Practice Exam

According to the principles of ocean marine insurance, a total loss may occur in which of the following ways a)Collison b)Actual c)Labor d)Sue

Actual

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

Excess insurance over the primary liability policy

Which of the following exposures in NOT covered under a homeowners policy? a)Personal liability b)Medical payments to an insured c)Unscheduled personal property damage d)Bodily injury to others

Medical payments to an insured

All of the following are additional coverage under a homeowners policy EXCEPT a)Outbuildings b)Fire department service charge c)Coverage for trees, shrubs, and other plants d)Payment for reasonable repairs and debris removal following a covered loss

Outbuildings

If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising? a)Sharing b)Retention c)Transfer Only d)Avoidance

Retention

Which part of the policy clarifies the terms that are used throughout the policy? a)Definitions b)Conditions c)Insuring agreement d)Declarations

a)Definitions

What information is found in the conditions part of an insurance policy a)The description of the duties and obligations of the insured b)The persons or risks not covered under the policy c)The identity of the named insured d)The amount of coverage provided by the policy

a)The description of the duties and obligations of the insured

An individual just applied for National Flood insurance. How many days can she expect to wait before coverage is effective? a)20 b)30 c)45 d)60

b)30

The businessowners policy (BOP) extension coverage form for personal property off premises is limited to a)$2,500 b)$5,000 c)$10,000 d)$15,000

c)$10,000

All of the following are eligibility criteria for the low cost automobile program EXCEPT a)The vehicles value b)Any felony convictions c)The income level d)The insured drivers age

Any felony convictions

Under the farm property and livestock coverage forms, which of th following property is covered for loss by the perils of earthquake or flood a)Farm machinery b)Attacks by dogs of the insured c)Household contents d)Farm animals

Farm animals

Which endorsement, when added to the personal auto policy, alters the definition of covered auto to include motor homes, golf cards, or motorcycles? a)Nonhighway vehicle endorsement b)Miscellaneous-type vehicle endorsement c)Recreational vehicle endorsement d)Extended coverage endorsement

Miscellaneous-type endorsement

What coverage form in the fam policy insures equipment on an open peril basis? a)Farm property b)Farm liability c)Mobile agriculture machinery and equipment d)Livestock

Mobile agriculture machinery and equipment

Workers Compensation rating is developed by applying a rating bureau job classification rate to which of the following? a)Noncash compensation b)Minimum Wage c)Job title d)Payroll

Payroll

An individual skilled in the process of selecting risks that will not create adverse selection for an insurance company is called a)Actuary b)underwriter c)Adjuster d)General agent

Underwriter

An insurer 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 $1,200. The total payment made under the insured's policy is a)$125,200 b)$126,200 c)$100,200 d)$150,200

a)$125,200

For there to be a negligent liability, all of the following must exist except? a)A reasonable expectation that the act may cause injury or damage b)A breach of the legal duty which results in injury or damage to another person c)A legal duty to act, or not to act, under the circumstances d)Proximate cause between the wrong and the injury or damage

a)A reasonable expectation that the act may cause injury or damage

Insurers CANNOT transact insurance in this state without a a)Certificate of Authority b)Broker's license c)Certificate of insurance d)Letter of Clearance

a)Certificate of Authority

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? a)Insuring agreement b)Exclusions c)Declarations d)Conditions

a)Insuring agreement

Which of the following is the other major coverage provided by the business owners liability coverage form? a)Medical payments b)Personal liability c)Auto liability d)Employers liability

a)Medical payments

In a liability policy with split limits of 25/50/25, which number is the maximum amount that would be payable int he event of damage to a person's property? a)The amount of the third number, $25,000 b)The amount of all three numbers, $100,000 c)The amount of the first number, $25,000 d)The amount of the second number, $50,000

a)The amount of the third number, $25,000

Which of the following best describes how underinsured motorist coverage works? a)The coverage pays the difference between the insured's underinsured motor is limit and the other drivers property damage coverage limit b)The coverage pays for the insurance company to sue the underinsured motorist and his insurance company for full payment c)The liability for the loss is divided evenly between the insured's insurance and the underinsured motorist's insurance d)The insured's policy pays the whole amount of the liability

a)The coverage pays the difference between the insured's underinsured motor is limit and the other drivers property damage coverage limit

