Property and Casualty Insurance Mastery Exam A
A piece of jewelry valued at $10,000 is stolen from the insured while at the mall. How much will an HO-3 policy pay for this loss?
$1,500
The insured had a pair of antique silver candlesticks valued at $2,000. A thief stole 1 candlestick. Because the set was "broken", the remaining candlestick's value was reduced to $250. Disregarding the deductible, the insurer would pay
$1,750
Ralph owns an antique pen and pencil set that is insured under a personal articles floater. The value of the set is $30,000. After the loss of the pen, the pencil is valued at $20,000. The insurance company will pay the maximum amount of
$10,000
The insured has an auto policy with liability limits of $30,000/$60,000/$10,000. He negligently runs off the road and causes $70,000 damage to an apartment building. How much will the policy pay?
$10,000
Auto liability limits expressed as 25/50/15 mean the policy will cover
$25,000 per person for bodily injury/$50,000 per accident for bodily injury/$15,000 per accident for property damage
Monica owns a $150,000 home. She carries 2 insurance policies on it: Company A insures $100,000 and Company B insures $50,000. If she suffers a $9,000 covered loss to her home, how much will Company A pay under the policy?
$6,000
Business personal property must be within how many feet of the premises to be covered on a commercial property policy?
100
After how many days is the insured penalized for a building being vacant at the time of loss?
60 days
Under the homeowners policy, in order to receive replacement cost on a partial loss, the amount of insurance carried must be at least
80% of replacement cost
Which of the following is NOT an example of insurable interest?
A person's interest in property she anticipates her uncle will leave to her in his will
Which of the following situations would most likely be covered by a commercial general liability (CGL) policy?
A surfboard falls off a shelf and injures a shopper.
Which of the following terms describes an insurance company that has been organized outside the United States or its possessions?
Alien
Which of the following best illustrates vicarious liability?
An employer is sued after their employee physically assaulted a customer.
Which of the following statements is TRUE regarding policy cancellation?
An insured can cancel a policy at any time.
Which of the following is used to determine the disputed value of covered property?
Appraisal
Which of the following is inland marine insurance?
Commercial property floaters
Which of the elements of a legal contract does an insurance premium represent?
Consideration
Which of the following commercial general liability (CGL) coverages would protect a policyholder for assumed liability under a construction contract to install water lines for a city?
Contractual liability
Which part of the dwelling property policy would cover lost rental revenue if the dwelling was being used as a rental property?
Coverage D
Lisa has a commercial general liability (CGL) policy for her bakery. She moves the bakery to a new location in another part of town. Which of the following statements about coverage at the new location is CORRECT?
Coverage is automatic until the end of the policy term.
Replacement cost coverage on the dwelling forms may be written for
Coverages A and B only
Which part of the insurance contract contains information about the effective date of coverage, deductible, premium, and location of the insured property?
Declarations page
The insured has run a red light and hits another car causing injury to the driver and damage to the car. The insured has what type of liability?
Direct
Which of the following individuals is likely to have a valid workers' compensation claim?
Employee injured while performing an operation for which he had not yet been trained
Which part of the insurance contract specifies the risks the policy will not cover?
Exclusions
Which part of the insurance contract specifies the risks the policy will not cover?
Exclusions.
The only newspaper in Clarksville was severely damaged by a tornado. The paper must be printed for several weeks at another printing facility in a distant town. Under which insurance coverage would that loss be covered?
Extra expense
The insurance company that Alan represents has just been placed into rehabilitation, but Alan continues to tell his clients the company is "financially strong" and he uses an outdated financial rating to back up his claim. What unfair trade practice has Alan committed?
False Financial Statements
Which of the following requires a person to prove that automobile liability insurance is in effect and is usually tied to vehicle registration?
Financial responsibility laws
Open peril coverage for both the dwelling and personal property is provided by the
HO-5
An individual who owns and lives in a condominium can obtain broad coverage for personal property in the condo under which homeowners form?
HO-6
In an insurance transaction, who does a licensed agent legally represent?
Insurer
Why is a businessowners policy called a package policy?
Insures property and negligence
If the insured has a policy that covers liability, where in the policy do you find the insurers duty to defend the insure
Insuring agreement
Which policy section includes the insurance company's promise to pay the claim?
