P&C Guarantee Exam CA

Business auto coverages apply only to those autos that are identified as covered autos in the declarations by entry of the appropriate numerical symbol. Which symbol affords the broadest coverage? 1. 1 2. 2 3. 7 4. 9

1. 1 "Symbol 1 provides coverage for the insured's exposure on any auto."

Which of the following is the cause of loss? 1. Peril 2. Hazard 3. Exposures 4. Risk

1. Peril "Perils are the cause of loss."

An individual skilled in the process of selecting risks that will not create adverse selection for an insurance is called 1. Actuary 2. Underwriter 3. Adjuster 4. General agent

2. Underwriter "An underwriter's function is to observe applications for insurance and determine who can be insured under which classification and rates"

Which of the following entities conducts a post-selection process? 1. The Commissioner 2. Medical Information Bureau 3. Underwriters 4. Producers

3. Underwriters

An individual just applied for National Flood Insurance. How many days can she expect to wait before coverage is effective? 1. 20 2. 30 3. 45 4. 60

2. 30 "There is a 30-day waiting period after the application has been accepted before coverage is effective except during the first 30 days after a community enters the emergency or normal programs"

All of the following are additional coverages under a homeowners policy EXCEPT 1. Payment for reasonable repairs and debris removal following a covered loss 2. Outbuildings 3. Fire department service charge 4. Coverage for trees, shrubs, and other plants

2. Outbuildings "Outbuildings are covered under Coverage B - Other Structures"

Which of the following is consideration on the part of an insurer? 1. Paying the premium 2. Underwriting 3. Paying a claim 4. Decreasing premium amounts

3. Paying a claim

With respect to the commercial package policy, an interline endorsement is one that 1. Never applies to all of the lines of insurance that is included in the package 2. Applies to all of the lines of insurance that are included in the package 3. Applies to only one line of insurance that is included in the package 4. May apply to more than one line of insurance that is included in the package

4. May apply to more than one line of insurance that is included in the package "Interline endorsements are those that apply, or could apply, to more than one coverage part on a CPP. They are prepared to eliminate redundancy and to minimize the number of endorsement in the package."

According to homeowners Coverage A, how much of a house's value must be insured in order to qualify for replacement coverage? 1. 50% 2. 75% 3. 80% 4. 85%

3. 80%

A performance bond is an example of which of the following types of bonds? 1. Judicial 2. Fiduciary 3. Injunction 4. Contract

4. Contract "A performance bond guarantees that the principal will complete the contract as agreed upon and is a type of contract bond."

What kind of coverage does Form DP-3 provide? 1. Basic peril 2. Named peril 3. Broad peril 4. Open peril

4. Open peril "DP-3 provides open peril coverage for structures insured under Coverages A and B"

A structure may be eligible for coverage under the National Flood Insurance Program if it meets all of the following requirements EXCEPT 1. Is not located within the Coastal Barrier Resource System 2. Has 2 solid walls and a roof 3. Is principally above ground 4. Is entirely over water

4. Is entirely over water "An eligible structure must have 2 solid walls and a rood, be principally above ground, and not entirely over water. Certain restrictions also apply to properties if located within areas defined by the federal government as part of the Coastal Barrier Resource System or as an Otherwise Protected Area."

Statistical probabilities of loss for a particular class of insureds is best predicted when the insured group is 1. Diverse 2. Older 3. Smaller 4. Larger

4. Larger

The basis of insurance is sharing which of the following among the members of a large homogeneous group with similar exposure to loss? 1. Hazards 2. Perils 3. Loss 4. Risk

4. Risk

At the expiration (or cancellation) of a claims-made policy, the insured is guaranteed to have an option to purchase a/an 1. Basic extended reporting period 2. Extended Hold harmless insurance endorsement 3. Extended supplemental limits of insurance 4. Supplemental extended reporting period

4. Supplemental extended reporting period "Once the basic extended reporting period takes effect, the insured is guaranteed the option to purchase supplemental extended reporting period coverage"

The insured's guest cottage, which is insured under his farm policy, is being rented by a young couple. When one of the renters is injured in the rented property, the insured files a claim under his farm liability coverage. How will the coverage respond? 1. The claim will be covered in full 2. The claim will be covered, but the benefits will be reduced 3. The claim will be covered only if the insured agrees to certain conditions 4. The claim will not be covered

4. The claim will not be covered "Rental or holding for rental of an insured location is excluded from coverage in farm policies."

Which of the following best depicts the law of large numbers? 1. Larger groups produce healthier applicants 2. Large groups offer less opportunity for loss 3. The larger the group is, the more likely it will be to get a good choice 4. The larger the pool of risks under study, the more accurate the predictions will be

4. The larger the pool of risks under study, the more accurate the predictions will be

All of the following are reasons an organization will stop being an entity eligible to hold a license EXCEPT 1. The termination of an association 2. The dissolution of a corporation 3. The dissolution of a partnership 4. The termination of a key employee

4. The termination of a key employee "An organization may survive the loss of a key employee, but it would not survive any of the other scenarios"

Which of the commercial property form is used to insure buildings while under construction? 1. Builders risk 2. Legal liability 3. Building and personal property 4. Business income

1. Builders risk

The statutory law defense that reduces injury and awards for damages proportionately when the plaintiff and defendant are both responsible is called 1. Comparative negligence 2. Assumption of risk 3. Intervening cause 4. Contributory negligence

1. Comparative negligence "In comparative negligence, the amount awarded to the claimant is based upon the percentage of fault of the defendant."

Lost treasures has a guard dog in a fenced lot to protect the salvage yard. The dog scared a passerby, who now claims that it was a traumatic experience and that he now suffers from recurring nightmares. A claim for personal injury of $5,000 is filed against Lost Treasures. Why will the personal and advertising injury liability section (Coverage B) of the CGL policy cover this claim? 1. Mental anguish is a covered injury 2. Animals are excluded from coverage 3. The injury was expected or intended 4. The occurrence was of premises

1. Mental anguish is a covered injury "Mental anguish is a covered injury under personal and advertising injury liability. Of course, documentation from a licensed practitioner that mental trauma has indeed resulted from this incident will be required prior to coverage."

An insurance agent visits a potential client and explains various types of policies. The customer displays a lack of interest, so the agent guarantees higher dividends than he knows would be possible. Which term describes what the agent has done? 1. Misrepresentation 2. Rebating 3. Twisting 4. Defamation

1. Misrepresentation

Your friend's dog that you are keeping while the friend is out of town bit a visitor in your home. Does your homeowners liability coverage apply? 1. Yes, the coverage would apply for any animal in your care 2. Yes, if the visitor has no health coverage 3. No, because the dog is not yours 4. No, because injury to others by animals is not covered

1. Yes, the coverage would apply for any animal in your care "Personal liability coverage in Section II will respond to any claim made against an insured for damages due to bodily injury or property damage. Your liability coverage would apply to damage caused by your animals, as well as any other animals in your care."

Which of the following could be insured with replacement cost coverage under the flood insurance program? 1. A shed 2. A single-family home 3. A garage 4. An apartment building

2. A single-family home "A single-family home will be insured with replacement cost coverage if it is insured to at at least 80% of its replacement value. All other buildings will be insured on an actual cash value basis."

A house insured with a homeowners policy has been blown off its foundation by a tornado. It must be demolished and removed so a replacement house can be built. Which of the following is true about debris removal? 1. HO policies do not cover debris removal 2. An additional 5% of the policy limit may be paid for debris removal 3. Because the full policy limit must be paid for the house, there is no coverage for debris removal 4. It will be paid if the debris removal endorsement has been added

2. An additional 5% of the policy limit may be paid for debris removal "Debris removal is not an additive coverage; it is part of the policy limit. However, when the amount of loss plus the cost to remove debris exceeds the policy limit, an additional 5% of the limit may be paid for debris removal."

Which of the following is a licensee able to place insurance with unauthorized insurers? 1. Reinsurance broker 2. Surplus lines broker 3. Mutual insurer 4. Managing general agent

2. Surplus lines broker

The California Insurance Commissioner may deny an application for license for all of the following reasons EXCEPT 1. The applicant is not properly qualified to perform the duties 2. The applicant does now have a California business address 3. The applicant does not have a good business reputation 4. The applicant transacted insurance prior to the issue of the license

2. The applicant does now have a California business address "Having a California business address is not a prerequisite qualification for holding a license. For example, an individual could apply independently and not be sponsored by an insurance company, or an agent who is licensed and lives in another state and they apply for the California nonresident license."

Which of the following statements is CORRECT regarding business income coverage under the businessowners policy (BOP)? 1. The business income coverage has a monthly limitation and a set benefit period 2. The business income losses are payable for 12 consecutive months following the occurrence 3. The business income coverage is subject to coinsurance limitations of 50% 4. The business income coverage has an aggregate dollar limit

2. The business income losses are payable for 12 consecutive months following the occurrence "Under the BOP, business income losses are payable for only 12 consecutive months following the occurrence of the direct physical damage"

To determine the actual cash value of an insured property, what must be deducted form the current replacement cost? 1. Stated value 2. Fair market value 3. Depreciated value 4. Agreed value

3. Depreciated value "When determining cash value, depreciation must be subtracted from the current replacement cost."

Which of the following exposures is NOT covered under a homeowners policy? 1. Bodily injury to others 2. Personal liability 3. Medical payments to an insured 4. Unscheduled personal property damage

3. Medical payments to an insured "Section II of the homeowners policy provides medical payments to others but excludes coverage for the payment of medical expenses of an insured."

What coverage in the farm policy insures equipment on an open peril basis? 1. Farm property 2. Farm liability 3. Mobile agriculture machinery and equipment 4. Livestock

3. Mobile agriculture machinery and equipment "The mobile agriculture machinery and equipment coverage form is used to insure eligible equipment on an open perils basis, subject to policy limitations and exclusions."

