Insurance

All of the following are additional liability coverages automatically provided in a homeowners policy EXCEPT

Personal injury. (Personal injury may be added 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.)

An insured has $5,000 of medical coverage on a personal auto policy at the time of a covered accident. The insured and 2 passengers are injured. Medical treatment 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 under medical payments coverage?

$14,000. (The limit is not more than $5,000 per person, per accident.)

An insured has a standard HO-4 policy with a $30,000 limit of coverage for personal property. While he was traveling, a fire in his hotel destroys clothes and luggage with a replacement value of $10,000 and jewelry with a replacement value of $10,000. Disregarding any deductible, and assuming of 20% has occurred in both properties, what amount is the insurer obligated to pay?

$16,000. (This loss would be settled on an actual cash value (ACV) basis: $20,000 total for the loss minus $4,000 for depreciation. Remember, the limitation on loss of jewelry applies to the peril of theft only.)

An employee sustained a temporary injury while at work. Her average weekly wage at the time of the accident was $900 a week. The statewide average weekly wage at the time was $600. What is the most that the employee can recover from Workers Compensation benefits for her lost wages?

$510/week. (The most an employee can recover is 66 2/3% of their average weekly wage, subject to a maximum of 85% of the statewide average weekly wage. In the case, 85% of $600 is $510.)

An employee sustained a temporary injury while at work. Her average weekly wage at the time of the accident was $900 a week. The statewide average weekly wage at the time was $600. What is the most that the employee can recover from Workers Compensation benefits for her lost wages?

$510/week. (The most an employee can recover is 66 2/3% of their average weekly wage, subject to a maximum of 85% of the statewide average weekly wage. In this case, 85% of $600 is $510.)

An insured hits a deer and crashes his car into a tree. The total damage to the vehicle is $6,000. How will this loss be covered?

$6,000 would be paid under other-than-collision coverage. (Because the proximate cause of the loss was contact with an animal, all of the damage would be paid under other-than-collision coverage.)

An insured has a personal auto policy with both comprehensive (other-than-collision coverage. His car is stolen and recovered five days later. If the insured claims transportation expenses of $20 per day, how much will his policy pay?

$60. (The policy will pay $20 per day after 48 hours, not to exceed 30 days in total.)

A producer moves to another state and terminates her residency in Arkansas. The Arkansas producer's license must be returned to the Commissioner within how many days?

10 days. (Producers who terminate their state residence must deliver the insurance license to the Commissioner within 10 days after terminating their residency.)

Which of the following individuals would NOT be eligible for coverage under the Arkansas Automobile Assigned Risk Plan?

A driver whose license has been revoked after 2 DWI convictions.

A tornado that destroys property would be an example of which of the following?

A peril. (A peril is the cause of loss insured against in an insurance policy.)

Coverage F (medical payments) under a homeowners policy would cover

A residence employee who is injured on the job. (Residence employees are eligible for medical payments if the bodily injury arises in the course of employee is not covered by workers compensation.)

A businessowners policy is

A self-contained prepackaged policy.

The declarations page of the homeowners policy provides all of the following information EXCEPT

A statement that earthquake damage is not covered. (The declarations section provides information as to who is insured, where they are located, when the policy provides coverage, how much coverage and the amount of deductible applied to a loss. The statement that earthquake damage is not covered is found in the policy form.)

An insured owns and operates a ranch. The insured has several vehicles that are used in the ranching operation and for personal use. Which of the following could NOT be insured under a personal auto policy?

A two-ton grain truck with a 6,500- pound capacity. (A two-ton-truck weighs 4,000 pounds. With its cargo weight of 6,500 pounds, it exceeds the 10,000-pound gross vehicle weight (GVW) limit and would not be eligible. The GVW is the maximum recommended weight, including the weight of the vehicle, fuel, and fluids, passengers, and all cargo.)

All of the following are acceptable forms of proof of financial responsibility for auto liability EXCEPT

A valid driver's license.

