Questions on insurance exam
What is the minimum required liability limit for property damage in an auto liability policy? a) $20,000 b) $10,000 c) $8,000 d) $15,000
a) $20,000 Nevada requires a minimum liability limit of $20,000 for property damage.
What is the maximum amount a surplus lines broker can charge for obtaining surplus lines coverage? a) 20% of the premium b) 15% of the premium c) 5% of the premium d) 0% of the premium
a) 20% of the premium a surplus lines broker may charge a max fee of 20% of the premium for obtaining surplus lines coverage
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
a) to pre-establish the amount of coverage available for property items that are difficult to value the value of the insured items is determined at the time the policy is written, not at the time of loss
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT a) Legal purpose b) Offer and acceptance. c) Conditions. d) Consideration.
c) conditions conditions are part of the policy structure
A policyholder has an equipment breakdown policy with a $200,000 limit. If a boiler explosion causes $100,000 damage to the boiler itself, $50,000 damage to the insured's building, and $30,000 of expediting expenses, how much will the insured collect under the policy? a) $175,000 b) $180,000 c) $200,000 d) $100,000
a) $175,000 The limit of the equipment breakdown policy structure applies to property of the insured, property of others, and expediting expenses in any combination as long as expediting expense does not exceed $25,000.
If a person is charged with a category D felony for committing insurance fraud, what would be the maximum time of imprisonment? a) 4 years b) 6 months c) Up to 10 years d) 1 year
a) 4 years if convicted, such a person can be charged with a category D felony and subjected to imprisonment of 1 to 4 years
The ABC Corporation has $100,000 of coverage on its building through insurance Company A, and $50,000 of identical coverage on the same building through insurance Company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs and the pro rata method is used, how much will each insurer pay? a) Company A will pay $16,000; Company B will pay $8,000. b) Company A will pay $20,000; Company B will pay $4,000. c) Company A will pay $12,000; Company B will pay $12,000. d) Company A will pay $24,000; Company B will pay $0.
a) Company A will pay $16,000; Company B will pay $8,000. Each policy pays its pro rata share of the loss based upon each policy's structure of the total amount of coverage
Which of the following circumstances would be EXCLUDED under medical payments coverage of a personal auto policy? a) The insured is injured while driving his motorcycle on his resident premises. b) The insured's friend is injured in an accident while riding as a passenger in the insured's car. c) The insured's mother is injured while exiting from the insured vehicle. d) The insured is struck by another vehicle while crossing the street.
a) The insured is injured while driving his motorcycle on his resident premises. coverage does not apply when the insured is occupying a vehicle with fewer than 4 wheels
All of the following are true regarding physical damage coverage EXCEPT a) The limit of liability is the greater of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle. b) Losses to nonowned autos will be covered the same as the broadest coverage available for any covered auto, except nonowned trailers are limited to $1,500. c) The policy will pay up to $20 per day up to a maximum of $600 for rental transportation. d) The insurer will pay for direct and accidental loss to a covered auto minus any applicable deductible.
a) The limit of liability is the greater of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle. The limit of liability is the lesser of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle.
A small restaurant was forced to close for 10 days in August when the power company's transformer was destroyed by lightning, and the restaurant was without electricity. Which of the following endorsements could be added to the businessowners policy that would provide protection against loss of income from such events? a) Utility services - time element endorsement b) Utility services-direct damage endorsement c) Named peril endorsement d) Protective safeguards endorsement
a) Utility services - time element endorsement The utility services - time element endorsement would cover business income and extra expense arising from utility service disruption that is caused by a covered peril.
When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered a) Discrimination. b) Twisting. c) Controlled business. d) Adverse selection.
a) discrimination Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.
Employee fidelity may be written in all the following ways EXCEPT a) Location schedule. b) Individual. c) Name schedule. d) Position schedule.
a) location schedule Fidelity bonds are purchased by employers and may be written for individual named employees, on a named schedule basis where one bond is issued for several employees listed by name, or position schedule where several positions are listed and whoever is occupying a scheduled position is covered.
If a person is using an auto with the belief that he is entitled to do so, subrogation rights under a personal auto policy would apply to all coverages EXCEPT a) Physical damage. b) Uninsured motorist. c) No-fault medical payments. d) Liability.
a) physical damage Subrogation rights do not apply to physical damage coverage if the damage is caused by a person using the auto with a reasonable belief that they were entitled to do so.
