Insurance Property and Casualty
Which of the following would NOT be considered an insured under a homeowners policy?
An individual, under 21, in the care of but not related to the insured
The Gramm-Leach-Bliley Act was passed to
Protect private customer information filed with a financial institution.
All of the following are essential parts of the insurance contract EXCEPT
Provisions.
A situation in which a person can only lose or have no change represents
Pure risk.
An agent offers his client free tickets to the Super Bowl game in exchange for the purchase of an insurance policy. The agent is guilty of
Rebating.
A policy that insures all property at multiple locations for a single amount is referred to as
Blanket.
Which of the following would NOT be covered under the liability section of a personal auto policy?
Bodily injury is caused by the insured's negligence while driving a three-wheel all-terrain vehicle.
Which of the following statements regarding coverage for the flood and earthquake perils is true?
Both are excluded perils in all property policies.
When a motor vehicle causes any bodily injury or causes property damage in excess of $400, who must provide security and proof of future financial responsibility?
Both the owner and driver regardless of fault
Which of the following policies does NOT contain an automatic reinstatement provision?
Business automobile liability
Which of the following would provide coverage to a garage not attached to the primary insured dwelling?
Coverage B
When a producer was reviewing a potential customer's insurance coverage that is written by another company, the producer made several oral statements that were maliciously critical of that other insurer. The producer could be found guilty of
Defamation.
All of the following are true regarding deposit premium EXCEPT
It is 50% of the actual premium.
All of the following are true regarding deposit premium EXCEPT
It must be paid in advance.
Which of the following statements is NOT true regarding a personal umbrella liability policy?
It provides errors and omissions coverage for an agency
Which of the following statements is NOT true regarding a personal umbrella liability policy?
It provides errors and omissions coverage for an agency.
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
Larger.
For a contract to be enforceable by law, the purpose of the contract must be
Legal and not against public policy.
Which of the following personal auto coverages would pay for the insured's travel expenses and loss of earnings while involved in the settlement process of a covered loss?
Liability coverage
An insured is driving his or her automobile and strikes a large pothole, causing a flat tire. Which coverage of the insured's personal auto policy will pay for the repair?
Loss is not covered
Which of the following is NOT true concerning the fair rental value coverage provided in a dwelling policy?
Loss or expense caused by the cancellation of a lease is covered.
Under a policy, the condition that determines how the amount of damaged or lost property will be determined is known as
Loss valuation.
Insurance is a contract by which one seeks to protect another from
Loss.
Which of the following would NOT be considered part of the insured location under the liability section of a homeowners policy
Vacant farmland owned by the insured
While driving, an insured's auto strikes a deer, causing the insured to lose control of the auto and strike a tree. The total damage to the auto was $6,000. Which of the following coverages would cover this loss and for how much?
$6,000 would be paid under other-than-collision coverage.
Alan has a Personal Auto Policy with Part C limits of $100/$300 Uninsured/Underinsured Motorist. Alan is injured by Ben who has Part A limits of $50/$100. The police determine that Ben is at fault for the accident and Alan's $125,000 of medical expense. How much will Alan's Part C pay?
$50,000
How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card?
$500
Any person acting as an insurance producer without a valid license may be fined up to
$1,000 for each violation.
The broad theft coverage endorsement on the dwelling form specifies all of the following limitations EXCEPT
$1,000 on silverware.
Any licensed person in this state may be assessed a civil penalty for an unintentional violation of a state insurance statute up to
$1,000.
Transportation expenses are covered under a Personal Auto Policy for
$20 per day, for a maximum of $600.
Coverage for water backup or sump pump overflow is excluded from the Dwelling Policy. However, with the purchase of the water backup and sump pump overflow endorsement, coverage for up to $5,000 in loss or damage can be provided for an additional premium. What is the deductible associated with this coverage?
$250
A producer intentionally violated insurance statutes. Ultimately, the Commissioner determined there were a total of 25 separate violations. What is the total, monetary penalty this producer can expect to receive?
$250,000
The regular National Flood Insurance Program would insure an eligible single-family dwelling for up to
$250,000.
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?
$30,000
Norm has a Personal Auto Policy with both comprehensive (other than collision) and collision coverage. His car is stolen and recovered five days later. If Norm claims transportation expenses of $20 per day, how much will his policy pay?
$60
In compliance with Tennessee's financial liability law, written proof of liability insurance coverage provided by a single limit policy must be in what amount?