An uninsured motor vehicle includes all of the following EXCEPT

A vehicle being used for public livery. (A vehicle being used for public livery is a standard exclusion in uninsured motorist coverage, not a category or type of uninsured motor vehicle.)

Which of the following is the closest term to an authorized insurer?

Admitted. (Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.)

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

Agreed value. ( Agreed value works best for items whose value does not fluctuate much. When a loss occurs, the policy pays the agreed value as specified on the policy schedule, regardless of the insured item's appreciation or depreciation.)

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. (Agreed value is a property policy with a provision agreed upon by the insurer and insured as to the amount of insurance that represents a fair valuation for property at the time the insurance is written. When a loss occurs, the policy pays the agreed value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation.)

Which of the following insurers must be members of the Rural Risk Underwriting Association in this state?

All insurers that write property insurance. (All insurers that write property insurance in the state are required to be members of the association.)

A person who negotiates the settlement of insurance claims on behalf of the insurer is known as

An adjuster

In insurance, an offer is usually made when

An applicant submits an application to the insurer. (In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues policy.)

Which of the following could be covered by an HO policy?

An oriental rug in an on-premises apartment.

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered

An unfair trade practice

Which of the following is a compensable injury?

Anne carelessly walks through a glass door at her employer's place of business. (The following are not compensable injuries: 1. Horseplay or injuries to an active participant in an assault, 2. Any recreational activity that is purely for the employee's personal pleasure, or 3. The use of alcohol or illegal drugs.)

When a disagreement occurs as to how to settle a loss in a "fender bender" between two cars, what procedure is followed?

Arbitration through the court. (Arbitration is a low-cost alternative to a full-blown lawsuit.)

Which of the following is a method of claim settlement used in casualty insurance when the insured and insurer cannot agree on how to settle a claim?

Arbitration. (Arbitration is a method of casualty claim settlement used when the insured and insurer cannot agree on how to settle a claim. The arbitrator's decision is binding to both parties.)

Generally speaking, how soon must an employee report an injury to his or her employer?

As soon as reasonably possible. (An employer may set any timeframe that is reasonable.)

How often must the insurers notify policyholders who do not currently carry residential earthquake insurance of potential eligibility for residential earthquake insurance through the Marker Assistance Program?

At least 3 times over a 4-year period. (The notice must be on a form adopted by the Board of the Arkansas Earthquake Authority and approved by the Insurance Commissioner, and must be provided to the policyholders at least 3 different times over a 4-year period. This notice. cannot be deemed to provide earthquake coverage to policyholders.)

Which of the following is an example of a protective safeguard in a businessowners policy?

Automatic sprinkler system. (The protective safeguards endorsement adds a policy condition requiring the insured to maintain protective safeguards (automatic sprinkler system, fire alarm, etc.) as a condition for coverage.)

An employee is injured while visiting the employer's out-of-state site. How will the workers compensation benefits be determined?

Benefits will be provided if the state was listed on the policy information page. (Employers must list all states in which they do business on the policy information page for coverage to apply in those states.)

Who will transport the property of anyone who hires them?

Common carries.

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. (Conditions are part of the policy structure. Consideration is an essential part of a contract.)

An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this?

Consequential. (Consequential loss, also known as indirect loss, is a second financial loss caused by a covered direct loss.)

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

Contents are covered open peril on HO-5, and named peril on HO-3. (HO-5 provides open peril coverage for contents; HO-3 is named peril coverage for contents. Replacement cost coverage is available only by endorsement to either form.)

An insured's house is damaged by a fire and is uninhabitable. As a result, the insured has to rent an apartment until repairs are made. A dwelling insurance policy will pay for the expense of renting the apartment. Which type of broad or special form coverage does the insured have? A. Coverage E - Additional Living Expense B. Coverage A - Dwelling C. Coverage B - Other Structures D. Coverage D - Fair Rental Value

Coverage E- Additional Living Expense. (Coverage E is a broad or special form under the dwelling policy that pays for additional living expenses while the insured's dwelling is being repaired.)

