Frequently Missed Questions for Producer Licensing Exam

Special limits of liability in HO policies are as follows: for money, bank notes, bullion, gold, silver (excluding goldware and silverware), platinum, coins, and other metals;

$200

Theft coverage under an HO-8 is restricted to

$1,000 basic limit that applies to theft losses, and no coverage for theft of personal property off premises.

Following the Christmas season, an insured decides to store his decorations in the attic for the summer. While moving the decorations, he accidentally drops a heavy box that crashes through the ceiling, causing $1,000 of damage. His HO-3 will pay

$1,000 less the deductible.

occurrence

An_______ includes those losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.

What is covered under Coverage B: Other Structures under the HO forms?

ALL of the above

In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation?

Agreed value

Who may cancel an in-force insurance policy?

Either the insured or the insurer

coinsurance clause

In the event of a total loss, the ------ does not operate and the face amount of the policy is paid.

Coverage D: Loss of Use HO-6

Is the total limit of liability in Additional living expenses, fair rental value, and civil authority prohibits use.

Illegal

Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is

illegal

It is ______ to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.

Under contributory negligence, when an individual is found to have contributed to his or her own loss in any way, another party

May not be held liable.

Coverage C: Personal Property HO-6

Personal property owned or used by an insured while it is anywhere in the world. After a loss and at the insured's request, it will cover personal property owned by: Others while the property is on the part of the residence premises occupied by an insured; a guest or a residence employee, while the property is in any residence occupied by an insured.

Limit of property at other residences:

Personal property usually located at another residence of the insured is covered for the larger of $1,000 or 10% of the Coverage C limit. This limitation does not apply if property is moved because the residence premises is being repaired, renovated or rebuilt. When property is moved to a newly acquired residence for 30 days, the limit shown on the declarations will apply on a proportional basis to each residence. Coverage will not extend beyond the expiration date of the policy

When a replacement auto is acquired during the policy period, what coverage will apply to it automatically under a personal auto policy?

Whatever coverage applied to the vehicle being replaced

Section 1- Property Coverages

The HO Policy form includes property coverage for the insured residence (coverage A- dwelling), other structures (coverage B), and personal property (coverage c), similar to dwellings form. The fourth coverage, loss of use (coverage d), is similar to the fair rental and additional living expense coverage described in the broad and special dwelling forms. All coverage forms include a basic deductible of $250, which applies to all coverages unless noted in the policy.

Under the limits of insurance provision found in the Physical Damage Coverage Form in a Commercial Auto policy, how much will an insurer pay to repair or replace a covered auto?

The lesser of the actual cash value or the cost to repair or replace a covered auto

Coverage C in HO forms is broken into 4 categories: Property not covered

limitations are added to the HO policy for property of roomers, boarders and tenants

Glass or Safety glazing material under HO-8

losses are limited to $100

Agreed value

is a property policy with a provision agreed upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the property at the time the insurance is written. When a loss occurs, the policy pays the agreed value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation

Debris Removal under HO-8

is not considered an additional amount of insurance and is included in the total policy limit.

HO-2 (broad form)

provides protection for losses from named perils. Not Covered: the inside of a building for damage by rain, snow, sleet, sand, or dust unless wind or hail damage first creates the opening. The inside of a building for loss by a falling object unless the falling object first damages the roof or an outside wall. Fences, driveways and walks for damage from a vehicle owned or operated by a resident; or damage from water or steam if a dwelling is vacant from a period of more than 60 days.

Coverage C in HO forms is broken into 4 categories: Limit for property at other residences

similar to the worldwide property coverage offered in the DP policies, but the sublimit only applies to other owned residences

The "limits of insurance" provision of the physical damage coverage

states that the insurer will pay the lesser of the actual cash value or the cost to repair or replace a covered auto. This is the same as the provision found in the Business Auto Coverage Form.

Declarations

states who is insured, what is insured, where the property is located, when the policy begins and ends, how much insurance and how much premium. The exclusions tell what is not covered.

Coverage C in HO forms is broken into 4 categories: Special limits of liability

types of property and sublimit amounts are similar to the Broad Theft Endorsement for DP forms; however, in HO forms, it is important to pay particular attention to the categories that are only limited by the peril of theft.