Super Value Store has a commercial general liability policy written with a general aggregate limit of $300,000 and an occurrence limit of $100,000. A customer injured on the premises was awarded $45,000 for medical expenses and loss of earnings, and $60,000 for pain and suffering. The court costs and attorney fees were $15,000. How much will the CGL policy pay? a) $105,000 b) $115,000 c) $120,000 d) $100,000
b) $115,000 the policy would pay up to the occurrence limit plus, as supplementary payments, the cost of the court and attorney fees over and above the limit
An insured has $5,000 of medical coverage on a personal auto policy at the time of a covered accident. The insured and two passengers are injured. Medical treatment costs $7,000 for the insured, $4,000 for the first passenger, and $8,000 for the second passenger. How much will the policy pay under medical payments coverage? a) $5,000 minus the policy deductible b) $14,000 c) $15,000 d) $5,000 maximum for the accident
b) $14,000 the limit is not more than $5,000 per person, pr accident
An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay? a) $0 b) $30,000 c) $32,000 d) $40,000
b) $30,000 This insured only carried 75% of the amount of insurance he had agreed to carry ($120,000 of the agreed $160,000), so the insurer will pay only 75% of the loss, or $30,000. If the insured had carried the required amount of insurance, partial losses would be paid in full. In the event of a total loss, the face of the policy would be paid. If the full amount is not carried, divide the actual amount carried by the amount that should be carried (the coinsurance amount), and multiply it by the loss.
A businessowners policy is a) A monoline policy. b) A self-contained prepackaged policy. c) A special policy designed for large retail operations. d) Part of a commercial package policy.
b) A self-contained prepackaged policy. A businessowners policy is similar in structure to the personal lines homeowners policy except it covers a business exposure for both property and liability losses.
A parking garage owner completed major renovations to a parking garage just prior to selling it to another company. Three months later, overhead concrete fell onto cars in the second floor level. Under the garage coverage policy conditions, which of the following is true? a) The damage occurred when the renovations were done. b) The damage occurred when the concrete fell. c) The renovation contractor is liable. d) The first owner is responsible for the damage.
b) The damage occurred when the concrete fell Under the conditions of a garage coverage policy, the loss occurs at the time of the incident, not when the faulty work was done.
Who must offer insurance to pay the market value of a mobile home? a) No one is required to provide that kind of insurance b) All insurers providing property insurance for mobile homes c) All insurers providing any kind of property insurance d) All insurers providing casualty insurance
b) all insurers providing property insurance for mobile homes Each insurer that provides property insurance covering mobile homes in Nevada must offer insurance to pay the market value of the mobile home in the event of a total loss of the mobile home.
In return for premium, an insurance company must a) give the insurer valuable consideration b) be fair in underwriting and pay covered losses c) provide the insured with coverage adequate to all potential losses d) use the standardized tables of coverage for specific risks to be excluded from coverage
b) be fair in underwriting and pay covered losses In return for premium, an insurance company must be fair and impartial in underwriting of risks and must pay claims made for all covered losses
A builder's risk form is most often written as which of the following? a) Specific value form b) Completed value form c) Scheduled form d) Reporting form
b) completed value form A building under construction could be insured on reporting forms, but the value of the building should only increase during the policy period. To prevent all the administrative work required for reporting forms, most often completed value forms are used.
Which of the following is NOT a duty of the Commissioner? a) Regulate insurance rates b) Develop insurance rates c) License insurance companies and producers d) Enforce violations of the Insurance Code
b) develop insurance rates The Commissioner reviews rates to make sure that they are fair, adequate, and not unfairly discriminating, but the Commissioner does not develop the rates.
What method of premium computation relates an employer's losses, payroll, and premiums to the rating bureau's classifications of operations? a) Arbitration plan b) Experience modification factor c) Workers classification factor d) Merit rating plan
b) experience modification factor an experience modification factor is developed by rating a bureau. the calculations relate to an employer's losses, payroll, and premiums, segregated according to classifications of operations, all as reported to the bureau by the employer's insurance company
Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called a) Described coverage. b) Specific coverage. c) Schedule coverage. d) Blanket coverage.
b) specific coverage One location is insured for a specific amount of insurance on the structure and contents.
An insured's accounts receivable records have been damaged. The loss may be covered with a) The valuable papers coverage form. b) The accounts receivable coverage form. c) Commercial property insurance. d) The commercial articles coverage form.
b) the accounts receivable coverage form The accounts receivable coverage form reimburses the insured for amounts that can't be collected from customers due to damage to the company's records.