In dwelling policies, automatic increase in insurance is

Coverage by endorsement. (Automatic increase in insurance is an endorsement that may be added to a DP to increase the amount of insurance by an annual percentage to offset the effects of inflation. This endorsement requires additional premium.)

The basic dwelling form (DP-1) provides all of the following coverages without endorsement EXCEPT

Coverage for additional living expense

Which of the following dwelling policy forms primarily insures a structure on an actual cash value basis?

DP-1. (DP-1 insures the structure on an actual cash value basis. DP-2 and DP-3 insures the structure on a replacement cost basis.)

Which of the following dwelling coverage forms would pay replacement cost for the dwelling?

DP-2 and DP-3. (DP-2 and DP-3 pay replacement cost as long as the house is insured for at least 80% of its value on the date of loss.)

Which of the following examples of losses paid under an HO-3 also would be paid under an HO-2 homeowners policy?

Damage to the dwelling caused by ash or dust from volcanic eruption. (An HO-3 covers losses on an open peril basis. An HO-2 covers losses on a named peril basis. Both forms cover damage to the dwelling caused by ash or dust from a volcanic eruption.)

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT a) An offer of employment b) Stocks, securities, or bonds c) An offer to share in commissions generated by the sale d) Dividends from a mutual insurer

Dividends from a mutual insurer. (Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.)

In addition to the common policy conditions, all of the following conditions apply to liability coverage EXCEPT

Employers liability. (The following conditions apply to the liability coverage in addition to the common policy conditions; bankruptcy, duties in event of occurrence, claim or suit, legal action against the insurer, and separation of insured. Employers liability is an exclusion.)

What method of premium computation relates an employer's losses, payroll, and premiums to the rating bureau's classifications of operations?

Experience modification factor. (An experience modification factor is developed by a rating bureau. The calculations relate an employer's losses, payroll, and premiums, segregated according to classifications of operations, all as reported to the bureau by the employer's insurance company.)

An insured is involved in an auto accident in another state. The state has a financial responsibility law that specifies limits of liability higher than the limits shown in the declarations. What amount will the insured's policy pay?

Higher limits. (According to the out-of-state coverage provision in the personal auto policy (PAP), if the state or province has a financial responsibility law specifying limits of liability higher than the limits shown in the declarations, the insured's policy will provide the higher specified limits.)

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?

Illegal. (It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.)

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?

Indemnity. (The principle of indemnity stipulates that the insured can only collect for the amount of the loss even if the policy is written with greater benefit limits.)

What do individuals use to transfer their risk of loss to a larger group?

Insurance

Which of the following situations would NOT be considered "property insurance" under state law?

Insurance protecting the operator of an automobile against liability for damage to property belonging to another. (Insurance covering liability for property damage that has not been assumed under a contract is not considered to be "property insurance.")

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. (The insuring agreement is the part of the policy structure that describes the insured perils and the method of indemnification.)

All of the following are conditions commonly found in the insurance policy EXCEPT

Insuring agreement. (The insuring agreement provides information on the policy's coverages. Conditions state the legal obligations and duties of the parties to the contract.)

What is the role of an adjuster?

Investigate and negotiate settlement of claims on behalf of the insurer. (An adjuster is an individual, firm, limited liability company, or corporation who for compensation as an independent contractor or as the employee of an independent contractor or for fee or commission investigates and negotiates, on behalf of the insurer, settlement of claims arising under insurance contracts.)

Which of the following best describes a misrepresentation?

Issuing sales material with exaggerated statements about policy benefits. (Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.)

Which of the following types of property would be covered in homeowners coverage forms?

Landlord furnishings in an on-premises apartment.

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

Legal and not against public policy. (The purpose of a contract must be legal and not against public policy for the contract itself to be enforceable by law (or legal).