Insuring agreement
Which is a characteristic of the businessowners policy (BOP)?
It stands by itself as a commercial package policy.
Which of the following coverages is included in the homeowners policy but is not included in an unendorsed dwelling policy?
Liability
Which of the following policy provisions allows the insured to immediately benefit from any changes to coverage made during the policy period that would broaden coverage?
Liberalization
Which of the following policy provisions allows the insured to immediately benefit from any changes to coverage made during the policy period that would broaden coverage?
Liberalization.
Lightning strikes a house and causes a fire. The firemen cause damage by spraying water to put out the fire. What is the proximate cause of this loss?
Lightning
What is the purpose of the conditions section of an insurance policy?
List the obligations of the insured and the insurance company
Which of the following would be considered special damages?
Medical expenses
Which of the following could be scheduled under a miscellaneous type vehicles endorsement to the personal auto policy?
Motorcycle
When would misrepresentations in an application be a basis for denying a claim?
Only if they were fraudulent
What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?
Open peril policy
What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?
Open peril policy.
Which of the following is NOT a commercial general liability exposure?
Owned investment portfolio
Which of the following is NOT a benefit of workers' compensation insurance?
Pain and suffering
Who are the 3 parties to a surety bond?
Principal, obligee, and surety
Which of the following principles holds that a person should not profit by collecting on insurance?
Principle of indemnity
When an insurance company cancels a policy, what is the method used to determine the premium refund that is due?
Pro rata
What is the meaning of actual cash value (ACV)?
Replacement cost, minus depreciation
Which of the following property policy forms should be used when it is difficult to provide the insurance company with an accurate statement of values because of fluctuations in inventory from month to month?
Reporting form
Answers to questions by the insured on applications are called?
Representations
Which of the following could be eligible for a businessowners policy?
Rest Easy Bed & Breakfast
Mary's insurance company pays for damage to her car caused by John. The insurance company now tries to get its loss paid for by John or his insurance company. What is this called?
Subrogation
Who may place insurance risks with unauthorized insurers?
Surplus lines agents/brokers
The business auto policy (BAP) uses symbols to denote the vehicles to which each of the policy's coverages applies. Which of these symbols allows coverage of all vehicles: owned, nonowned, and hired?
Symbol 1
What is the basic difference between the dwelling DP-2 and DP-3?
The DP-3 provides open peril coverage on the dwelling and other structures.
Who is responsible for controlling the content, form, and distribution of insurance policy advertisements?
The insurer
An insured rents a car while on vacation in Canada and causes an accident. Is there coverage under his personal auto policy?
The loss is covered under an unendorsed personal auto policy.
Which of the following losses would NOT be paid under the liability coverage of the homeowners policy?
The named insured's son damages the family's garage with his car.
What is the purpose of the ordinance or law coverage?
This additional coverage provides an additional amount of insurance for the increased costs of repair due to zoning laws.
An insured home has been vacant for 90 days. Which of the following perils would most likely NOT be covered
Vandalism
Which of the following is NOT considered an "occurrence" for insurance purposes?
Wear and tear on an industrial machine
A pollutant is a contaminant that is
all of these may be pollutants
Under the Valued Policy Law, the claim is payable
at full limit of liability
All of the following perils are covered under the Basic Commercial Property Causes of Loss form EXCEPT
falling objects
A person may NOT act as a producer/agent unless
licensed by the Department of Insurance
Twisting is
misrepresenting a policy in a replacement sale
All of the following are elements of negligence EXCEPT
must be intentional
Homeowners policies exclude losses from all of the following EXCEPT
negligence
The commercial package policy excludes
ocean marine coverage
All of the following are responsibilities of the agent when writing insurance EXCEPT
pay claims promptly
At all times, agents must uphold their fiduciary duty. The best example of this is
promptly submitting an insured's premium to the home office
Tony buys his wife, Millicent, a $50,000 diamond ring. When she is not wearing it, Millicent keeps it in a safe deposit box at the local bank. This is an example of risk
reduction
The law of large numbers states that
the larger the number of individual risks combined into one group, the more accurate the prediction of the amount of loss in any given period
Shoplifting would be classified under crime insurance as
theft
The personal auto policy's comprehensive physical damage coverage covers all of the following EXC
freezing
The building and personal property form covers all the following EXCEPT
highway billboards
An errors and omissions policy could be issued to cover the following occupations EXCEPT
veterinarians
All of the following may be included in a commercial package policy (CPP) EXCEPT
workers compensation
Using simple, layman's language while discussing insurance concepts, refraining from making inaccurate remarks about other agents or insurers, and placing customer interests above one's own are all examples of an agent's
ethical conduct
Under the workers' compensation laws, which of the following would NOT be covered?