$60,000
If a property is covered by Company A for $20,000 and Company B covers the same property for $40,000, how much will Company A pay on a $24,000 loss?
$8,000
Three years ago, an insured moved to an unfurnished apartment. She bought new furniture that cost $9,000. Last week, there was a fire in the apartment that destroyed the furniture. Replacement cost is $10,500. The adjuster told the insured her furniture depreciated $2,500. If insurance is written on an actual cash value basis, how much will it pay for the loss?
$8,000
How many credit hours of excess continuing education are producers allowed to carry over to the next renewal cycle?
12 hours
With respect to the personal auto policy, which of the following vehicles could be classified as a nonowned auto?
A vehicle that is titled to another person, but is being used with permission by an insured
The secretary of the treasury estimates that a recent terrorist attack caused losses of more than $100 billion. According to the 2007 reauthorization of the Terrorism Risk Insurance Program, how many days' notice must the secretary provide to Congress?
15
If a nonrenewal notice DOES NOT contain a reason for the nonrenewal action, how many days does the insured have to issue a written request for a reason?
15 days after the effective date of the nonrenewal
A temporary license may be issued by the Commissioner for a period not to exceed how many days?
180
How many hours of continuing education must be completed in ethics each licensing period?
2
Cancellation of a policy in effect more than 60 days WILL NOT be effective unless the insured is given _______ days' notice by mail or delivery.
20
As a condition for renewal of their licenses, how many hours of continuing education are required for all resident and nonresident insurance producers?
24
Unless revoked or suspended, how long does a producer's license remain in effect in Tennessee?
24 months
How long is the waiting period after the application has been accepted before flood coverage goes into effect?
30 days
How many days does the insurer have to re-underwrite a policy that is found to be incorrect or incomplete?
30 days
If a resident insurance producer moves from Tennessee to another state, he/she must file a change of address and provide certification from the new resident state within how many days of the change of legal residence?
30 days
If an insurance company does not intend to renew a contract of any kind of personal risk insurance, the company must mail or deliver to the named insured notice of its intention not to renew at least ______ prior to the expiration of the policy.
30 days
If an insurer is going to terminate the appointment of an insurance producer, within how many days following termination must the insurer notify the Commissioner of the termination?
30 days
Insurers that use credit information to underwrite or rate risks for personal insurance may NOT use credit information that is older than
36 months.
When negative action is taken against a consumer based on their credit information, how many factors for the negative action must be included?
4
Under Coverage C of a homeowners policy, the amount of insurance provided to cover personal property of the insured is
50% of the amount provided as Coverage A.
How long does a producer have after writing a Fire insurance contract to have the building inspected?
90 days
What is a Certificate of Insurance?
A written document showing the types and amounts of insurance that have been issued to the insured
Which of the following may obtain a producer's license, but may NOT sell, solicit, or negotiate a contract of insurance in Tennessee?
A business entity
A licensed life producer wrote a policy that covers the life of his brother. Since the insured was related, the producer refunded the commission earned on this policy to the insured. This is considered to be
A family business transaction.
Which of the following would be required to complete prelicensing education?
A nonresident life insurance producer who is planning to transact property insurance
What must be included in notice of cancellation or intent not to renew an auto liability policy?
A notice informing the insured of his/her possible eligibility for insurance through the automobile assigned risk plan
A tornado that destroys property would be an example of which of the following??
A peril
What is a material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
The Declarations of the Homeowners policy provides all of the following information EXCEPT
A statement that earthquake damage is not covered
In an auto policy, the medical payments coverage is similar to
Accident insurance, because it pays medical expenses regardless of fault.
Which part of an in insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses?
Additional coverage
Which of these is defined as the maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims that may be made or the number of accidents that may occur?
Aggregate limit of liability
A person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance is known as
An Insurance Producer
Which of the following would NOT qualify as a hired auto?
An auto borrowed from an employee
Which statement best defines an insurance producer?
An individual who has a contract or agreement with an insurer to solicit or negotiate insurance policies on behalf of that insurer
A licensed life producer wrote a policy that covers the life of his brother. Since the insured was related, the producer refunded the commission earned on this policy to the insured. This is considered to be
An unfair trade practice.
Which of the following clauses establishes the procedure for determining the amount of a loss when the insurer and the insured cannot agree on the value of property or amount of loss?