Which of the following is NOT an example of the company's location of incorporation? 1. Domestic 2. Foreign 3. Alien 4. Authorized

4. Authorized "Insurance companies are classified as to the location of incorporation into domestic, foreign and alien"

An insured intentionally did not disclose a material fact on an application for insurance. This would be considered 1. Coercion 2. Avoidance 3. Misrepresentation 4. Concealment

4. Concealment "Concealment is the legal term for the intentional withholding of information of a material fact that is crucial in making a decision. In insurance, concealment is the withholding of information that will result in an imprecise underwriting decision."

A liability policy that provides coverage for a claim for injury or damage only if the claim is first reported or filed against the insured during the policy period is called 1. Claims-made form 2. Occurrence form 3. Premises coverage 4. BI/PD form

1. Claims-made form

Which of the following best depicts the law of large numbers? 1. Large groups offer less opportunity for loss. 2. The larger the group is, the more likely it will be to get a good choice. 3. The larger the pool of risks under study, the more accurate the predictions will be 4. Larger groups produce healthier applicants

3. The larger the pool of risks under study, the more accurate the predictions will be "Actuaries utilize the law of numbers to set premium rates. It is more likely for similar results to occur if a larger group is studied."

Which of the following is NOT one of the three other coverages available with the personal liability supplement? 1. Damage to the property of others 2. Bankruptcy 3. Claims expense 4. First aid to others

2. Bankruptcy

in the event a notice sent to an insured's email is not received, an insurer must either confirm the insured's email or send a notice by regular mail within 1. 5 business days 2. 7 business day 3. 10 business days 4. 30 business days

1. 5 business days "If a notice sent electronically is not received by an insured, an insurer must confirm the insured's email on file or send the notice by mail within 5 business days."

For there to be negligent liability, all of the following must exist EXCEPT 1. A reasonable expectation that the act may cause injury or damage 2. A breach of the legal duty which results in injury or damage to another person 3. A legal duty to act, or not to act, under the circumstances 4. Proximate cause between the wrong and the injury or damage

1. A reasonable expectation that the act may cause injury or damage "Liability insurance covers injury or damage to others that is neither intended nor expected by the insured"

Other than perils, the difference in the three DP forms is in coverage provided. Which of the following coverage options is covered by the DP-2 and DP-3 but not DP-1? 1. Coverage E - Additional Living Expense 2. Coverage A - Dwelling 3. Coverage B - Other Structures 4. Coverage D - Fair Rental Value

1. Coverage E - Additional Living Expense "Coverage E - Additional Living Expense must be obtained through an endorsement in a DP-1 policy."

All of the following are ways to handle EXCEPT 1. Elimination 2. Avoidance 3. Reduction 4. Transfer

1. Elimination "Risk cannot be eliminated"

Which of the following is covered under a dwelling policy? 1. Fire caused by an earthquake 2. Freezing plumbing systems 3. Flood or surface water 4. Structures used for commercial manufacturing

1. Fire caused by an earthquake "Freezing plumbing systems and losses by flood, surface water, and earthquake specifically are excluded. However, fire and explosion that result from an earthquake, and damage caused by human or animal forces would be covered. Structures used for commercial or farm purposes are not eligible for coverage."

An applicant for property insurance owns a building in which combustible materials are stored in the furnace room. From an underwriting standpoint, this risk would like be considered a 1. Morale hazard 2. Speculative risk 3. Moral hazard 4. Physical hazard

1. Morale hazard

Which of the following is NOT one of the independent rating services that publishes guides to insurance companies financial integrity? 1. NAIC 2. Fitch 3. AM Best 4. Moody's

1. NAIC

Insurance provides a means to 1. Transfer a loss 2. Retain a loss 3. Avoid a loss 4. Eliminate a loss

1. Transfer a loss

How long does the removal coverage remain in effect under the standard fire policy? 1. 30 days 2. 5 days 3. 10 days 4. 15 days

2. 5 days

What policy would a business owner whose business fills scuba tanks most likely need to insure unfired pressure vessels and compressors? 1. Contractors equipment floater 2. Equipment breakdown 3. Inland marine scuba floater 4. Commercial general liability

2. Equipment breakdown "Equipment breakdown coverage is for high-pressure systems"

Which of the following will be covered by businessowners property coverage form? 1. Aircraft and vehicles 2. Outdoor fences 3. Buildings and business personal property 4. Money and securities

3. Buildings and business personal property

Which homeowners form provides open peril coverage for dwelling (Coverage A) and contents (Coverage C)? 1. Form 2 2. Form 3 3. Form 5 4. Form 8

3. Form 5

During an ocean marine adventure, you are forced to jettison a piece of cargo to save the rest of the cargo to save the rest of the cargo and the ship. This is considered 1. A salvage loss 2. Sue and labor 3. A particular average 4. A general average

4. A general average

Which part of the policy clarifies the terms that are used throughout the policy? 1. Conditions 2. Insuring agreement 3. Declarations 4. Definitions

4. Definitions

Which would NOT be covered by an insured's uninsured motorist coverage? 1. The insured's neighbor borrowed the insured's car and was hit by an uninsured motorist 2. The insured's car is hit by someone who auto insurer is insolvent 3. The insured's son is struck by a hit-and-run driver 4. The insured causes a head-on collision with the car of an uninsured motorist

4. The insured causes a head-on collision with the car of an uninsured motorist

What type of policy, which may be added by endorsement of purchased separately, may an insured purchase in order to provide coverage for other types of contracts? 1. A contractual liability policy 2. A term life policy 3. An other coverages policy 4. An added endorsement policy

1. A contractual liability policy "In order to provide coverage for other types of contracts, the insured may purchase a contractual liability policy, which may be added by endorsement or purchased separately. With this coverage, the insurer agrees to pay for bodily injury or property damage liability that the insured has agreed to assume under a written contractual agreement"

The limited theft endorsement designed for a landlord excludes all of the following EXCEPT 1. A lawnmower the landlord owns and keeps at rented premises 2. Jewelry stolen from the landlord's home 3. Money stolen from the tenant's apartment 4. Silverware stolen from the landlord's china cabinet

1. A lawnmower the landlord owns and keeps at rented premises "This form completely excludes coverage for money, deeds, bank notes, gold and silver, securities, accounts, tickets, stamps, etc;, jewelry, watches, furs, and precious and semi-precious stones;"

An insured just purchased an auto policy for his new car. He wants to understand what perils are not insured against. Which section of his policy should the insured check? 1. Exclusions 2. Insuring agreement 3. Declarations 4. Definitions

1. Exclusions "The exclusion section of an insurance policy details what perils are not insured against and what persons are not insured"

When may a representation be withdrawn by the applicant? 1. Only before the insurance is in effect 2. Only after the insurance is in effect 3. At any time as long as all parties agree 4. It can never be withdrawn once submitted

1. Only before the insurance is in effect "A representation may be altered or withdrawn before the insurance goes into effect, but not afterwards"

The commercial general liability Coverage Part A - Bodily Injury and Property Damage provides coverage for which of the following? 1. Premises 2. Hired autos 3. Employers 4. Machinery

1. Premises "Premises, operations, products, and completed operations coverage are included in a general liability coverage part"

An insured's child ran into a neighbor's planter on his bicycle and broke the planter and ruined the plants. The cost to replace the planter was $400, and the cost to replace the plants was $100. Which section of the insured's homeowners policy would pay? 1. Section II with no deductible 2. Section I with no deductible 3. Section I, subject to the deductible 4. Section II, subject to the deductible

1. Section II with no deductible "Under Section II - Additional Coverage Damage to Property of Others, the policy would provide replacement cost coverage up to $1,000 to pay for damage to property of others caused by an insured"

An insured was having a new home built. While digging the footings for the foundation, the contractor struck a solid rock formation and found that was necessary to blast the formation in order to remove the rocks. The force of the blast broke several windows and some chinaware in a neighbor's home several blocks away. Who pays for this damage? 1. The contractor 2. The neighbor's insurer 3. The insured's insurer, if the neighbor proves that the insured was negligent 4. The insured's insurer, regardless of negligence

1. The contractor "Most states impose absolute liability when a person's actions are determined to be against public policy. Damage caused by the use of explosives or damage caused by harboring poisonous snakes or wild animals are examples. The neighbor would not need to prove negligence; he would only need to prove that the damage occurred."

The commercial crime coverage that would provide coverage for theft by the insured's employees is 1. Computer Fraud 2. Employee Theft 3. Funds Transfer Fraud 4. Forgery or Alteration

2. Employee Theft "Employee Theft covers loss by theft if committed by the insured's employees"

Which of the following would be considered a covered auto on your personal auto policy? 1. Your farm wagon being towed by your tractor 2. Your farm wagon being towed by your pick up truck 3. Your pickup truck used for deliveries of your retail business 4. Your farm tractor

2. Your farm wagon being towed by your pick up truck

Coverage E (Personal Liability) and/or Coverage F (Medical Payments to Others) would respond to a claim arising from all of the following situations EXCEPT 1. An insured's boat stored in the garage slips off of its supports and injures a visitor 2. An insured's dog left in the care of a friend bites a salesman 3. An insured's 14-year-old son was throwing rocks at the neighbor's house and broke several windows 4. While sweeping the floors, an insured's resident maid trips and falls down the stairs, breaking her leg

3. An insured's 14-year-old son was throwing rocks at the neighbor's house and broke several windows "Intentional damage by any insured, age 13 years or older, is not covered"

Which of the following perils is NOT covered the DP-2? 1. Damage caused by the weight of ice and snow 2. Damage caused by falling objects 3. Damage to pets, birds, or fish 4. Damage caused by burglars

3. Damage to pets, birds, or fish

The garage coverage form is written to cover the insurance needs of an insured in the business of selling, repairing, servicing or storing automobiles. Which of the following coverages are not included in a garage policy? 1. Premises and operations liability 2. Product liability 3. Physical damage on a customer's auto 4. Auto liability

3. Physical damage on a customer's auto "The garage policy has a care, custody and control exclusion which would eliminate coverage for any damage to a customer's auto. This exposure would need to be covered under a garagekeepers policy."

The defendant being released on a surety bail bond is the 1. Obligee 2. Insured 3. Principal 4. Surety

3. Principal "The defendant has made a promise to show up in court at the specified time. The principal makes a promise to perform."

