Arkansas Property & Casualty Insurance

Policyholder N insurers his owner-occupied home under 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 expenses?

$20,000 or 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 3 persons have claims of $20,000 each, the total amount paid is:

$50,000

Which of the following claims would not be covered under section II of a homeowners policy?

$500 a day for insureds loss of earnings while defending a suit

K gets a horrible rash after using wrinkle-prevention cream for 2 months. This is considered:

An occurrence

If the insured and insurer do not agree on the value of a property loss, what condition would apply?

Appraisal

A secondary loss that occurs as a result of a direct loss from a covered peril is considered:

Consequential loss

Which of these statements is not true about uninsured motorist coverage?

Coverage is automatically provided for the damage to the insureds vehicle

Under which form is the coverage B limit included in the overall policy limit represented by coverage A?

DP-1

The insured is not required to do which of the following in the event of a property claim?

Notify police, whether or not a law has been broken

What is the term for a cause of loss, such as theft of a car?

A Peril

Water damaged caused by which of the following is a covered loss under the dwelling policy?

Discharge caused by a plumbing failure

Actual cash value is best defined as which of the following ?

Today's current price, minus depreciation

Of the following boats, which can be added to the homeowners policy for liability protection?

20' sailing boat

All of the following statements about binders are true, except:

A binder specifies the premium amount

Which of the following is false in regards to the Home Day Care endorsement?

A day care employee is covered

Which of the following is eligible to receive medical payments under section II of a homeowners policy?

A residence employee

Uninsured motorist coverage under a personal auto policy covers which of the following vehicles?

A vehicle owned by the names insured

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

ABC Insurance Company

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

Abandonment

Which of the following is a legal liability imposed without demonstrated negligence ?

Absolute Liability

Which of the following coverages is not included in the Basic Dwelling Form?

Additional living expenses

Plaintiff K was injured after losing control of his skis on a slope with well-marked signs indicating the degree of difficulty. What legal defense is available to the ski resort to avoid liability for the injury?

Assumption of risk

Which of the following statements about liability insurance is false?

Bodily injury includes personal injury, sickness, and disease

All of following are true of the dwelling special form, except:

Both the dwelling and contents are covered on an open perils basis (only dwelling is covered on an open perils basis)

All of the following are methods of writing property insurance limits, except:

Concurrent coverage

Which is true of the dwelling policy special form?

Contents are covered on an actual cash value basis

Which term best describes the equal sharing of a loss by two or more insurers until the loss is paid, or until each insurer has exhausted its limits of insurance, whichever comes first?

Contribution of Equal Shares

All of the following statements are correct regarding coverage E, except:

Coverage E is available under all dwelling policy forms

Under a personal auto policy , which of the following is true of liability for bodily injury resulting from the insured's use of a non-owned auto?

Coverage is provided on an excess basis

Which of the following is true regarding coverage of trees, shrubs or plants under the dwelling policies?

Damage to plants by wind, hail, weight of ice, snow or sleet is not covered

The Terrorism Insurance Program created by the TRIA is administered by which of the following federal entities?

Department of the Treasury

Which of the following statements regarding types of property loss is false?

Direct losses include additional living expenses

Liability for use of which of the following vehicles is not covered by the homeowners policy?

Dune buggy used on a public beach

Under the Other Insurance condition, when two property policies cover the same property, how is a loss apportioned?

Each policy will share proportionately according to the total insurance

Which of the following is true concerning the Home Day Care coverage endorsement to the homeowners policy?

Extends section II coverages to the insured's home day care business

Which of the following best describes a hostile fire ?

Fire caused by a spark escaping from a fireplace and igniting a carpet

The HO-8 form settles losses to the building on what valuation method?

Functional replacement value

A deer chews a hole in an insured's she's sitting next to a pond. Which of the following forms could cover this damage?

