P & C FINAL EXAM !!!

Replacement cost less depreciation defines a. Actual cash value b. Market value c. Insurable value d. Liberalization amount

a. Actual cash value

Each of the following may be victims of a robbery of a business's property EXCEPT a a. Custodian b. Messenger c. Night watchman d. Safe or vault

c. Night watchman

Which of the following types of exposures is NOT eligible to be covered by a business owner's policy? a. General contractor at a fixed location b. Shoe repair shop c. Parking Lot d. Tailor

c. Parking Lot

Uncertainty concerning financial loss best describes the concept of a. Indemnity b. Insurance c. Risk d. Hazards

c. Risk

A condition creating or increasing the chance for loss is known as a a. Peril b. Hazard c. Loss d. risk

b. Hazard

Aviation insurance provides an insured with liability protection while an insured is a. In the air only b. In the air or on the ground c. On the ground only d. In the air, including takeoff and touchdown

b. In the air or on the ground

Internal limitations on property covered under a homeowner's policy include which of the following? a. Antiques and fine art b. Money, jewelry, and furs c. Furniture and clothes d. Appliances and equipment

b. Money, jewelry, and furs

The type of insurance company in which the policy holder is considered an owner, with the right to vote and share in the profits, is a a. Stock company. b. Mutual company. c. Reciprocal Company. d. Lloyd's Association.

b. Mutual company.

Each of the following is covered under a commercial property policy EXCEPT a. Merchandise b. Outdoor curbside signs c. Fixtures d. Furniture

b. Outdoor curbside signs

The Extra Expense coverage form provides a. Additional money to pay for property damage losses at a covered location b. Payment for unforeseen expenses an insured may incur while the business is shut down following a property loss c. Coverage that will permit the insured to continue in business without interruption following property damage loss d. Extra money for an insured whose accounts receivable records have been damaged

c. Coverage that will permit the insured to continue in business without interruption following property damage loss

The term burglary as used in burglary and robbery insurance, means the felonious taking of property in which of the following ways a. From within an insured premises, safe, or vault, leaving visible marks of forced entry b. From a custodian, by violence or threats of violence, or from his person or direct custody, if he has been killed or rendered unconscious c. From an armored car or the employee of an armored car d. By the threat of violence to someone inside or outside the insured premises

a. From within an insured premises, safe, or vault, leaving visible marks of forced entry

Premium rates for workers' compensation are based upon a. Per $100 of payroll b. Per 100 square feet c. Per $100 of protection d. Per diem assessments

a. Per $100 of payroll

All of the following statements are correct regarding the duties of an insured following a loss except the insured must a. Reimburse the mortgagee for its interest in the damaged property b. Protect the property from further damage c. Separate the damaged from undamaged property d. Provide immediate written notice to the company

a. Reimburse the mortgagee for its interest in the damaged property

The purpose of insurance is to a. Transfer risk from a person, business or organization to an insurance company. b. Eliminate risk by accumulating funds so the risk of loss no longer exists. c. Reduce risk by transferring funds from individuals posing a little hazard to those who pose greater hazards. d. Retain risk through the law of large numbers.

a. Transfer risk from a person, business or organization to an insurance company.

In which of the following instances would coverage be triggered under a claims made form a. When a claim is reported and filed b. When a covered employee is injured on the job c. When bodily injury to others occurs following a retroactive date, if any d. When injury or damage occurs during the policy period

a. When a claim is reported and filed

The law that says the federal government has the right to regulate insurance only to the extent it is not regulated by state law is _________. a. the McCarran-Ferguson Act. b. the Gramm-Leach-Bliley Act. c. the FCRA. d. the Violent Crime Control and Law Enforcement Act of 1994.

a. the McCarran-Ferguson Act.

The federal law that says the federal government can only regulate insurance companies to the extent they are not regulated by state law is a. The Law Enforcement Act of 1994 b. the McCarran -Ferguson Act. c. Gramm-Leach- Bliley Act d. FCRA

b. the McCarran -Ferguson Act.