When a regular bill of lading is issued, who will be responsible for the invoice cost of any damaged property? a) The driver of the truck b) The carrier c) The person to whom the goods are being shipped d) The shipper
b) the carrier when a regular bill of lading is issued, the carrier will be responsible for the invoice cost of any damaged property, and the shipper does not have to specifically declare a value
Which of the following statements is FALSE regarding motor vehicle physical damage appraisers? a) They investigate claims of physical damage to insured motor vehicles. b) They do not have to be employed by any one insurance company. c) They must be licensed by the Commissioner. d) They must post a bond of $2,500 in favor of the people of the state of Nevada.
b) they do not have to be employed by any one insurance company motor vehicle physical damage appraisers must be employed by an insurance company and licensed by the commissioner
Equipment breakdown coverage is written with a single limit of insurance per accident. What is the sublimit for hazardous substance cleanup or repair or replacement of contaminated property? a) $15,000 b) $20,000 c) $25,000 d) $50,000
c) $25,000 Equipment breakdown coverage is written with a single limit of insurance per accident. However, within this limit, the policy has the following sublimits: $25,000 for expediting expenses; $25,000 for hazardous substance cleanup, repair or replacement of contaminated property; $25,000 for ammonia contamination damage; $25,000 for water damage.
A producer who has allowed his or her license to lapse may reinstate the license without retaking the examination within what maximum time period? a) 30 days b) 6 months c) 12 months d) 2 years
c) 12 months A producer who has allowed his/her license to lapse may reinstate the license no later than 12 months after the due date of the renewal fee, without being required to pass a written examination.
Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within what maximum time period? a) 90 days b) 1 year c) 3 years d) 5 years
c) 3 years A coverage requirement in the policy states that medical expenses must be incurred within three years of the accident. The services also must be rendered within that time period.
Which of the following statements regarding coverage for the flood and earthquake perils is true? a)Flood and earthquake coverage is available only through government insurance. b) Flood insurance is usually provided in property policies, but earthquake coverage is available by endorsement only. c) Both flood and earthquake are excluded perils in all property policies. d) Flood and earthquake coverage is available in all policies.
c) Both flood and earthquake are excluded perils in all property policies. Flood and earthquake are both excluded perils in all property policies. However, the coverage for both or either one usually can be purchased separately for an additional premium (by endorsement)
The pro rata liability clause is designed to protect the principle of a) Insurable interest. b) Waiver and estoppel. c) Indemnity. d) Subrogation.
c) Indemnity If more than one policy is in force on the same property at the same time covering the same perils, this is concurrent coverage. The intent of insurance is that after a loss, the insured is restored to the condition he or she was in before the loss (indemnified). Each policy pays a percentage of a loss directly related to the amount of insurance it provides compared to the total amount of coverage.
In which of the following situations would the jewelers block extension cover a loss? a) A jeweler agrees to exhibit a necklace and earrings set in a showcase away from the premises. The case is broken into, and the set is stolen. b) An employee of a jewelry store is wearing a cameo brooch and ring set to display to customers. During the day, she discovered the brooch has fallen off, and she can't find it. c) A jeweler fixes a necklace and sends it by registered mail to the owner. When the necklace arrives, it has been damaged. d) A jewelry store is robbed while displaying bracelets and necklaces at a public exhibition.
c) a jeweler fixes a necklace and sends it by registered mail to the owner. when the necklace arrives, it has been damaged Property in transit by registered mail is covered under the jewelers block extension.
Which of the following does NOT fit the definition of an administrator? a) A person who collects premiums for workers compensation insurance b) Someone who administers a trust c) A life and health producer who only sells insurance d) A person who administers a self-insurance program for an employer
c) a life and health producer who only sells insurance Administrators collect premiums, adjust or settle claims, administer trusts and self-insurance programs. Someone whose activities are limited to the sale of insurance would not be considered an administrator.
An insured's house is damaged by a fire and is uninhabitable. As a result, the insured has to rent an apartment until repairs are made. A dwelling insurance policy will pay for the expense of renting the apartment. Which type of broad or special form coverage does the insured have? a) Coverage B - Other Structures b) Coverage D - Fair Rental Value c) Coverage E - Additional Living Expense d) Coverage A - Dwelling
c) coverage e - additional living expense Coverage E is a broad or special form under the dwelling policy that pays for additional living expenses while the insured's dwelling is being repaired.
