Readiness Exam - Property

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

b. the insured building is vacant for over 60 days *this is a standard condition of commercial property coverage

What kind of coverage does Form DP-3 provide?

open peril

Which of the following perils is NOT covered the DP-2?

Damage to pets, birds, or fish

An agreement that is enforceable by law is known as what kind of contract?

Legal

Which valuation method takes into consideration what a willing buyer would pay for an insured property?

Market value

The exact, direct, uninterrupted cause of loss is the

Proximate cause

An applicant for a disability insurance policy has a heart condition of which they are unaware and therefor they answer no to the question pertaining to heart problems on their application. Their answer is considered to be

Representation

Which of the following is NOT a cause of loss form for commercial property coverage

Specific

A commercial building insured on an 80% coinsurance policy is valued at $500,000. To avoid a coinsurance penalty, at the time of a partial loss, the building would be need to be insured for at least A. $500,000 B. $400,000 C. $300,000 D. $200,000

$400,000 $500,000x0.8 = $400,000

How many people must sustain death or serious physical injury before the War or Terrorism Exclusion in a businessowners policy applies

50

What is the minimum penalty that may be imposed on an insurer found guilty of defamation? A. $200 B. $500 C. $1,000 D. $10,000

A. $200 - any person or entity that violates the Insurance Code provision on defamation may receive a penalty of at least $200, but no more than $10,000

A premium finance company may cancel an insurance contract listed in the premium finance agreement with a notice of at least how many days? A. 10 days B. 15 days C. 20 days D. 30 days

A. 10 days - a premium finance company may cancel an insurance contract listed in the premium agreement, as long the company provides a 10-day notice to the named insured

An insured is the owner of a clothing boutique. She has a Floor Plan Merchandise Floater to cover the property that is financed until it is sold. At closing time a month ago, she noticed that 3 very expensive dresses had been stolen. However, she did not file a report to her insurance company until recently. How much will her insurer pay for this loss

A. 90% of the limit written B. 100% of the limit written C. Nothing D. 50% of the limit written 90% of the limit written - if the insured has not filed a report at the time of loss, the insurer will be liable only for 90% of the limit written

Which of the following would be added for coverage under a property policy by an endorsement? A. Additional insureds B. All insureds C. Named insured D. First named insured

A. Additional insureds - additional insureds are individuals or businesses that are not named as insureds on the declarations page, but are protected by the policy, usually in regard to a specific interest. Additional insureds usually are added to the policy by an endorsement

Which part of the policy defines the terms that are used through the policy? A. Definitions B. Conditions C. Insuring agreement D. Declarations

A. Definitions

Space Age Rockets make model rocket supplies and has 12 employees. The company is located in Atlanta, GA. Georgia has compulsory workers compensation laws. Space Age's owner thinks that his company is too small and unprofitable to carry the workers comp plan mandated by the state. Possible consequences of noncompliance include all of the following EXCEPT A. Forced payment of billing for services rendered by any private insurer that "binds" coverage based on an employee's request for coverage B. Closure of the business as a public nuisance by state officials C. Payment for injuries in monetary amounts stipulated by the state with respect to workers compensation plans D. Payment of fines and penalties as dictated by state compliance authorities

A. Forced payment of billing for services rendered by any private insurer that "binds" coverage based on an employee's request for coverage

Which homeowners form provides open peril coverage for dwelling (Coverage A) and contents (Coverage C)?

