Random Property Insurance Questions
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?
$175,000 The limit of the equipment breakdown policy 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.
**What is the fine for violating the Commissioner's cease and desist order?**
$5,000 If a person violates a Cease and Desist Order, the Commissioner may assess a fine of up to $5,000 for each violation.
A group of 4 entrepreneurs decides to open an insurance company. How many must be licensed insurance producers?
1 Not every partner or officer needs to hold an individual producer license. However, every partner or officer who will actively solicit the sale of insurance must hold an individual producer license. If none of the partners plan to sell insurance, at least one partner or officer must hold an individual producer license anyway.
How long is the policy period for NFIP flood insurance?
1 year NFIP flood insurance has a policy term of 1 year.
**A producer received a group master policy and certificates for delivery to the insured. Within how many days must the policy and certificates be delivered?**
10 calendar days All policies, certificates or other evidence of insurance that are received by an insurance producer must be delivered or mailed to the insured within 10 calendar days of the receipt by the producer.
A producer received a group master policy and certificates for delivery to the insured. Within how many days must the policy and certificates be delivered?
10 calendar days All policies, certificates or other evidence of insurance that are received by an insurance producer must be delivered or mailed to the insured within 10 calendar days of the receipt by the producer.
Under the conditions of a Film Coverage Form, how long must the insured maintain records of each production?
3 years after the policy expires The insured must maintain accurate records of each production for at least 3 years after the policy expires.
**If a producer has been convicted of a crime, he or she must notify the Commissioner within**
30 Days A producer must notify the Commissioner within 30 days of a conviction of a crime, indictment, or filing of a formal charge against him/her.
Within how many days must a producer report claims to the insurer?
5 business days Claims must be reported to the insurer no later than 5 business days after the receipt of notice of claim by the producer
Under the dwelling policy form, what is the maximum time limit during which multiple volcanic activities would be considered part of one occurrence?
72 hours All volcanic eruptions will be considered one occurrence if they occur within one 72-hour period.
What is the maximum allowed value of a gift that an agent can give to an insured without violating the regulation on rebating?
$100 In this state, promotional materials, articles of merchandise, or gifts that have a redeemable value of $100 or less are not considered "valuable consideration," and therefore, are allowed.
Which of the following individuals would most likely be issued a nonresident producer's license? A Massachusetts resident who sells insurance full-time in Boston but wants to expand his customer base by becoming licensed in New Jersey. BA Pennsylvania resident who has an expired producer's license in Pennsylvania. CA New Jersey resident who will soon be moving to Washington and applies to the New Jersey Insurance Department for a nonresident license for Washington so she can sell insurance upon her arrival. DAn individual who has only lived in New Jersey for 3 months applies to the Insurance Department for a nonresident license in New Jersey. He will receive his resident license after living in New Jersey for 1 year.
A Massachusetts resident who sells insurance full-time in Boston but wants to expand his customer base by becoming licensed in New Jersey. In order to obtain a nonresident license in this state, prospective licensees must be actively licensed producers in their own state.
**An insurance producer refused to comply with a subpoena. What would be the producer's penalty for this violation?**
A fine up to $5,000 Failing to or refusing to comply with a subpoena will result in a fine up to $5,000 for the first offense, and up to $10,000 for each subsequent offense.
Which of the following would be considered an unfair claims settlement practice?
Advising the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered This act is a violation as defined in the Unfair Settlement Practices.
Which of the following may be covered by electronic data processing coverage form under an inland marine policy? Computer hardware that is specifically scheduled. BExtra expense the insured incurs to continue the business following a loss. CData processing media, including magnetic tapes or paper tapes, punch cards and discs DAll of these are covered.
All of these are covered. All of these are covered items under electronic data processing coverage.
Who may make application to the New Jersey Insurance Underwriting Association for an eligible applicant?
Any licensed producer authorized by the applicant Any person with insurable interest in insurable property, who has failed to procure essential property insurance from an authorized insurer in the voluntary market, is entitled to apply to the Association for coverage and inspection of the property. Application may be made by any licensed producer authorized by the applicant.
**An insurer cancelled a contract with a producer on April 1st. By what date must the insurer notify the Commissioner of this action?**
April 15th If an insurer cancels an agency contract, it must notify the Commissioner in writing within 15 days.
According to the common policy conditions for a commercial package policy, if the insured dies, the policy rights and duties
Automatically transfer to a legal representative The Insurance Services Office, Inc. (ISO) common policy conditions for the commercial package policy states that in the event of the insured's death, rights and duties are automatically transferred to the insured's legal representative.