Which of the following additional perils is covered under both the basic form and broad form dwelling policies? a) Weight of ice, snow, or sleet b) Freezing of plumbing, heating, or air conditioning systems c) Internal explosion d) Falling objects
c) internal explosion internal explosion is included in all forms
#20. How does the mobilehome endorsement affect the other coverage of law or ordinance in a homeowners policy? a) It limits the coverage. b) It has no effect on this coverage. c) It removes the coverage. d) It broadens the coverage.
c) it removes the coverage the mobilehome endorsement makes the other coverage of law or ordinance inapplicable to the policy
A sworn written statement that must be furnished by the insured to the insurer before any loss under a policy can be paid is called a) Claim report. b) Binder. c) Proof of loss. d) Notice of claim.
c) proof of loss Proof of loss is a sworn statement that must usually be furnished by the insured to an insurer before any loss under a policy can be paid. Proof of loss must be in writing
Insurance is the transfer of a) Hazard. b) Peril. c) Risk. d) Loss.
c) risk insurance is the transfer of financial responsibility associated with a potential of a loss (risk) to an insurance company
What is continuous care coverage in this state? a) Long-term care coverage b) Disability income coverage c) Workers compensation coverage d) Limited benefit coverage
c) workers compensation coverage Continuous care insurance is also known as workers compensation insurance. All persons who sell that type of coverage must be licensed as an accident and health insurance producer, as well as a casualty insurance producer.
Insurance companies in Nevada must offer insureds under policies covering the use of passenger cars the option of purchasing how much coverage to pay for reasonable and necessary medical expenses resulting from an accident? a) $100 b) $5,000 c) $2,500 d) $1,000
d) $1,000 An insurance company transacting automobile insurance in Nevada must offer insureds under policies covering the use of a passenger cars the option of purchasing at least $1,000 of coverage to pay for reasonable and necessary medical expenses resulting from an accident.
Workers compensation rating is developed by applying a rating bureau job classification rate to each a) $250 of payroll. b) $500 of payroll. c) $1,000 of payroll. d) $100 of payroll.
d) $100 of payroll. Workers compensation rating is developed by applying a rating bureau job classification rate to each $100 of payroll.
Johanna purchased a National Flood Insurance policy 10 days after her community entered an emergency program. When would her coverage be effective? a) 30 days after the application has been accepted b) 12:01 pm on the 5th day after the endorsement request has been mailed c) 5 days after the application and premium payment are mailed d) 12:01 am the day after the application and premium payment are mailed
d) 12:01 am the day after the application and premium payment are mailed During the first 30 days after a community enters the emergency or normal programs, coverage on a flood policy begins at 12:01 a.m. the day after application and premium payment have been mailed.
How much notice must an insurer give to an insured when canceling a personal policy that was issued for a 3 year term? a) 30 days before the expiration date b) 60 days before any anniversary c) 60 days before the expiration date d) 30 days before any anniversary
d) 30 days before any anniversary Personal policies issued for a term longer than 1 year may be cancelled with notice 30 days before any anniversary date of the policy.
Under the dwelling policy form, what is the maximum time limit during which multiple volcanic activities would be considered part of one occurrence? a) 24 hours b) 36 hours c) 48 hours d) 72 hours
d) 72 hours All volcanic eruptions will be considered one occurrence if they occur within one 72-hour period.
The duties of a managing general agent may include all of the following EXCEPT a) Adjusting claims. b) Negotiating reinsurance contracts. c) Issuing binders. d) Altering policies.
d) Altering policies. Managing general agents negotiate reinsurance contracts on behalf of the insurer, issue binders, as well as participate in the adjustment of claims. Only an insurer's executive officer may change a policy.
Who can countersign a policy issued in this state? a) An insurance broker only b) An underwriter c) A policy applicant d) An appointed and licensed agent
d) An appointed and licensed agent Any appointed and licensed agent of Nevada can countersign the policy.
Which of the following must be obtained by someone who intends to function as an administrator? a) Certificate of authority b) Administrator's license c) Limited lines producer license d) Certificate of registration
d) Certificate of registration No one may function as an administrator unless he or she obtains a certificate of registration as an administrator from the Commissioner.