The limited theft endorsement designed for a landlord excludes all of the following EXPECT a)Silverware stolen from the landlord's china cabinet b)A lawnmover the landlord owns and keeps at rented premises c)Jewelry stolen from the landlord's home d) Money stolen from the tenant's apartment

b)A lawnmover the landlord owns and keeps at rented premises

Which of the following would NOT be eligible for coverage under a personal auto policy? a)A trailer owned by the insured b)A vehicle purchased 90 days ago c)A vehicle listed on the declarations page d)A nonowned temporary substitute vehicle

b)A vehicle purchased 90 days ago

A performance bond is an example of which of the following types of bonds? a)Injunction b)Contract c)Judicial d)Fiduciary

b)Contract

What policy would a business owner whose business fills scuba tanks most likely need to insure unfired pressure vessels and compressors? a)Contractors equipment floater b)Equipment breakdown c)Inland marine scuba floater d)Commercial general liability

b)Equipment breakdown

All of the following are factors in the determination of actual cash value EXCEPT a)Property type b)Insurance premium paid c)Age of property d)Replacement cost

b)Insurance premium paid

Insurance rates developed by the underwriter based on his skill and experience instead of actuarial analysis are known as a)Manual rates b)Judgment rates c)Merit rates d)Experience rates

b)Judgment rates

In the last 72 hours, there were 3 instancesof 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? a)Zero b)One c)Two d)Three

b)One

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? a)Product liability b)Physical damage on a customer's auto c)Auto liability d)Premises and operations liability

b)Physical damage on a customer's auto

Which homeowners form provides open peril coverage for dwelling (coverage A) and contents (coverage C) a)Form 2 b)Form 3 c)Form 5 d)Form 8

c)Form 5

Which valuation method takes into consideration what a willing buyer would pay for an insured property? a)Actual Cost value b)Functional replacement value c)Market value d)Replacement value

c)Market value

A standard fire policy would best be described as a/an a)Basic perils contract b)Broad perils contract c)Named perils contract d)All risks perils contract

c)Named perils contract

The extended nonowned coverage provides protection to a)The person named and his or her spouse only b)Anyone who is given permission to drive by the named insured c)Only the person named on the policy d)The person named on the policy and all residence family members

c)Only the person named on the policy

The declarations section in a homeowners policy provides all of the following information EXCEPT a)Amount of deductible applied to a loss b)insured locations c)Policy exclusions d)Basic underwriting information

c)Policy exclusions

When the ownership of a vessel changes, the premium will be returned on a a)Annual basis b)Lump sum basis c)Pro rata basis d)Monthly basis

c)Pro rata basis

When an insurer pays for the cost to exchange demaged property with new property of similar kind and quality, it is called a)Market Value b)Stated amount c)Replacement Cost d)Actual Cash value

c)Replacement Cost

If the premiums collected by an insurer participating in the WYO flood program are insufficient to cover losses, which of the following would be true? a)The insurer must apply for disaster relief funds b)Federal insurance administration will remove the insurer from the NFIP c)The insurer will be reimbursed for the excess costs by the NFIP d)The insurer must cover the loss out of its surplus

c)The insurer will be reimbursed for the excess costs by the NFIP

The personal property off premises extension of dwelling forms provides limits of coverage up to a)10% of coverage A anywhere in the U.S. or Canada b)10% of coverage A anywhere in the world c)10% of coverage C anywhere in the U.S. or Canada d)10% of coverage C anywhere in the world

d)10% of coverage C anywhere in the world

Unless the commissioner disapproves a rate change application, it will be assumed to be approved a)30 days b)60 days c)90 days d)180 days

d)180 days

Which of the following would be eligible for homeowners coverage F - Medical payments in the event of injury at the insured's premises? a)The named insured's spouse b)A guest who was hurt at the insured's party five years ago c)A person regularly residing with the insured d)A full time maid

d)A full time maid

If a fire erupts in the kitchen and spreads to the upstairs bedroom, resulting in the destruction of furniture, what type of loss has occurred? a)Indirect b)Consequential c)Proximate d)Direct

d)Direct

An aleatory contract is based on what kind of exchange a)Equal amounts for pay in and pay out b)Balanced benefits c)Exchange of equal obligations d)Unequal exchange of values

d)Unequal exchange of values

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? a)$150,000 b)All of the damages were covered by his insurance policy c)$50,000 d)$100,000