Additional Coverages : Coverage D: Fire department service charge

will pay up to $500 for liability assumed by agreement for fire department charges to protect insured property. The deductible does not apply, and the limit is an additional amount of insurance.

Additional Coverages : Coverage D: Credit card, electronic funds transfer card or access device, forgery and counterfeit money

will pay up to $500 to cover the legal obligation of an insured to pay because of the theft or unauthorized use of a credit card, electronic funds transfer card, loss caused by forgery of a check, or loss through acceptance of counterfeit money that duplicates U.S. or Canadian currency. No deductible applies, and the limit is considered additional insurance.

nonowned automobiles.

Autos leased, hired, rented, or borrowed from employees are considered

Worldwide Coverage under HO-8 is restricted to

Coverage for personal property away from the premises is limited to the larger of 10% of the personal property limit or $1,000

HO-5 Comprehensive Form

Covers both the dwelling and other structures on an open peril basis. It also covers personal property on an open peril basis, with the exception of landlord furnishings in an apartment that is rented (or held for rental to others). Landlord furnishing is limited to $2500 limit and provided on a named peril basis. Theft includes misplacing or losing of insured property, also known as mysterious disappearance.

Coverage C: Personal Property covers

. Personal property owned or used by the insured while it is anywhere in the world. At the discretion of the named insured, property of others, property of guests or residence employees may also be covered while on the residence premises. Residence employees may also have their belongings covered while in any residence an insured is occupying; 2. Property of roomers and boarders related to an insured; 3. Hobby aircraft and parts not used or designed to carry people; 4. Motor vehicles and other conveyances but only while used to service the premises or designed to assist the handicapped; 5. Blank storage media and prepackaged computer software

Coverage C: Personal Property HO Form does NOT cover

1. Any items that are separately described and insured regardless of the limit of insurance; 2. Animals, birds and fish; 3. Aircraft and parts whether attached or not, other than hobby aircraft noted above; 4. Hovercraft and parts; 5. Motor vehicles and other motorized land conveyances, other than noted above. This includes electronic apparatus powered solely by the vehicle. Also included are parts and accessories to the vehicle and electronic equipment but only while in or upon the vehicle; 6. Business data contained in books of accounts, paper records or in computer equipment; 7. Property of roomers, boarders and tenants (when not a relative of the insured); 8. Property in an apartment regularly rented or held for rental by an insured; 9. Property rented or held for rental by the insured to others while off the residence premises; 10. Credit cards, debit cards or any device used to deposit, withdraw or transfer funds; 11. Water or steam (for example, a broken water pipe significantly increases an insured's water bill).

Special limits of liability in HO policies are as follows: for securities, accounts, deeds, evidences of debt, letters of credit, notes other than bank notes, manuscripts, passports, tickets, and stamps

1500

Special limits of liability in HO policies are as follows: for watercraft and their trailers, furnishings, equipment, and outboard motors;

1500

Under the additional living expenses coverage, if a civil authority prohibits the insured from using the dwelling because of direct damage to a neighboring location from a peril covered in the insured's policy, loss would be covered for up to

2 weeks.

How many days does a producer have to respond to the Commissioner's inquiry regarding a claim?

20 calendar days

Special limits of liability in HO policies are as follows: for loss of antennas, wires, or any media used with the electronic equipment in a motor vehicle.

250

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

3 days

Under the dwelling policy, if an insurer chooses to repair or replace damaged or lost property, it must inform the insured within how many days of receiving proof of loss?

30 days

WYO program

A ---- is made up of private insurers that write and service National Flood Insurance policies on a no risk-bearing basis through a special arrangement with the Federal Insurance Administration. ----- retain part of the flood insurance premium to pay for commissions and administrative costs. The remaining premiums, plus investment, are used to cover losses.

A dwelling policy

A ---- will pay loss of use due to civil authority for a maximum of two weeks.

When other insurance is written on the same basis as a commercial property policy, the obligation of the insurer is to cover

A share of the loss.

HO-8 (modified coverage form)

A unique homeowners form, it is intended for use when replacement cost coverage is not practical. When the market value of the structure is considerably lower than the replacement cost, such as some older homes, this form may be useful.

In a personal auto policy, the medical payments coverage is similar to

Accident insurance, because it pays medical expenses regardless of fault

Special limits of liability in HO policies are as follows: $2500

All listed

Coverage C Personal Property (direct) and Coverage D loss of use (indirect) which applies?