Which of the following is the legal name of a corporation or partnership under which a licensee conducts insurance business?
Business name A business name is the legal name of a corporation or partnership or any trade of fictitious name under which a licensee conducts insurance business.
Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as
Cancellation Cancellation is the termination of an in-force insurance policy by either the insured or the insurer prior to the expiration date shown in the policy. Termination may be voluntary, involuntary, or in mutual accordance with provisions contained in the policy.
**The Department can run a report on a specific producer that lists his or her license information, current license status, and the types of insurance that he or she can transact. What is the name of this report?**
Certification of license status report The Insurance Department can issue a certification of license status of any currently licensed producer or producer licensed within the past 4 years. The certification includes basic license information, including license number, types of insurance that the producer can transact, and whether the license is still in effect.
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as
Coercion. These are all considered to be Unfair Trade Practices, which are major violations that can lead to heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you agree to buy auto insurance from them.
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?
Company A will pay $16,000; Company B will pay $8,000. (24,000= Main insurance pays more other insurance pays less but still = loss amnt) Each policy pays its pro rata share of the loss based upon each policy's share of the total amount of coverage.
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
Conditions. Conditions are part of the policy structure. Consideration is an essential part of a contract.
**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?**
Consideration The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.
Which of the following is NOT an essential element of an insurance contract?
Counteroffer In order for insurance contracts to be legally binding, they must have four essential elements: agreement (offer and acceptance), consideration, competent parties, and legal purpose. Counteroffer is not required.
**If an insurer and insured have a dispute about whether a particular loss is covered under a policy, which authority will settle the dispute?**
Court system If an insurer and insured have a dispute about whether a particular loss is covered under a policy, the court system is asked to interpret the contract.
**Which of the following types of insurance would be written by a limited lines agent?**
Credit insurance Limited lines agent can write the following types of insurance: bail bonds, car rental insurance, credit insurance, ticket insurance, travel insurance, group mortgage cancellation, legal insurance, self-storage personal property insurance, and special nonresident limited lines.
Which of the following examples of losses paid under an HO-3 also would be paid under an HO-2 homeowners policy?
Damage to the dwelling caused by ash or dust from a volcanic eruption An HO-3 covers losses on an open peril basis. An HO-2 covers losses on a named peril basis. Both forms cover damage to the dwelling caused by ash or dust from a volcanic eruption.
Which of the following is a mandatory part of an insurance policy that varies with each individual policy?
Declarations Because the declarations tell who, what, when and where, this information is different in each contract.
The part of a property policy that shows the amount of insurance, premium, and policy term is the
Declarations. Who, what, when, where, and how much insurance and premium all are stated in the policy Declarations.
Which of the following would NOT be included in a commercial package policy?
Dwelling coverage A commercial package policy may include coverage for exposures of a business, but not the personal exposure of the insured. The dwelling policy is a personal lines policy and would not be in a commercial package policy.
The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the
Exclusions The exclusions section of an insurance policy details what perils are not insured against and what persons are not insured.
When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement?
False financial statement False financial statements are made when insurance companies attempt to hide their financial troubles from the public and government officials.
Applicants for surplus lines authority must fulfill all of the following requirements EXCEPT
Hold a bond as a condition for licensure. New Jersey does not require a bond as a condition for licensure in surplus lines.
Who is responsible for filling out a notice of claim form?
Insured Notice of claim is a form or statement from an insured to an insurer, informing the insurer that events leading to a possible claim have occurred.
All of the following are true of Coverage B - Other Structures in homeowners policies EXCEPT
It must be added by endorsement to a homeowners policy. Homeowners policies automatically provide an amount of insurance in Coverage B that is equal to 10% of the amount written as Coverage A. This amount may be increased by endorsement.
What significance did U.S. vs. South-Eastern Underwriters have on the insurance industry?
It reversed the decision of Paul vs. Virginia, determining that insurance is interstate commerce and should be regulated federally. In 1942, the Attorney General of the United States filed a brief on the Sherman Act against the South-Eastern Underwriters Association, a cooperative rating bureau, alleging that the bureau constituted a combination in restraint of trade. In 1944, the Supreme Court reversed its decision of Paul vs. Virginia, stating that insurance is interstate commerce and is therefore subject to regulation by the federal government. This decision stands today.
For a contract to be enforceable by law, the purpose of the contract must be
Legal and not against public policy. the purpose of a contract must be legal and not against public policy for the contract itself to be enforceable by law (or legal).
Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called
Material misrepresentations. A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company.
The Physicians and Surgeons Equipment Floater in NOT intended for which of the following?
