P&C Test

Which statement is correct? A A spark that jumps from a fireplace and ignites a nearby rug would be deemed a hostile fire B Loss of profits resulting from a fire is a direct loss C Blanket coverage is commonly written when insuring property at a single location D Most property policies include inherent vice as a covered peril

A A spark that jumps from a fireplace and ignites a nearby rug would be deemed a hostile fire

Which of the following is true regarding a negligence claim? A The claimant must demonstrate that the actions of the insured were the direct or proximate cause of the claimed injury or damages B An uninjured party to an accident is presumed to be negligent C In every accident there is one or more negligent parties D Every accident resulting in bodily injury or property damage is due to a negligent act

A The claimant must demonstrate that the actions of the insured were the direct or proximate cause of the claimed injury or damages

All of the following statements regarding the property policy structure are correct, except: A The insured's duties and obligations are listed in the conditions section B Additional coverages are added to the policy for an additional premium C The Declarations Page lists other parties having an insurable interest in the property D The insuring agreement describes the perils that are covered under the policy

B Additional coverages are added to the policy for an additional premium

All of the following statements regarding liability losses are correct, except: A Personal injury includes libel, slander, and false arrest B Bodily injury includes personal injury, physical injury, sickness and disease C Property damage includes physical damage to tangible property, including loss of use of that property D Loss of consortium means the loss of companionship of a husband or wife

B Bodily injury includes personal injury, physical injury, sickness and disease

Which of the following is the best explanation of liability insurance? A It provides coverage to any party for injury that is expected to happen B It provides protection in the event the insured's negligence causes bodily injury or property damage to others and the insured becomes legally obligated to pay damages C It provides coverage for bodily injury or property damage arising out of the insured's premises or operations regardless of fault or negligence D It provides coverage for bodily injury or property damage to the insured and the insured's property

B It provides protection in the event the insured's negligence causes bodily injury or property damage to others and the insured becomes legally obligated to pay damages

Actual cash value may be defined as: A The original purchase price of property, minus depreciation B The cost to replace or repair property, minus depreciation C The cost to replace or repair the property D The agreed upon specific value determined before the policy was issued

B The cost to replace or repair property, minus depreciation

Which statement regarding liability coverage and limits is false? A An excess coverage policy pays only after a primary policy has been exhausted B The per occurrence limit is the maximum amount recoverable during the policy period C Pro rata liability is proportionate distribution of liability among insurers that have policies on the same risk D Primary coverage pays first with respect to other policies

B The per occurrence limit is the maximum amount recoverable during the policy period

All of the following statements regarding property insurance are correct, except: A The insurer may cancel a policy, after providing proper notice B A property that contains neither occupants nor personal property is deemed vacant C The owner of clothing left in the care of a dry cleaner is called a bailee D A binder is a temporary proof of ins

C The owner of clothing left in the care of a dry cleaner is called a bailee

Which of the following most accurately describes the abandonment condition? A Abandoned property must be protected from further damage B The insured must cooperate with the company in the investigation of a claim C The insured cannot abandon damaged property to the insurer D The insured must make reasonable and necessary repairs to protect the property

C. the insured cannot abandon damaged property to the insurer

The Additional Coverages part of a property insurance policy provides: A The insured the right to request additional coverage to supplement the policy after paying an additional premium B The insured the right to request that extra coverage be provided by endorsement C The company the right to voluntarily waive the deductible D Coverage that supplements the basic coverages in the insuring agreement which is automatically included without an additional premium

D Coverage that supplements the basic coverages in the insuring agreement which is automatically included without an additional premium

Which of the following best defines short rate cancellation? A The premium is fully earned by the insurance company B The insured will receive none of the unearned premium C The insured will receive exactly half of the unearned premium D The insured will receive less than the full amount of the unearned premium

D The insured will receive less than the full amount of the unearned premium

The concealment and fraud condition in a property insurance policy states: A The company will not grant any coverage that benefits a bailee B Making a false statement regarding a claim does not constitute fraud C The insured must cooperate with the company in the investigation of a claim D The policy will be voided if there is material concealment, misrepresentation, or fraud on the insured's part

D The policy will be voided if there is material concealment, misrepresentation, or fraud on the insured's part