What is the main distinction between between a hired auto and a nonowned auto? 1. The length of time the insured uses the auto 2. The amount of premium 3. Whether a payment is made for the use of the auto 4. Who owns the auto

4. Who owns the auto

Which of the following would be considered a peril? 1. Fire 2. Smoking 3. Driving too fast for conditions 4. Playing golf in a thunderstorm

1. Fire "Fire is a peril (a cause of loss). Hazards increase the chance a peril could occur"

In order to receive transportation expenses under the personal auto policy following damage to an auto caused by collision, an insured must have 1. Collision coverage 2. Uninsured motorist property damage 3. Supplementary payments 4. Other-than-collision coverage

1. Collision coverage The policy will pay $20 a day for a maximum of $600 for autos that cannot be used for more than 24 hours because of damage caused by collision only if the declarations page of the policy indicates that collision coverage is provided for that auto.

If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising? 1. Retention 2. Transfer only 3. Avoidance 4. Sharing

1. Retention

When reviewing a standard workers compensation and employers liability policy, the limits of coverage are described in Part One of the policy. The dollar limits of the benefits provided are stated 1. In the state workers compensation law itself 2. On the face of the policy declarations page 3. In Line Item 3(A) of the policy information page 4. In paragraph 1 of Part One as directed by law

1. In the state workers compensation law itself

What does HO personal property coverage NOT cover? 1. Personal property of roomers not related to the insured 2. The spouse's personal property 3. The insured's personal property in another country 4. The resident's son's personal property

1. Personal property of roomers not related to the insured "Contents coverage does not apply to people who pay to be at the insured's home-tenants, renters, or boarders."

Which of the following would NOT be covered under the directors and officers liability coverage? 1. Reimbursement for fines and penalties 2. Wrongful acts while directors and officers are acting in an official capacity 3. Neglect and breach of duty 4. Misstatements made by the directors and officers

1. Reimbursement for fines and penalties "Directors and officers liability policies will pay only for damages that the corporation would, under the law, be required to reimburse the individual director or officer. The policy generally will not pay for fines, penalties, or punitive damages."

Which of the following types of bonds guarantees that a supplier will furnish supplies, materials, products, and equipment as specified in the written contract? 1. Supply bond 2. Labor and materials bond 3. Performance bond 4. Bid bond

1. Supply bond

A personal auto policy has the limits of 15/30/5. What is the least amount he policy will pay for the bodily injury to one person? 1. $5,000 2. $15,000 3. $30,000 4. $50,000

2. $15,000

All of the following are eligibility criteria for the low cost automobile program EXCEPT 1. The vehicle's value 2. Any felony convictions 3. The income level 4. The insured drivers age

2. Any felony convictions "Only felonies or misdemeanors related to violations of the Vehicle Code would be consider an eligibility factor"

Under Coverage B - Other Structures, a homeowners policy provides coverage for other structures on the residence premises. Which of the following statements is NOT true of this coverage? 1. Other structures may not be used to store business property of others, even though a business is not conducted from the structure 2. Any loss paid under Coverage B reduces the Coverage A limit of liability 3. Other structures covered under Coverage B must be set apart from the dwelling by clear space 4. A detached garage may be covered if rented to others as a private garage

2. Any loss paid under Coverage B reduces the Coverage A limit of liability "The automatic limit for Coverage B is 10% of the limit of liability that applies to Coverage A. Use of this coverage does not reduce the Coverage A limit of liability."

When Jane and her insurer could not agree on the amount of liability loss after her accident, the settlement was submitted to someone whose decision was then binding on both parties. What condition did Jane use? 1. Third party 2. Arbitration 3. Appraisal 4. Fair Value

2. Arbitration

All of the following statements about mutual insurance companies are correct EXCEPT 1. Mutual companies issue policies referred to as participation 2. Policy dividends issued by mutual companies are guaranteed and not taxable 3. Dividends allow policyholders to share in a mutual company's divisible surplus 4. Dividends are a return of unused premiums

2. Policy dividends issued by mutual companies are guaranteed and not taxable

An insured was backing his car out of the driveway and hit a fire hydrant. the automobile sustained $1,300 of damage. The insured's auto policy has a $500 deductible. Which of the following is true? 1. The insured will pay all but $500 of any claims he makes on his policy 2. The insured is responsible for the first $500 of any claim that he makes on his policy 3. The insured is responsible for the total of $500 on claims made for the calendar year on the policy 4. The insured will receive a $500 discount on all repair work that is contracted by his insurer

2. The insured is responsible for the first $500 of any claim that he makes on his policy

All of the following are true about the cancellation provision of a commercial insurance policy EXCEPT 1. The insured may cancel the policy at any time by mailing or delivering written notice of cancellation to the insurer 2. The insurer is required to provide proof that the insured received the cancellation notice prior to cancelling the policy 3. The insurer is required to give advance notice of its intended cancellation to the isnrued 4. The insurer may cancel the policy by mailing or delivering written notice of cancellation to the first named insured

2. The insurer is required to provide proof that the insured received the cancellation notice prior to cancelling the policy

If the premiums collected by an insurer participating in the WYO flood insurance program are insufficient to cover losses, which of the following would be true? 1. Federal Insurance Administration will remove the insurer from the NFIP 2. The insurer will be reimbursed for the excess costs by the NFIP 3. The insurer must cover the loss out of its suprlus 4. The insurer must apply for disaster relief funds.

2. The insurer will be reimbursed for the excess costs by the NFIP

In a personal auto policy, underinsured motorist coverage applies when? 1. You are involved in an auto accident with another motorist who is at fault and does not have any insurance 2. You are injured in an auto accident with another motorist who is at fault but has limits of insurance that are not adequate to cover your medical expenses 3. You are not involved in an auto accident and then discover that your insurance company is insolvent 4. You are at fault for an auto accident with another motorist, but your limits are not adequate to pay for all of the damage

2. You are injured in an auto accident with another motorist who is at fault but has limits of insurance that are not adequate to cover your medical expenses

An insured and his spouse were traveling down an icy road and hit a sign, accumulating $1,350 damage to their car. They have a $250 deductible. They already collected on a $1,500 claim earlier this year. How much will they collect on this claim? 1. $0 2. $250 3. $1,100 4. $1,350

3. $1,100 "They will collect the difference between this claim and the amount of their deductible, which equals $1,100. Collision deductibles apply to every collision."

The businessowners policy (BOP) extension coverage form for personal property off-premises is limited to 1. $2,500 2. $5,000 3. $10,000 4. $15,000

3. $10,000 "The personal property off-premises extension under the businessowners policy is limited to $10,000"

Farmer Steve's shed has been vacant for an entire year. When he files a claim to cover some recent damage to the shed, how much will his farm policy pay? 1. Nothing 2. 50% of half of the limit of insurance, or 25% 3. 50% of the limit of insurance 4. All of the cost, up to the limit of insurance

3. 50% of the limit of insurance "If a building or structure is vacant or unoccupied for more than 120 consecutive days, the limits of insurance applicable to the building and its contents are reduced by 50%"

Under a commercial general liability policy, which of the following is NOT considered mobile equipment? 1. The Department of Transportation's resurfacing equipment 2. The bulldozer used by an excavating company 3. An automobile used as a company car by a real estate company 4. A combine used on a farm

3. An automobile used as a company car by a real estate company "Mobile equipment is defined as bulldozers, farm machinery, forklifts and other vehicles, including attached equipment, designed for use off public roads' vehicles maintained for use solely on or next to the insured premises; vehicles that travel on crawler treads; vehicles used primarily to provide mobility to power cranes, shovels, loaders, diggers, drills; any other road construction or resurfacing equipment."

Which of these would be covered by the medical payments coverage in a personal auto policy? 1. A runaway shopping cart in a mall parking lot knocks an insured down, breaking his leg 2. An insured trips over the curb while crossing the street on the way to her car and sprains a wrist 3. An insured slams a hand in a car door while getting in, breaking the hand 4. An insured falls down while water-skiing and is run over by a boat

3. An insured slams a hand in a car door while getting in, breaking the hand "Auto medical payments coverage applies while in, on, entering, or leaving a car"

Which valuation method takes into consideration what a willing buyer would pay for an insured property? 1. Actual cost value 2. Functional replacement value 3. Market Value 4. Replacement value

3. Market Value "If property is insured for market value, it is insured for what a willing buyer would pay prior to a loss"

Which statement best describes agreement as it relates to insurance contracts? 1. All parties must be capable of entering into a contract 2. Each party must offer something of value 3. One party accepts the exact terms of the other party's offer 4. The intent of the contract must be legally acceptable to both parties

3. One party accepts the exact terms of the other party's offer "In insurance contracts, there must be a definitive offer by one party, and this offer must be accepted in its exact terms by the other party. Agreement includes both an offer and its acceptance"

Insurance contracts are unilateral in nature. What does that mean? 1. All parties to the contract exchange something of value 2. A promise is made only at the time of policy application 3. Only one party makes a promise 4. The insured must make a promise to pay the premium

3. Only one party makes a promise "In a unilateral contract, only one of the parties to the contract is legally bound to do anything. The insured makes no legally binding promises. However, an insurer is legally bound to pay losses covered by a policy in force."

The extended nonowned coverage provides protection to 1. The person named and his or her spouse only 2. Anyone who is given permission to drive by the named insured 3. Only the person(s) named on the policy 4. The person named on the policy and all residence family members

3. Only the person(s) named on the policy

Who acts on behalf of the principal? 1. Insurer 2. Insured 3. The State 4. Agent

4. Agent "An agent acts on behalf of the principal, who is the entity that the agent represents in contractual agreements with third parties."

