Property and Casualty/Liability Insurance Basics

Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses?a)Exclusions b)Declarations c)Insuring agreement d)Additional coverage

Additional coverage

All of the following are conditions commonly found in the insurance policy EXCEPT a)Subrogation. b)Appraisal. c)Insuring agreement. d)Cancellation and nonrenewal.

Insuring agreement.

An ocean marine loss that occurs through the voluntary sacrifice of a part of the vessel or cargo to save the ship, crew, or other cargo is known as a)Particular average. b)Inchmaree clause. c)Protection and indemnity. d)General average.

General average.

Which of the following is NOT an optional coverage built into the condominium association coverage form? a)Replacement cost b)Real estate tax liability c)Agreed value d)Inflation guard

Real estate tax liability

All of the following are purposes of insurance EXCEPT to a)Limit the adverse effects of competition on the cost of insurance. b)Regulate insurance marketing practices. c)Earn commissions. d)Protect the best interests of the public.

Earn commissions.

Jean owns a craft store. The protective safeguards endorsement of her BOP requires the store to have a functional automatic sprinkler system. A winter storm freezes the pipes to the sprinkler system, causing the system to shut down. How many hours does Jean have to restore the system before she must notify her insurer? a)12 hours b)24 hours c)36 hours d)48 hours

48 hours

During a house fire, an insured moves an antique chair listed on the policy to a storage unit. In the Standard Fire Policy, how many days will the antique chair be covered at the new location? a)3 days b)5 days c)15 days d)30 days

5 days

Which of the following persons is NOT required to complete CE? a)A property insurance intermediary with 40 years of continuous licensure b)Any licensee over 65 with more than 25 years of continuous licensure c)A limited lines intermediary with 40 years of continuous licensure d)A life insurance intermediary with 18 years of continuous licensure

A limited lines intermediary with 40 years of continuous licensure

According to the standard mortgage clause, who has the right to bring a suit in their own name to recover damages, pay policy premiums, and submit a proof of loss? a)Policyholder b)Mortgagee c)Insurance company d)Governor

Mortgagee

Which of the following would the livestock coverage form NOT insure against? a)The euthanasia of livestock suspected of carrying mad cow disease b)Death of livestock caused by accidental drowning c)Death of livestock caused by a tornado d)The euthanasia of livestock after being hit by a vehicle

The euthanasia of livestock after being hit by a vehicle

Which of these is defined as the maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims that may be made or the number of accidents that may occur? a)Per occurrence limit b)Split limit c)Aggregate limit d)Per person limit

Aggregate limit

An insured works outside the home. The insured's sister lives with him and cares for his four children. When the insured's home is severely damaged by fire, the family moves into an apartment while repairs are being made. The largest apartment available in the area has two bedrooms, so the insured's sister has to stay at a motel. How much will the HO-3 form pay for these additional living expense? a)Nothing b)All of the expense up to the Coverage D limit c)The cost of renting an apartment, but not the cost of the motel room d)The cost of renting an apartment, and 50% of the cost of the motel

All of the expense up to the Coverage D limit

All of the following would be considered rebating EXCEPT a)An agent offers tickets to a baseball game as an inducement to buy insurance. b)An agent misrepresents policy benefits to convince a policyowner to replace policies. c)An agent offers the use of his lake house to a client as an inducement to buy an insurance policy from him. d)An agent offers to share his commission with a policyholder.

An agent misrepresents policy benefits to convince a policyowner to replace policies.

How long are oral contracts valid in Wisconsin? a)30 days b)Oral contracts are not valid. c)48 hours d)3 business days

30 days

An insurance producer who by contract is bound to write insurance for only one company is classified as a/an a)Captive agent. b)Solicitor. c)Broker. d)Independent producer.

Captive agent.

Which of the following causes of loss would NOT be covered under a BOP form? a)Earth movement, power failure, and flood b)Riot, sprinkler leakage, or sinkhole collapse c)Fire or lightning d)Tornado

Earth movement, power failure, and flood

All of the following actions can be described as twisting EXCEPT a)Making an incomplete comparison between the existing and proposed policies b)Explaining to client the advantages of permanent insurance over term and suggesting changing policies c)Misrepresenting the terms and conditions of the existing policy to make the new one more attractive d)Embellishing the terms of the proposed policy in order to convince the insured to switch

Explaining to client the advantages of permanent insurance over term and suggesting changing policies

Which of the following coverages is included in an unendorsed homeowners policy? a)Medical payment to others b)Personal property replacement coverage c)Fungi, wet or dry rot, or bacteria d)Earthquake

Medical payment to others

Illegal use of narcotics would be an example of a a)Moral hazard. b)Physical hazard. c)Pure hazard. d)Morale hazard.

