2-20 questions

Under the unendorsed Homeowners Policy, jewelry is covered up to what amount?

$1,500 for loss by theft Jewelry, watches, furs, precious and semiprecious stones are covered up to $1,500 for loss by theft. Other named peril losses are covered up to the Coverage C limit.

Policyholder S has a HO-5 policy with a $250,000 Coverage A limit. After a strong wind blows a mailbox into S's front picture window, causing $2,500 damage, S immediately buys $250 of wood and plastic sheeting to cover the damaged window and prevent further damage. How much would S's policy reimburse?

$2,750 When an insured's property is damaged by a covered peril, the Reasonable Repairs additional coverage pays the reasonable costs by the named insured to take necessary measures to protect the property against further damage. The policy would therefore pay the full amount of the loss to the window, plus the insured's cost in covering it to prevent further damage.

Policyholder N insures his owner-occupied home under a dwelling property policy (DP-3) with a limit of $100,000. If the dwelling is damaged in a fire, what is the limit of insurance that will apply to Coverage E, Additional Living Expense?

$20,000 The Coverage E is 20% of Coverage A.

A liability policy contains a per person bodily injury limit of $25,000 and a per occurrence limit of $50,000. If an accident were to occur and three persons have claims of $20,000 each, the total amount paid is:

$50,000 The policy pays up to $25,000 for each person injured, but no more than $50,000 per occurrence, regardless of the number of persons injured. Therefore, the limit for this accident is $50,000.

Which type of liability limit applies to Medical Payments coverage?

Per person Medical payments coverage for all types of policies pays on a "per person" limit

Under the Homeowners Policy, Medical Payments coverage will apply to expenses that are incurred within what length of time following an accident?

3 years Medical Payments Coverage will pay for necessary medical expenses that are incurred or medically ascertained within 3 years from the date of an accident causing bodily injury.

Possibility of loss is called:

A risk Risk, simply defined, is uncertainty concerning a loss. Without the possibility of loss, no such uncertainty exists.

The maximum amount that a coverage will pay for loss to any one injured party regardless of overall policy limits, is known as the:

Per person limit The per person limit is the maximum amount of coverage available for each person that sustains bodily injuries in an occurrence.

Rates that cannot be used until the Department or Division of Insurance approves them are referred to as:

Prior approval rates In prior approval states, rates cannot be used until the Department or Division of Insurance authorities approve them, or until a specific time has passed after the filing without being disapproved.

An agent for ABC Insurance company is representing an insured in an insurance transaction. The principal in the agency relationship is:

ABC Insurance Company ABC Insurance authorizes the agent to transact business with the insured.

In property insurance, which clause prevents the insured from relinquishing ownership and leaving damaged property to the insurer and claiming a total loss?

Abandonment The Abandonment clause provides that the company will not accept property abandoned by an insured when there is a claim dispute.

Under the Basic Dwelling Form, losses are paid on which basis?

Actual Cash Value The DP-1 pays on an actual cash value, rather than replacement cost basis.

An insurer that is authorized to do business in a particular state is said to be:

Admitted An admitted insurer is an insurer that is authorized to transact insurance in a state by that state's insurance department, as evidenced by a Certificate of Authority to transact business.

Which of the following is an example of vicarious liability?

An employer's liability for the acts of an employee Vicarious liability is the liability assigned to one party for the conduct of another, based solely on a relationship between the two. Examples include employer/employee relationships and parent/child relationships.

The provision that the insured's interest in a property insurance policy may not be transferred to another person without the consent of the insurance company, is called:

Assignment It is important for the insurance company to know whom it is insuring, for underwriting reasons. Therefore, it must consent, in writing, to any assignment of the policy.

Which of the following methods of writing insurance is used to provide insurance on properties at different locations, using a single policy, and a single limit of insurance?

Blanket Blanket insurance covers more than one item of property on one policy for a single amount of insurance, which applies to each item as needed.

Personal Injury includes all of the following, except:

Bodily Injury Personal Injury is non-bodily injury to a person arising from wrongful conduct.

Which is true of Coverage C of the Dwelling Policy?

Coverage C provides coverage for the personal property of a guest At the insured's request, Coverage C will apply to personal property of a guest or servant while located on the described location. Personal property of a tenant or boarder is not covered.

Policyholder M insures her owner-occupied single family residence under a dwelling property policy (DP-3) with a limit of $100,000. If the dwelling is damaged in a fire, what policy coverage will pay for M's extra costs to stay in a motel and board her pets while the fire damage is being repaired?

Coverage E Coverage E pays for the necessary increase in living expenses incurred by the insured if the building is rendered unfit for its normal use.

The Additional Coverages part of a property insurance policy provides:

Coverage that supplements the basic coverages in the insuring agreement which is automatically included without an additional premium Additional coverages are automatically included in property policies without an additional premium. The type of additional coverages depends upon the type of policy. Additional coverages are paid in addition to those stated in the insuring agreement and include debris removal, collapse, and fire department service charges.

