Pearson VUE: Property Insurance Practice Exam

A building adjacent to an insured's business is severely damaged by fire. Because of the nature of the damage to the adjoining property, the insured is denied access to the business by the fire department. If the insured's property is covered under a Business Income Coverage Form, the insurer will cover the loss of earnings for a MAXIMUM of: A. three weeks B. thirty days C. sixty days D. six months

A

A primary obligation of an insurer is to: A. pay the claims covered under the policy B. provide a financial statement with each policy C. make inspections and surveys of insured property D. prepare an inventory after a loss

A

Actual cash value is most often defined as which of the following options? A. Replacement cost less depreciation B. Amount paid less depreciation C. Fair market value plus appreciation D. Appraised value

A

In order to issue a written binder for a commercial property policy, what is the MINIMUM consideration a producer must secure from an applicant? A. A promise to pay the premium B. A signature on a premium finance agreement C. Payment of six months' premium D. Payment of twelve months' premium

A

Inland Marine insurance is commonly used to insure all of the following items EXCEPT: A. automobiles B. stamps C. camera equipment D. jewelry

A

Which of the following phrases BEST defines a hazard? A. A condition that increases the chance of a loss B. The uncertainty of a loss C. The cause of a loss D. An unexpected loss

A

Which of the following policy forms would BEST protect a business that must keep operating after a loss? A. Extra Expense B. Business Income C. Gross Earnings D. Contingent Business Interruption

A

Which of the following terms is defined as the uncertainty of future outcome? A. Risk B. Hazard C. Peril D. Cause

A

X insures a home for $100,000 under a Dwelling Property Broad Form (DP-2). If a flood causes $1,000 in damage to the home's contents, which of the following MAXIMUM amounts will X's insurer pay? A. $0 B. $800 C. $900 D. $1,000

A

A Commercial Building and Personal Property form provides coverage for: A. a patio attached to the building B. business personal property C. personal auto held for sale D. guard dogs

B

A Commercial Package policy must include at least how many coverage parts? A. One B. Two C. Three D. Four

B

A Commercial Property policy specifies which of the following responsibilities as a duty of the insured? A. To return the policy if it is canceled by the insurer B. To provide a sworn Proof of Loss statement if requested by the company C. To pay the mortgagee in full in the event of a total loss D. To pay premiums within thirty days after receiving an invoice

B

A company's promise to pay for damage caused by or resulting from any covered Cause of Loss would be found in which of the following sections of a Commercial Property policy? A. Declarations B. Insuring Agreement C. Conditions D. Exclusions

B

An applicant's statement included in the insurance contract that the property to be insured has an operable sprinkler system is: A. agency binding authority B. a warranty C. a representation D. an affidavit

B

An insured's HO-2 Form has a $100,000 coverage limit on the dwelling and a $50,000 Personal Property limit with the standard deductible. If a sailboat valued at $1,500 is stolen from the insured's premises, the insured will collect a MAXIMUM of which of the following amounts? A. $1,000 B. $1,250 C. $1,400 D. $1,500

B

Information provided by the insured in a Proof of Loss is considered: A. a warranty B. a representation C. an assignment D. an agreement

B

The owner-operator of a computer store often leaves expensive computers balanced negligently on the edges of tables, believing that any damage to the computers will be paid by the insurance policy. This situation is BEST described as a: A. moral hazard B. morale hazard C. catastrophic hazard D. psychological hazard

B

The principle of indemnity is designed to avoid: A. two policies sharing payment for a loss B. overpayment of a claim C. the return of earned premiums D. a Coinsurance clause of less than 80 percent

B

Under a Homeowners policy, an insured is required to take all of the following actions when a covered loss occurs EXCEPT: A. give prompt notice to the insurer or its producer B. hire an appraiser to determine the amount of loss C. notify the police if the loss is the result of theft D. protect the property from further loss

B

Which of the following coverages may be added by endorsement to a Boiler and Machinery policy? A. Expediting Expenses B. Extra Expense C. Property Damage Liability D. Damage to Property of the Insured

B

Which of the following perils is covered by Broad Form perils but is not covered by the Basic Form? A. Vandalism B. Weight of ice and snow C. Riot D. Windstorm

B

Which of the following perils is covered under the Commercial Property Basic Cause of Loss form? A. Collapse B. Sinkhole collapse C. Falling objects D. Breakage of glass

B

Which of the following sources may be used to provide property insurability information? A. Police records B. Physical inspections C. Checking account statements D. Lie detector tests