In a DP-1 if the insured elects to apply Coverage B to a detached garage, Coverage A will 1. Only be applicable if the insured pays a higher deductible 2. Only be applicable if the insured pays an additional premium 3. Be increased by 10% 4. Be reduced by 10%

4. Be reduced by 10% "Coverage B - Other Structures applies 10% of Coverage A to a detached structure"

What part of the insurance contract describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured? 1. Exclusions 2. Declarations 3. Conditions 4. Insuring agreement

4. 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"

The broad cause of loss form in the commercial property policy contains three perils in addition to the basic form perils. Which of the following is NOT one of those three perils? 1. Water damage 2. Weight of snow, ice, or sleet 3. Falling objects 4. Utility services

4. Utility services "Falling objects, weight of snow, ice, or sleet, and water damage are the three perils added in the broad form. Utility services is specifically excluded"

A pair of insureds run a travel business out of their home. Due to the terrorist acts that have occurred recently, the insureds want to get a property and liability policy that will cover their home-based business. A plan that is suitable for their needs would be a 1. Standard homeowner's policy is the ONLY plan available 2. Travel insurance policy 3. Commercial travel liability policy 4. Home-based business policy endorsement

4. Home-based business policy endorsement "The home-based business endorsement provides a wider range of coverages than standard homeowner's policy that includes property and liability coverage normally found in a commercial insurance policy"

A homeowner sets a fire in a fireplace, but a log rolls out, doing fire damage to the living room. Under the Standard Fire Policy, this would be classified as 1. Indirect fire 2. Second-tier fire 3. Friendly fire 4. Hostile fire

4. Hostile fire "Under the Standard Fire Policy, hostile fire is a fire that escapes its intended confines. Although not specifically stated in the Standard Fire Policy, coverage is provided for loss by hostile fires, only."

Section III of the business auto policy provides physical damage coverage. All of the following are physical damages that may be selected coverages EXCEPT 1. Specified causes of loss coverage 2. Comprehensive coverage 3. Collision coverage 4. Limited peril coverage

4. Limited peril coverage "Comprehensive coverage is the same as other-than-collision coverage of the personal auto policy. Collision coverage is the same as that coverage in the personal auto policy. Specified causes of loss cover fire, lighting, explosion, theft, windstorm, hail, earthquake, flood, or the sinking, burning, collision, or derailment or a conveyance transporting the covered auto only."

Which of the following is NOT available in a package policy? 1. Business auto liability 2. Fire legal liability 3. Medical payments 4. Professional liability

4. Professional liability "Business auto liability is optional. Fire legal liability and medical payments are included, but professional liability is not included."

Coverage D, additional living expenses, is intended to 1. Pay a set amount per day. 2. Pay hotel costs but not the cost of meals or transportation 3. Pay all expenses incurred by a family who cannot use their home because of a covered loss 4. Allow the family to maintain their normal standard of living

4. Allow the family to maintain their normal standard of living

What information is found in the conditions part of an insurance policy? 1. The description of the duties and obligations of the insured 2. The persons or risks not covered under the policy 3. The identity of the named insured 4. The amount of coverage provided by the policy

1. The description of the duties and obligations of the insured "The conditions part of an insurance policy describes the obligations of both the insurer and the insured with respect to the policy."

If the ocean marine contract insures the property for an amount agreed to by the insured and insurer at the time the contract is made, it is considered 1. A valued contract 2. A replacement cost contract 3. A demurrage contract 4. An indemnity contract

1. A valued contract "If the insurer and insured agree upfront on what will be paid in the event of a total loss, it is a valued contract"

Which of the following would NOT be eligible for coverage under a personal auto policy? 1. A vehicle purchased 90 days ago 2. A vehicle listed on the declarations page 3. A nonowned temporary substitute vehicle 4. A trailer owned by the insured

1. A vehicle purchased 90 days ago "A covered auto includes automobiles listed in the declarations, owned trailers, newly acquired autos (for 30 days), nonowned temporary substitute vehicles, and additional temporary vehicles due to repair, servicing, breakdown, or loss"

All are legal defenses against a claim of negligence EXCEPT 1. Absolute liability 2. Intervening cause 3. Contributory negligence 4. Assumption of risk

1. Absolute liability "Absolute liability is imposed on one who owns something that is or does something that is inherently dangerous. An injured party does not need to prove negligence."

Which of the following statements does NOT describe endorsements? 1. Endorsements may only add coverage to a current policy, not remove 2. Endorsements may be added during the policy term 3. Endorsements are printed addenda to a policy 4. Endorsements must be signed by an executive officer

1. Endorsements may only add coverage to a current policy, not remove "Endorsement can be used to correct items, add coverage or delete coverage from an existing policy. This may be done when the policy is issued or during the policy term. When added, the written endorsement must be signed by an executive officer of the insurer and attached to the policy."

Restoring an insured financially after a claim is known as 1. Indemnity 2. Adhesion 3. Restoration 4. Reasonable expectations

1. Indemnity "Under indemnity, an insured or a beneficiary is permitted to collect only to the extent of the financial loss"

All of the following statements are true regarding the Mexico Coverage Endorsements in personal auto policies EXCEPT 1. It provides full liability coverage 2. It applies only to accidents which occur within 25 miles of the U.S. border. 3. It applies only if the insured is in Mexico for no more than 10 days 4. It provides limited coverage

1. It provides full liability coverage. "The insured is required to purchase liability coverage through a Mexican insurer and coverage will only apply as excess over other collectible insurance. All the other statements are true."

Insurance rates developed by the underwriter based on his skill and experience instead of actuarial analysis are known as 1. Judgement rates 2. Merit rates 3. Experience rates 4. Manual rates

1. Judgement rates

The 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 1. Liberalization clause 2. Assignment clause 3. Duplicate coverage clause 4. Other insurance clause

1. Liberalization clause "Liberalization is a property insurance clause that extends broader legislated or regulated coverage to current policies, so long as it does not result in a higher premium."

Which endorsement, when added to the personal auto policy, alters the definition of covered auto to include motor homes, golf carts, or motorcycles? 1. Miscellaneous-type vehicle endorsement 2. Recreational vehicle endorsement 3. Extended coverage endorsement 4. Nonhighway vehicle endorsement

1. Miscellaneous-type vehicle endorsement

Workers compensation rating is developed by applying a rating bureau job classification rate to which of the following? 1. Payroll 2. Noncash compensation 3. Minimum wage 4. Job title

1. Payroll "Workers comp applies a rating bureau classification rate to each $100 of payroll."

Which of the following is FALSE concerning liability coverage of a business auto policy? 1. The company will reimburse the insured for all loss of earnings 2. The company will pay the premium on any appeal bond 3. The company will pay any interest accruing between time of judgement and payment 4. The company will defend any suit alleging bodily injury (BI) or property damage (PD) covered by the policy

1. The company will reimburse the insured for all loss of earnings "Only a limited amount of lost earnings per day will be paid, and only on those days the insurer requires the insured to be somewhere other than at work"

What types of injuries could incur additional penalties and/or increased benefits paid by the employer? 1. The employer's willful failure to provide required safety goggles 2. Loss of a limb while following safety procedures 3. An injury that occurred while on a dangerous job site 4. A fall that is the result of a slippery workplace floor

1. The employer's willful failure to provide required safety goggles "Certain types of injuries might incur additional benefits to be paid by the employer, or might incur a penalty. These would include injuries that occurred to a minor who is illegally employed, or if an employer willfully fails to provide required safety equipment."

A golfer slices a tee shot and the ball goes through the window of a house beside the fairway. The broken glass is paid for by 1. The golfer's homeowners liability coverage 2. The homeowner's property coverage on the house 3. The liability policy of the golf course 4. The property coverage of the golf course

1. The golfer's homeowners liability coverage "The insured's homeowners liability coverage is worldwide and covers damages for bodily injury or property damage to others that occur while the insured is engaged in a personal activity."

Late one night on his way home from a local bar, a man runs his covered auto into an insured's car. The man was operating his vehicle while under the influence of alcohol. The insured had no personal injuries, but her car had damage. Her insurance policy paid for the damages to her car. The subrogation provision in her policy allows 1. The insurer to attempt to recover the damages from the man and/or his insurance company 2. The insured to sue the man to recover only the damages not paid by her own insurance company 3. The insurer to increase her premiums because of being a higher risk 4. The insured to sue the man to recover any damages she sees fit

1. The insurer to attempt to recover damages from the man and/or his insurance company

A trucking company's truck is out of service for repairs. While making the delivery in a borrowed truck, the driver is responsible for an accident that causes $55,000 in property damage to other vehicles and injures to 2 individuals. Under the commercial auto liability policy conditions, which pays for what loss? 1. The policy for the company that borrowed the truck will be primary, and the titled owner of the truck will be excess 2. The insurance companies will share in the settlement based on the other insurance condition 3. Only the insurance company for the borrower of the truck will pay for damages and injuries 4. The policy for the titled owner of the truck will be primary, and the borrower's insurance will be excess

1. The policy for the company that borrowed the truck will be primary, and the titled owner of the truck will be excess

Which of the following statements regarding surety bonds is true? 1. The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled 2. A surety bond is also known as third-party guarantee insurance because it always involves three parties 3. The principal is the designated beneficiary of the holder of the surety bond 4. The person who promises to fulfill the obligation of the bond is known as the obligee

1. The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled "The principal is the person who promises to fulfill the obligation of the bond. Surety bonds are not insurance, so therefore they are not known as third-party insurance. The obligee is the person to whom the promise has been made and to whom the bond is payable"

What amount of coverage is provided on HO policies for watercraft? 1. Up to $1,500 2. Up to $10,000 3. Up to $2,000 4. None

1. Up to $1,500 "Homeowners policies have special limits for boats and other items that go with the boat. $1,500 for watercraft and their trailers, furnishings, equipment and outboard motors"

The insured's product under a commercial general liability policy does NOT include which of the following? 1. Vending machines rented to others 2. Containers furnished in connection with the product 3. Warranties made with respect to the fitness or quality of the product 4. Any goods or products manufactured by the insured

1. Vending machines rented to others "The rending of vending machines to others would be a contractual liability exposure"

Under Coverage C, and at the request of an insured, personal property of a guest or residence employee is covered 1. While it is in any residence premises occupied by an insured 2. While it is in any residence premises occupied by a named insured 3. Anywhere in the world 4. Only while on a residence premises

1. While it is in any residence premises occupied by an insured "At the request of an insured, personal property of a guest or residence employee may be covered while it is in any residence occupied by an insured"

Medical benefits under workers compensation statutes are provided 1. Without limit 2. For up to $500,000 per injury or disease 3. For a certain percentage of the worker's annual income 4. For up to $100,000 per injury or disease

1. Without limit "There is no maximum set for necessary medical expense"

While engaged in a pick-up soccer game in the neighborhood park, the insured collides with another player, breaking his nose. Would the insured's homeowners medical payments cover the injury? 1. Yes, medical payments coverage also applies off the insured premises 2. No, because even though it was a pick-up game, it was an organized event 3. No, personal liability applies on-premises only 4. No, the insured was not negligent

1. Yes, medical payments coverage also applies off the insured premises "Homeowners medical payments coverage applies worldwide as long as the loss occurred during a personal activity of the insured."