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

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

Which program was designed to provide an additional source of earthquake insurance?

Market Assistant Program. (The Market Assistance Program (MAP) was created to provide greater availability of earthquake insurance in the state.)

Which of the following coverages is included in an unendorsed homeowners policy?

Medical payment to others.

A failure to report insurance fraud to the Commissioner is considered a/an

Misdemeanor. (Failing to report fraud is considered a Class A misdemeanor.)

During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes

Misrepresentation. (Making false or misleading statements with the intent to defraud another is misrepresentation.)

All of the following statements are FALSE regarding garage physical damage coverage EXCEPT

No coverage is provided for any auto stored for more than forty-five days at a location not shown in the declarations. (Collision coverage is not for any specific risk. Autos held for sale are covered when auto designation Symbol 31 is shown on the declaration page. The "specific causes of loss" coverage is available for physical damage coverage.)

Rental Reimbursement is only available if the policy includes which coverage?

Other Than Collision Coverage. (This endorsement is only available if the policy includes other than collision coverage. This endorsement will reimburse the insured for rental charges incurred because the covered auto is out of use because of a covered loss.)

Which of the following watercraft will NOT be covered by business liability insurance?

Owned watercraft 53 feet long. (Watercraft while on shore at a premises owned by the insured and nonowned watercraft less than 51 feet long not being used to carry persons or property for a fee will be covered.)

Which of the following conditions is NOT necessary for becoming a non-resident producer in this state?

Passing the licensing examination. (To become a non-resident producer in Arkansas, one must be a licensed resident producer in good standing in one's home state, and submit appropriate application and fees. No additional prelicensing education or examinations are required as long as the two states have reciprocity.)

Which of the following conditions is NOT necessary for becoming a non-resident producer in this state?

Passing the licensing examination. (To become a non-resident producer in Arkansas, one must be a licensed resident producer in good standing in one's home state, and submit appropriate application and fees. No additional relicensing education or examinations are required as long as the two states have reciprocity.)

Which professional liability form provides form coverage for liability arising out of malpractice, error, or mistakes made in rendering professional services?

Physicians, surgeons and dentists malpractice. (The physicians, surgeons and dentists malpractice form provides coverage for liability arising out of malpractice, error, or mistakes made in rendering or failing to render professional services.)

The party to a surety or fidelity bond who promises to fulfill the obligation is the

Principal. (The principal purchases the bond and promises to perform.)

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

Proof of loss. (A sworn statement, called proof of loss, must usually be furnished by the insured to an insurer before any loss under a policy can be paid.)

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

Provided by the insured's policy on an excess basis. (Automobile insurance follows the insured auto, so the coverage written on the auto is primary. Automobile insurance also follows the insured as excess over other collectible insurance.)

All of the following are considered parts of the policy structure EXCEPT

Provisions

A producer in another state wants to become a producer in Arkansas. The other state gives the same privileges to Arkansas producers wanting to be licensed in that state as it does its own producers. Arkansas therefore extends the privileges of its producers to the prospective producer of the other state. What is this called?

Reciprocity. ("Reciprocity" occurs when the state in which the person resides accords the same privilege to residents of Arkansas.)

The Federal Fair Credit Reporting Act

Regulates consumer reports

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

Renewal dates. (An Insuring Agreement establishes the obligation of the insurance company to provide the insurance coverages as stated in the policy. The insuring agreement lists the parties to the contract, effective and renewal dates, the description of coverage provided, and perils (among other things). Location of premises, policy limits, supplemental representations, and insurer's name and address can all be found in the Declarations.)

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

Replacement cost.

All of the following are factors in rating workers compensation insurance EXCEPT

Sales. (The hazard of the work, the amount of payroll, and the employer's prior loss experience are all rating factors.)

According to the businessowners policy (BOP) definitions, which of the following does NOT mean valuable papers and records?