$50,000

According to homeowners Coverage A, how much of a house's value must be insured in order to qualify for replacement coverage? a)50% b)75% c)80% d)85%

c)80%

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 a)Second-tier fire b)Friendly fire c)Hostile fire d)Indirect fire

c)Hostile fire

A representation in an insurance contract qualifies as a(n) a)Express Warranty b)Policy provisions c)Opinion d)Implied warranty

Implied warranty

Which of the following in NOT true regarding the automatic increase in insurance endorsement in dwelling policies? a)It increases the amount of coverage by an annual percentage b)It is optional c)It provides protection from inflation d)It does not require additional premium

It does not require additional premiums

Which of the following would be covered under a building and personal property coverage form? a)Personal property while airborne b)Underground pipes c)Outdoor sign d)Building foundations

Outdoor sign

Which of the following would NOT be covered under the directors and officers liability coverage? a)Wrongful acts while directors and officers are acting in an official capacity b)Neglect and breach of duty c)Misstatements made by the directors and officers d)Reimbursement for fines and penalties

Reimbursement for fines and penalties

All of the following statements about mutual insurance companies are correct EXCEPT a)Policy dividends issued by mutual companies are guaranteed and not taxable b)Dividends allow policyholders to share in a mutual company's divisible surplus c)Dividends are a return of unused premiums d)Mutual companies issue policies referred to as participating

a)Policy dividends issued by mutual companies are guaranteed and not taxable

Section III of the business auto policy provides physical damage coverage. All of the following are physical damages that may be selected coverages EXCEPT a)Comprehensive coverage b)Collision coverage c)Limited peril coverage d)Specified causes of loss coverage

c)Limited peril coverage

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

c)Only one party makes a promise

Compulsory automobile financial responsibility laws may be satisfied in all of the following ways EXCEPT a)A certificate of passing a safe driver's education course b)Posting a bond with the motor vehicle department c)The purchase of insurance from an insurance company d)A certificate of self insurance

*a)A certificate of passing a safe driver's education course

At the expiration (or cancellation) of a claims made policy, the insured is guaranteed to have an option to purchase a/an a)Basic extended reporting period b)Extended hold harmless insurance endorsement c)Extended supplemental limits of insurance d)Supplemental extended reporting period

*d)Supplemental extended reporting period

A provision found in most claims-made liability forms that allows the insure coverage for claims arising from events that occurred during the policy period, but was not reported until after the policy expiration is called a)Extended warranty agreement b)Extended reporting period (ERP) c)Extended period of indemnity d)Extended coverages

Extended reporting period (ERP)

Statistical probabilities of loss for a particular class of insureds is best predicted when the insured group is a)Older b)Smaller c)Larger d)Diverse

Larger

An applicant for property insurance owns a building in which combustible materials are stored in the furnace room. From an underwriting stand point, this risk would like be considered a a)morale hazard b)Speculative risk c)Moral hazard d)Physical Hazard

Morale hazard

What sublimit in a liability policy sets the maximum amount that will be paid for all claims arising from a single accidents? a)Combined single b)Aggregate b)Per occurrence d)Per person

Per occurrence

Which of the following types of property would be covered under Coverage C- personal property in a dwelling policy? a)Any personal watercraft b)Motor vehicles c)Rowboats d)2-passenger aircraft

Rowboats

Wagering on a sporting event is know as what type of risk a)Simple b)Pure c)Speculative d)Calculated

Speculative

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? a)Protection and indemnity b)Sue and labor c)Pilotage and towage d)War and strikes

Sue and labor

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

The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled

An insured goes out to an expensive restaurant one night and uses the restaurant's valet parking services. The restaurant hires a third-part 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? a)The parking garage insurance b)The valet services insurance c)The insured's personal auto policy d)The restaurant's liability insurance

The valet services insurance

When an insured's gardener was spraying weeds in his lawn, he failed to notice that the wind was drifting the spray into the neighbor's yard where he damaged their flower bed. The insured was found to be legally liable for this damage. This is an example of a)Gross negligence b)Vicarious liability c)Intervening cause d)Comparative neglicgence

Vicarious liability

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

a)A duplex that is occupied by two families, each of which have a bedroom rented to a boarder