All of the HO

HO-6 (condominium unit owners)

Also expands coverage to include parts of the building, such as alterations and appliances that the insured is required to insure because of the condominium association agreement.

the HO-3

Because ___ covers structures on an open-peril basis, the insurance company would pay $1,000 minus any deductible the insured must pay.

Which of the following must an insurer obtain in order to transact insurance within a given state?

Certificate of authority

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

Consideration

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

Counter Offer

insurance business

Doing ----- in this state involves, but it not limited to, making, proposing, or delivering insurance contracts, managing insurance records, processing insurance claims, and possessing an insurance license.

Which of the following would NOT constitute doing the business of insurance in this state?

Examining insurer records

All of the following are found in the declarations section of a policy EXCEPT the

Exclusions

What coverage does not cover loss or expense due to cancellation of a lease agreement?

HO-6

What is NOT covered under the Coverage A Dwelling?

HO-6 also includes items that would normally be listed as not covered in Coverage B, such as other structures held for rental to a person not a tenant of the dwelling unless used as a private garage, structures form which business is conducted and structures used to store business property unless the property is owned by the insured or a tenant of the dwelling.

Additional Coverages : Coverage D: (in HO-4 only)*. Building additions and alterations

If the insured makes or acquires improvements to the residence premises made at the insured's expense, the policy will provide an additional limit of insurance equal to 10% of Coverage C.

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?

Illegal

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

Insuring Agreement

What is NOT covered under the Coverage A Dwelling?

Land Including land on which the residence premises or other real property is located.

Coverage A HO-6 does NOT cover

Land, including land on which the residence premises, real property, or structures are located; structures rented or held for rental to any person that is not a tenant of the dwelling, unless used solely as a private garage; structures from which any business is conducted; structures used to store business property. However, this form does cover a structure that contains business property solely owned by an insured or a tenant of the dwelling, provided that the business property does not include gaseous or liquid fuel in permanently installed fuel tank of a vehicle or craft parked or stored in the structure.

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of

Misrepresentation.

A private passenger auto operated by the named insured that is not titled to the insurer and that is borrowed from an employee or partner is considered a(n)

Nonowned auto.

Losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected is the definition of which of the following terms?

Occurrence

What type of insurance policy insures against all risk of loss that are not specifically excluded by the policy?

Open Peril Policy

A participating insurance policy may do which of the following?

Pay dividends to the policyowner

Who would participate in a Write Your Own (WYO) flood insurance program?

Private insurers that write and service National Flood Insurance policies on a no risk-bearing basis

Property of guest or residence employees under HO-8

Property may be covered only while on the insured premises.

HO-3 (special form)

Provides protection for dwelling and other structures on an open peril basis and personal property is covered only for broad perils. Vehicle damage to fences, driveways, or walks is covered even of caused by an insured or resident. Exclusions: All property, losses, and perils not covered because of limitation of the insuring agreement and the general exclusions; Damage caused by freezing while the dwelling is vacant, unoccupied, or being constructed unless the insured takes reasonable care to maintain heat in the premises or to shut off and drain the water supply; Theft in or to a dwelling or structure under construction; Vandalism and malicious mischief if the dwelling has been vacant for a certain period of time( more than 60 days). Gradual, preventable, or expected losses such as wear and tear, latent defect, contamination, bulging, or expansion of foundation, pavements, walls, or floors; Faulty, inadequate, or defective planning, zoning, surveying, design. Losses caused by weather conditions to the extent that they contribute to causes found in the general exclusions. acts, decisions, or failure to act.

HO-4 (contents broad form)

Tenant broad form, insures personal property for broad perils. Coverage may not be issued to an owner-occupant. May be written for a tenant who resides in a rented dwelling, apartment, or mobile home, but does not provide coverage on the dwelling itself.

Coverage A HO-6

The alterations, appliances, fixtures and improvements that are a part of the building contained within the residence premises; Items of real property that pertain exclusively to the residence premises; Property that is the insured's insurance responsibility under a corporation or association of property owners agreement; and structures owned solely but the insured, other than residence premises, at the location of the residence premises.

Surety bonds are written for a definite limit called

The bond penalty.

All of the following statements concerning coinsurance are true EXCEPT

The coinsurance formula will also be applied to total losses.