Securities (Valuable papers and records means inscribed, printed or written documents, manuscripts, and records (including abstracts, books, deeds, drawings, films, maps, or mortgages). The term does not mean money or securities.)

In the event of a claim under a commercial general liability policy, the insured has all of the following duties to the insurer EXCEPT

Submitting to a medical exam when requested. (Under medical payments coverage, the injured third party has to submit to an exam upon request, not the insured.)

Which of the following symbols is available to an insured with vehicles subject to no-fault coverage?

Symbol 5 (Symbol 5 covers owned autos subject to no-fault coverage.)

What is the deductible of a personal liability umbrella policy called?

The SIR. (The self-insured retention (SIR) is an initial part of a loss the insured pays before the umbrella pays if no other policy covers the loss.)

Theft coverage under an HO-8 is restricted to

The actual cash value of what was stolen, with limits for certain classes of property. (Since HO-8 policies are for older homes, they insure dwellings at actual cash value, not replacement cost because the cost of rebuilding with the materials and details of the original home would make replacement cost coverage prohibitively expensive. Theft is the actual cash value of what was stolen, with limits for certain classes of property.)

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

The average amount of insurance during construction. (The premium is based on the average value of the house and building materials from the first day of construction until completion.)

A parking garage owner completed major renovations to a parking garage just prior to selling it to another company. Three months later, overheard concrete fell on cars in the second floor level. Under the garage coverage policy conditions, which of the following is true?

The damage occurred when the concrete fell. (Under the conditions of a garage coverage policy, the loss occurs at the time of the incident, not when the faulty work was done.)

Which of the following circumstance would be EXCLUDED under medical payments coverage of a personal auto policy?

The insured is injured while driving his motorcycle on his resident premises. (Coverage does not apply when the insured is occupying a vehicle with fewer than 4 wheels.)

According to businessowners policy Section I, which of the following is NOT a condition to be met for the terms of the policy to apply to mortgageholders?

The mortgageholder must petition the state department of insurance for named status.

Which of the following losses would most likely NOT be covered under Coverage A in the dwelling policy?

Theft of a renter's lawnmower used to service the premises. (Coverage A on the dwelling includes all attached structures and outdoor personal property or equipment used to maintain or service the premises if not covered elsewhere. The lawnmower most likely would not be covered because the dwelling insured is rented to others without content coverage. If the landlord furnishes lawnmowers or other equipment to service the premises, there is no need to schedule a small amount of content 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. (The dealership does not have legal title to the trade-in vehicle, so no coverage is provided under the business auto physical damage coverage due to the false pretense clause.)

When a vehicle travels from one state to another, what happens to the limits of policy liability in a personal auto policy?

They do not change. (The minimum liability limits do not change when a vehicle travels from state to state and remain the same regardless of the state the vehicle is in.)

Which of the following is NOT true regarding insurance consultants?

They do not need to be a resident in this state.

All of the following statements are true regarding fire department service charge under the businessowners policy EXCEPT

This coverage limit pays in place of the limit of insurance shown in the declarations.

What is the main justification for the existence of the State Insurance Department?

To protect the public. (The State Insurance Department exists to protect the public.)

Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of

Twisting. (Twisting is a misrepresentation that persuades an insured or a policyowner, to his or her detriment, to cancel, lapse, or switch policies.)

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

Uninsured motorist coverage. (Trailers, while being towed by an insured auto, are covered automatically for bodily injury (BI), property damage (PD) and uninsured motorist (U/M) under Part A of a personal auto policy.)

All of the following are essential elements of a commercial package policy (CPP) EXCEPT

Valuations and/or settlement provisions. (Regardless of how the policy is written, it will be comprised of the following essential elements; declarations page, conditions, interline endorsements, and coverage parts.)

Both the broad theft and limited theft endorsements on the dwelling program exclude all of the following types of property EXCEPT

Watercraft. (Canoes have limited coverage.)

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. (Workers compensation is not available through the commercial package policy (CPP).)