Which of the following conditions is NOT included for farm liability in addition to the common policy conditions? a)Arbitration b)Bankruptcy of the insured c)Duties in the event of an occurrence, claim, or suit d)Liberalization

a)Arbitration

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

b)The policy may be voided

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? a)No. because even though it was a pick up game, it was an organized event b)No. personal liability applies on premises only c)No, the insured was not negligent d) Yes, medical payments coverage also applies off the insured premises

d) Yes, medical payments coverage also applies off the insured premises

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? a)Yes, if the visitor has no health coverage b)No, because the dog is not yours c)No, because injury to others by animals is not covered d)Yes, the coverage would apply for any animal in your care.

d)Yes, the coverage would apply for any animal in your care.

Which commercial property form is used to insure buildings while under construction? a)Builders risk b)Legal liability c)Building and personal property d)Business income

Builders Risk

When insurance is written on a dwelling form, which of the following types of property would be insured under Coverage B (other structures) a)A garage separated from the dwelling b)Materials and supplies used for construction or repair of the dwelling c)A laundry room attached to the dwelling d)Building equipment and outdoor equipment

A garage separated from the dwelling

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? a)Coverage D-Fair rental value b)Coverage E- Additional living expense c)Coverage A - Dwelling d) Coverage B- Other structures

Coverage E Additional living expense

The equipment breakdown coverage form provides coverage for all of the following EXCEPT a)Bodily injury liability b)Expediting expenses following a covered loss c)Damage to the insured's property d)Damage to property of others in the insured's care and custody

a)Bodily injury liability

Which type of authority is found in the agent's contract? a)Express b)Apparent c)Implied d)Assumed

a)Express

All of the following are covered perils in a a standard fire policy EXCEPT a)Friendly fire b)hostile fire c)Removal from premises d)Lightning

a)Friendly fire

Restoring an insured financially after a claim is known as a)Indemnity b)Adhesion c)Restoration d)Reasonable expectations

a)Indemnity

What kind of coverage does form DP-3 provide a)Open peril b)Basic peril c)Named peril d)Broad peril

a)Open peril

An insurance company that is owned by the policy holders is called a a)Mutual insurer b)Fraternal insurer c)Stock insurer d)Reciprocal insurer

*a)Mutual insurer

All of the following statements regarding personal property coverage in the homeowners program are correct EXCEPT a)The HO-3 policy covers the mysterious disappearance of personal property b)Coverage on money is limited to $200 c)Personal property coverage is usually 50% of the coverage A limit d)Earthquake coverage my be added by endorsement

*a)The HO-3 policy covers the mysterious disappearance of personal property

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? a)An increase in the combined ratio means that profitability is improving b)When the ratio is over 100, the insurer has an "underwriting profit" c)A decrease in the combined ratio means financial profitability is improving d)A decrease in the combined ratio means financial profitability is decreasing

A decrease in the combined ratio means financial profitability is improving

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

A plot of farmland owned or rented by the insured

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? a)HO policies do not cover debris removal b)An additional 5% of the policy limit may be paid for debris removal c)Because the full policy limit must be paid for the house. there is no coverage for debris removal d)It will be paid if the debris removal endorsement has been added

An additional 5% of the policy limit may be paid for debris removal

The FAIR plan offers a basic property insurance policy that may include all of the following features EXCEPT a)Extended coverage for both structure an personal property;perils include damage caused by:wind, hail, aircraft damage, riot, vehicle damage, explosions & smoke b)Vandalism & malicious mischief (V&MM) for both structure and personal property c)Automobile and farm coverage d)Fire coverage for the personal property or personal property of others

Automobile and farm coverage

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

Offering an inducement of something of value not specified in the policy

Homeowners policies consider all of the following insured locations EXCEPT a)A strawberry patch owned by the insured b)Land owned by the insured on which his new home is under construction c)An individual cemetery plot d)The hotel ballroom rented by the insured for a family reunion

a)A strawberry patch owned by the insured

Under a commercial general liability policy, which of the following is NOT considered mobile a)An automobile used as a company car by a real estate company b)A combine used on a farm c)The department of transportation's resurfacing equipment d)The bulldozer used by an excavating company

a)An automobile used as a company car by a real estate company

Which of the following is NOT one of the independent rating services that publishes guides to insurance companies financial integrity? a)Moody's b)NAIC c)Fitch d)Am Best