Moral hazard.

Which of the following covers a carrier for liability for loss to cargo while it is being transported in a truck? a)Motor truck cargo policy - owners form b)Trip transit policy c)Truckers coverage form d)Motor truck cargo policy - carriers form

Motor truck cargo policy - carriers form

All of the following are true regarding rebates EXCEPT a)Dividends are not considered to be rebates. b)Rebates are allowed if it is in the best interest of the client. c)Rebates are only allowed if specifically stated in the policy. d)Rebating can be anything of monetary value given as an inducement to purchase insurance.

Rebates are allowed if it is in the best interest of the client.

Which method of loss valuation is contrary to the basic concept of indemnity? a)Market value b)Agreed value c)Replacement cost d)Functional replacement cost

Replacement cost

Which of the following is used in the formula for calculating the actual cash value of a property? a)Replacement cost b)Stated value c)Fair market value d)Agreed value

Replacement cost

Which of the following is NOT a mandatory provision for property policies issued in the state of Wisconsin? a)A mortgagee clause b)Obligations in the event loss occurs c)Replacement cost coverage d)A description of the location of the property covered

Replacement cost coverage

According to the conditions of a hull policy after a loss, when would wages and maintenance be paid for the master, officers, and crew? a)When moving the vessel from one port to another b)While laid up in port awaiting repair c)Within 15 days after filing claim for damages d)While on shore leave

When moving the vessel from one port to another

What is WIP's maximum limit of coverage for a fire policy on personal property at one location?a)$1,000,000 b)$1,500,000 c)$100,000 d)$500,000

$100,000

Who must be a member of the Wisconsin Insurance Plan?a)Membership is voluntary b)All insurance companies authorized to write basic property insurance in the state c)All insurers authorized to write motor vehicle insurance in the state d)All insurance companies doing business in Wisconsin

All insurance companies authorized to write basic property insurance in the state

In a dwelling policy, which of the following is true regarding personal liability coverage? a)It does not cover medical payments to others. b)It is included in all dwelling policies. c)It is the same as in homeowners policies. d)It must be added as a supplement or written as a separate policy.

It must be added as a supplement or written as a separate policy.

What type of coverage is Coverage E in homeowners policies? a)Personal liability b)Additional coverage c)Loss of use d)Personal property

Personal liability

The livestock coverage form covers which of the following losses? a)Sheep died after an attack by the family dog b)A cow died after it ran into a moving tractor c)All risk coverage for death of livestock by any cause except those excluded d)Named peril coverage for death of livestock

Named peril coverage for death of livestock

Events in which a person has both the chance of winning or losing are classified as a)Retained risk. b)Speculative risk. c)Insurable. d)Pure risk.

Speculative risk.

When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written as a)Actual cash value. b)Specific insurance. c)Stated amount. d)Replacement cost.

Stated amount.

Which of the following perils is covered by the HO-2 and HO-3? a)Flood b)War c)Sudden and accidental rupture of a heating system d)Loss due to power interruption that occurs off the premises

Sudden and accidental rupture of a heating system

When the condominium association coverage form and the condominium commercial unit-owners form both cover the same loss, a)The association coverage form will be considered primary and pay the loss. b)The unit-owners coverage form will be considered primary and pay the loss. c)Each coverage form will pay a pro rata share. d)Neither will pay.

The association coverage form will be considered primary and pay the loss.

All of the following are characteristics of the dwelling policy EXCEPT a)Dwellings up to four family units are eligible. b)The dwelling must be owner-occupied. c)Coverage includes the dwelling only, contents only, or both. d)Incidental occupancy of limited service-type exposure is permitted.

The dwelling must be owner-occupied.

Which of the following is NOT settled on an actual cash value basis while covered under the business property coverage form? a)Works of art or antiques b)Valuable papers and records c)Property of others d)Manuscripts

Valuable papers and records

Which of the following is correct regarding the amount of insurance that a lender may require as a condition to a loan on a property insured against risks to improvements? a)100% of the stated value b)100% of the replacement value c)100% of the actual cash value d)100% of the functional replacement cost

100% of the replacement value

All of the following statements describe the concept of strict liability EXCEPT a)It is imposed on defendants engaged in hazardous activities. b)Claimants may need to provide proof that a product defect caused an injury. c)It is imposed regardless of fault. d)It is applied in product liability cases.