The termination of an insurance policy, by either the insured or the insurer before the expiration date, is known as:

Cancellation Either party to the contract may cancel insurance policies before the expiration of the policy if the cancellation notice requirements are met.

When damages are reduced in proportion to the degree of negligence, this is an example of:

Comparative Negligence Comparative negligence is a defense wherein damages are reduced in proportion to the degree of the claimant's negligence. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant may only recover 95% of damages.

Which of the following defenses against negligence reduces damages in proportion to the degree of negligence?

Comparative Negligence Comparative negligence provides that the damages recoverable by each party to the suit be reduced in proportion to that party's degree of negligence.

When an applicant intentionally fails to make a material fact known, it is known as:

Concealment Concealment is defined as the withholding of known facts, the knowledge of which would change the decision of an insurer with respect to underwriting, settling a loss, or determining the premium.

When a loss occurs as a result of two perils, one of which is excluded and the other of which is insured against, the situation is known as:

Concurrent Causation Concurrent Causation is the legal doctrine that states that when a property loss is due to two causes, one that is excluded and one that is covered, the loss is covered.

Of the Dwelling Policy forms, which one would cover an owned mobile home permanently affixed to a foundation?

DP-1 A mobile home is only eligible for coverage under the DP-1.

Which of the following statements regarding deductibles is true?

Deductibles help reduce the number of frivolous or small claims The Deductible is the amount of each loss that the insured must bear before the policy responds to the loss. Deductibles eliminate the expense of processing small claims, resulting in reduced premiums.

The insurance contract is said to be a contract of utmost good faith, because:

Each party is entitled to rely upon the representations of the other that there is nothing concealed or dishonest It is assumed that utmost good faith exists in both parties to the contract.

If an insurer is incorporated in Rhode Island, but primarily does business in New York, what type of insurer would it be considered in New York?

Foreign An insurer that is incorporated under the laws of another state is considered a foreign insurer.

Where in the Dwelling policy is it stated that earth movement, landslide, mine subsidence, and mudflow are not covered unless resulting from direct loss by fire or explosion?

General Exclusions The perils of earth movement, landslide, mine substance, and mudflow are perils that, because of their catastrophic nature, are not insured under the Dwelling policy.

Which form is designed for the unit-owner of a condominium?

HO-6 The HO-6 Form is designed for the owner-occupant of a condominium unit.

Which of the following is not a condition found in an insurance policy?

Insuring Agreement The Insuring Agreement is a Section of the policy, separate and distinct from the policy conditions.

Which of the following is true concerning the Home Day Care Coverage Endorsement to the Homeowners Policy?

It extends Section II coverages to the insured's home day care business The Home Day Care Coverage Endorsement extends the coverage of the Homeowners Section II to the Day Care Business.

Wet leaves on a sidewalk are considered a:

Leaves that have fallen and gotten wet through natural causes increase the chance of a loss. They are an example of a physical hazard.

Which property insurance condition states that a suit may not be filed by the insured against the insurer under certain circumstances?

Legal Action Against Us Unless all terms of the policy have been complied with by the insured, the insured cannot file suit against the insurer. An insured cannot ignore his/her responsibilities under the policy, then subsequently bring legal action against the insurer.

Personal injury liability includes which of the following?

Libel and slander Personal injury liability is the legal liability for injury other than bodily injury or property damage. Examples of personal injury include libel, slander, false arrest, invasion of privacy, and copyright infringement.

Which property condition requires the insurer broaden coverage during the policy period without an increase in premium?

Liberalization The Liberalization Clause states that if the insurance company makes a change that broadens coverage under this edition of the policy without an additional premium charge, the change will automatically apply to this policy.

The maximum amount a policy will pay in the event of a loss, regardless of the number of insureds, claims made, lawsuits filed, or parties making claims is the:

Limit of liability The limit of liability, or limits of insurance, are shown on the policy declarations page and are the most paid by the policy regardless of the number of insureds, claims made, lawsuits filed, or parties making claims or filing lawsuits.

Bodily Injury may include which of the following?

Loss of Earnings Bodily injury includes such items as medical expenses, lost wages, mental anguish, death and disfigurement.

Medical Payments under Section II of the Homeowners Policy would cover all of the following, except:

Loss of Income of an injured person Coverage F (Medical Payments to Others), pays necessary medical expenses incurred within three years from the date of an accident. This may include surgical, dental, hospital, ambulance, professional nursing and similar expenses.

When writing an application for car insurance, Producer M asked her client, B, if he had been convicted of driving while intoxicated (DWI) in the past 10 years. B answered 'no,' although he had been convicted of a DWI last year. B is guilty of which of the following?

Misrepresentation Misrepresentation is a false statement in the application and if material, meaning the company's decision to issue the application would have been different, the policy would be voided.

The owner of an antique store leaves valuable breakable items on display while heavy construction is taking place, believing that any pieces that fall and break will be covered by insurance. This demonstrates which hazard?