b)NAIC

The businessowners liability coverage form would respond to a claim arising from which of the following events? a)An injury arising out of a customer falling because of a wet floor b)An injury to an employee while performing his or her job c)Damages sought by a third party as a result of an accounting error d)An injury arising out of the sale of alcoholic beverages

a)An injury arising out of a customer falling because of a wet floor

An insured's home catches fire. As a result, the insured's family must stay in a motel until the home is reparied. The cost of the motel stay would be considered a a)Consequential loss b)Resulting loss c)Direct loss d)Negligent Loss

a)Consequential loss

All of the following are optional endorsements that may be added to the standard equipment breakdown coverage EXCEPT a)Debris removal b)Utility interruption c)Extra expense d)Business interruption

a)Debris removal

Which of the following is covered under a dwelling policy? a)Fire caused by an earthquake b)Freezing plumbing systems c)Flood or surface water d)Structures used for commercial manufacturing

a)Fire caused by an earthquake

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 a)Home based business policy endorsement b)Standard homeowner's policy is the ONLY plan available c)Travel insurance policy d)Commercial travel liability policy

a)Home based business policy endorsement

What does HO personal property coverage NOT cover? a)Personal property of roomers not related to the insured b)The spouse's personal property c)The insured's personal property in another country d)The resident's son's personal property

a)Personal property of roomers not related to the insured

The basis of insurance is sharing which of the following among the members of a large homogeneous group with similar exposure to loss? a)Risk b)Hazards c)Perils d)Loss

a)Risk

Which of the following types of bonds guarantees that a supplier will furnish supplies, materials, products, and equipment as specified in the written contract? a)Supply bond b)Labor and materials bond c)Performance bond d)Bid bond

a)Supply bond

The cost bond guarantees a)The plaintiff will pay court cost and damages to the defendant if the plaintiff loses the court case b)A contractor's cost overruns will be paid c)A person will appear in court when required d)Damages will be paid when an injunction should not have been issued, but was

a)The plaintiff will pay court cost and damages to the defendant if the plaintiff loses the court case

The livestock coverage form provides coverage for livestock. Livestock means any of the following EXCEPT a)Turkeys and chickens b)Cattle and swine c)Sheep and goats d)Horses and mules

a)Turkeys and chickens

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? a)Utility Services b)water damage c)Weight of snow, ice, or sleet d)Falling objects

a)Utility Services

What is the main distinction between a hired auto and a nonowned auto? a)Who owns the auto b)The length of time the insured uses the auto c)The amount of premium d)Whether a payment is made for the use of the auto

a)Who owns the auto

The amount of loss the insured is willing to absorb without insurance protection is known as a)self insurance retention b)Maximum deductible c)Stop loss d)Limit of liability

a)self insurance retention

Which of the following is consideration on the part of an insurer? a)Underwriting b)Paying a claim c)Decreasing premium amounts d)Paying the premium

b)Paying a claim

Which action by an insurer or its representatives is NOT considered an unfair claims violation? a)The claims department fails to affirm or deny coverage within a reasonable period of time after proof of loss has been submitted b)An agent advises a claimant to obtain the services of an attorney c)A claims adjustor misrepresents pertinent policy provisions to dissuade an insured from making a claim d)An agent does not respond to a claimant's communication concerning a claim where a response is required

b)An agent advises a claimant to obtain the services of an attorney

Coverage C in homeowners policy forms offers all of the following EXCEPT a)Coverage for property located at another residence premises b)Coverage for loss of use c)Worldwide coverage d)Coverage for property of others

b)Coverage for loss of use

Which of the following perils is NOT covered the DP-2 a)Damage caused by falling objects *b)Damage to pets, birds, or fish c)Damage caused by burglars d)Damage caused by the weight of ice and snow

b)Damage to pets, birds, or fish

Super Sale Construction has the best safety record of any construction company in the country. It has been recognized by OSHA for its record and received an award for having no accidents in the past five years. Super safe has suffered economically due to increased lumber costs, insurance costs, and labor costs. One method by which super safe could lower its insurance costs for its commercial policy is through the use of a)Decreased deductions on the current commercial policy which will result in a decrease level of self insurance b)Scheduled ratings risk assessment which allows the insured to receive credits and debits for business practices which increase or decrease the risk of loss c)Premium financing plans which allow super safe to pay lower premiums when needed and make up the difference when profits increase d)A reinsurance contract that is purchased from a direct reinsurer therefore, bypassing the agent commissions.