The commercial property other insurance provision

The commercial property other insurance provision states that the insurer will be responsible for only a proportional share of an insured loss when the insured also has other insurance written according to the terms and conditions.

Additional Coverages : Coverage D: Ordinance or law does NOT cover

The loss in value to any covered building or other structure because of the requirements of any ordinance or law (for example, although the Americans with Disabilities Act (ADA) sets specific requirements for minimum clear floor space dimensions in restrooms, ordinance or law coverage will exclude costs necessary for making the restroom compliant with ADA); or The costs to comply with any ordinance or law that required any insured to test for, clean up, or otherwise respond to pollutants on any covered building.

Trees, Plant, Shrubs under HO-8

The maximum for any on tree, plant of shrub is only $250

What is the purpose of a claims made form?

To allow insurers to determine adequate rate for unknown losses claimed in the future

What is NOT covered under Coverage B: Other Structures under the HO forms?

all of the above

Additional Coverages : Coverage D: Ordinance or law

allows insureds to use up to 10% of the limit of liability that applies to Coverage A (or the limit for buildings, additions and alterations in the HO-4) for the increased cost incurred because of enforcement of any ordinance or law that requires one of the following: The construction, demolition, or renovation of part of a covered building damaged by a peril insured against; or The demolition and reconstruction of the undamaged part of a covered building if it must be demolished because of damage to another part of the covered building by a peril insured against.

Coverage B- Other Structures

also referred to as appurtenant structures, a basic amount of insurance equal to 10% of Coverage A limit is included for other structures, but a policy may be written with higher limits. Is similar to that found in the dwelling policy program with some notable exceptions. The homeowners form substitutes the definition of business with the coverage description. The HO forms add coverage for gravemarkers and mausoleum as they are no longer included in the list of property not covered.

Additional Coverages : Coverage D:. Collapse

applies to property covered under Coverages A and B with respect to this additional coverage. This additional coverage does not increase the limit of liability. Collapse means the abrupt falling down or caving in of a building or any part of a building, with the result that the building or part of the building cannot be occupied for its current intended purpose. A building or any part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse. The policy insures for direct physical loss to covered property involving collapse of a building or any part of a building if the collapse was caused by one or more of the following: The perils insured against; Decay that is hidden from view, unless the presence of such decay is known to an insured prior to the collapse; Insect or vermin damage that is hidden from view, unless the presence of such damage is known to an insured prior to the collapse; Weight of contents, equipment, animals, or people; Weight of rain which collects on a roof; or Use of defective materials or methods in construction, remodeling or renovation if the collapse occurs during the course of the work. Loss to awnings, fences, patios, decks, pavement, swimming pools, underground pipes, flues, drains, cesspool, septic tank, foundation, or retaining walls is not included under the definition of collapse, unless the loss is a direct result of the collapse of a building or any part of a building.

Additional Coverages : Coverage D: Trees, shrubs, and other plants

are covered if loss or damage is caused by fire, lightning, explosion, riot or civil commotion, aircraft, vehicle not owned or operated by a resident of the residence premises, vandalism or malicious mischief, or theft. This is an additional amount of insurance and is limited to a maximum of $500 per tree, shrub, or plant, and a maximum per loss of 5% of the amount of coverage on the dwelling. In forms HO-4 and HO-6, the maximum per loss is 10% of the Coverage C limit.

Coverages A and B under HO-8

are provided on a functional replacement cost basis.

Coverage C in HO forms is broken into 4 categories: Covered Property

coverage in the HO policies is expanded to anywhere in the world. The DP policy is primarily used for personal property on the described location

Additional Coverages : Coverage D: Property removed

coverage is provided for any cause of loss for up to 30 days while covered property is being removed because of endangerment by covered peril.

Additional Coverages : Coverage D: Reasonable repairs

coverage is provided to cover the expenses incurred by the insured to make reasonable repairs to protect property from further damage following loss by a covered peril.

Special limits of liability in HO policies are as follows: $1500

for other trailers; for theft of jewelry, watches, furs, precious, and semiprecious stones; for property away from the premises used for business purposes; for loss of portable electronic equipment that produces, receives, or transmits audio, visual, or data signals while in a motor vehicle

Coverage A Dwelling (Direct) which does NOT apply

ho 4

Coverage B: Other Structures (Direct) which does NOT apply

ho 4

Arbitration

is a method of casualty claim settlement used when the insured and insurer cannot agree on how to settle a claim.