A. HO-2 B. HO-3 C. HO-5 D. HO-8 C. HO-5 HO-2 is named peril (broad form perils) coverage for both dwelling and contents. HO-3 form is open peril for dwelling and named peril for contents. HO-5 is open peril for both dwelling and contents. HO-8 is named peril (basic perils) coverage for both

With respect to the commercial package policy, an interline endorsement is one that A. May apply to more than one line of insurance that is included in the package B. Never applies to all of the lines of insurance that is included in the package C. Applies to all of the lines of insurance that is included in the package D. Applies to only one line of insurance that is included in the package

A. May apply to more than one line of insurance that is included in the package - Interline endorsements are those that apply to more than one coverage part on a CPP. They are prepared to eliminate redundancy and to minimize the number of endorsements in the package

Which statement best describes agreement as it relates to insurance contracts? A. One party accepts the exact terms of the other party's offer B. The intent of the contract must be legally acceptable to both parties C. All parties must be capable of entering into a contract D. Each party must offer something of value

A. One party accepts the exact terms of the other party's offer - insurance contracts, there must be a definite offer by one party, and this offer must be accepted in its exact terms, by the other party. Agreement includes both an offer and its acceptance

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 may be added by endorsement

A. The HO-3 policy covers the mysterious disappearance of personal property - Mysterious disappearance is the disappearance of property without knowledge as to the location, time, or how the property was lost. Mysterious disappearance, or losses that cannot be identified as to the time and place, are excluded from most personal property coverages

In a liability policy with split limits of 25/50/25, which number is the maximum amount that would be payable in the 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

If an insurance policy has the additional coverage provision, how does it affect the policy premium? A. There is no additional premium B. Premium will be recalculated when a specified loss covered by this provision occurs C. Additional premium will be assessed D. Premium will be calculated on a pro data basis based on amount of additional coverage

A. There is no additional premium

Which method of dealing with risk is applied when insurance is purchased? A. Transfer B. Sharing C. Avoidance D. Reduction

A. Transfer

What is a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected no intended called?

Accident

Unless additional coverages are added to the businessowners policy (BOP), the maximum amount of coverage on an outdoor sign is attached to a building is limited to A. $500 B. $1,000 C. $2,000 D. $4,000

B. $1,000 - coverage on an outdoor sign attached to the building under the BOP form is limited to $1,000. The outdoor sign optional sign coverage allows an insured to purchase larger amounts of insurance for outdoor signs

When do binders expire?

As soon as the policy is issued

Insureds covered under a Mobile Homeowners Policy move their mobile home to prevent it from being damaged by a fire. What is the maximum amount the policy will pay for this? A. $350 B. $500 C. $1,000 D. $5,000

B. $500

All of the following are true about the Insurance Frauds Prevention Act EXCEPT A. The Director may provide a fee to be paid by the reporting insurers directly to the designated organization or agency to cover any of the costs associated with providing this service B. Any person, who furnishes information on its behalf, is liable for damages in a civil action or subject to criminal prosecution for any oral or written statement made C. The Act is intended to permit the Director and department to utilize their expertise and discover insurance frauds D. The Director of Insurance may designate one or more data processing organizations or governmental agencies to assist him/her in gathering any information and making compilations

B. Any person, who furnishes information on its behalf, is liable for damages in a civil action or subject to criminal prosecution for any oral or written statement made - in the absence of malice, NO insurer, or person who furnishes information on its behalf, is liable for damages in a civil action or subject to criminal prosecution for any oral or written statement made or any other action taken that is necessary to supply information required.

In order to start coverage before a policy is issued, insurers can issue a(n) A. Subrogative agreement B. Binder C. Coverage authorization D. Indemnity certificate

B. Binder

What two policy components are part of every commercial package policy? A. Property coverage and liability coverage B. Common policy declarations and common policy conditions C. Common policy exclusions and agreement D. Consideration and agreement

B. Common policy declarations and common policy conditions - any commercial lines coverage in the program may be written independently as a monoline policy, or may be written with other coverages as part of a package. In either case, all policies make use of the same common policy declarations page and the same common conditions. The only difference is the number of coverage parts.