b)Scheduled ratings risk assessment which allows the insured to receive credits and debits for business practices which increase or decrease the risk of loss

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? a)Section II, subject to the deductible b)Section II, with no deductible c)Section I, with no deductible d)Section I, subject to the deductible

b)Section II, with no deductible

All of the following are TRUE statements regarding cancellation procedures EXCEPT a)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 b)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 c)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 d)When a policy is cancelled upon its effective date, it is considered a flat cancellation and no premium charge is generally made

b)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

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 a)Entirety b)Subrogation c)Indemnity d)Insurable interest

b)Subrogation

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 the damage? a)The insured's insurer, regardless of negligence b)The contractor c)The neighbor's insurer d)The insured's insurer, if the neighbor proves that the insured was negligent

b)The contractor

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 a)The property coverage of the golf course b)The golfer's homeowners liability coverage c)The homeowner's property coverage on the house d)The liability policy of the golf course

b)The golfer's homeowners liability coverage

A personal umbrella policy may act as excess over any of the following insurance coverage policies EXCEPT a)Auto liability coverage b)Comprehensive personal liability c)Auto collision coverage d)Homeowners Section II coverage

c)Auto collision coverage

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? a)$2,000 b)$1,000 c)$10,000 d)$12,000

c)$10,000

Under business personal property limit. seasonal increase, if no percentage is specified in the declarations, seasonal fluctuations will automatically increase the limit for business personal property by a)10% b)15% c)25% d)50%

c)25%

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

c)A printer gets her hand crushed in a printing press at work

Which of the following could be insured with replacement cost coverage under the flood insurance program? a)An apartment building b)A shed c)A single family home d)A garage

c)A single family home

Which of the following would NOT be covered as a loss under Coverage D of a homeowners policy? a)After a fire in a building next to the insured's home, the insured couldn't not occupy his home, and had to stay at a motel for one week. b)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. c)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. d)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

c)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.

In the DP-1, if the insured elects to apply coverage B to a detached garage, Coverage A will a)Only be applicable if the insured pays an additional premium b)Be increased by 10% c)Be reduced by 10% d)Only be applicable if the insured pays a higher deductible

c)Be reduced by 10%

This statutory law defense that reduces injury and awards for damages proportionately when the plaintiff and defendant are both responsible is called a)Intervening cause b)Contributory negligence c)Comparative negligence d)Assumption of risk

c)Comparative negligence

Which of the following is covered by auto other than collisions comprehensive coverage? a)Portable CD player b)Awning attached to car for camping c)Electric equipment required for the normal operation of the car d)Radar detector

c)Electric equipment required for the normal operation of the car

An insurer incorporated under the laws of another state but doing business in this state is considered to be a(n): a)Alien b)Domestic c)Foreign d)Multi-national

c)Foreign

A scheduled personal property endorsement will be used to insure a)Personal vehicles used by travelers anywhere in the world b)Personal items at their actual cash value c)Higher limits of coverage for fine arts items d)High value items only within the US

c)Higher limits of coverage for fine arts items

Which is NOT true of workers compensations coverage a)It offers death benefits b)It offers rehabilitation benefits c)Medical payment benefits are limited d)Medical payment benefits are unlimited

c)Medical payment benefits are limited

Which of the following is an endorsement that changes the actual cash value settlement on personal property to a replacement cost basis a)Preservation of property b)Permanent total compensation c)Personal property replacement cost d)Actual cash loss

c)Personal property replacement cost

What type of insurer uses a format sharing agreement? a)Mutual insurers b)Fraternal benefit societies c)Reciprocal insurers d)Stock insurers

c)Reciprocal insurers

What are the types of compensatory damages? a)Unique and general b)Special and punitive c)Special and general d)Punitive and reward

c)Special and general

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

c)The company will reimburse the insured for all loss of earnings

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

c)The insured building is vacant for over 60 days

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 a)The DP policy will pay for the pipes, but not the labor b)The DP policy will pay for the labor, but not the pipes c)This loss is excluded from coverage d)This loss is covered

c)This loss is excluded from coverage

When dos the federal emergency flood insurance program go into effect? a)Annually for the flood season b)When mandated by the president of the united states c)When a community applies for the program d)As soon as the flooding occurs