Morale Hazard This is considered an attitude of indifference or carelessness which increases the probability of a loss.

The person specifically designated in the policy as the person with whom the contract of insurance has been made, is considered to be the:

Named Insured The Named Insured is the entity with whom the insurance contract is made. When there is more than one entity designated as named insured in the policy, then contractual obligations are transacted with the first one designated, known as the first named insured.

Which provision stipulates that coverage will not benefit a party that is holding, storing, or moving insured property for a fee?

No Benefit to Bailee The No Benefit To Bailee provision makes clear that the insurer has no obligation to a bailee, even if the bailment is to the benefit of the insured.

All of the following are true regarding the Broad Theft Endorsement on a Dwelling policy, except:

Only on-premises coverage is available The Broad Form Theft endorsement is attached to owner-occupied Dwelling policies to provide theft coverage for the owner-occupant's Personal Property. On-premises and off-premises coverage is available.

When coverage applies to losses from all perils except those specifically excluded, the policy is said to be written on which of the following basis?

Open Perils The open perils policy insures against all perils that are not excluded, rather than enumerating the perils being insured against.

Which of the following statements about medical payments is true?

Payments are made regardless of fault or negligence Medical payments coverage provides payment of medical and medically associated expenses on a voluntary basis, without regard to negligence or fault on the part of the insured.

The most a policy will pay for a loss arising out of any one accident regardless of overall policy limits, is known as the:

Per occurrence limit The per occurrence limit represents the most the policy will pay for all losses arising out of any one occurrence, regardless of other policy limits.

All of the following are covered under Section II of the Homeowners Policy, except:

Property of the insured

Insurance is designed to provide protection against which of the following?

Pure Risk With pure risk, the only consideration is the possibility of loss or no loss. By contrast, speculative entails a chance of gain as well as a chance of loss.

Most of H's jewelry is covered under the Coverage C special limits except for her $10,000 necklace inherited from her mother. Which of the following endorsements might H's agent recommend?

Scheduled Personal Property The Scheduled Personal Property is used to increase limits of liability for certain categories of personal property and to broaden the perils insured against that apply to that property.

In respect to Section II of a Homeowners Policy, all of the following are true, except:

Section II losses are subject to a standard $250 deductible Section II losses are not subject to a deductible.

Taxable corporate dividends are received by which type of insurer's shareholders?

Stock A stock company is owned by its stockholders who elect the directors and officers.

When a claimant can prove that a product caused an injury, the fact that the manufacturer will be held liable regardless of whether the product was defective or not, is considered which of the following?

Strict Liability The doctrine of strict liability applies to products and their manufacturers. It holds that the manufacturer can be held responsible for an injury caused by a product, even if the product is not defective.

What is the principle of liability that imposes legal liability for injury and damage by products?

Strict liability Strict liability applies to products causing an injury, whether or not the product was defective.

Which of the following best describes the principle of Indemnity?

The insured is restored to the same financial condition as prior to the loss, with no loss or gain Indemnity is the principle that restores an insured party to the economic position he/she enjoyed before sustaining a loss.

Which of the following is stated in the insuring agreement?

The perils insured against The insuring agreement states the insurance company's promise to pay the insured, including the exact perils insured against by the policy.

Which of the following is true regarding Coverage A under the Dwelling Policy?

The policy does not include coverage for wind loss of television antennas Wind loss of television antennas is so common the coverage is available only through attachment of an endorsement providing this coverage for an additional premium.

When an insurance policy is not clear, the court will usually interpret in favor of the insured because of which characteristic?

The policy is a contract of adhesion A contract of adhesion is a contract between two parties that is written on a 'take it or leave it' basis. Because the other party has no control over the terms of the contract, any ambiguity is usually construed against the party who drew it up.

Under a Dwelling Policy, the coverage extension of Debris Removal will pay for:

The removal of the debris caused by an insured peril This coverage pays the insured's reasonable expenses for the removal of debris of covered property if the property is damaged by an insured peril.

Where can an insured find insurance coverage after being rejected by Insurer A due to claims history?

The residual market is a coverage source of last resort for businesses and individuals who have been rejected by voluntary market insurers.

Which of the following might be considered a physical hazard?

The storage of flammables near a furnace A physical hazard is a condition on the property, or exposed to the property, that increases the probability of loss to the property.

Actual Cash Value is best defined as which of the following?

Today's current price, minus depreciation Actual Cash Value valuation provides that the policy will pay the cost to repair or replace the damaged property at the time of loss, less a depreciation factor based upon the age of the property.

Under aleatory contracts the exchange of values may be:

Unequal An aleatory contract is contingent on particular events, such a covered loss. Under an insurance policy, the insurer's obligation to pay a loss depends on uncertain events, while the insured must pay a fixed premium during the policy period. Thus, the exchange of values is likely to be unequal between any given insurer and insured.

Which of the following is not an example of a pure risk?

Wall Street's decline in the stock market A decline in the stock market is a speculative risk.