A trucking company has a $1 million umbrella policy in place. The businessowner agrees to maintain a 200/500/100 limit on auto liability, and a personal liability of $400,000. After a car accident, the business is sued. Injuries are awarded to a single injured party in the amount of $300,000. It turned out that the business actually carried only 100/250/50 auto limits. What is the total amount the umbrella policy will pay? 1. $50,000 2. $100,000 3. $200,000 4. $300,000

2. $100,000 "The umbrella policy pays as if the underlying limits were in effect. The underlying limit agreed to by this business was $200,000 per person. Therefore, the umbrella would be the additional $100,000. The business itself would be responsible for the difference between what was required and what was actually provided."

How many hours of continuing education are required per renewal for broker-agent in this state? 1. 20 hour, 2 of the hours must be in ethics 2. 24 hours, 3 of the hours must be in ethics 3. 24 hours, 2 of the hours must be in ethics 4. 30 hours, 4 of the hours must be in ethics

2. 24 hours, 3 of the hours must be in ethics "According to the California Insurance Code, 24 hours of continuing education must be completed each renewal. Of the 24 hours, at least 3 must be in ethics."

An insured was told to leave his home because of endangerment by a brush fire that was out of control. The insured was able to have his personal property moved to storage away from the endangered area. For how long will the homeowners policy provide coverage for the stored property? 1. 10 days 2. 30 days 3. 90 days 4. 3 days

2. 30 days "Under the additional coverage property removed, a homeowners policy will insure property against direct loss from any cause while being removed from premises endangered by a peril insured against and for no more than 30 days while removed."

Costs to repair, recover, or recondition will exceed the policy limits, so the insurer pays the policy's agreed value. This is called 1. Demurrage 2. A constructive total loss 3. A general average 4. A particular average

2. A constructive total loss "A constrictive total loss is declared if costs to repair or recover exceed the policy limits"

Which of the following is the best definition of "indemnification"? 1. A contract whereby the two parties involved agree to what things of value will be exchanged by the parties to the contract 2. A contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event 3. The act of one person who agrees to restore an injured person to the condition he/she enjoyed proper to the loss 4. A legal entity which acts on behalf of itself, accepting legal and civil responsibility for the actions it performs and making contracts in its own name

2. A contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event "After a loss of all or part of the value of an asset, the act of one person who agrees to bear the burden of the person which suffered the loss, or to assume the responsibility of the person who caused the loss, and to restore the injured person to the condition they enjoyed prior to the loss. is call indemnification."

Combined ratio is defined as the percentage of each premium dollar a property/casualty insurer spends on claims and expenses. Which of the following statements is TRUE regarding the combined ratio? 1. When the ratio is over 100, the insurer has an "underwriting profit." 2. A decrease in the combined ratio means financial profitability is improving 3. A decrease in the combined ratio means financial profitability is decreasing 4. An increase in the combined ratio means that profitability is improving

2. A decrease in the combined ratio means financial profitability is improving "Combined ratio is defined as the percentage of each premium dollar a property/casualty insurer spends on claims and expenses. A decrease in the combined ratio means financial profitability is improving; an increase means that profitability is decreasing. When the ratio is over100, the insurer has an "underwriting loss." "

With regard to homeowners Section II, which of the following does NOT meet the definition of insured location? 1. A secondary residence acquired by the insured during the policy period 2. A plot of farmland owned or rented by the insured 3. A meeting hall rented to the insured to hold a reception for his daughter's wedding 4. A cabin rented to the insured for use on a family vacation

2. A plot of farmland owned or rented by the insured

In a personal auto policy (PAP), a covered auto includes all of the following EXCEPT 1. A nonowned temporary substitute vehicle 2. A van used in the delivery business 3. A trailer owned by the insured 4. A farm implement being towed behind the insured's pickup

2. A van used in a delivery business "If used primarily for deliveries, a PAP cannot insure the vehicle"

Which of the following would NOT be covered as a loss under Coverage D of a homeowners policy? 1. An insured's home is damaged by fire. The insured incurs expenses for living in a motel and having meals in a restaurant while repairs are made 2. An insured leased a dwelling for 5 years. Two years later, the property owner died and the new property owners wanted to make the property their principal residence, so the lease was canceled 3. An insured has an apartment in his home. The tenant's negligence started a fire, and the apartment was not fit to live in for 4 months while repairs were being completed 4. After a fire in a building next to the insured's home, the insured could not occupy his home, and had to stay at a motel for one week

2. An insured leased a dwelling for 5 years. Two years later, the property owner died and the new property owners wanted to make the property their principal residence, so the lease was canceled

The FAIR Plan offers a basic property insurance policy that may include all of the following features EXCEPT 1. Vandalism & Malicious Mischief (V&MM) for both structure and personal property 2. Automobile and farm coverage 3. Fire coverage for the personal property or personal property of others. 4. Extended coverage for both structure and personal property; perils include damage caused by: wind, hail, aircraft damage, riot, vehicle damage, explosion & smoke

2. Automobile and farm coverage

Two men are partners in a moving company. They have two trucks used to move property of others. They should insure their trucks under a 1. Commercial auto fleet policy 2. Business auto policy 3. Personal auto policy 4. Garage liability coverage form

2. Business auto policy "The business auto policy would be the correct policy to insure vehicles used in business. A minimum of 5 vehicles would be necessary to insure as a fleet."

An insured's limit of liability applies to a total of damages for bodily injury and property damage resulting form one accident, which may be used in any combination of amounts, not to exceed the single limit. What type of limit does this insured have? 1. Per occurrence 2. Combined single 3. Split 4. Aggregate

2. Combined Single

What two policy components are part of every commercial package policy? 1. Property coverage and liability coverage 2. Common policy declarations and common policy conditions 3. Common policy exclusions and agreement 4. Consideration and agreement

2. Common policy declarations and common policy conditions "Any commercial lines coverage in the program may be written independently as monoline policy, or it may be written with other coverages as part of a package. In either case, all policies make use of the same common policy declarations page and the same common conditions. The only difference is the number of coverage parts."

An insured's home catches fire. As a result, the insured's family must stay in a motel until the home is repaired. The cost of the motel stay would be considered a 1. Negligent loss 2. Consequential loss 3. Resulting loss 4. Direct loss

2. Consequential loss "Consequential losses, also referred to as indirect losses, are losses that occur as a result of a direct loss. Having to stay at a motel while repairs are being made on a damaged property would result in an extra living expense. This expense, though not directly a result of the fire, would be considered an effect of it"

Loss valuation is best described as the process of 1. Accepting or denying coverage based on historical evidence of an applicant's property losses 2. Determining an appropriate value for the repair or replacement of property following a specific loss 3. Providing equal benefits for a wide array of covered properties 4. Defining the replacement costs of property in relation to competitor insurers' costs of the same type

2. Determining an appropriate value for the repair or replacement of property following a specific loss

California's Insurance Code requires all insurers to have a department the sole purpose of which is to investigate possible 1. Claims arising from arson 2. Fraudulent claims from insureds 3. Violations of the Code by agents 4. Fraud by insurers

2. Fraudulent claims from insureds "Every agent licensed by the State of California has a responsibility to help combat insurance fraud, and every insurer must have a fraud prevention unit. (CIC 1874.4 and CIC 1875.20)"

A scheduled personal property endorsement will be used to insure 1. Personal items at their actual cash value 2. Higher limits of coverage for fine arts items 3. High value items only within the U.S. 4. Personal vehicles used by travelers anywhere in the world

2. Higher limits of coverage for fine arts items "If the insured requires higher limits for certain types of property, the scheduled personal property endorsement may be used to schedule individually described items, such as jewelry, fine arts, coins, musical instruments, cameras, etc. The coverage is provided worldwide."

All of the following are factors in the determination of actual cash value EXCEPT 1. Property type 2. Insurance premium paid 3. Age of property 4. Replacement cost

2. Insurance premium paid "Actual cash value (ACV) is a valuation method in which the value of property is determined using the replacement cost for property of like kind and quality, minus depreciation. The original cost is not a factor."

Per the California Insurance Code, the best definitions of "shall" and "may" are 1. Permissive and mandatory 2. Mandatory and permissive 3. Mandatory and unknown 4. Mandatory and optional

2. Mandatory and permissive " "Shall" means required or mandatory; "may" means permissible or allowed."

An insurance policy form that lists specific covered perils provides 1. Blanket coverage 2. Named peril coverage 3. Open peril coverage 4. Special peril coverage

2. Named peril coverage "Named peril coverage describes an insurance policy form that lists specific covered perils."

In the last 72 hours, there were 3 instances of volcanic eruptions that damaged a property covered by a dwelling policy. How many deductibles will the insured have to pay before the policy covers the damages caused by the eruptions? 1. Zero 2. One 3. Two 4. Three

2. One "All volcanic eruptions occurring within a 72-hour period (of the initial eruption) will be considered one occurrence. This means there will only be one deductible."

