Exam FX Insurance Practice Exam 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

In Texas, unless higher optional limits are purchased, the maximum amount payable for all auto personal injury protection benefits arising out of a single accident shall not exceed

$2,500.

The War, Military Act, and Terrorism Exclusion will only apply to an incident of terrorism in which the total of insured damage to all types of property in the United States, its territories and possessions, Puerto Rico and Canada exceeds what amount?

$25,000,000

A dwelling policy has a standard deductible that applies to all property coverage, except fair rental value, additional living expense, and the fire department service charge. How much is this deductible?

$250

Coverage for water backup or sump pump overflow is excluded from the Dwelling Policy. However, with the purchase of the water backup and sump pump overflow endorsement, coverage for up to $5,000 in loss or damage can be provided for an additional premium. What is the deductible associated with this coverage?

$250

If a liability policy had split limits of 50/100/30, what is the maximum amount that would be payable in the event of injury to a single person?

$50,000

How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card?

$500

The businessowners policy liability coverage will pay for necessary medical expenses of others incurred within what maximum time period?

1 year

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

15

Which of the following policies will help an auto dealership cover most of its liability exposures?

A garage liability coverage

In a participation plan, the insured may be eligible for which of the following?

A partial premium refund

Which of the following definitions best defines the term "accident"?

A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended

What are common carriers required to issue to every shipper that it transports goods for?

A uniform bill of lading

In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation?

Agreed value

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

Agreed value

An insured works outside the home. The insured's sister lives with him and cares for his four children. When the insured's home is severely damaged by fire, the family moves into an apartment while repairs are being made. The largest apartment available in the area has two bedrooms, so the insured's sister has to stay at a motel. How much will the HO-3 form pay for these additional living expense?

All of the expense up to the Coverage D limit

The inspections and surveys condition in a businessowners policy

Allows the insurer the right to inspect the insured's premises.

In insurance, an offer is usually made when

An applicant submits an application to the insurer.

With respect to the business of insurance, a hazard is

Any condition or exposure that increases the possibility of loss.

Insurable interest in a property policy must be proven

At the time of loss.

An applicant is purchasing a homeowners policy. A producer comes to her home, fills out the paperwork, and tells the applicant that her home will be covered as soon she signs all of the paperwork, and that she will receive a new policy in the mail in 5 business days. Even though the policy is not issued, the applicant's home is temporarily covered until then. Which of the following makes that possible?

Binder

A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of

Coercion.

When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of

Concealment

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

The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the

Conditions

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

Consideration

The at-fault driver in an insured's auto crash had the state required minimums for auto liability coverage, but not enough to pay for all the damage done to the insured. This driver is

Considered underinsured.

Which of the following is NOT an essential element of an insurance contract?

Counteroffer

A professional liability policy will provide coverage for loss in all of the following cases, except, when the insured doctor was shown to be

Criminally negligent.

If a licensed agent in Texas receives a criminal conviction, that information must be reported to

Department of Insurance.

What term includes damage where the insured peril was the proximate cause of loss?

Direct loss

Which of the following special liability coverages will provide protection to managers of a corporation for claims arising from a wrongful act committed by the manager while in an official capacity?

Directors and officers liability

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

Which of the following provisions requires that the insured protects the damaged property from further damage, cooperates with the insurer in settling the loss, and submits to the insurer signed proof of loss within a specified period of time?

Duties after loss

According to the appraisal condition of a homeowners policy, what procedure may be followed if the insurer and insured do not agree as to the size of a loss?

Either party may make a written request for an appraisal.

What is the purpose of the coinsurance clause found in property insurance policies?

Encourage the insured to insure the property closer to its full value

Which of the following would be named on the declarations page of a property or liability policy?

First named insured

Which of the following would NOT be considered rebating?

Giving a client a $25 pen with the insurer's logo during the insurance application process

All of the following are requirements for applicants for a Risk Manager license in Texas EXCEPT

Have at least 2 years of insurance experience

Events or conditions that increase the chances of an insured loss occurring are referred to as

Hazards

When would a misrepresentation on the insurance application be considered fraud?

If it is intentional and material

In liability insurance policies, supplementary payments are made

In addition to the limit of liability.

The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the

Insuring agreement.

Which of the following best describes a misrepresentation?

Issuing sales material with exaggerated statements about policy benefits

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

Larger

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?

Law of large numbers

For a contract to be enforceable by law, the purpose of the contract must be

Legal and not against public policy.

Which of the following personal auto coverages would pay for the insured's travel expenses and loss of earnings while involved in the settlement process of a covered loss?

Liability coverage

An employee who refuses services or refuses to cooperate with services provided by the Rehabilitation Commission will

Lose entitlement to supplemental income benefits.

Insurance is a contract by which one seeks to protect another from

Loss

Which of the following is the basis for a claim against an insurance policy?