Sally is given a certificate of insurance as proof of financial responsibility. The minimum limit amount is $15,000. Which of the following policies most likely applies to Sally's situation? a) It is for bodily injury or death to 2 or more persons in any one accident. b) It is for injury or destruction of property of others in any one accident c) It is for basic liability insurance of the vehicle d) It is for bodily injury or death to one person in an accident.
d) It is for bodily injury or death to one person in an accident. When a certificate of insurance is given as proof of financial responsibility, the insurance policy must be written with the following minimum limits: $25,000 for bodily injury or death to one person in one accident; $50,000 for bodily injury or death to 2 or more persons in any one accident; and $20,000 for injury or destruction of property of others in any one accident.
A person who acts as a motor vehicle physical damage appraiser without a license is subject to an administrative fine of a) Not less than $1,000 for each violation. b) Not more than $2,500 for each violation. c) Not less than $2,500 for each violation. d) Not more than $1,000 for each violation.
d) Not more than $1,000 for each violation. A person who acts as a motor vehicle physical damage appraiser without a license is subject to an administrative fine of not more than $1,000 for each violation.
All of the following are true regarding rebates EXCEPT a) Rebates are only allowed if specifically stated in the policy. b) Rebating can be anything of economic value, given as an inducement to buy. c) Dividends are not considered to be rebates. d) Rebates are allowed if it's in the best interest of the client.
d) Rebates are allowed if it's in the best interest of the client. A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.
An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have? a) Schedule b) Blanket c) Special d) Specific
d) Specific Specific insurance provides a specific amount of coverage for each property. A blanket insurance policy provides coverage for more than one property with a single limit of coverage.
The effective period of a binder may be extended 30 days at a time with written approval of a) The insured. b) The insurer. c) The policyholder. d) The Commissioner.
d) The Commissioner. The effective period of a binder may be extended 30 days at a time with written approval of the Commissioner.
All contracts of property insurance covering subjects located in Nevada are subject to the applicable provisions of a) The Commissioner. b) The insurer. c) The Nevada Commission of Property Insurance. d) The Insurance Code.
d) The Insurance Code. All contracts of property insurance covering subjects located in this state are subject to the applicable provisions of the Insurance Code.
The occurrence form trigger is based on which of the following? a) The place where the injury or damage occurs b) The amount of the insured's deductible c) The number of claims made during the policy period d) The date when injury or damage occurs
d) The date when injury or damage occurs the occurrence form trigger is based on the date when injury or damage occurs and covers claims made at any time for injuries that occur during the policy period
When a disagreement occurs as to how to settle a loss in a "fender bender" between two cars, what procedure is followed? a) A lawsuit is filed b) Appeal to the DOI c) The adjuster's first opinion must be accepted d) Arbitration through the court
d) arbitration through the court arbitration is a low-cost alternative to a full-blown lawsuit
Which of the following risks is eligible for coverage under a businessowners policy? a) Banks b) Automobile dealers c) Bars or taverns d) Condominiums
d) condominiums Insurance Services Office, Inc. (ISO) maintains a list of risks not eligible for consideration for a BOP. Financial institutions, auto dealers, and bars and grills are specifically excluded from coverage.
If the damaged vehicle is subject to a security interest or the legal owner of the damaged vehicle is different from the registered owner, the vehicle must be repaired by a garage or licensed body shop unless a) It has been declared a partial loss. b) The total charge for repair is $300. c) It has been declared a partial loss and the total charge for repair is more than $300. d) It has been declared a total loss or the total charge for the repair is $300 or less.
d) it has been declared a total loss or the total charge for the repair is $300 or less If the damaged vehicle is subject to a security interest or the legal owner of the damaged vehicle is different from the registered owner, the vehicle must be repaired by a garage or licensed body shop unless it has been declared a total loss or the total charge for the repair is $300 or less.
Under the coverage of which of the following liability policies may an insured require the insurer to defend a claim? a) Auto liability b) General liability c) Personal liability d)Professional liability
d) professional liability Because the reputation of the professional, as well as the monetary amount is at risk, if the insured feels certain that they are not at fault, even though it might be less expensive to pay the amount of loss sought, they can require the insurer to defend the claim. Usually there is a significant discount of premium to the insured if they will give up this right.
Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as a) Twisting. b) False advertising. c) Coercion. d) Rebating
d) rebating Rebating is defined as any inducement offered to the insured in the sale of insurance products that is not specified in the policy. Both the offer and acceptance of a rebate are illegal.
