

An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor, who was sitting on the porch is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. What type of limit of liability does the insured have?

80% of the property's replacement cost or more

An insured owns a building that is valued at $400,000. To comply with the 80% coinsurance provision of his insurance policy, how much should he insure the property for?

specific

An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have?

vicarious liability

An insured's 9 year old son threw a ball, accidentally breaking a neighbor's plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of

$30,000

An insured's building has an actual cash value of $200,000 and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

the producer photographed the wrong house; the insured's house would not pass underwriting standards

An insured's fire policy has been in force for over 120 days. For which of the following reasons may the insurer cancel the policy?

$5,000

An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today's prices. If the roof has been depreciating at $200 per year and the insured's policy is written on the actual cash value (ACV), how much will the policy pay toward the insured's new roof?

a loss caused by an act of God

An insurer CANNOT renew a homeowners policy because of

$15,000/$30,000

An insurer may be fined for non willful or for willful violations of insurance laws with which of the following respective fines

$100

Anyone who willfully violates. cease and desist order can be fined what maximum amount per day?

replacing the property with other property of a lesser kind of quality

At the time of loss insured against in a property and casualty policy, the insurer's claim settlement options include all of the following EXCEPT

experience

Compared with other drivers in his age group, a driver has had more minor accidents and traffic violations. Which of the following rating types would most accurately reflect the driver's true insurance risk?

contracts of adhesion

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

misrepresentation

During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes

5 years

How must a licensee keep records of insurance transactions on file, available for inspection by the Director

90 days

If the insurer non renews a homeowners policy during the hurricane season, how many days' notice must the insurer provide to the policy owner?

company

In any case where there is a controversy or dispute between the insurance company and the insured, the soliciting agent is the agent of the

the factors that determine rates

In insurance terms, what are components?

an applicant submits an application to the insurer

In insurance, an offer is usually made when

obtain an insurance agency license

In order to transact business in this state, an agency must meet all of the following requirements EXCEPT

deductible

In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit?

the person must have at least completed secondary education

In terms of parties to a contract, which of the following does NOT describe a competent party?

the cause of loss insured against

Peril is most easily defined as

manual rates

Rates that are established based on the similarities of the risk with other risks are known as

may be in writing or electronically

Required privacy policy notices to consumers and customers

cancellation

Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as

company A will pay $16,000; company B will pay $8,000

The ABC Corporation has $100,000 of coverage on its building through insurance Company Amanda $50,000 of identical coverage on the same building through insurance Company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs and the pro rata method is used, how much will each insurer pay?

no later than 5 years from now

The Director has just finished examining a domestic insurer. When is the Director next required to examine the same insurer?

total loss by fire

The SC valued policy law is effective for which loss

the insured may not relinquish ownership of damaged property to claim a total loss, but must protect damaged property from further loss

The abandonment provision in property insurance policies states that

express authority

The authority granted to an agent through the agent's contract is referred to as

perils

The causes of loss insured against in an insurance. policy are known as

A statement that earthquake damage is not covered

The declarations page of the homeowners policy provides all of the following information EXCEPT

definitions

The part of a policy that clarifies terms in the policy is the

declarations

The part of a property policy that shows the amount of insurance, premium, and policy term is the

insuring agreement

The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the

conditions

The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the

how parties to the contract must act following a loss

The policy conditions define

subrogation

The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called

primary policy

The policy that pays first in the event of a covered loss is known as

underwriting

The process an insurer uses to evaluate applications and determine if a policy should be issued and on what terms, conditions, and rates is known as

abandonment

The property condition that precludes the insured from simply turning over damaged property to the insurer and claiming a total loss is called

loss

The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as

pure risk and speculative risk

The risk of loss may be classified as

discrimination

Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called?

respond to the consumer's complaint

Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must

proximate cause

What fundamental principle in property insurance holds that when there is an unbroken connection between an occurrence and damage that grows out of the occurrence, then the resultant damage is all a part of the occurrence?

physical

What hazard would you be concerned about if you lived next to an explosives contractor?

other insurance

What insurance policy provision determines how the policy will respond if there is more than one insurance policy written on the same risk?

encourage the insured to insure the property closer to its full value

What is the purpose of the coinsurance clause found in property insurance policies?

reinsurance

What method do insurers use to protect themselves against catastrophic losses?

direct loss

What term includes damage where the insured peril was the proximate cause of loss?

renewal dates

What type of information would be found in a policy's insuring agreement?

absolute

What type of liability would a person who owns wild animals have?

vicarious liability

When a parent is required to pay for damages caused by his or her children, this is an example of

30 days

When a producer's appointment is cancelled by the company, the Department of Insurance must be notified within

concealment

When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of

on the declarations page of the policy

Where is the policy period stated?

implied

Which authority is NOT stated in an agent's contract but is required to conduct insurance?

making derogatory oral statements about another insurer's financial condition

Which of the following best describes the unfair trade practice of defamation?

loss of use

Which of the following coverages in dwelling and homeowners policies is for indirect losses?

reciprocal

Which of the following insurance options would be considered a risk-sharing arrangement?

fraternal

Which of the following insurance providers must be nonprofit and sell insurance only to its members?

the loss must be catastrophic

Which of the following is NOT a characteristic of an insurable risk?

