Simulated Exam Review

Under the professional liability loss settlement provision, what must an insurer do before offering to pay a claimant to settle a claim?

Get the insured's consent

If an insured needs protection on a property other than money and securities inside the premises from losses caused by breaking and entering after business hours, which of the Crime Coverage forms should be purchased?

Inside Premises- Robbery or Burglary of Other Property

Which of the following occupations would NOT directly help to qualify someone for the office of Commissioner of Insurance? a) Executive in business administration b) Practicing attorney c) Insurance agent d) Certified public account

Insurance Agent (the commissioner must have at lease 5 years experience in at least one of the other occupations)

Which of the following would NOT be covered by HO liability insurance

Intentional tort

To perform work on a customer's car, a mechanic in an auto shop had to put the vehicle on a service hoist. The hoist collapsed, damaging the vehicle and injuring the mechanic. In regard to the garage coverage form, which of the following statements is true? a) Coverage is provided for the bodily injuries to the mechanic. b) No coverage is applicable. c) Coverage is provided for the car on the hoist only. d) Coverage is provided for all perils.

b) No coverage applies (the garage coverage form does not cover property damage for a customer'svehicle that is on a service hoist or for bodil injury)

Which of the following best describes the amount of loss assessment coverage included under a homeowners policy liability coverage section?

Up to $1,000 per occurrence (Section II - Loss Assessment Coverage - applies to assessments against the insured by a condominium association or other cooperative body of property owners. Coverage is limited to $1,000, but an increased limit of coverage is available by endorsement.)

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?

$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)

Anyone who violates the Insurance Code of TExas may be fined up to...?

$25,000

Which of the following can qualify for a surplus lines license? a) An individual licensed as a Local Recording Agent in Texas b) An individual licensed as a Managing General agent in Texas c) A nonresident agent using the license for limited purposes on behalf of a purchasing group operating in Texas d) Any of the above

Any of the above

Which of the following losses would most likely NOT be covered under Coverage A in the dwelling policy? a) Supplies used for repair of the dwelling b) Theft of a renter's lawnmower used to service the premises c) Fire damage to building material on the premises d) Outdoor personal property of the insured

B

An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor, who was sitting on the porch, is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have?

Combined Single (Combined single is a single dollar limit of liability applying to the total of damages for bodily injury and property damage combined resulting from one accident or occurrence.)

A producer who fails to segregate premium monies from his own personal funds is guilty of...

Commingling

The difference in the contents coverage on an HO-3 and HO-5 is?

Contents are covered open peril on HO-5 and named peril on HO-3

Which commercial crime form would provide coverage for a loss that did not necessarily happen during the policy period but was revealed during the policy period?

Discovery Form

Replacement Cost is defined as

Full replacement of property at its CURRENT cost, new and without reduction for depreciation

What type of compensatory damages will pay for pain and suffering and disfigurement?

General (General compensatory damages are for intangible elements that cannot be specifically measured in terms of dollars.)

A health care provider wants to provide medical professional liability insurance for its employees. Unfortunately, the provider has searched unsuccessfully for an insurance carrier that can provide this insurance. Which of the following will most likely be able to provide this insurance?

Joint Underwriting Association

All of the following are types of adjuster's licenses available in this state EXCEPT a) All lines adjuster. b) Property and casualty adjuster. c) Life and health claims adjuster. d) Workers compensation and employer's liability adjuster.

Life and Health Claims Adjuster

In which type of commercial crime policy coverage is triggered by a loss that happens during the policy period but is not necessarily discovered during the policy period?

Loss Sustained Form

Which of the following coverages in dwelling and homeowners policies is for indirect losses? -Contents -Loss of Use -Dwelling -Structures -

Loss of Use (loss of use coverage applies after a direct loss caused by a covered peril has occurred)

Is backdating a policy to secure a lower premium for the insured a type of misrepresenation

No (Demonstrating conservative returns in the illustrations would not be a violation)

Losses caused by continuous or repeated exposure to conditions resulting in injury persons or damage to property that is neither intended nor expected is the definition of?

Occurrence

Under dwelling policy, which of the following clauses applies if an insured has lost one of two matching silver candlesticks?

Pair or set

An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have?

Specific (Specific insurance provides specific amounts of coverage for each property. A blanket insurance policy provides coverage for more than one property, BUT with a single limit of coverage)

The income benefit received by an employee who is disabled but has not attained the max medical improvement is classified as

Temporary

A company has a businessowners policy on a building with an estimated replacement cost of $300,000. The company carries $150,000 of insurance. If a loss occurs, how much will the insured company be paid?

The coinsurance formula would apply (If the property is not insured to 80% of the full replacement value, the policy will pay the greater of actual cash value (ACV) or the coinsurance formula: amount carried ÷ amount that should be carried × amount of loss = amount paid.)