HO-3 special forms covers everything except what is excluded, a deer is not a listed exclusion

Loss of income suffered by a store owner after his/her store is destroyed in a fire is considered a(n):

Indirect loss

The following are all true regarding risk management , except:

Insurance is designed to cover both intentional & unintentional losses

Which of the following is not essential in determining if an action is due to negligence?

Insured party must prove the wrongdoer committed a criminal act

A second negligent act that interferes with the chain of events leading to a loss is known as a(n):

Intervening cause

Which of the following is true regarding personal liability supplement?

It provides coverage for claim expenses, first aid expenses and damage to property of others

Which of the following coverages is not found under section I of the homeowners policy?

Liability

All of the following are true of section II of a homeowners policy, except:

Loss assessment charges against the insured by a property owner's association are excluded

Which of the following part D claims would be denied under the personal auto policy?

Loss to the covered auto caused by road damage to tires

The loss of property when the cause of loss is not known is considered:

Mysterious disappearance

Which of the following is defined as the failure to act in a reasonable and prudent manner ?

Negligence

When the insurer elects to end coverage at the end of the policy period, the policy is said to be ?

Nonrenewed

Which of the following is the board term for an accident that also includes a continuous and repeated exposure?

Occurrence

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 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

Which type of standard policy includes coverage options that would not exclude damage by flood?

Personal Auto

Under the property removed coverage extension of a dwelling policy, which of the following is incorrect?

Policy will not provide any coverage while the insured property is being removed from endangered property

A state requiring that the commissioner agree that a company's rates are appropriate before they are made effective used which type of rating approval?

Prior approval

If other insurance also applies to a loss covered by a policy, which of the following will establish the method for determining how the insurance companies will pay the loss?

Pro rata liability

The formal statement that verifies details so the insurer can determine liability is called:

Proof of loss

Which of the following statements is not correct regarding rates and premiums?

Rates may only be excessive if the inside is making up for lossy reserves

A fire sprinkler system installed in a factory is considered which of the following methods of managing risk?

Reduction

Which statement is true concerning homeowners policies?

Section I deductibles does not apply top property covered under the scheduled personal property endorsement

Which of the following perils is not covered under the dwelling broad form?

Smoke damage from industrial operations

A hazard is best defined as:

Something that increases the chance of loss

Which type of risk involves the possibility of loss or gain?

Speculative

The time period in which a lawsuit may be filed after the occurrence of a claim is referred to as:

Statue of limitations

A manufacturer is held liable if a product caused an injury whether the product was or was not defective. This describes what type of liability?

Strict liability

Which of the following places insurance with a non-admitted insurer when insurance cannot be placed with an admitted insurer?

Surplus lines producer

All of the following are true of a homeowners policy, except:

The HO-2 provides open perils coverage on the dwelling

Which statement is true concerning dwelling policies?

The Special Form insures the dwelling on an open perils basis, and insures the contents against the broad form perils

The limited theft coverage endorsement to the DP is used under which of the following circumstances?

The insured dwelling is tenant-occupied

Which of the following is not covered under coverage A of the homeowners policy?

The land on which the dwelling is located

Which of the following is not an element of an insurable risk?

The loss must be catastrophic

The provision the establishes the method by which coverage will be applied if other insurance applies to the loss, is sometimes called:

The pro rata liability provision

Which of the following coverages under the personal auto policy protects the insured against drivers who do not have adequate auto liability

Underinsured motorist coverage

Which of the following has the primary responsibility of determining acceptable risks?

Underwriter

Which form would not insure against external explosion?

Unendorsed DP-1

Because only the insurance company makes a promise to pay a future claim, the insurance contract is:

Unilateral

All of the following are covered perils under the extended coverage endorsement to the DP-1, except:

Weight of ice, snow, or sleet

Which statement is true concerning Coverage D of the homeowners policy?

coverage will pay for any increase in living expenses required to maintain the insured's normal standard of living

Which type of liability limit applies to Medical Payments coverage?

per person

Dividends issued by Stock insurers are paid to:

stockholders