Loss

Which of the following coverages in dwelling and homeowners policies is for indirect losses?

Loss of use

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

The process of determining the premium charged and how much insurance is required for a particular loss is called

Loss valuation

The type of professional liability coverage a medical doctor needs is

Malpractice coverage.

Most insurance policies exclude losses by

Mysterious disappearance.

Duties of the insurer found in property policy conditions include all of the following EXCEPT

Notify the insured in the event of financial difficulty.

What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk?

Other insurance

The mobilehome endorsement alters the homeowners policy to cover a mobilehome and other structures on land

Owned or leased by the resident of the mobilehome.

A bond is written for a set limit, and the surety will be liable only for this amount of the limit. This limit is known as the

Penalty

The causes of loss insured against in an insurance policy are known as

Perils

Coverage for all of the following is found in Section I of a homeowners policy EXCEPT

Personal liability.

Which of the following liability exposures is most likely for a small specialty clothing retail boutique?

Premises liability exposure

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

Professional liability

Before an insurer will pay any loss under a policy, what is usually required from the insured?

Proof of loss

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.

The Federal Fair Credit Reporting Act

Regulates consumer reports.

What type of information would be found in a policy's insuring agreement?

Renewal dates

In property insurance, actual cash value is defined as which of the following?

Replacement cost at the time of the loss, less depreciation

Insurance is the transfer of

Risk

Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called

Specific coverage.

Robbery is

Taking of property by use of force, violence, or fear.

Burglary is defined as

Taking of property from within the premises leaving visible signs of forced entry.

Which of the following would qualify as a competent party in an insurance contract?

The applicant has a prior felony conviction.

How much is the premium for the dwelling under construction endorsement under the dwelling policy?

The average amount of insurance during construction

Surety bonds are written for a definite limit called

The bond penalty.

Peril is most easily defined as

The cause of loss insured against.

All of the following statements concerning coinsurance are true EXCEPT

The coinsurance formula will also be applied to total losses.

The occurrence form trigger is based on which of the following?

The date when injury or damage occurs

An employee may be eligible for supplemental income benefits upon

The expiration of the impairment income benefit period.

All of the following conditions must exist for injury or damage to be included in the products and completed operations hazard of a commercial general liability policy EXCEPT

The injury or damage must occur within 90 days after the insured's work is completed.

Which of the following is most likely to occur if it is determined by the audit that the deposit premium was too high?

The insured will receive a return premium.

Which of the following statements would be correct if an insured failed to maintain the underlying limits as required by a personal umbrella policy?

The insured would be responsible for the amount required as underlying limits in the event of a claim.

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

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

Under the limits of insurance provision found in the Physical Damage Coverage Form in a Commercial Auto policy, how much will an insurer pay to repair or replace a covered auto?

The lesser of the actual cash value or the cost to repair or replace a covered auto

In terms of parties to a contract, which of the following does NOT describe a competent party?

The person must have at least completed secondary education.

A specific coverage part is listed on the commercial package policy declarations page, but there is no premium shown. What does that mean?

There is no coverage.

A used car dealer takes a car in trade as partial payment for a car on its car lot. The customer promises to bring in the car's title but does not. Another customer takes the trade-in for a test drive and has an accident. In regard to the dealership's business auto physical damage coverage, which of the following it true?

There is no coverage.

Which of the following is true regarding single dwellings that are insured to at least 80% of the replacement value?

They are automatically provided with replacement cost coverage.

An insured is driving her auto and strikes a large pothole, causing a flat tire. Which coverage of the insured's personal auto policy will pay for the repair?

This loss is not covered

Which of the following IS considered a work-related injury/occupational disease under Workers Compensation law?

Tom works as a painter in an auto body shop. The chemicals from the paint aggravate Tom's asthma to the point that he must be hospitalized for several days.

The type of insurance used to cover goods for one specific trip is called

Trip transit.

In the personal auto policy, owned trailers being towed by an insured auto are automatically covered for

Uninsured motorist coverage.

A small restaurant was forced to close for 10 days in August when the power company's transformer was destroyed by lightning, and the restaurant was without electricity. Which of the following endorsements could be added to the businessowners policy that would provide protection against loss of income from such events?

Utility services - time element endorsement

A building is insured, but no one has lived or worked in it for 10 years. The building is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered

Vacant

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage

The bankruptcy provision found in the personal auto policy states that bankruptcy of the insured

Will not relieve the insurer of its policy obligations.

The insured with a claims-made commercial general liability (CGL) policy may request in writing claim and occurrence information from the insurer at any time up to 60 days after the policy period ends. The insurer must provide the information

Within 45 days.

A commercial package policy (CPP) allows the insured to select the coverage needed and customize the policy to meet the needs of the insured's business. In a CPP, the business owner may select from all of the following types of coverage EXCEPT

Workers compensation coverage