Under the personal auto policy, liability for bodily injury resulting from the insured's use of a nonowned vehicle is provided by

The insured's policy on an excess basis

Is the Commissioner of Insurance the only entity with the authority to grant temporary life insurance agent's license?

Yes (temp licenses are issued for 90 days)

Another person has alleged that you are responsible for damage to their property. You notify your homeowners insurer. the insurer will

either pay or defend as it decides

Insurance is the transfer of

risk

If more than one person has an insurable interest in the property covered under a dwelling policy then

the insurer will be liable for only the insured's interest in the damaged property

An insured has $5,000 of medical coverage on a personal auto policy at the time of a covered accident. The insured and the two passengers are injured. Medical trreatment 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?

$14,000 (the limit is no more than 5,000 PER PERSON)

A $100,000 house insured on a policy with an 80% coinsurance requirement has a fire that caused $40,000 of damage; the owner has a policy with $60,000 coverage. How much can the owner collect for his loss?

$30,000 ( For the total amount of a partial loss to be paid, a house must be insured for at least 80% of its value on the date of loss. In this case, because the house is insured for only $60,000 (75% of the minimum requirement), the policy will pay only 75% of the loss, or $30,000.)

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?

$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 premium discount is the term that describes when an insured owes a total standard premium greater than ...

$5,000

Personal property coverage under a homeownes policy would cover -a pet that the insured is temporarily keeping for a friend -The insured's camera if it is stolen while the insured is on vacation -A neighbor's fence is damaged by the insured -Property moved to a newly acquired residence after 60 days

-the insured's camera is stolen while the insured is on vacation.

What is the required notice of cancellation of a HO policy to the insured?

10 days

An insurer must acknowledge receipt of a Notice of Claim within how many days?

15

In order to qualify for supplemental income benefits, an employee must have an impairment rating of at least what?

15%

An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today's prices. If the roof has been depreciating at $200 per year and the insured's policy is written on the actual cash value(ACV), how much will the policy pay toward the insured's new roof?

5,000 (ACV is calculated as replacement cost less depreciation) {6,000-(200*5)}

For which of the following actions can an agent's license be suspended or revoked? a)Misstatements on the application b)Rebates of premiums c)Misdemeanors d)Unintentional violations of state laws

Rebates of premiums

Which method of loss valuation is contrary to the basic concept of indemnity?

Replacement Cost (The replacement cost method of loss valuation is contrary to the basic concept of indemnity because following a loss it may provide the insured with a settlement in excess of the property's actual cash value.) {like the roof example}

If a deceased employee is survived by an eligible spouse and 3 dependent children, what percentage of the death benefit will be paid to the spouse?

50% (One half of the death benefit will be paid to the spouse, and one half of the benefit will be shared equally among the children)

Which of the following types of valuation works best for property whose value does not fluctuate much?

Agreed value

The limited theft endorsement is intended for which type of property?

An apartment building in which the owner does not reside

Which of the following statements is INCORRECT with regard to surplus lines insurance? a) Business placed with a surplus lines insurer is subject to a premium tax that must be collected by the broker. b) Policies written by a surplus lines insurer typically contain standard coverages and forms. c) To sell surplus lines insurance, the licensee must obtain a surplus lines broker's license. d) Before coverage is placed with a surplus lines company, diligent effort must be made to place the risk with admitted insurers.

Policies written by a surplus lines insurer typically contain standard coverages and forms. (Surplus lines insurers do not have to file their rates or forms with the insurance department, and because they are not admitted, each policy will show an amount as premium tax payable to the Department of Insurance.)

Under the coverage of which of the following liability policies may an insured require the insurer to defend a claim?

Professional Liability

Pertaining to insurance what is the definition of a fiduciary responsibility?

Promptly forwarding premiums to the insurance company

What are the two types of compensatory damages?

Pure and Speculative

All of the following are true regarding rebates EXCEPT -Rebates are only allowed if specifically stated in the policy. -Rebating can be anything of economic value, given as an inducement to buy. -Dividends are not considered to be rebates. -Rebates are allowed if it's in the best interest of the client.

Rebates are allowed if it's in the best interest of the client

Which of the following losses would be covered under the property damage liability coverage of a personal auto policy? -the insured's vehicle is damaged when it collides with a deer -a passenger in the insured's vehicle is injured following an accident caused by the insured. -The insured damages a rented garage when he failed to stop in time. -A temporary sub vehicle is damaged while the insured is driving

The rented garage damage

An insured relocated to another state for work. However, she still owns and insures a house in the state, but has had no one living in it for 3 months. She is also storing some furniture an clothes in the house. From an insurancce standpont, the insured's house is considered

Unoccupied