Summer owns a home with a replacement cost of $150,000. For the replacement cost provisions of a homeowners contract to apply, Summer must carry how much minimum coverage? a. $90,000 b. $105,000 c. $120,000 d. $135,000

c. $120,000

Most flood insurance coverage is provided by a. Private insurance companies b. State-run programs c. A federal government program d. Surplus lines insurers

c. A federal government program

All of the following statements are correct concerning personal liability coverage provided by a homeowners policy EXCEPT a. It is generally a single limit policy b. It covers an insured's legal liability as a result of non business activities c. An insurer will not defend a liability suit that is obviously groundless d. The basic limit of coverage is $Flic

c. An insurer will not defend a liability suit that is obviously groundless

The owner of a Laundromat who dry-cleans clothing belonging to others would purchase which of the following a. Transportation Floater b. Trip transit c. Bailee policy d. Commercial floater

c. Bailee policy

If a neighbor accidentally drives his vehicle into the insured's fence, this would a. Be covered under a basic form-dwelling policy with the extended coverage perils b. Not be covered under any of the dwelling policy forms c. Be covered under the broad form-dwelling policy d. Be covered as part of the extension of coverage under all dwelling coverage forms

c. Be covered under the broad form-dwelling policy

A coverage form added to the commercial package policy that provides protection against the direct loss to buildings under construction is known as a. Rent insurance b. Legal liability c. Builder's risk coverage d. General contractor's insurance

c. Builder's risk coverage

An auto repairman forgets to replace the oil drain plug in a customer's engine that results in a loss of oil during the next several days. The loss of oil causes the engine to seize. Which of the following coverages would protect the repairman in this situation? a. Owners and contractors protective liability b. Contractual liability c. Completed operations liability d. Owners, landlords, and tenants liability

c. Completed operations liability

A business is sued because a wall constructed on its property 12 years ago collapsed and injured a child last week. Which of the following statements is NOT CORRECT? a. The current insurance company is obligated to defend the insured b. Coverage is provided under the premises and operations section of the CGL policy c. Coverage is provided under the completed liability section of a CGL policy d. The current insurance company must defend the insured if the case is arbitrated

c. Coverage is provided under the completed liability section of a CGL policy

Collision insurance covers which of the following? a. All damage to an auto struck by the insured, if the insured is legally liable b. Upset of the auto without a deductible applying c. Direct loss to the auto caused by collision with another object d. Collision of the covered vehicle with a large animal

c. Direct loss to the auto caused by collision with another object

The Turners are concerned about the burglaries that have been occurring frequently in their apartment complex. They decide it's time to buy renters insurance. This describes which of the following? a. Personal contract b. All-risk coverage c. Exposure d. Adverse selection

c. Exposure

Which of the following describes an insurance company doing business in a state other than the one where it is incorporated? a. Nonadmitted b. Domestic c. Foreign d. Alien

c. Foreign

Which of the following is responsible for the licensing of insurance agents? a. American Council of Insurers b. Interstate Commerce Commission c. Individual State Insurance Departments d. Federal Trade Commission

c. Individual State Insurance Departments

All of the following statements are correct concerning an umbrella liability policy EXCEPT it a. Provides extra limits of coverage b. Is an indemnity contract on behalf of an insured for a variety of liability losses c. Is the only liability contract an individual or business needs d. Provides coverage for exposures not covered by other policies

c. Is the only liability contract an individual or business needs

All of the following losses are covered by a personal auto policy EXCEPT a. Theft b. Glass breakage c. Liability for damage to the insured's property d. Damage to the property of others

c. Liability for damage to the insured's property

The commercial property policy condition that automatically provides broader coverage when an insurer makes revisions to a current policy edition without charging the insured additional premium is called the a. Duplicate coverage clause b. Other insurance clause c. Liberalization clause d. Assignment clause