Appraisal clause
Which of the following describes the transfer of a legal right or interest in an insurance policy?
Assignment
ACE Insurance is not planning to renew Joe's personal risk insurance policy. To do this, ACE Insurance is mailing a notice of its intentions to Joe. When must this notice be sent?
At least 30 days before the policy expires
Insurable interest in the property covered in a policy must be proven
At time of application
Insurable interest in the property covered in a policy must be proven
At time of loss
Any of the following would be considered an Unfair Trade Practice, EXCEPT
Attempting to settle a claim by the use of arbitration
A Limited Insurance Representative is an individual, other than an insurance producer, who may solicit or negotiate contracts for certain types of insurance which includes all of the following EXCEPT
Automobile physical damage insurance.
In return for premium, an insurance company must
Be fair in underwriting and pay covered losses.
An insurance contract must contain all of the following to be considered legally binding EXCEPT
Beneficiary's consent.
Which of the following best describes liberalization clause in a policy?
Changes adopted by the insurer that broaden coverage automatically apply to the policy at no additional premium.
Which of the following activities would be interpreted as acting as an insurance producer?
Collecting premiums, Countersigning policies, Soliciting policies
Lily is driving her car through a residential area. She loses control of the car, and crashes into Max's front porch. Max, who was sitting on the porch, is injured. Lily's liability insurance policy has a limit set at $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does Lily have?
Combined single
All of the following are classes of inland marine risks EXCEPT
Common Carrier Cargo Liability
The ABC Corporation has $100,000 of coverage on its building through insurance Company A, and $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, how much will each insurer pay?
Company A will pay $16,000; Company B will pay $8,000
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. What is this act called?
Concealment
An applicant who knowingly fails to communicate a fact that would help an underwriter make a sound decision regarding coverage is guilty of
Concealment.
An insured intentionally did not disclose a material fact on an application for insurance. This would be considered
Concealment.
If an insured is in the process of moving to a new location, his personal property coverage under the dwelling policy will apply on a pro rata basis at both locations for
Concealment.
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT
Conditions.
An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this?
Consequential
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following terms best describes what the insurer has violated?
Consideration
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
Consideration
The at-fault driver in an insured's auto crash had the state required minimums for auto liability coverage, but not enough to pay for all the damage done to the insured. This driver is
Considered underinsured.
Which of the following statements is true concerning the special form dwelling policy?
Coverage A is for all-risk perils, and Coverage C is for basic perils only
Which of the following dwelling coverage forms would pay replacement cost for the dwelling?
DP-2 and DP-3
If a producer continues to violate the Insurance Code, a new civil penalty will be assessed every
Day.
Which of the following is a mandatory part of an insurance policy that varies with each individual policy?
Declarations
The part of a property policy that shows the amount of insurance, premium, and policy term is the
Declarations.
A beauty parlor burns to the ground. What type of loss is this to the owner?
Direct
What term includes damage where the insured peril was the proximate cause of loss?
Direct loss
All else being equal, which of the following will NOT be considered unfair discrimination by insurers?
Discriminating in benefits and coverages based on the insured's habits and lifestyle
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?
Discrimination
What is the purpose of the coinsurance clause found in property insurance policies?
Encourage insurance to value
All of the following are found in the declarations section of a policy EXCEPT the
Exclusions.
The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the
Exclusions.
The requirement that an agent not co-mingle insurance monies with their own funds is known as
Fiduciary responsibility
Which of the following claims would be included under the dwelling policy?
Fire damage to the insured's rowboat located in the attached garage
Which of the following losses would be covered by an unendorsed homeowners policy?
Fire or lightning
In commercial policies, who has control of the policy?
First named insured
Which of the following is an example of an agent's fiduciary responsibilities?
Forwarding premiums to the insurer
The homeowners policy covers collapse caused by all of the following EXCEPT
Foundation cracks.
Replacement cost is defined as
Full replacement of property at its current cost, new and without reduction for depreciation.
Which of the following is NOT covered by the condominium unit owners endorsement?
Furniture in the building
What type of compensatory damages will pay for pain and suffering and disfigurement?
General
Which of the following policies does NOT contain an automatic reinstatement provision?
General liability written with an aggregate limit
The main difference between an HO-4 and an HO-6 is
HO-4 does not cover additional living expenses.
Events or conditions that increase the chances of an insured loss occurring are referred to as
Hazards.