Federal Deposit Insurance Corporation (FDIC)

Which of the following is NOT a government health insurance program?

counteroffer

Which of the following is NOT an essential element of an insurance contract?

declarations

Which of the following is a mandatory part of an insurance policy that varies with each individual policy?

warranty

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

exposure

Which of the following is a unit of measurement an underwriter uses when determining the premium rates for insurance?

liberalization

Which of the following policy provisions would automatically broaden coverage under a policy without requiring additional premium?

concurrency

Which of the following terms refers to other insurance that is written on the same risk, but not on the same coverage basis?

supplemental policies, life insurance policies and annuities, accident and health insurance policies

Which of the following type of policies are protected by the SC Guaranty Association?

agreed value

Which of the following types of valuation works best for property whose value does not fluctuate much?

discriminating in benefits and coverages based on the insured's habits and lifestyle

Which of the following will NOT be considered unfair discrimination by insurers?

a house

Which of the following would NOT be classified as personal property for insurance purposes?

confirming future dividend in a life insurance policy

Which of the following would be considered an illegal inducement to purchase insurance?

endorsements

Which of the following would modify the original insurance contract by either adding or removing coverage?

signing blank applications or insurance policies is prohibited

Which statement regarding signing of blank forms by a producer is true?

twisting

Which type of misrepresentation persuades an insured, to his or detriment, to cancel, lapse, or switch policies from one to another?

all admitted P&C insurers

Who are required to be members of the SC Property and Casualty Insurance Guaranty Association?

3 days

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?

false advertising

An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?

foreign

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?

rebating

Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as

fraud

D'Seevum Insurance Company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the net two years. What term best describes this act?

$2,500

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?

pay dividends to the policyowner

A participating insurance policy may do which of the following?

aleatory

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?

false advertising

Circulating deceptive sales material to the public is what type of Unfair Trade Practice?

in favor of the insured

Courts will interpret any ambiguity in an insurance contract

without receiving written consent from an insurance regulatory authority

Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce

inviting prospective clients to the grand opening of the company's new office

State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT

guides describing company financial integrity

What insurance concept is associated with the names Weiss and Fitch?

one-sided: only one party makes an enforceable promise

What is a definition of a unilateral contract?

comparative negligence

What is the legal defense that can be used in most states in which proportionate damages may be awarded when both the plaintiff and defendant were negligent?

180 days

What is the maximum duration of a temporary license?

agent

According to the Law of Agency, a principal is represented by a/an

twisting

Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of

salvage

When the insured's car was totaled in a recent accident, the ownership of the car was transferred to the insurer. The insurer then sold off the wrecked car to recover some of the loss it paid to the insured. What is the term for this action?

express and implied

Which of the following are the authorities that an agent can hold?

a certificate of authority is the license given by the insurer to its producers

Which of the following statements is INCORRECT about appointments of producers?

agent's contract with the principal

What documentation grants express authority to an agent?

illegal

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?

commission

Any payment to a producer from an insurer that is contingent on the sale of an insurance policy or contract is called a

it does not cover workers compensation claims

All are true about the SC Property and Casualty Insurance Guaranty Association EXCEPT

illegal under any circumstances

An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following describes this act?

apparent

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?

additional coverage

Claim related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses are covered by which part of a policy?

reduction

Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe?

larger

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

reasonable expectations

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?

restores an insured person to the same financial state as before the loss

In a case of loss, the indemnity provision in insurance policies

reinsure policies of the insolvent insurer through other companies

In the event of an insurer's insolvency, the SC Life and Health Guaranty Association will

It is never legal to limit coverage based on marital status

In which of the following situations is it legal to limit coverage based on marital status?

insuring agreement

All of the following are conditions commonly found in the insurance policy EXCEPT

dividends from a mutual insurer

All of the following would be considered rebates if offered to an insured in the sale of insurance EXCEPT

an agent misrepresents policy benefits to convince a policy owner to replace policies

All of the following would be considered rebating EXCEPT

the policy will not be affected

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?

direct response marketing

An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act?

is unauthorized and may not transact insurance within the state

An insurance company that has not applied, or has applied and been denied a Certificate of Authority

Certificate of Authority

An insurance company's license to transact business in this state is known as

make laws relating to the business of insurance in this state

The Director of Insurance has all of the following duties EXCEPT

driving recklessly

Which of the following is considered to be a morale hazard?

anyone found guilty of insurance fraud is charged with a misdemeanor

Which of the following statements is INCORRECT concerning the Insurance Fraud Act?

Lloyd's association

An insurance organization that does not issue insurance policies but provides a meeting place for underwriters to conduct business is known as a

the client

An insurance producer has not been appointed to an insurance company. Who is the producer considered to represent?

the foreign company

The Director is conducting an examination of a foreign company transacting business in SC. Who is responsible for the cost of the examination?

regulates consumer reports

The Federal Fair Credit Reporting Act

utmost good faith

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as

fraternal benefit society

Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?

a ban on selling insurance up to 5 years

Which of the following is NOT a penalty for transacting insurance without being properly licensed?

a producer promptly forwarding premiums to the insurance company

Which of the following is an example of a producer's fiduciary responsibilities?

not taxable since the IRS treats them as a return of a portion of the premium paid

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are

nonrenewal

When an insurance policy does not offer a continuation or replacement at its expiration date, it is considered a

moral hazard

An individual's tendency to be dishonest would be indicative of a

sexual orientation

An insurance application cannot ask about which of the following information about an applicant?

8

A producer licensed in Life and Health, as well as Property and Casualty, must complete a minimum of how many hours in each line of authority every 2 years?

150 days

A producer was issued a temporary license 30 days ago. How much longer can the license remain in effect?

defamation

Which of the following describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?

6 months

A producer failed to complete the required continuing education credit hours for this compliance period. Within what time period after the deadline may the license be reinstated?

Fair Credit Reporting Act

An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company?