An applicant could purchase an insurance policy to cover losses from all the following, except: A An operation of drug smuggling B Loss of property through burglary or theft C Sudden and direct damage to property by natural causes D Loss of assets through tort actions brought against the person

a. an operation of drug smuggling

Theft is specifically defined as: A Threatening bodily harm to a bailee B Any act of stealing C Malicious vandalism D The loss of property when the cause is unknown

a. any act of stealing

When the insured and the insurer fail to agree on the amount to be paid for a property loss, the dispute resolution method is called a(n): A Appraisal B Abandonment C Agreement Clause D Approximate Clause

a. appraisal

The Law of Large Numbers provides that: A As the number of insured units increases, predictability of losses improves B As the number of insured units increases, losses decrease C If funds are insufficient to pay claims, the insured is assessed additional premium D Small certain losses are substituted for large uncertain losses

a. as the number of insured units increases, predictability of losses improves

Which of the following applies when two parties rely upon the promises of the other? A Concept of utmost good faith B Concept of adhesion C Doctrine of estoppel D Parole evidence rule

a. concept of utmost good faith

Which of the following applies when two parties rely upon the promises of the other? A Concept of utmost good faith B Parole evidence rule C Concept of adhesion D Doctrine of estoppel

a. concept of utmost good faith

When both parties to a contract must perform certain duties in order to make the contract enforceable, this is known as a(n): A Conditional contract B Unilateral contract C Contract of adhesion D Aleatory contract

a. conditional contract

Which is the correct term to describe a contract prepared by one party and submitted to the other party on a "take it or leave it" basis, without negotiations? A Contract of Adhesion B Aleatory C Valued contract D Conditional contract

a. contract of adhesion

Which of the following is attached to a property and casualty insurance policy to amend policy provisions or conditions? A Endorsement B Warranty C Consideration D Exclusion

a. endorsement

The authority of a producer that is stated in his/her agency contract, are said to be: A Express Powers B Assumed Powers C Apparent Powers D Implied Powers

a. express powers

Which section lists the perils insured against by a property insurance policy? A Insuring Agreement B Definitions C Declarations D Additional Coverages

a. insuring agreement

A potential cause of loss, such as fire, explosion, flood, or theft is considered to be a(n): A Peril B Accident C Occurrence D Hazard

a. peril

What is the term for a cause of loss, such as the theft of a car? A A peril B Risk C Accident D Hazard

a. peril

Insurance is designed to provide protection against which of the following? A Pure Risk B Speculative risk C Involuntary risk D Certain Risk

a. pure risk

Which type of risk involves the possibility of loss or gain? A Speculative B Stable C Insurable D Pure

a. speculative

The time period in which a lawsuit may be filed after the occurrence of a claim is referred to as: A Statute of limitations B Statutory law C Common law defenses D Limit of liability

a. statute of limitations

Short rate cancellation occurs when: A The insured cancels the policy mid-term B The policy is non-renewed C An insurer cancels the policy mid-term D A policy is flat cancelled

a. the insured cancels the policy mid-term

Which of the following has the primary responsibility of determining acceptable risks? A Underwriter B Adjuster C Auditor D Producer

a. underwriter

A property purchased 10 years ago for $100,000 has a replacement value today of $200,000. It has depreciated 3% each year. What is today's actual cash value? A $200,000 B $140,000 C $100,000 D $70,000

b. $140,000

Which of the following is true about a stock insurance company? A A stock insurance company is any insurance company whose home office is in this state and is incorporated in this state B A stock insurance company is run by officers and directors and has a stated amount of capital stock owned by stockholders C A stock insurance company is one whose home office is in some other state, but does business in this state D Policyholders own and control a stock insurance company

b. A stock insurance company is run by officers and directors and has a stated amount of capital stock owned by stockholders