c)When a community applies for the program

If a car is stolen and left in a snow bank, causing the radiator to freeze and sustain heavy damage, is the damage covered by the auto policy? a)No, freezing is never covered b)No, Theft is never covered c)Yes, freezing exclusion is removed if the car is stolen d)Yes, there is no exclusion for freezing

c)Yes, freezing exclusion is removed if the car is stolen

An insured rents out a bedroom in his residence for $50 per week. The residence is badly damaged by 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? a)$150 b)$300 c)$900 d)$1,050

d)$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. a)$2,000 b)$2,500 c)$1,000 d)$1,500

d)$1,500

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? a)$0 b)$1,000 c)$4,000 d)$8,000

d)$8,000

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

d)A general average

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

d)Abandon t he property involved to the insurer

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 a)While sweeping the floors, an insured's resident maid trips and falls down the stairs, breaking her leg b)An insured's boat stored in the garage slips off of its supports and injures a visitor c)An insured's dog left in the care of a friend bites a salesman d)An insured's 14 year old son was throwing rocks at the neighbor's house and broke several windows

d)An insured's 14 year old son was throwing rocks at the neighbor's house and broke several windows

Which of the following statements is true concerning a workers compensation and employers liability policy a)Claims of surviving children are not covered b)Claims of a surviving spouse are not covered c)Punitive or exemplary damages are covered d)Exposures in states listed on the information page are covered

d)Exposures in states listed on the information page are covered

An audit revealed the administrator for a pension plan has made investments that were not consistent with the risk tolerance set forth in the plan for its members. The earnings for the past year are substantially below the average for comparable funds. The governing board wants to take action against the administrator. What type of commercial liability would the board need to provide for this risk a)Employee dishonesty bond b)Personal injury liability c)Fiduciary liability owned by the administrator d)Fiduciary liability policy paid by the pension fund

d)Fiduciary liability policy paid by the pension fund

Which of the following losses would be excluded from coverage under the farm property special form? a)Loss of livestock caused by attack by dogs or wild animals b)Theft of property from the insured's residence c)Drowning of livestock d)Fire caused by curing tabacco

d)Fire caused by curing tabacco

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? a)HO-2 b)HO-3 c)HO-4 d)HO-5

d)HO-5

Which form insures both buildings and personal property on an open peril basis? a)HO-2 b)HO-3 c)HO-4 d)HO-5

d)HO-5

An insured was involved in an accident that was caused by a tire blowing out. The insured was severely injured and incurred medical expenses of $100,000. The insured brough 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? a)Both manufacturers would share the loss b)Neither manufacturer would have to pay because of the buyer beware doctrine c)Manufacturer of the auto d)Manufacturer of the tire

d)Manufacturer of the tire

The equipment breakdown coverage form values loss on a/an a)Valued basis b)Stated amount basis c)Actual cash value basis d)Replacement cost basis

d)Replacement cost basis

A statement made by an applicant for insurance that must be true in every respect is considered to be a a)Misrepresentation b)Warranty c)Concealment d)Representation

d)Representation

For an additional premium, the extended coverages written on the basic form dwelling policy would cover which of the following a)Vandalism b)Glass breakage c)Fire d)Riot

d)Riot

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

d)The owner-occupant of a condominium unit

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 injuries to 2 individuals. Under the commercial auto liability policy conditions, which policy pays for this loss? a)The insurance companies will share in the settlement based on the other insurance condition b)Only the insurance company for the borrower of the truck will pay for damages and injuries c)The policy for the titled owner of the truck will be primary, and the borrower's insurance will be excess d)The policy for the company that borrowed the truck will be primary, and the titled owner of the truck will be excess

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

When Symbol 7 is provided, which of the following statements is true with regards to newly acquired autos? a)They are covered only until the end of the policy form b)They are not covered until the insurer is notified c)They are automatically covered only for 30 days d)They are covered if they are used to replace previously owned autos with that coverage

d)They are covered if they are used to replace previously owned autos with that coverage

Under Coverage C, and at the request of an insured, personal property of a guest or residence employee is covered a)While it is in any residence premises occupied by a named insured b)Anywhere in the world c)Only while on a residence premises d)While it is in any residence premises occupied by an insured

d)While it is in any residence premises occupied by an insured