The policy conditions define
How parties to the contract must act following a loss.
Which of the following is grounds for canceling a noncancellable, guaranteed renewable auto policy? I. The insured's spouse, an operator of the vehicle, does not renew his/her driver's license. II. The insurer is no longer licensed to write auto liability insurance in this state. III. The premiums, premium balances, and renewal premiums are paid when due. IV. The insured motor vehicle is used to transport illegal drugs.
I, III, and IV
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
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act?
Illegal under any circumstances
Which of the following types of discrimination would be considered legal?
In policy benefits on the basis of life expectancies
The pro rata liability clause is designed to protect the principle of
Indemnity.
An additional loss that results from a direct loss of property is called a/an
Indirect loss.
All of the following are factors in the determination of actual cash value EXCEPT
Insurance premium paid.
Which of the following is NOT true of National Flood Insurance?
Insurance provided by the flood program also is available in standard property policies.
Anyone covered under an insurance policy, whether named or not, is known as the
Insureds.
All of the following are conditions commonly found in the insurance policy EXCEPT
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
Insuring agreement.
In property insurance, actual cash value is defined as which of the following?
Market value of the property at the time of the loss
An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?
Material misrepresentation
Which of the following statements concerning a personal auto policy is true?
Medical payments coverage applies per person, per accident.
Under a dwelling policy, the insurer will be liable for no more than the insured's interest in a damaged property if the property is insured by
More than 1 person.
Which of the following perils is covered by flood insurance?
Mudslide caused by accumulations of water under the ground
Which of the following does the term "proximate cause" refer to?
Negligence that leads to an injury
In the event an insurer cancels an automobile insurance policy for a reason other than nonpayment of premium, what must be included in the notice?
Notification that the named insured may be eligible for coverage through the Assigned Risk Plan
All of the following are unfair claims settlement practices EXCEPT
Offering substantially more than the amounts ultimately recovered in actions brought by insureds.
What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk?
Other insurance
Which of the following personal auto coverages would pay for damage to a covered auto due to contact with a deer?
Other-than-collision (comprehensive coverage)
Which of the following homeowners endorsements covers liability exposures arising from an incidental business conducted within a building on the residence premises
Permitted incidental occupancies
Which of the following liability coverages must be added by endorsement to a homeowners policy in order to apply?
Personal injury
Section I of a boatowners policy covers
Physical damage.
Which method of loss valuation is contrary to the basic concept of indemnity?
Replacement cost
In property insurance, actual cash value is defined as which of the following?
Replacement cost at the time of the loss, less depreciation
All of the following statements regarding a boatowners policy are true EXCEPT
Replacements for the boat listed in the Declarations are automatically covered, if the insured notifies the insurer within 60 days and pays the additional premium.
Which of the following is NOT consideration on the part of an insured?
Representations on the application
Insurance is the transfer of
Risk.
The endorsement that provides coverage for losses arising from sudden collapse of earth arising from underground limestone created by the action of water on rock formations is a/an
Sinkhole collapse endorsement.
Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages?
Special
What are the two types of compensatory damages?
Special and general
A policy that covers all causes of loss except for those specifically excluded is known as
Special form.
All of the following causes of loss forms are "named peril" forms EXCEPT
Special form.
Greg owns several buildings, each at a different location and insured on a separate policy. What type of coverage does Greg have?
Specific
If the insured owns a watch valued at $10,000, full coverage can be provided on a homeowners policy by purchasing the
Specific
Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called
Specific coverage.
Sally has a property insurance policy that is not subject to any coinsurance requirements. Her policy has a set amount of insurance scheduled for her property. What loss valuation method does her policy use?
Stated amount
When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written
Stated amount
To insure coin collections, stamp collections, and other items that would be difficult to appraise after a loss, it is best to insure with
Stated amount insurance.
When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written
Stated amount.
Which of the following is NOT consideration on the part of an insured?
Submitting a Statement of Good Health
The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses?
Subrogation
The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as
Subrogation.
Which of the following perils is covered by the HO-2 and HO-3?
Sudden and accidental rupture of a heating system
Robbery is
Taking of property by use of force, violence, or fear.
The regulation of the insurance industry primarily rests with
The State.
Sara owns a fire insurance policy on her house. If her home is totally destroyed in a fire, how much will the insurer be liable for?
The actual cash value of the property at the time of loss
If a building is totally destroyed by fire, how much is the insurance company liable for at the time of the loss?