c. Liberalization clause

Which of the following losses is covered by the inside the premises—robbery or safe burglary of other property crime coverage form a. Theft from a messenger while at the bank b. Theft by an employee c. Merchandise stolen from a custodian d. Money stolen from an employee

c. Merchandise stolen from a custodian

Which Surety bond guarantees that bills for labor and materials will be paid by the contractor to the subcontractors as they are due? a. Supply bond b. Completion bond c. Payment bond d. Performance bond

c. Payment bond

Each of the following is a producer's responsibility to the insurer EXCEPT to a. Be loyal to the insurer's interest b. Obey all legal instructions provided by the insurer c. Perform all duties regardless of the degree of care d. Keep the insurer informed of all facts related to its agency relationship

c. Perform all duties regardless of the degree of care

By entering into an insurance contract, a policy holder transfers the right of legal action against a responsible third party to the insurer. This process is known as a. Insurable interest b. Coinsurance c. Subrogation d. Abandonment

c. Subrogation

Which of the following is closely related to the concept of insurable interest? a. The concept of replacement cost b. Actual cash value c. The principle of indemnity d. Proximate cause

c. The principle of indemnity

The insured's home is covered by a DP-3. Two years ago, the insured bought the home for $58,000. Today, its replacement value is $60,000. How much Coverage A does the insured need to qualify for replacement cost coverage? a. $60,000 b. $46,000 c. $58,000 d. $48,000

d. $48,000

An insured purchased new furniture for $6,000. At the time of a fire loss, it had depreciated $2,000. The same furniture will cost $7,000 to replace. What is the actual cash value of the destroyed furniture? a. $4,000 b. $8000. c. $6000. d. $5000.

d. $5000.

According to the cancellation condition in the Common Policy Conditions form, if the insurance company is cancelling a Commercial Package policy for nonpayment of premium, the insured must be given at least how many days notice of cancellation? a. 30 b. 60 c. 14 d. 10

d. 10

If an insured and insurer disagree as to whether there is coverage under a policy which of the following processes will be utilized a. Appraisal b. Subornation c. Assignment d. Arbitration

d. Arbitration

A short term proof of insurance coverage provided to an applicant until a policy can be produced is known as a(n) a. Endorsement b. Preliminary contract c. Proposal ----> Incorrect d. Binder

d. Binder

The phrase robbery or holdup, as used in burglary and robbery insurance, means the felonious taking of property in which of the following ways a. By someone using a scheme, trick, or device designed to deprive the owner of the property b. From within an insured premises, safe, or vault, by actual force and violence, leaving visible marks of forced entry c. From insured premises left unguarded and accessible without evidence of forced entry d. By use of or threat of the use of violence with the means to carry it out

d. By use of or threat of the use of violence with the means to carry it out

All of the following are supplemental payments found in liability policies EXCEPT a. All expenses and defense costs incurred by the insurer b. Reasonable expenses incurred by an insured at the insurer's request c. Limited amounts for bail bonds and other bonds related to a claim d. Costs the insured incurs in hiring their own attorney

d. Costs the insured incurs in hiring their own attorney

What part of an insurance policy personalizes the policy as to whom and what are insured? a. Insuring Agreements b. Conditions c. Exclusions d. Declarations

d. Declarations

All of the following perils are covered by a basic property insurance policy EXCEPT a. Fire b. Internal Explosion c. Lightning d. Falling Objects

d. Falling Objects

A surety bond pays which of the following parties a. Principal b. Contractor performing the work c. Surety d. Obligee

d. Obligee

If a driver loses control of his auto and damages the fence of a neighbor, the damages will be paid for by the driver's a. Collision b. Comprehensive c. Uninsured motorist d. Property damage liability