An insured believes that his insurer is not properly fulfilling its obligations regarding his policy. What section of the policy will give the insured more information about specific duties of the insurer? A. Obligations B. Conditions C. Endorsements D. Definitions

B. Conditions

An insured's home catches fire. As a result, the insured's family must stay in a motel until the home is repaired. The cost of the motel stay would stay would be considered a A. Negligent loss B. Consequential loss C. Resulting loss D. Direct loss

B. Consequential loss

A sworn statement must usually be furnished by the insured to an insurer and must include what information about the occurrence and the amount of indemnity claimed? A. Type and frequency B. Date and description C. Category D. Extremity

B. Date and description

An insured just purchased an auto policy for his new car. He wants to understand what perils are not insured against. Which section of his policy should the insured check? A. Definitions B. Exclusions C. Insuring agreement D. Declarations

B. Exclusions

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 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

B. Federal Insurance Administration will remove the insurer from NFIP

How does insurance distribute the financial consequences of individual losses? A. It transfers the risk to small number of persons insured B. It transfers the risk to all persons insured C. It retains the financial consequences D. It transfers the risk to associates of the insured

B. It transfers the risk to all persons insured

Which of the following would NOT be covered by commercial inland marine policies? A. Bridges and tunnels B. Property loss due to military action C. Commercial property floated risks D. Loss caused by weather conditions

B. Property loss due to military action Inland marine policies cover instruments of transportation and communication as well as movable property according to the Nationwide Marine Insurance Definition. Losses caused by war or military actions are excluded

If a mortgagee is named in a mortgagee clause, how would a property policy pay claims on a home damaged in a fire? A. The mortgagee may only receive loss reimbursement if the mortgagee brings an action against the insured B. The mortgagee would receive loss reimbursement C. The insured is considered a co-claimant and receives loss reimbursement from the mortgagee D. Only the insured would receive loss reimbursement

B. The mortgagee would receive loss reimbursement

In order to start coverage before a policy is issued, insurers can issue a

Binder

Which of the following would NOT be covered by commercial inland marine policies

Bridges and tunnels

An insured was traveling down an icy road and hit a sign, causing $1,350 damage to the car. The policy requires a $250 deductible. The insured already collected on a $1,500 claim this year. How much will the insured collect on this claim? A. $0 B. $250 C. $1,110 D. $1,350

C. $1,110 - $1,350 - $250 deductible

Using the pro rata method, if a property is covered by Company A for $20,000 and Company B covers the same property for $40,000, how much will Company A pay on a $24,000 loss? A. $20,000 B. $12,000 C. $8,000 D. $0

C. $8,000 - each policy pays a percentage of the loss based on the percentage of coverage that policy provides. Company A carries 1/3 of the total coverage ($20,000 + $40,000 = $60,000). Therefore, it is responsible for 1/3 of the $24,000 loss, or $8,000

How many people must sustain death or serious physical injury before the War of Terrorism Exclusion in a Businessowners policy applies? A. 500 B. 1,000 C. 50 D. 100

C. 50

Which of the following is NOT considered an insurable peril? A. A loss that results from a fire that starts when lightning strikes a barn B. An injury to a customer who falls on a wet floor of a local grocery store C. A loss resulting from gambling D. Loss of revenue caused by the temporary closing of a business following a covered loss

C. A loss resulting from gambling

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 could 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 cancelled 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 cancelled

Loss valuation is best described as the process of A. Defining the replacement costs of property in relation to other insurers' costs of the same type B. Accepting or denying coverage based on historical C. Determining the premium charged and the amount of insurance required on a specific property D. Providing equal benefits for a wide array of covered properties

C. Determining the premium charged and the amount of insurance required on a specific property - loss valuation is the process of determining an appropriate monetary value as it relates to a particular loss and the repairs or replacements required as a result

What term includes losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected? A. Incident B. Additional coverage C. Occurrence D. Accident

C. Occurrence

Under an HO-2 policy, the insurer will pay no more than the actual cash value of the property damage until A. The property is re-valued B. The insured submits another claim C. The property repair or replacement is complete D. The property is sold

C. The property repair or replacement is complete

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. Comparative negligence B. Gross negligence C. Vicarious liability D. Intervening cause