Heart-related illness resulting from hereditary causes
An insurance policy covers fire, will not cover nuclear contamination, and loss must be reported as soon as possible. In this order, where are these facts found in the policy?
Insuring agreement, exclusions, and conditions
A wet floor in a restaurant is:
a physical hazard
The Terrorism Risk Insurance Act provides federal compensation for insured losses resulting from acts of terrorism. All of the following would qualify as acts of terrorism EXCEPT
acts causing property damage and loss of life in foreign countries
All of the following are excluded from the liability portion of commercial auto coverage EXCEPT
all expenses incurred by the insurer
If you own and drive a car, you have
an exposure
The method used to determine the value of a loss should the adjuster and the insured disagree is called the
appraisal method
Under the Valued Policy Law, the claim is payable
at limits of liability
States give an insurer permission to transact insurance with a certificate of
authority
All of the following would be covered property by the CPP building and personal property form EXCEPT
bailee property
An automobile policy may be canceled for any of the following reasons EXCEPT
being involved in a hit-and-run accident for which the insured was not at fault
An agent license is renewed by paying the applicable renewal fee and completing
continuing education
The conditions section of an insurance policy
describes the duties of the insured and insurance company
A commercial general liability "occurrence" policy provides coverage for a claim that occurred
during the policy period
All of the following are basic parts of an insurance policy EXCEPT
endorsements
Commingling refers to
improperly mixing personal funds with insurer or insured's funds
The State Guaranty Fund was established to protect all of the following EXCEPT
insurance companies
A cease and desist order
is issued by the Insurance Commissioner when it appears an unfair trade practice has occurred
Misrepresentation is
leading someone to believe that an insurance policy provides certain benefits when it does not
All of the following are insured contracts under the commercial general liability (CGL) policy EXCEPT
lease of business equipment
The crime policy insuring agreement for inside theft of money and securities will cover all of the following losses EXCEPT
merchandise found missing during an inventory
In property insurance, an insurable interest
must be present at the time the policy is written and also at the time of loss
A business income policy covers all of the following EXCEPT
non-continuing expenses
If a claim is valid, the insurer may
pay the claim to the extent of the limits of liability
A policy used to insure separate pieces of jewelry is called a
personal articles floater
Guaranty associations have been created for the purpose of
protecting insureds in the event of a member insurance company's insolvency
Offering to split commissions with a new customer is an example of
rebating
All of the following practices violate ethical principles in the selling of insurance EXCEPT
replacement
The deductible in an umbrella policy is referred to as
self-insured retention
All of the following are duties of the insured following a loss EXCEPT
separate damaged from undamaged property
An HO-3 would cover loss from
smoke
If a loss paid by a workers' compensation policy was caused by a negligent third party, the insurer retains the right to
subrogate
The procedure for resolving a disagreement between the insured and insurer about a loss is outlined in
the conditions
The term unoccupied means
the insured has gone on vacation
The insured's property insurance policy has a deductible clause. This means tha
the insured must pay a certain amount for each loss incurred under the policy
The garage policy covers all of the following EXCEPT
the insured's medical bills
The listing of the perils covered under a policy is found in
the insuring agreement
The FAIR Plan was brought into being for all of the following purposes EXCEPT
to cover dwellings that are in poor condition
The owner of an old building buys insurance to protect himself from a possible lawsuit. This is an example of risk
transfer
Flood insurance covers all of the following EXCEPT
underground leakage of pipes
When an insurer charges a higher rate for insurance based on an insured's race, religion, or national origin, it is considered
unlawful discrimination
An insured item is destroyed by a covered cause of loss. The insurer and the insured have determined the value of the loss in advance, and the full amount is payable under the
valued (agreed amount) contract