Which of the following would be covered under a building and personal property coverage form? 1. Underground pipes 2. Outdoor sign 3. Building foundations 4. Personal property while airborne

2. Outdoor sign

Which of the following would be covered under a building and personal property coverage form? 1. Underground pipes 2. Outdoor sign 3. Building foundations 4. Personal property while airborne

2. Outdoor sign "Outdoor signs are covered for up to a specified amount if attached to a building. Others are specifically excluded"

An insured is injured while driving his own car. Which of the following coverages will par for the loss? 1. Part A liability 2. Part B - Medical payments 3. Part C- Uninsured Motorist 4. Part D - Damage to your auto

2. Part B - Medical payments "Medical payments coverage pays all necessary medical and funeral expenses incurred and services rendered to the insured or any other person while occupying a covered auto"

What sublimit in a liability policy sets the maximum amount that will be paid for all claims arising from a single accident? 1. Aggregate 2. Per occurrence 3. Per person 4. Combined single

2. Per occurrence "Puts a ceiling on the payment for all claims that arise from a single accident"

Which of the following is an endorsement that changes the actual cash value settlement on personal property to a replacement cost basis? 1. Permanent total compensation 2. Personal property replacement cost 3. Actual cash loss 4. Preservation of property

2. Personal property replacement cost

Which type of damages is intended as a form of punishment for negligent, willful, or outrageous intent? 1. Property 2. Punitive 3. Special 4. General

2. Punitive "Punitive damages are a form of punishment for extreme behavior. When compensatory damages are not considered adequate, punitive damages are often allocated."

When an insurer pays for the cost to exchange damaged property with new property of similar kind and quality, it is called? 1. Stated amount 2. Replacement cost 3. Actual cash value 4. Market value

2. Replacement cost

The amount of loss the insured is willing to absorb without insurance protection is known as 1. Limit of liability 2. Self-insured retention 3. Maximum deductible 4. Stop loss

2. Self-insured retention

The livestock coverage form provides coverage for livestock. Livestock means any of the following EXCEPT 1. Horses and mules. 2. Turkeys and chickens 3. Cattle and swine 4. Sheep and goats

2. Turkeys and chickens "Turkeys and chickens are classified as poultry, not livestock."

Which of the following becomes part of the contract, is guaranteed to be true, and if untrue, may be grounds for rescinding the policy? 1. Contract of adhesion 2. Warranty 3. Consideration 4. Facility of payment clause

2. Warranty "A warranty must be literally true. A violation of a material warranty permits the other party to rescind the contract."

All of the following are TRUE statements regarding cancellation procedures EXCEPT 1. The termination of an insurance contract with the premium charge being adjusted in proportion to the exact time the protection has been in force is considered a pro rata cancellation 2. Short-rate cancellation allows the insured to pay less for each day of coverage than if the policy had remained in force for the full term 3. Short-rate cancellation is a cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period 4. When a policy is cancelled upon its effective date, it is considered a flat cancellation and no premium charge is finally made

2. Short-rate cancellation allows the insured to pay less for each day of coverage than if the policy had remained in force for the full term "Short-rate cancellation is a cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period. In effect, the insured has paid more for each day of coverage than if the policy had remained in force for the full term."

What are the types of compensatory damages? 1. Special and punitive 2. Special and general 3. Punitive and reward 4. Unique and general

2. Special and general "The two classes of compensatory damages that may be awarded are special and general damages"

Upon payment for a loss, the insured is obligated to surrender to the insurer the right to sue a negligent third party. This is called 1. Entirety 2. Subrogation 3. Indemnity 4. Insurable interest

2. Subrogation "Claims should be paid only once and by the liable party. The insurer pays policy claims and has the right to try to be repaid by the party who actually caused the loss."

All of the following statements regarding personal property coverage in the homeowners program are correct EXCEPT 1. Earthquake coverage may be added by endorsement. 2. The HO-3 policy covers the mysterious disappearance of personal property 3. Coverage on money is limited to $200 4. Personal property coverage is usually 50% of the Coverage A limit.

2. The HO-3 Policy covers the mysterious disappearance of personal property "Mysterious disappearance is the disappearance of property without knowledge as to the location, time, or how the property was lost. Mysterious disappearance, or losses that cannot be identified as to the time and place, are excluded from most personal property coverages."

Which of the following statements is correct regarding the debris removal coverage under the businessowners policy (BOP)? 1. The debris of covered property must be reported in writing within 270 days of the loss 2. The insured's limit of liability is 25% of the sum of the direct loss payment plus the deductible amount 3. It pays for cleanup or removal of pollutants from land or water 4. It pays for removal of the debris of the insured's damaged automobile

2. The insured's limit of liability is 25% of the sum of the direct loss payment plus the deductible amount.

An insured's diner suffered a fire loss. In addition to the damage caused by the fire, the floor covering had to be replaced because of the water damage. It took 4 weeks for the repairs to be completed. The insured was without income for that period of time. The insured's policy includes both direct and indirect loss coverage. What part of the loss would be paid as indirect loss? 1. The entire loss would be paid as direct loss by fire 2. The loss of income for the time the diner was closed 3. The cost of replacing the floor covering due to the water damage 4. Both the loss of income and the cost of the floor covering

2. The loss of income for the time the diner was closed

The cost bond guarantees 1. Damages will be paid when an injunction should have been issued, but was 2. The plaintiff will pay court cost and damages to the defendant if the plaintiff loses the court case 3. A contractor's cost overruns will be paid 4. A person will appear in court when required

2. The plaintiff will pay court cost and damages to the defendant if the plaintiff loses the court case "The plaintiff will pay court cost and damages to the defendant if the plaintiff loses the court case."

An insured goes out to an expensive restaurant one night and uses the restaurant's valet parking services. The restaurant hires a third-party to perform the valet services, who, in term, rents parking spaces in a private parking structure nearby. While the valet was parking the insured's car, he got into an accident. Whose insurance coverage will be primary in this situation? 1. The parking garage insurance 2. The valet services' insurance 3. The insured's personal auto policy 4. The restaurant's liability insurance

2. The valet services' insurance "At the time of the accident, the car was in the care and custody of the valet service, so their insurance will be primary, and the PAP covering the auto is excess over any insurance belonging to the facility."

When Symbol 7 is provided, which of the following statements is true with regards to newly acquired autos? 1. They are automatically covered only for 30 days 2. They are covered if they are used to replace previously owned autos with that coverage 3. They are covered only until the end of the policy term 4. They are not covered until the insurer is notified

2. They are covered if they are used to replace previously owned autos with that coverage "If Symbol 7 is used, coverage for newly acquired vehicles applies if the insurer already covers all autos owned by the insured, or if the newly acquired vehicle is replacing a previously owned auto that had that coverage. The insured must inform the insurer that coverage is requested within 30 days of acquiring the vehicle."

The owner of a rental dwelling, insured under a DP-2, turns off the heat in the insured dwelling during the winter months because the dwelling is not occupied. The building's water pipes freeze and break, causing damage. How will the policy react to this loss? 1. The DP policy will pay for the labor, but not the pipes 2. This loss is excluded from coverage 3. This loss is covered 4. The DP policy will pay for the pipes, but not the labor

2. This loss is excluded from coverage "Freezing and breaking of pipes is not covered unless the insured maintains heat in the building"

What is the purpose of the ordinance or law coverage endorsement? 1. To protect the insured against losses caused by laws 2. To remove the exclusion of losses resulting from ordinance or laws 3. To exclude losses resulting from newly issued ordinances or laws 4. To enforce ordinances or laws as they pertain to insurance policies

2. To remove the exclusion of losses resulting from ordinance or laws "The ordinance or law coverage endorsement is used to remove the exclusion of losses resulting form ordinances or laws."

When does the federal emergency flood insurance program go into effect? 1. When mandated by the president of the United States 2. When a community applies for the program 3. As soon as the flooding occurs 4. Annually for the flood season

2. When a community applies for the program "The federal emergency flood insurance program goes into effect when a community applies for the program and ends when all NFIP criteria have been met and the regular program can begin"

An insured has a personal umbrella with a $2,000 self-insured retention (SIR). Assuming no other policy is involved, how much would the umbrella pay after a $12,000 personal injury liability claim? 1. $2,000 2. $1,000 3. $10,000 4. $12,000

3. $10,000 "If no other policy pays, the insured must pay a SIR"

An insured was judged at fault in an automobile accident. He has the 100/300 bodily injury liability coverage. Three other individuals were injured in the vehicle hit by the insured. They were awarded damages of $150,000, $75,000 and $75,000. What amount, if any, was not covered by his insurance policy? 1. $150,000 2. All of the damages were covered by his insurance policy 3. $50,000 4. $100,000

3. $50,000 "The number 100 in the 100/300 limits means the most that the only ONE individual will be awarded for bodily injury is $100,000. The $150,000 leaves $50,000 unpaid."

If a regular insured rate for an auto policy is $1,000 a year, what would be the rate charged for a Good Driver Discount policy for the same coverage? 1. $200 2. $1,000 3. $800 4. $500

3. $800

The personal property off-premises extension of dwelling forms provides limits of coverage up to 1. 10% of Coverage A anywhere in the world 2. 10% of Coverage C anywhere in the U.S. or Canada 3. 10% of Coverage C anywhere in the world 4. 10% of Coverage A anywhere in the U.S. or Canada

3. 10% of Coverage C anywhere in the world "Under all dwelling forms, the insured may apply up to 10% of the Coverage C limit against losses by covered perils to personal property (other than rowboats or canoes) while it is anywhere in the world."

Which of the following would be eligible for Homeowners Coverage F - Medical Payments in the event of injury at the insured's premises? 1. A guest who was hurt at the insured's party five years ago 2. A person regularly residing with the insured 3. A full-time maid 4. The named insured's spouse Medical payments on the HO policy cover costs incurred for up to three years after the accident.. Coverage does not apply to any insured or a regular resident of the premises, except resident employees not covered by workers compensation.

3. A full-time maid "Medical payments on the HO policy cover costs incurred for up to three years after the accident. Coverage does not apply to any insured or a regular resident of the premises, except resident employees not covered by workers compensation."