d. Property damage liability

Jamie has an automobile policy with limits of $50,000 per person and $100,000 per occurrence. An accident occurs and two people are injured, one with $25,000 in injuries and the other with $75,000 in injuries. If Jaime is found responsible, what is the maximum amount his policy will pay for the injuries? a. $50,000 b. $75,000 c. $100,000 d. $0; the injured parties' policy will pay for their injuries

b. $75,000

Uninsured motorist coverage in an auto policy provides payments for which of the following a. Bodily injury to other parties b. Bodily injury to the insured c. Physical damage to the auto d. Bodily injury to the uninsured driver

b. Bodily injury to the insured

And the insurance policy is prepared by the insurance company with little or no input from the insured. This means that an insurance policy is a/an a. Unilateral contract. b. Contract of Adhesion. c. Personal contract. d. Contract of utmost good faith.

b. Contract of Adhesion.

Tony has a liability policy that covers his business. Sometime during the policy period a loss occurs, but Tony does NOT become aware of the loss until several years after his policy expires. Which of the following types of policies would cover the loss? a. Serial policy b. Occurrence policy c. Claims-made policy d. The loss would not be covered under any type of policy

b. Occurrence policy

What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? a. Named peril policy b. Open peril policy c. Specified peril policy d. Binder policy

b. Open peril policy

Mr. James is an employee of the county government who wants protection in case others believe he does not perform his duties adequately. Which bond should Mr. James choose to cover this exposure? a. Labor and materials bond b. Public officials bond c. Federal bond d. Fiduciary bond

b. Public officials bond

What is the primary difference between a claims-made and occurrence form of a CGL policy a. The claims made form provides coverage only for events that take place during the policy period b. The claims made policy provides coverage for claims first made during the policy period c. The occurrence form provides coverage for claims that occur after the expiration of the policy using a tail d. The occurrence form is issued with an aggregate limit and the claims made form is not

b. The claims made policy provides coverage for claims first made during the policy period

A diamond ring that is shoplifted from a jewelry store display is considered the subject of a. Mysterious disappearance b. Theft c. Robbery d. Embezzlement

b. Theft

All of the following losses would be covered by a personal auto policy EXCEPT a. A medical payment claim reported 4 years after the accident causing the injury b. Bodily injury to a passenger who owns her own auto policy c. A person injured while alighting from the insured's auto d. Injuries sustained by an insured who is struck by a car while walking across the street

a. A medical payment claim reported 4 years after the accident causing the injury

What is a hazard? a. An increase in the possibility that a loss might occur. b. The chance of a loss. c. The uncertainty about whether or not a loss might occur. d. The cause of loss. Incorrect, Please review Chapter 2 General Insurance

a. An increase in the possibility that a loss might occur.

A loss that occurs when an individual breaks into a safe and leaves visible signs of forcible entry best describes a. Burglary b. Robbery c. Mysterious disappearance d. Larceny

a. Burglary

A portion of an insurance contract that informs who and what is covered, in addition to when coverage is effective, is known as the a. Declaration page b. Insuring agreement c. Conditions d. Exclusions

a. Declaration page

The Homeowners form that provides open peril coverage on the dwelling and broad coverage on personal property is the a. HO-3 b. HO-4 c. HO-2 d. HO-6

a. HO-3

An individual who owns and lives in a condominium can obtain broad coverage for personal property in the condo under which Homeowners' form? a. HO-6 b. HO-4 c. HO-2 d. HO-3

a. HO-6

All of the following statements are correct about risk retention groups EXCEPT: a. It is federally regulated. b. It is state regulated. c. It is available to almost all businesses. d. It is a self insurance program for business groups.

a. It is federally regulated.