Medical supplies located in a hospital This coverage form protects individuals in the medical or dental profession for loss to valuable medical and dental equipment, materials and supplies, including office equipment and furniture, and similar property of others. Coverage is not intended for hospitals, schools or other institutions.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of
Misrepresentation. Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.
A business using its own trucks to move its own cargo would insure the cargo using
Motor truck cargo - owners form. A business using its own trucks to move its own cargo would insure the cargo using the owners form.
A contract between a producer and an insurance company
Must be in writing and signed by both parties. Contractual relations between a producer and an insurance company are conducted through a contract signed by both parties.
All of the following professional designations are recognized by the Department as acceptable substitutes for education and examination requirements EXCEPT: Chartered Financial Consultant (ChFC) BChartered Life Underwriter (CLU) CProfessional Insurance Agent (PIA) DChartered Property/Casualty Underwriter (CPCU)
Professional Insurance Agent (PIA) The designations recognized by the Department are Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), and Chartered Property/Casualty Underwriter (CPCU).
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
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.
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of
Rebating. When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.
What type of information would be found in a policy's insuring agreement?
Renewal dates An Insuring Agreement establishes the obligation of the insurance company to provide the insurance coverages as stated in the policy. The insuring agreement lists the parties to the contract, effective and renewal dates, the description of coverage provided, and perils (among other things). Location of premises, policy limits, supplemental representations, and insurer's name and address can all be found in the Declarations.
The endorsement that provides coverage for losses arising from sudden collapse of earth arising from underground limestone created by the action of water on rock formations is a/an
Sinkhole collapse endorsement. The sinkhole collapse endorsement will provide coverage for sinkhole collapse, which means a sudden settlement or collapse of the earth supporting the property resulting from an underground hole caused by water on limestone or other rock formations.
**Which of the following is a person or organization that is allowed to write business in New Jersey for insurance companies that do not possess a certificate of authority in New Jersey, if no authorized insurers in New Jersey offer the specific type of insurance in question?**
Surplus lines agent A surplus lines agent is allowed to write business in New Jersey for insurance companies that are not authorized New Jersey insurers. No authorized insurers in New Jersey can offer the specific type of insurance in question.
In New Jersey, hurricane deductibles must be approved by
The Department of Banking and Insurance Hurricane deductibles, either a percentage or dollar amount, must be approved by the Department of Banking and Insurance.
5 Which of the following would qualify as a competent party in an insurance contract?
The applicant has a prior felony conviction. When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, a 12-year-old student is considered to be underage in most states and a person under mind-impairing medication most likely would not be mentally competent.
Which of the following is NOT the consideration in a policy? The promise to pay covered losses BThe application given to a prospective insured CSomething of value exchanged between parties DThe premium amount paid at the time of application
The application given to a prospective insured Consideration is something of value that is transferred between the two parties to form a legal contract.
The list of lines of insurance for which there is no reasonable or adequate market in New Jersey, as determined by the Commissioner, is known as?
The exportable list. The Commissioner may declare eligible for export certain lines or classes of insurance for which, after a hearing, he or she determines that there exists no reasonable or adequate market in New Jersey. This is known as the exportable list.
The common policy condition is a modular part combined with other parts to create the contract. The common policy condition section contains provisions that are applicable to all lines of coverage that may be included in the policy. Which of the following provisions would be found in the common policy conditions section of the policy?
The first named insured may cancel the policy at any time by giving written notice to the insurer. The insurer is granted the right to audit books and records for a period of up to 3 years. The insurer is automatically granted the right to make inspections, surveys and such relating to the insurance. Only the first named insured may make requests for any changes in the policy.
When a mortgagee is named in a mortgagee clause attached to a fire or other direct damage policy,
The loss reimbursement is paid to the mortgagee. When a mortgagee is named in a mortgagee clause attached to a fire or other direct damage policy, the loss reimbursement will be paid to the mortgagee. The mortgagee's rights of recovery will not be defeated by any act or negligence on the part of the insured. The mortgagee is also given other rights, such as bringing a suit in their own name to recover damages.
**An organization licensed as a producer business entity based in New York would like to transact insurance in New Jersey. Which of the following is true?**
The organization will need to obtain a nonresident business entity license, and its producers will need to obtain nonresident licenses Nonresident producer business entities can obtain nonresident licenses as long as they meet all of the qualifications (other than location) required of resident producer business entities. They, too, must already possess resident licenses in their home state of residency
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
Warranty A warranty in insurance is a statement guaranteed to be true. When an applicant is applying for an insurance contract, the statements he or she makes are generally not warranties but representations. Representations are statements that are true to the best of the applicant's knowledge.