After a covered loss on a homeowners policy, the insured must do all of the following EXCEPT 1. If requested, submit to an examination under oath 2. Prepare an inventory of damaged and undamaged property, including bills, receipts, and related documentation 3. Abandon the property involved to the insurer 4. Allow the insurer to inspect the property as often as reasonably necessary

3. Abandon the property involved to the insurer

What is a sudden, unplanned and unexpected even, not under the control of the insured, resulting in injury or damage that is neither expected nor intended called? 1. Peril 2. Hazard 3. Accident 4. Burglary

3. Accident "An accident is a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected nor intended."

Worker's Compensation rehabilitation benefits include all of the following EXCEPT 1. Lodging and meals 2. Living expenses 3. Alcoholism treatment 4. Travel

3. Alcoholism treatment "Worker's Compensation rehabilitation benefits include any expenses related to providing treatment necessary to return the worker to full employment, however, they specifically exclude losses caused by intoxication"

Which of the following conditions is NOT included for farm liability in addition to the common policy conditions? 1. Duties in the event of an occurrence, claim, or suit 2. Liberalization 3. Arbitration 4. Bankruptcy of the insured

3. Arbitration "In addition to the common policy conditions, the farm liability coverage form includes a number of conditions: bankruptcy of the insured, duties in the event of an occurrence, claim, or suit, insurance under 2 or more coverages, legal action against the insurer, no admission of liability with medical payments, other insurance, transfer of right of recovery, liberalization, representations, and separation of insureds"

Insurers CANNOT transact insurance in this state without a 1. Certificate of Insurance 2. Letter of Clearance 3. Certificate of Authority 4. Broker's license

3. Certificate of Authority "With the exception of surplus lines insurers, insurers must obtain a Certificate of Authority from the Department of Insurance in order to transact insurance in this state"

An applicant for a license previously had a judgement against him after entering a plea of "nolo contendere." This applicant is considered to be 1. On probation for a period of 5 years 2. Not guilty. 3. Convicted 4. Innocent under the Code, but guilty by law

3. Convicted "If an applicant is found guilty in a trial in which he or she entered a plea of "no contest," her or she is considered convicted"

Coverage C in homeowners policy forms offers all of the following EXCEPT 1. Coverage for property of others 2. Coverage for property located at another residence premises 3. Coverage for loss of use 4. Worldwide coverage

3. Coverage for loss of use "Loss of use is covered by Coverage D. All the other listed coverages are available through Coverage C."

All of the following are optional endorsements that may be added to the standard equipment breakdown coverage form EXCEPT 1. Extra Expense 2. Business interruption 3. Debris removal 4. Utility interruption

3. Debris removal "Debris removal is not an endorsement"

The purpose of purchasing an umbrella liability policy is to provide 1. Coverage that is not readily available through an authorized insurer in the state 2. Coverage that usually may only be added by endorsement 3. Excess insurance over the primary liability policy 4. Coverage to those who cannot obtain it on a regular market

3. Excess insurance over the primary liability policy "An umbrella policy, sometimes called catastrophe insurance, provides excess coverage over the primary liability policy. Coverage is usually broader than the underlying policies."

Which homeowner form provides open peril coverage for dwelling (Coverage A) and contents (Coverage C)? 1. Form 2 2. Form 3 3. Form 5 4. Form 8

3. Form 5 "Form 2 is named peril (broad form perils) coverage for both dwelling and contents. Form 3 is open peril for dwelling and named peril for contents. Form 5 is open peril for both dwelling and contents. Form 8 is named peril (basic perils) coverage for both"

Which of the following is NOT true regarding the automatic increase in insurance endorsement in dwelling policies? 1. It is optional 2. It provides protection 3. It does not require additional premium 4. It increases the amount of coverage by an annual percentage

3. It does not require additional premium

For a contract to be enforceable by law, its purpose must be 1. For the benefit of the general public 2. Of pure intent 3. Legal and not against public policy 4. For financial gain

3. Legal and not against public policy "The purpose of a contract must be legal and not against public policy for the contract itself to be enforceable by law (or legal)"

Which of the following describes an insurer's responsibility for payment under a policy, as stated in the common policy provisions? 1. Utmost good faith 2. Premiums 3. Limits of liability 4. Consideration

3. Limits of liability "Limits of liability are the insurer's liability for payment as stated in an insurance policy."

An insured was involved that was caused by a tire blowing out. The insured was severely injured and incurred medical expenses of $100,000. The insured brought a recovery action against the manufacturers of the auto and the tires. The court held that the tire was the cause of the accident. Who is required to pay for this loss? 1. Neither manufacturer would have to pay because of the "buyer beware" doctrine 2. Manufacturer of the auto 3. Manufacturer of the tire 4. Both manufacturers would share the loss

3. Manufacturer of the tire "The manufacturer of the tire made an implied warranty that the product was safe to use; therefore, it would be held strictly liable"

What are the two sources for workers compensation insurance? 1. Assigned risk plan and employer-funded plan 2. Comprehensive fund and private market 3. Monopolistic state fund and competitive market 4. Contributory and noncontributory funds

3. Monopolistic state fund and competitive market

Among people in the same class and life expectancy, which of the following factors can be used to influence premium rates? 1. Marital Status 2. Race 3. Occupation 4. Ancestry

3. Occupation "Discrimination in rates, premiums, policy benefits, etc., for persons within the same class or with the same life expectancy is illegal. No discrimination may be made on the basis of marital status of an individual, race, color, national origin, creed, or ancestry unless the distinction is made for a business purpose or required by law."

A pharmacy offers a delivery service to its customers. When the delivery driver parked his truck in front of a customer's home, someone broke into the delivery truck and stole the money inside the vehicle. Which crime coverage will cover the loss of the money? 1. Inside the premises-theft of money and securities 2. Inside the premises-robbery or safe burglary of other property 3. Outside the premises (theft, disappearance or destruction) 4. Vandalism and malicious mischief

3. Outside the premises (theft, disappearance or destruction)

The equipment breakdown coverage form values loss on a/an 1. Stated amount basis 2. Actual cash value basis 3. Replacement cost basis 4. Valued basis

3. Replacement cost basis "Property is insured on a replacement cost basis. However if damaged property is not repaired or replaced w/in 24 months after the accident, settlement is at the smaller of ACV, or the cost to repair or replace"

Any intentional and fraudulent omission on the part of one insured entitles the insurer to 1. Apply for reconsideration 2. Re-underwrite the policy 3. Rescind the policy 4. Charge a higher premium on the anniversary date

3. Rescind the policy

For an additional premium, the extended coverages written on the basic form dwelling policy would cover which of the following? 1. Glass breakage 2. Fire 3. Riot 4. Vandalism

3. Riot

In contrasting stock insurers with mutual insurers, which statement is true? 1. Nonparticipating policies can pay out dividends to the policyholders 2. Mutual insurers are owned by the shareholders and issue participating policies 3. Stock insurers are owned by the shareholders and issue nonparticipating policies 4. Stock dividends are tax free while policy dividends are taxable

3. Stock insurers are owned by the shareholders and issue nonparticipating policies "Stock insurers are owned by their shareholders/stockholders. Their policies are labeled nonparticipating since the insureds do not share in the divisible surplus (dividends)"

Which clause of a hull policy says that if the insured does not take immediate steps as soon as possible to minimize the loss and protect the property from further loss the coverage may be invalidated? 1. War and strikes 2. Protection and indemnity 3. Sue and labor 4. Pilotage and towage

3. Sue and labor

Coverage for loss by some perils under a building and personal property form is suspended if 1. The insured fails to satisfy the coinsurance provision 2. An uninsured peril causes a partial loss 3. The insured building is vacant for over 60 days 4. A loss occurs while a hazard beyond the insured's control is increased

3. The insured building is vacant for over 60 days "This is a standard condition of commercial property coverage."

Each of the following may be insured under an HO-3 homeowners policy EXCEPT 1. One co-owner when each distinct portion of a two-family dwelling is occupied by co-owners 2. The intended owner-occupant of a dwelling under construction 3. The owner-occupant of a condominium unit 4. An occupant of dwelling under a life estate arrangement when dwelling coverage is at least 80% of the current replacement cost.

3. The owner-occupant of a condominium unit "HO-3 is designed to insure a structure under Coverage A. A condominium unit owner does not own the structure, only space in the structure."

Under the property and casualty conditions of a homeowners policy, what may happen if it is discovered that the policyowner committed concealment or fraud? 1. The insured may have the opportunity to reapply for the policy 2. The policy will be voided only if the fraud was committed before a loss 3. The policy may be voided 4. The insurer may void the policy only if it gives the insured 10 days' notice

3. The policy may be voided "Concealment or fraud on the part of the insured may result in the policy being immediately voided, whether the fraud was committed before or after the loss"

What was the purpose of the Motor Carrier Act of 1980? 1. To provide auto insurance to motor carriers who cannot obtain it on the regular market 2. To establish financial responsibility requirements for all personal and commercial autos 3. To establish financial responsibility requirements for interstate motor carriers. 4. To prohibit foreign motor carriers to operate in interstate commerce

3. To establish financial responsibility requirements for interstate motor carriers. "The Motor Carrier Act of 1980 set out the minimum financial responsibility requirements for motor carriers operating commercial motor vehicles in interstate, foreign, or intrastate commerce; for-hire carriers of passengers operating in interstate or foreign commerce; and all carriers of hazardous property."

An aleatory contract is based on what kind of exchange? 1. Balanced benefits 2. Exchange of equal obligations 3. Unequal exchange of values 4. Equal amounts for pay in pay out

3. Unequal exchange of values

An insured rents out a bedroom in his residence for $50 per week. The residence is badly damaged by the fire. During the three weeks required to repair the fire damage, the insured pays $900 in rent for a short-term apartment, and the renter is forced to find other accommodations. Disregarding any extra expense for meals, how much would an HO-3 will pay under Coverage D? 1. $150 2. $300 3. $900 4. $1,050

4. $1,050 "Coverage D would pay $900 as additional living expense, and $150 as loss of rent for a total of $1,050"

Homeowners policy limits the amount of property and liability coverage available for Boatowners. Only $____ of coverage is provided in the Homeowners policy for damage to watercraft, accessories, equipment and trailers. 1. $2,000 2. $2,500 3. $1,000 4. $1,500

4. $1,500 "Only $1,500 of coverage is provided in the Homeowners policy for damage to watercraft, accessories, equipment and trailers. If additional coverage is needed, a separate Boatowners policy can be obtained."