All of the following statements about binders are true, except: A A binder specifies the effective date of coverage and amount of coverage B A binder specifies the premium amount C A binder specifies the perils covered D A binder specifies the insurer providing the coverage

b. a binder specifies the premium amount

Which of the following defines a tort? A Liability assigned to one party for the conduct of another B A wrongful act C An award to an injured party D An unforeseen event from which damage results

b. a wrongful act

What is the term for the idea that some risks are less desirable than average risks, and that these risks tend to seek coverage to a greater extent than more favorable risks? A Law of Large Numbers B Adverse selection C Estoppel D Sharing

b. adverse selection

Which kind of contract is defined as an unequal exchange in value? A Personal B Aleatory C Unilateral D Adhesion

b. aleatory

The termination of an insurance policy, by either the insured or the insurer before the expiration date, is known as: A Nonrenewal B Cancellation C Subrogation D Abandonment

b. cancellation

When an insured fails to disclose known facts in an application for insurance, he/she may be guilty of: A Twisting B Concealment C Breach of warranty D Waiver

b. concealment

The rules and procedures to be followed by the insured and the insurer are found in which section of an insurance policy? A Declarations B Conditions C Definitions D Insuring Agreement

b. conditions

All of the following are risk management techniques, except: a. transfer b. enhancement c. retention d. avoidance

b. enhancement

When an individual faces the risk of economic loss in the event of property damage, this indicates which of the following? A Merit rating B Insurable interest C Limit of recovery D Subrogation

b. insurable interest

Which of the following best describes a liability policy that is written on a primary basis? A It provides only basic coverage B It is the policy that pays first with respect to other policies C It pays only after other insurance covering the same loss is exhausted D It shares the loss with other policies covering the same loss

b. it is the policy that pays first with respect to other policies

A false statement in the application for insurance is called a: A Representation B Misrepresentation C Warranty D Concealment

b. misrepresentation

Which term describes the situation when two policies covering the same property contain different coverages? A Concurrent causation B Nonconcurrency C Coinsurance D Blanket coverage

b. nonconcurrency

When coverage applies to losses from all perils except those specifically excluded, the policy is said to be written on which of the following basis? A Valued B Open Perils C Named Perils D Agreed Value

b. open perils

Which of the following is not within an agent's authority? A Selling applications on insurer's behalf B Representing the insured's interest C Using express authority D Countersigning insurance contracts

b. representing the insured's interest

In property insurance, the principle that gives the insurer the right to take possession of damaged property after paying the loss is known as: A Vacancy B Right of Salvage C Abandonment D Indemnity

b. right of salvage

All of the following are options for managing risk, except: A Avoiding the risk B Subrogating the risk C Transferring the risk D Retaining the risk

b. subrogating the risk

All of the following are elements of an insurable risk, except: A The loss must be measurable B The loss may be catastrophic C The loss must be accidental D There must be a large number of homogenous units with the same exposure

b. the loss must be catastrophic

Which of the following is not an example of a pure risk? A A tornado destroying a mobile home park B A slip and fall injury at a large department store C Wall Street's decline in the stock market D A fire causing a home to be uninhabitable

c. Wall Street's decline in the stock market

Wet leaves on a sidewalk are considered a: A A natural hazard B A moral hazard C A physical hazard D A morale hazard

c. a physical hazard

All of the following are true of the Fair Credit Reporting Act, except: A A consumer has the right to obtain the substance of the information in the reporting agency file B A consumer who was investigated must be informed whenever credit or insurance was denied because of an adverse report C A report can be changed by court action only D The Act protects the rights of the individual from overly intrusive information collection practices

c. a report can be changed by court action only

Possibility of loss is called: A An insurable interest B A peril C A risk D A hazard

c. a risk

The maximum amount payable for all losses within a policy period is known as the: A Combined single limit B Per occurrence limit C Aggregate limit D Per person limit

c. aggregate limit

When a producer exceeds the authority expressed in the agency contract and the insurer does not take action, which of the following types of authority is created? A Actual B Implied C Apparent D Express

c. apparent

D does not agree with the insurance company's value of his property damaged as a result of his recent property loss. Which of the following establishes the procedure D and the insurance company must use to settle this issue? A Definitions Clause B Loss Payable Clause C Appraisal Clause D Claim Settlement Clause

c. appraisal clause

When Applicant P fails to disclose all of his motor vehicle violations in an application for automobile insurance, he may be guilty of: A Avoidance B Breach of warranty C Concealment D Estoppel

c. concealment

When an applicant intentionally fails to make a material fact known, it is known as: A Misrepresentation B Deception C Concealment D Bad faith

c. concealment

When a loss occurs as a result of two perils, one of which is excluded and the other of which is insured against, the situation is known as: A Supplemental Causation B Bilateral Causation C Concurrent Causation D Proximate Causation