Which of the following is NOT considered an insurable peril? a. Losses that result from gambling b. The loss of revenue caused by the temporary closing of a business following a covered loss c. Loss that results from a fire that starts when lightning strikes a barn d. A woman injured when she falls on the wet floor of local grocery store

a. Losses that result from gambling

A farmer's crops being damaged by toxic fumes that have been escaping continuously from a factory is an example of a(n) a. Occurrence b. Accident c. Secondary cause d. Insurable interest

a. Occurrence

Which one of the following types of benefits is generally not provided by a state's workers compensation law? a. Pain and suffering b. Rehabilitation c. Disability d. Medical

a. Pain and suffering

Which one of the following types of benefits is generally not provided by a state's workers compensation law? a. Pain and suffering b. Rehabilitation c. Disability d. Medical

a. Pain and suffering

Which of the following describes actual cash value? a. Replacement cost-depreciation b. Agreed amount c. Cost to repair or replace d. Market value-depreciation

a. Replacement cost-depreciation

Employee theft coverage would provide for a. The loss of money by a company officer b. The loss of securities due to the robbery of a safe c. Damage to the premises caused by a fire started by a burglar d. The loss of use of property taken in a robbery

a. The loss of money by a company officer

Which of the following commercial liability policy versions covers injuries sustained during a policy period even if the claim is not actually filed years after the policy has been cancelled? a. Claims made form b. Occurrence form c. Premises form d. Contractual liability form

b. Occurrence form

If Scott and Wendy file bankruptcy, which of the following is TRUE regarding their insurance policy a. Scott and Wendy can abandon their property to the insurance company because they no longer have an insurable interest. b. The insurer's responsibilities are not eliminated. c. The mortgage company loses its interest in the property. d. Scott and Wendy's interest in their property is excess over any other creditors.

b. The insurer's responsibilities are not eliminated.

The renewal fee for a Louisiana producer license is a. $100 b. $5000 c. $50 d. $250

c. $50

The pair and set clause found in property insurance policies states that in the event of a loss to only part of a pair or set, losses will be settled a. As if the entire pair or set had been destroyed b. At the proportionate amount of the stated value c. Either by repairing or replacing the damaged part or by paying the difference between the actual cash value before and after the loss d. Based on the actual cash value of the individual part

c. Either by repairing or replacing the damaged part or by paying the difference between the actual cash value before and after the loss

An employee of an insured is injured on the job. Coverage would be provided under which of the following products? a. CGL b. BOP c. Workers' Compensation d. Fidelity bond

c. Workers' Compensation

Which of the following insurance principles permits a policy holder to be reimbursed for losses experienced? a. Subrogation b. Insurable interest c. Direct loss d. Indemnification

d. Indemnification

A commercial general liability policy provides coverage for a. Bodily injury to an employee b. Damage to property owned by an insured c. Bodily injury caused by an auto accident d. Liability for slander

d. Liability for slander

The purpose of a binder is to a. Guarantee that an insurance policy will be issued provided the insured has made no misrepresentations on the application b. Provide the insurance company with the information about the insured required to decide whether or not to issue the policy c. Eliminate the need for the policy to be countersigned when it is issued d. Provide temporary protection for the insured between the time the application is made and the policy is issued or the binder expires

d. Provide temporary protection for the insured between the time the application is made and the policy is issued or the binder expires

Which one of the following is NOT an element of insurability? a. Loss must be calculable b. Risk of loss must represent a financial hardship c. Cost of insurance must not be catastrophic d. Risk of loss is a speculative risk

d. Risk of loss is a speculative risk

For a contract to be valid, the parties involved must be competent to contract. Each of the following is considered a competent party EXCEPT a. A 21 year-old man b. A foreigner c. Someone whose principal aim is to make a profit d. Someone who is not sane

d. Someone who is not sane

An insurance contract does which of the following a. Eliminates risk by accumulating funds b. Makes risk predictable by transferring funds c. Eliminates risk by transferring funds d. Transfers risk by accumulating funds

d. Transfers risk by accumulating funds

Personal business property out in the open is covered under a commercial property policy only while a. Located within eyesight of the described premises b. Specifically described on the declarations c. Within 50 feet of the described premises d. Within 100 feet of the described premises

d. Within 100 feet of the described premises