An insured has an automobile policy with limits of 100/300/50 and a deductible of $1,000. He is involved in an auto accident and crashes into another driver's auto. The other driver is awarded $125,000 for his injuries and $25,000 for the damage to his car. The insured's vehicle has damage in the amount of $1,200. The total payment made under the insured's policy is 1. $126,200 2. $100,200 3. $150,200 4. $125,200

4. $125,200 "The amount of coverage for the other driver's injuries is limited to $100,00. The damage to the other driver's car, $25,000, is covered in full. The damage to the insured's car is covered minus the $1,000 deductible. Thus, the total payment is $125,200"

A home is insured for $200,000 under an HO-3. Last week, the owner purchased a new home and began to move his personal property to the new residence. Last night, vandals did $8,000 of damage to the property that had been moved to his new residence. Disregarding any deductible, how much will the HO-3 pay? 1. $0 2. $1,000 3. $4,000 4. $8,000

4. $8,000

According to business property coverage form vacancy condition, if a policy is issued to the owners of a building, the building will be considered vacant if what portion of the square footage is unused? 1. 20% 2. 45% 3. 50% 4. 65%

4. 65%

Which of the following risks would be eligible for coverage under a dwelling policy form? 1. A single-family dwelling occupied by a single person who operates a business of buying and selling firearms in the basement 2. A single-family dwelling that contains a beauty shop that employs three full-time operators 3. A single-family dwelling that is located on farm premises 4. A duplex that is occupied by two families, each of which have a bedroom rented to a boarder

4. A duplex that is occupied by two families, each of which have a bedroom rented to a boarder "Eligible dwelling properties do not need to be exclusively residential, but any incidental business must provide service rather than sales and must not have more than 2 persons working on the premises. Risk cannot be located on a farm."

When insurance is written on a dwelling form, which of the following types of property would be insured under Coverage B (Other Structures)? 1. Materials and supplies used for construction or repair of the dwelling 2. A laundry room attached to the dwelling 3. Building equipment and outdoor equipment 4. A garage separated from the dwelling

4. A garage separated from the dwelling

Which of the following situations would be covered by workers compensation? 1. A secretary chokes on an apple while on break in the break room 2. A construction worker who refused to wear a hardhat gets hit on the head at a construction site 3. A professional chef burns himself on his stove at home while preparing for a private dinner party 4. A printer gets her hand crushed in a printing press at work

4. A printer gets her hand crushed in a printing press at work "Workers compensation covers job-related injuries, but not intentional self-injury, willful misconduct, or violation of safety"

Homeowners policies consider all of the following insured locations except? 1. Land owned by the insured on which his new home is under construction 2. An individual cemetery plot 3. The hotel ballroom rented by the insured for a family reunion 4. A strawberry patch owned by the insured

4. A strawberry patch owned by the insured "Insured location cannot include farmland or any premises used for business purposes"

According to the principles of ocean marine insurance, a total loss may occur in which of the following ways? 1. Labor 2. Sue 3. Collision 4. Actual

4. Actual "According to the principles and practice of ocean marine insurance, total loss may occur in actual total loss and constructive total loss."

A personal umbrella policy may act as excess over any of the following insurance coverage policies EXCEPT 1. Homeowners Section II coverage 2. Auto liability coverage 3. Comprehensive personal liability 4. Auto collision coverage

4. Auto collision coverage "Auto collision is not a liability coverage; therefore, the personal umbrella will not act as excess"

Under which legal defense may a claimant's recovery be defeated if the defendant can show that claimant contributed, no matter how slightly, to the injury or damage? 1. Comparative negligence 2. Pro rata liability 3. Presumed negligence 4. Contributory negligence

4. Contributory negligence "Recovery under contributory negligence requires that the defendant be 100% at fault and the claimant totally free of fault. Comparative negligence means that the other party's negligence or fault will not necessarily defeat the claim but will be used to mitigate the dames payable to the other party"

Which of the following dwelling policies require insurance equal to at least 80% of the replacement value of the dwelling at the time of loss in order to provide replacement cost coverage? 1. DP-1 only 2. DP-2 only 3. DP-3 only 4. DP-2 and DP-3

4. DP-2 and DP-3 "Under a DP-2 or DP-3, in order to collect replacement cost amounts in the event of a loss, the amount of insurance must be not less than 80% of the replacement cost of the dwelling at the time of loss. If the amount of insurance is less than 80%, the penalty is an actual cash value (ACV) settlement"

Under the farm property and livestock coverage forms, which of the following property is covered for loss by the perils of earthquake or flood? 1. Farm machinery 2. Attacks by dogs of the insured 3. Household contents 4. Farm animals

4. Farm animals "Livestock is covered for loss due to earthquake and/or flood"

The federal act that provided more favorable benefits for interstate railroad workers by allowing the injured worker to sue the employer for negligence is the 1. U.S Longshore and Harbor Workers Compensation Act 2. Federal Black Lung Compensation Act 3. Jones Act 4. Federal Employers Liability Act (FELA)

4. Federal Employers Liability Act (FELA) "FELA was passed in 1908 to protect interstate railroad workers. It allowed the injured worker to sue the employer for negligence, and it also removed two of the common law defenses: contributory negligence and assumption of risk."

Which of the following losses would be excluded from coverage under the farm property special form? 1. Loss of livestock caused by attack by dogs or wild animals 2. Theft of property from the insured's residence 3. Drowning of livestock 4. Fire caused by curing tobacco

4. Fire caused by curing tobacco "Fire losses caused by the curing of tobacco are specially excluded from coverage"

All of the following are covered perils in a standard fire policy EXCEPT 1. Hostile fire 2. Removal from premises 3. Lightning 4. Friendly fire

4. Friendly fire "Friendly fires are NOT a covered peril under the Standard Fire Policy"

All of these types of property may be covered on a farm property coverage form EXCEPT 1. Barns 2. Silos 3. Farm machinery 4. Growing crops

4. Growing crops

A homeowner has misplaced some of her insured personal property and has no idea what may have happened to it. Which HO policy form would cover such a loss? 1. HO-2 2. HO-3 3. HO-4 4. HO-5

4. HO-5 "HO-5 covers misplacing or losing (mysterious disappearance) as a theft loss."

Which homeowners form insures both buildings and personal property on an open peril basis? 1. HO-2 2. HO-3 3. HO-4 4. HO-5

4. HO-5 "Only the HO-5 form insures both the buildings and personal property on an open peril basis"

What term includes losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected? 1. Accident 2. Incident 3. Additional Coverage 4. Occurrence

4. Occurrence "An occurrence is a broader definition of loss than accident because it 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."

Which of the following best defines the unfair trade practice of rebating? 1. Making statements that misrepresent an insurance policy in order to induce an insured to replace the policy 2. Charging premium amounts in excess of the amount stated in the policy 3. Making false statements that are maliciously critical and intended to injury another person in the business of insurance 4. Offering an inducement of something of value not specified in the policy

4. Offering an inducement of something of value not specified in the policy "Rebating is offering anything of value that is not specified in the policy as an inducement to purchase insurance"

How is the premium paid for the businessowners policy? 1. Itemized premium 2. Pro rata liability premium 3. Separate premium for property and for liability 4. One indivisible premium

4. One indivisible premium "The premiums for the businessowners policy is indivisible, meaning there is no separate premium for property and for liablity"

When the ownership of a vessel changes, the premium will be returned on a 1. Monthly basis 2. Annual basis 3. Lump sum basis 4. Pro rata basis

4. Pro rata basis "When the ownership of a vessel changes, the premium will be returned on a pro rata basis. Premium also will be returned on a pro rata basis for each 30 consecutive day period laid up in port not under repair and not being used for storage or lighting. If the insurer cancels the policy, a pro rata refund is due. If cancelled by the assured, a short rate refund is due."

Eligibility requirements for obtaining property coverage in the FAIR Plan include all of the following, EXCEPT 1. Risk must be insurable 2. The applicant must have made an unsuccessful effort to obtain coverage in the normal market 3. Risk must be located in a specific area 4. Risk must be owner occupied

4. Risk must be owner occupied "State FAIR Plans provide a market for insurable risks that are unable to obtain coverage in the private sector because of geographical location"

Which of the following types of property would be covered under Coverage C - Personal Property in a dwelling policy? 1. 2-passenger aircraft 2. Any personal watercraft 3. Motor vehicles 4. Rowboats

4. Rowboats "Aircraft designed for flight and carrying people, motor vehicles, and motor-powered boats are excluded. However, rowboats and canoes would be covered"

What does the application of contract of adhesion mean? 1. The holder of the contract has the ultimate power of promise 2. The insurer may go to another for representation 3. It makes sure that the insured does not get more than the value of the loss 4. Since the insured does not participate in preparing the contact, any ambiguities would be resolved in favor of the insured

4. Since the insured does not participate in preparing the contact, any ambiguities would be resolved in favor of the insured "The insurer prepares the policy and submits it to the insured on a take-it-or-leave-it basis. Because the insured does not have input in drafting the policy but simply adheres to the terms of the policy, the policy is classified as a contract of adhesion. Any uncertain terms in the policy will be interpreted in favor of the insured."

Wagering on a sporting event is known as what type of risk? 1. Calculated 2. Simple 3. Pure 4. Speculative

4. Speculative

Under the Employee Theft coverage, when a covered employee is found to have participated in a dishonest act, the coverage for that employee will 1. Terminate in 30 days 2. Terminate on the anniversary of the bond 3. Continue unless the employee is convicted of a crime 4. Terminate immediately

4. Terminate immediately

Which of the following best describes how underinsured motorist coverage works? 1. The coverage pays for the insurance company to sue the underinsured motorist and his insurance company for full payment 2. The liability for the loss is divided evenly between the insured's insurance and the underinsured motorist's insurance 3. The insured's policy pays the whole amount of the liability 4. The coverage pays the difference between the insured's underinsured motorist limit and the other driver's property damage coverage limit.

4. The coverage pays the difference between the insured's underinsured motorist limit and the other driver's property damage coverage limit.