The actual value of the property
Under a dwelling policy, which of the following is NOT a factor in determining a loss?
The amount necessary to repair or replace the property
A policy is found to be incomplete based on false credit information. After adjustments are made, it is found that the insured has overpaid the premium and is entitled to a refund. What type of payment will the insured receive?
The amount of overpayment during the last 12 months of coverage or the actual policy period
In insurance, an offer is usually made when
The application is submitted.
Under Tennessee law, the limits for uninsured motorist coverage must be equal to which of the following?
The bodily injury liability limits stated in the insured's policy
Peril is most easily defined as
The cause of loss insured against.
All of the following statements concerning coinsurance are true, EXCEPT
The coinsurance formula also will be applied to total losses.
In terms of parties to a contract, which of the following does NOT describe a competent party?
The person must have at least completed secondary education.
When an umbrella policy is broader than underlying insurance and it pays a loss that is not covered by the underlying policy, it usually only pays
The excess over the self-insured retention.
Who is personally liable for all contracts of insurance unlawfully made within Tennessee on behalf of an unauthorized insurer?
The individual making the contract on behalf of the unauthorized insurer is liable.
The insured has violated the contract without the knowledge of the mortgage holder. After a loss
The insured cannot collect but the mortgage holder will still be paid.
Which of the following circumstances would be EXCLUDED under medical payments coverage of a personal auto policy?
The insured is injured while driving his motorcycle on his resident premises
Under which of the following circumstances would an insurer be allowed to cancel a dwelling policy midterm?
The insured knowingly lied about the year the property was constructed.
An automobile liability policy may be cancelled for any of the following reasons EXCEPT
The insured was involved in a collision that was the fault of the other driver
Which of the following statements would be correct if an insured failed to maintain the underlying limits as required by a personal umbrella policy?
The insured would be responsible for the amount required as underlying limits in the event of a claim.
In any controversy between the insured or the insured's beneficiary and the insurer that arises from the application for insurance or any policy issued in connection with the application, the producer is considered to be the agent of which of the following?
The insurer
Legal liability is when a person is considered liable for damages according to
The law
Legal liability is when a person is considered liable for damages according to
The law.
All of the following statements are true regarding physical damage coverage EXCEPT
The limit of liability is the greater of the ACV of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle.
When a mortgagee is named in a mortgagee clause attached to a fire or other direct damage policy
The loss reimbursement will be paid to the mortgagee as their interest may appear. ,The mortgagee's rights of recovery will not be defeated by any act or neglect of the insured., The mortgagee may bring a suit in their own name to recover damages to covered property.
For which of the following reasons may an auto insurance policy which has been in effect for 60 days be cancelled?
The named insured obtained the policy through material misrepresentation.
Which of the following is true of the Fair Credit Reporting Act?
The purpose of the act is to protect the consumer's right to privacy by making certain that underwriting data is confidential, accurate, relevant, and properly used.
What is the deductible of a personal liability umbrella policy called?
The self-insured retention (SIR)
If a producer fails to place a reasonable value on a property being insured for fire within 90 days, and a loss occurs, upon what will the settlement be based?
The value as shown by the policy or application
All of the following are perils covered under the broad form dwelling policy EXCEPT
Theft
If an individual insures his dwelling and contents under a DP-3, he would be protected against loss by all of the following perils EXCEPT
Theft of personal property located in the dwelling.
All of the following are other coverages included in both the broad and special form dwelling policy EXCEPT
Theft of personal property.
A temporary insurance License may be issued without examination in all of the following instances EXCEPT
To an applicant who fails to pass an insurance producer's examination.
Which of the following best expresses the purpose of a stated value contract?
To pre-establish the amount of coverage available for property items that are ****difficult to value*****
In the personal auto policy, owned trailers being towed by an insured auto are automatically covered for
Towing coverage.
In the personal auto policy, owned trailers being towed by an insured auto are automatically covered for
Uninsured motorists coverage.
All of the following are supplemental payments included in the liability section of a personal auto policy EXCEPT
Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident.
In forming an insurance contract, when does acceptance usually occur?
When an insurer approves a prepaid application
The personal injury liability endorsement to an HO policy applies to all the following EXCEPT
a) Invasion of privacy. b) False arrest. c) A third party breaks a leg when the insured knocks him down. d) Slander. The broken leg is covered by personal liability coverage.