It is imposed on defendants engaged in hazardous activities.

Which of the following homeowners endorsements covers liability exposures arising from an incidental business conducted within a building on the residence premises?a)Professional liability b)Business income - report of values c)Permitted incidental occupancies d)Special limit of liability

Permitted incidental occupancies

Section I of a boatowners policy covers a)Liability. b)Medical payments. c)Death. d)Physical damage.

Physical damage.

Which of the following statements is INCORRECT? a)Replacing insurance policies for the purpose of making commissions is legal. b)Misrepresenting the true nature or facts of a policy or its benefit in order to induce a policyholder to surrender one policy and replace it with another is illegal. c)It is illegal to be involved in any activity of boycott, coercion, or intimidation that is intended to restrict fair trade or to create a monopoly. d)Discrimination in rates, premiums, policy benefits, etc. for persons within the same class or with the same life expectancy is illegal.

Replacing insurance policies for the purpose of making commissions is legal.

As a condition to issuing a fire insurance policy, the Wisconsin Insurance Plan may require all of the following EXCEPT a)The applicant to make specific improvements on the property. b)The applicant to agree to a large or special deductible. c)The applicant to pay the cost of the property inspection. d)All are exceptions.

The applicant to pay the cost of the property inspection.

The most the insurer will pay for a loss under a businessowners policy is a)80% of the loss. b)20% of the loss. c)The limit of insurance after the deductible is paid. d)The amount of the loss minus the deductible.

The limit of insurance after the deductible is paid.

Which of the following best expresses the purpose of a stated value contract?a)To pre-establish the amount of coverage available for property items that are difficult to value b)To ensure that the principle of indemnification applies c)To establish the value of property subject to loss by theft or robbery d)To provide a maximum limit for which the insurance company may become liable in casualty losses

To pre-establish the amount of coverage available for property items that are difficult to value

What is the purpose of a binder of insurance? a)To ensure that the applicant will not apply for insurance with competing insurers b)To ensure that the insurer will accept the application for insurance with minimal underwriting c)Binders have no definite purpose d)To show the insurer's acceptance of the applicant's offer to buy insurance

To show the insurer's acceptance of the applicant's offer to buy insurance

Even though the Standard Fire Policy is a named peril contract, under which of the following circumstances would the policy provide "all risk of loss" coverage on insured property?a)Never b)Always c)When the loss is classified as an "act of God" d)When the loss is to insured property that has to be removed because of endangerment by a peril insured against under the policy

When the loss is to insured property that has to be removed because of endangerment by a peril insured against under the policy

Homeowners policies provide coverage for a)Property of tenants, roomers, or boarders not related to any insured. b)Business property while on the residence premises. c)Losses caused by off-premises power failure. d)The land under the residence.

Business property while on the residence premises.

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a)Adhesion b)Consideration c)Good faith d)Representation

Consideration

How soon after a direct loss does the period of restoration for extra expense coverage under businessowners property insurance begin?a)Immediately b)Within 24 hours c)Within 48 hours d)Within 72 hours

Immediately

The Commissioner conducts an examination of a domestic insurer and believes that the costs of examination places an unreasonable financial burden on the insurer. Which of the following will happen? a)The federal government will absorb the full cost. b)The federal government will absorb part of the cost, and the state government will absorb the rest of the cost. c)The costs will be reduced to the amount that the examinee can reasonably pay; the rest will be paid by the federal government. d)The Commissioner's office may pay all or part of the costs.

The Commissioner's office may pay all or part of the costs.

The most the insurer will pay for a loss under a businessowners policy is a)The amount of the loss minus the deductible. b)80% of the loss. c)20% of the loss. d)The limit of insurance after the deductible is paid.

The limit of insurance after the deductible is paid.

A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true? a)The loss is payable to the insured and the mortgagee. b)The mortgagee should submit a claim to its insurer, and the insured should submit a claim to the HO policy. c)The entire loss is payable to the mortgagee. d)The entire loss is payable to the insured.

The loss is payable to the insured and the mortgagee.

Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of a)Rebating b)Twisting c)Defamation d)Misrepresentation

Twisting