c. concurrent causation

A secondary loss that occurs as a result of a direct loss from a covered peril is considered: A Delayed Loss B Secondary Loss C Consequential Loss D Provisional Loss

c. consequential loss

In an insurance contract, the value that each party gives the other is called the: A Subject matter B Offer C Consideration D Acceptance

c. consideration

What is the term for a contract written by one party on a "take it or leave it" basis? A Bilateral contract B Aleatory contract C Contract of Adhesion D Conditional contract

c. contract of adhesion

The standard policy structure for insurance policies includes all of the following sections, except: A Insuring agreement B Exclusions C Duties

c. duties

If an insurer is incorporated in Rhode Island, but primarily does business in New York, what type of insurer would it be considered in New York? A Domestic B Alien C Foreign D Nonadmitted

c. foreign

Which kind of agent enters into agreements with more than one insurer? A Captive B Exclusive C Independent D Direct

c. independent

Which of the following is a characteristic of a Mutual Insurance Company? A Stockholders have ownership B Dividends are returned profits C Members are provided insurance by the company D A policyholder is a voting member on the Board of Directors

c. members are provided insurance by the company

The person specifically designated in the policy as the person with whom the contract of insurance has been made, is considered to be the: A Contingent Insured B Contract Insured C Named Insured D Additional Insured

c. named insured

All of the following are types of insurers, except: A Reciprocal insurers B Stock insurers C Proprietary insurers D Mutual insurers

c. proprietary insurers

The shifting of risk of loss to another party is known as which of the following? a. risk assumption b. risk reduction c. risk transfer d. risk avoidance

c. risk transfer

Which of the following places insurance with a non-admitted insurer when insurance cannot be placed with an admitted insurer? A General consultant B Direct response company C Surplus Lines producer D General use producer

c. surplus line producer

Which of the following is not true about an insurance policy? A An application is a document that provides information for underwriting purposes B A deductible is a specified amount of loss that is retained by the insured C The insuring agreement includes the name of the insured D An insurance policy that pays before all other coverage is called primary coverage

c. the insuring agreement includes the name of the insured

An insured should not profit from an insurance transaction. This describes which of the following principles? A The principle of subrogation B The principle of utmost good faith C The principle of indemnity D The principle of personal aspect

c. the principle of indeminity

Which of the following might be considered a physical hazard? A Dishonesty on the part of an insured B The insured's attitude that good housekeeping is not important C The storage of flammables near a furnace D The storage of flammables in a fireproof container

c. the storage of flammables near a furnace

H's liability policy has the following limits: $35,000 per person, $350,000 per occurrence, and $2,000,000 aggregate. This year, three claimants file in the amount $15,000, $30,000, and $45,000. How much will the policy pay? A $350,000 B $90,000 C $35,000 D $80,000

d. $80,000

Which Federal entity administers the Terrorism Risk Insurance Program Reauthorization Act? A Executive office B Secretary of State C Department of Defense D Department of the Treasury

d. Department of the Treasury

K gets a horrible rash after using wrinkle - prevention cream for 2 months. This is considered: A Punitive damages B Negligence C An accident D An occurrence

d. an occurence

Which term describes the equal sharing of a loss by two or more insurers until the loss is paid, or until each insurer has exhausted its limits of insurance, whichever comes first. A Pro rata liability B Primary insurance C Excess insurance D Contribution by Equal Shares

d. contribution by equal shares

The Gramm-Leach Bliley Act was responsible for which of the following? A Deregulation of the trucking industry B Regulation of investment companies C Enforcement of fraudulent insurance acts D Establishment of privacy protection for consumers

d. establishment of privacy protection for consumers

Estoppel is defined as which of the following? A Estoppel is the failure to disclose known facts B Estoppel is the intentional misrepresentation of a material fact C Estoppel is the intentional abandonment of a known right D Estoppel prevents a party from denying a fact, if the fact was admitted to be true by a previous action

d. estoppel prevents a party from denying a fact, if the fact was admitted to be true by a previous action