C. Vicarious liability

Which of the following perils is NOT covered by the DP-2

Damage to pets, birds, or fish

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 - coverage d will provide 900 for loss of use and e is 150

What is the maximum civil penalty that a producer can be charged if found guilty of violations in a court of law? A. $200,000 B. $20,000 C. $50,000 D. $100,000

D. $100,000 - in addition to or instead of any applicable denial, suspension, or revocation of a license, a person may, after a hearing, be subject to a civil penalty of up to $100,000 for each clause for denial, suspension, or revocation; however, the civil penalty may total no more than $100,000

A home 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 have 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

According to business property coverage form vacancy condition, if a policy is issued to the owner of a building, the building will be considered vacant if what portion of the square footage is unused and not rented? A. 20% B. 45% C. 50% D. 69%

D. 69% - when the policy is issued to the owner or general lessee of a building, the building is vacant unless at least 31% of its total square footage is rented to a lessee to conduct its customary operation, and/or is used by the building owner to conduct customary operations

In businessowners policies, how soon does the period of restoration for business income coverage begin after the direct loss? A. Immediately B. 24 hours C. 48 hours D. 72 hours

D. 72 hours - the period of restoration for business income coverage begins 72 hours after the direct loss, or immediately for extra expense coverage. It ends on the date the property has been repaired or business has resumed.

When a premium finance agreement contains a power of attorney enabling the premium finance company to cancel any insurance contract listed in the agreement, in the event of payment default, the insurance contract may not be cancelled by the company unless A. Written permission for the cancellation is granted by the Director B. Cancellation of insurance is never permitted once an agreement is accepted C. The insured agrees in writing to the cancellation D. At least 10 days' written notice is given of the finance company's intent to cancel unless the payment default is cured within 10 day period

D. At least 10 days' written notice is given of the finance company's intent to cancel unless the payment default is cured within 10 day period - to cancel an insurance policy or coverage because of payment default requires the premium finance company to first give the insured at least 10 days' written notice of their intent and provide the insured an opportunity to remedy the default within the 10 day period

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 - direct loss refers to any direct physical damage to buildings and personal property. Considering the fire was the initial cause of loss and spread to the bedroom, damages would be considered a direct loss of the fire

What are the two types of utility services endorsements? A. Direct loss and indirect damage B. Protective safeguards and mechanical breakdown C. Open peril and named peril D. Direct damage and time element

D. Direct damage and time element

In Buinessowners policies, a deductible does NOT apply to which of the following additional coverages A. Debris removal B. preservation of property C. Forgery or alterations D. Fire department service charge

D. Fire department service charge - the deductible does not apply to any of the following additional coverages: fire department service charge, fire extinguisher systems recharge expense, business income, extra expense, and civil authority coverages

Which of the following contract elements best describes insurance written in support of public policy? A. Consideration B. Offer and acceptance C. Competent parties D. Legal purpose

D. Legal purpose - insurance contracts must be written for a lawful reason and not against public policy. This requirement is referred as legal purpose

An insurance producer fails to meet the Director's continuing education requirement. Which of the following will most likely occur? A. The producer will have to be affiliated with another certified producer in order to be able to continue business B. The producer will have to pay a fine after the second failure. After five failures, the producer will be put on probation C. The producer's license will be suspended D. The producer's license will be

D. The producer's license will be terminated - an insurance producer license automatically terminates when an insurance producer fails to successfully meet the continuing education requirement

Which of the following is 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

D. it does not require additional premium

Coverage for loss by some perils under a building and personal property is suspended if

The insured building is vacant for over 60 days

If a mortgagee is named in a mortgagee clause, how would a property policy pay claims on a home damaged in a fire

The mortgagee would receive loss reimbursement

If an insurance policy has the additional coverage provision, how does it affect the policy premium

There is no additional premium

Which method of dealing with risk is applied when insurance is purchased

Transfer

A structure that is not inhabited by anyone and stores no property is considered

Vacant