Coverage C - Personal Property Personal property coverage

is the most notable coverage change from the dwelling property policy. Coverage C was optional in the dwelling policy, but is now mandatory coverage in all homeowners forms. The HO-2, HO-3, HO-5 and HO-8 will automatically include a limit of insurance equal to 50% of the Coverage A limit. This limit may be increased or decreased, but not below 40% for 1- and 2- family residences. In the HO-4 and HO-6 policy forms, the amount of insurance is selected by the insured, with coverage minimums varying by state. The personal property coverage in the homeowners policy is broader than that included in the dwelling coverage forms. The HO-8 form will be treated separately as it retains elements of the dwelling form when covering personal property.

Cancellation

is the termination of an in-force insurance policy, by either the insured or the insurer, prior to the expiration date shown in the policy.

Additional Coverages : Coverage D: Glass or safety glazing material

l will pay for breakage of glass or safety glazing material which is part of a covered building, storm door or storm window. Coverage is provided for the same property if the loss is due to earth movement. Covered property is also protected from fragments or splinters of broken glass or safety glazing material. No coverage is provided if the dwelling has been vacant for more than 60 consecutive days immediately before the loss. This limitation does not apply to loss due to earth movement.

All homeowners policies contain the Loss of Use coverage : Coverage D

which is a combination of Coverage D (Fair Rental Value) and Coverage E (Additional Living Expense) in the dwelling property policy. If a loss covered under the policy makes part of the residence premises not fit to live in, the insurer will cover loss of rent and additional living expenses for the shortest time required to repair or replace the damage. If the insured permanently relocates, additional living expenses will be paid only for the shortest time required to settle elsewhere. As in the dwelling policy, additional living expenses include any necessary increase in living expenses incurred by the insured, insured's relatives, or other persons under the age of 21 who are in the care of the insured or relative so that the insured's household can maintain its normal standard of living. If loss of use results from the order of a civil authority, the additional living expenses and fair rental value payments are limited to a maximum period of 2 weeks. The expiration of the policy will not impact the payment of this indirect coverage

A participating insurance policy

will pay dividends to the owner based upon actual mortality cost, interest earned and costs.

Additional Coverages : Coverage D: Debris removal

will pay reasonable expenses for the removal of debris of covered property for a covered cause of loss. This is not an additional amount of insurance, but the homeowners policy will allow for an additional amount of debris removal expense if the amount to be paid for the actual damage to the property, plus debris removal expense is more than the limit of liability (additional 5% of the applicable limit). Debris removal expense could apply to coverage A, B or C. A homeowners policy also will pay an insured's reasonable expense for the removal of the trees from the residence premises: The insured's tree(s) felled by the peril of windstorm or hail or weight of ice, snow, or sleet; or A neighbor's tree(s) felled by a Coverage C peril (broad form perils), provided the tree: Damages a covered structure; Does not damage a covered structure, but blocks a driveway on the residence premises that prevents a motor vehicle that is registered for use on public road from entering or leaving the residence premises; or Blocks a ramp or other fixture designed to assist a handicapped person to enter or leave the dwelling. The total amount of coverage included for tree removal is $1,000 with a sublimit of $500 for the removal of any one tree.

Additional Coverages : Coverage D: Loss assessment

will pay up to $1,000 for the insured's share of a loss assessment charged during the policy period against the insured as an owner or tenant of the residence premises by a corporation or association of property owners. The assessment must be made as a result of direct loss to property that is owned by all members collectively, as long as it is of the type that would be covered by the insured's policy if owned by the named insured. Damage to association property must be caused by a peril insured against, and does not include earthquake or land shock waves after a volcanic eruption.

Additional Coverages : Coverage D: except in HO-4)*. Landlord's furnishings

will pay up to $2,500 for an insured's appliances, carpeting, and other household furnishings in each apartment on the residence premises regularly rented or held for rental to others. Covered causes of loss are limited to Coverage C perils, excluding theft. This is not an additional amount of insurance.

Additional Coverages : Coverage D: Grave markers

will pay up to $5,000 for grave markers, including mausoleums, for loss caused by a peril insured against, on or off residence premises. This coverage does not increase the limits of liability that apply to the damaged covered property.