Rates are referred to as which of the following when the insurance company files for approval and then implements the rates? A Open Competition B Prior Approval C Mandatory D File and Use

d. file and use

When a property insurance policy states that damaged property will be replaced with other property that performs the same function with similar efficiency but is not identical to the damaged property, the policy is written on which of the following bases? A Agreed Value B Actual Cash Value C Valued Policy D Functional Replacement Cost

d. functional replacement cost

Driving while under the influence of alcohol is an example of: A Assumption of risk B Contributory negligence C Vicarious Liability D Gross negligence

d. gross negligence

When filing a claim, the insured is required to do all of the following, except: A Give notice of loss as soon as possible B Protect property from further damage C Cooperate with the insurance company D Hire an appraiser

d. hire an appraiser

The following are all true regarding risk management, except: A The insured may retain part of a risk through deductibles B Reduction is a method of managing risk C Insurance is considered a transfer of risk D Insurance is designed to cover both intentional and unintentional losses

d. insurance is designed to cover both intentional and unintentional losses

Which of the following is not true about insurance? A It transfers risk B It protects against uncertainty C It is a means of sharing loss D It eliminates risk

d. it eliminates risk

Which type of construction material has a fire-resistance rating between one and two hours for walls, floors and roofs? A Joisted Masonry B Non-Combustible C Fire Resistive D Modified fire-resistive

d. modified fire-resistive

When the insurer elects to end coverage at the end of the policy period the policy is said to be which of the following? A Cancelled B Lapsed C Terminated D Nonrenewed

d. nonrenewed

The insured is not required to do which of the following in the event of a property claim? A Protecting property from further damage B Give notice of loss as soon as possible C Cooperate with the insurance company D Notify police, whether or not a law has been broken

d. notify police, whether or not a law has been broken

What is the term for continuous exposure to the same harmful conditions? A Risk B Proximate cause C Accident D Occurrence

d. occurence

The Reasonable Expectations Doctrine states that: A A policyowner may expect the insurer to refund premiums if no claims are made B The insurer may reasonably expect full cooperation of the insured in the event of a loss C A policyowner may reasonably expect that all claims submitted will be paid D The reasonable expectations of policyowners will be honored even if the strict terms of the policy do not support these expectations

d. reasonable expectations of policyowners will be honored even if the strict terms of the policy do not support these expectations

Where can you find insurance coverage after being rejected by voluntary market insurers? A Lloyd's of London B Reinsurance C Risk Retention insurance D Residual market

d. residual market

A hazard is best defined as: A The possibility of a loss B A reduction in, decrease in, or disappearance of, value C The loss itself D Something that increases the chance of a loss

d. something that increases the chance of loss

Which of the following statements is true concerning the National Association of Insurance Commissioners? A The NAIC regulates the insurance industry in the United States and has enforcement powers B Regulations and laws are passed at its meetings C The NAIC was responsible for passage of the McCarran Act D The association promotes uniformity among states

d. the association promotes uniformity among states

Which of the following parties may assign a standard property policy? A The Bailee B The Insurer C The First Named Insured D The insured with prior written permission of the insurer

d. the insured with prior written permission of the insurer

Who do producers represent when transacting the business of insurance? A The Commissioner B The insured C Themselves D The insurer

d. the insurer

Which of the following is not included in the Declarations of a Property Policy? A The expiration date of the policy B The amount of premium C The amount of coverage D The perils that are not insured against

d. the perils that are not insured agaisnt

What is the term for the first event in the unbroken chain of events, that resulted in a loss? A Incidental Cause B Efficient Cause C Indirect Cause D The Proximate Cause

d. the proximate clause

Which of the following is not a function of insurance? A To protect against uncertainty and reduce anxiety B To transfer risk from the insured to the insurer C To exchange a small certain expense for a large uncertain loss D To act as an investment vehicle for the insured

d. to act as an investment vehicle for the insured

Which of the following is least likely to be a factor when determining the eligibility of a person for property insurance? A The claims history showing when prior claims occurred and how much was paid to settle the claim B The nature of the risk, such as the type of building and the number of families living in the building C Existence of any hazards such as a nearby gas station exposure D Whether the premium will be paid in full or billed to the insured

d. whether the premium will be paid in full or billed to the insured

Under the Fair Credit Reporting Act, which of the following statements is correct? A The reporting company can provide confidential information to anyone requesting it B The reporting agency has no responsibility to investigate inaccurate information C The Act is designed to protect reporting agencies from the public D If an individual is denied coverage, they can request a copy of the report

d.. if an individual is denied coverage they can request a copy of the report