B

A deer jumps through the window of an insured's home, damaging the interior and exterior walls. Which of the following Homeowners Forms listed below is the LEAST comprehensive form that will still provide coverage for this loss? A. HO-1 Form B. HO-2 Form C. HO-3 Form D. HO-5 Form

C

A family takes their 50 horsepower outboard motor boat to the lake on a trailer towed behind their personal auto. The pleasure boat is appropriately covered for physical damage under which of the following policies? A. Dwelling B. Homeowners C. Boatowners D. Yacht

C

A fire in an insured's restaurant burns the kitchen walls and causes smoke damage to the entire interior. Water used to extinguish the fire causes extensive damage to floors and furnishings. The water damage is best described as: A. a time element loss B. a consequential loss C. a direct loss D. an indirect loss

C

An insured has an HO-3 Form. When using a snowblower borrowed from a neighbor, the insured strikes a large rock and causes $2,000 worth of damage to the snowblower. Under which section of the policy could payment be made on the insured's behalf? A. Personal Property B. Building C. Personal Liability D. Loss of Use

C

An insured owns a set of six drawing pens designed and used by Benjamin Franklin. Each pen is worth $1,000 alone, but the set is worth $12,000. One pen is destroyed by a covered peril. Under the Pair and Set clause, the insurer will pay a MAXIMUM of which of the following amounts? A. $1,000 B. $2,000 C. $7,000 D. $12,000

C

During a tornado, a barn is destroyed when a section of its wall is blown down, knocking over a lantern, which sets the barn on fire. The proximate cause of loss is the: A. fire B. collapse of the wall C. tornado D. smoke

C

G insures G's television repair shop under a Building and Personal Property Coverage Form with limits of $100,000 on the building and $50,000 on business personal property. A fire causes $10,000 in damage to the building and $20,000 in losses to the contents. G also has to pay $1,000 for debris removal. If the policy has a deductible of $250, G will receive a MAXIMUM of which of the following amounts from the insurer? A. $29,750 B. $30,000 C. $30,750 D. $31,000

C

In a Commercial Property form, if a building is left vacant, coverage for vandalism will continue for up to how many days? A. Thirty B. Forty-five C. Sixty D. Ninety

C

S is purchasing a Commercial Property policy to cover a commercial building with a replacement cost of $100,000. The policy includes an 80 percent Coinsurance clause. To avoid a coinsurance penalty in the event of a partial loss, S should purchase a policy with minimum limits of AT LEAST which of the following amounts? A. $100,000 B. $90,000 C. $80,000 D. $20,000

C

Special Form or Open Perils coverage: A. Provides coverage against the named perils B. Provides coverage against scheduled risks C. Is limited by the named exclusions D. Includes no exclusions

C

The MAXIMUM amount a policy will pay in the event of a loss is called the: A. coinsurance amount B. deductible C. limit of liability D. pro rata return

C

The procedure for resolving a disagreement between an insured and an insurer about a loss is described in which of the following parts of an insurance policy? A. Declarations B. Insuring Agreement C. Conditions D. Exclusions

C

Under a Personal Property Floater, a loss is covered when it occurs: A. in the insured's home only B. in the United States only C. in the United States or Canada only D. anywhere in the world

C

Which of the following Homeowners coverages does NOT generally contain a deductible? A. Personal property B. Other structures C. Liability D. Dwelling

C

All of the following items are included in the Nationwide Marine definition EXCEPT: A. imports and exports B. fine arts C. furs D. real property

D

All of the following options are examples of insurable interest EXCEPT: A. a person's interest in property she is buying on contract B. a tenant's interest in improvements she has made to a leased building C. a TV repairman's interest in a customer's TV which has been repaired but is still on premises D. an individual's interest in property her parents will someday leave to her

D

All of the following perils are covered under a Building and Business Personal Property Coverage Form with a Causes of Loss-Basic Form attached EXCEPT: A. smoke B. sprinkler leakage C. sinkhole collapse D. earth movement

D

An insured owns an antique marble statue valued at $3,000, which is covered under a Personal Articles Floater. Damage to the statue would be covered in all of the following situations EXCEPT: A. it was accidentally damaged by a housekeeper B. it was damaged in a flood C. a guest of the insured maliciously damaged it D. the insured threw it

D

N's next door neighbor, S, dumps hot ashes in N's trash dumpster, starting a fire and causing severe damage to N's home. N's company pays the loss and then goes after S for payment. This is an example of: A. pro rata liability B. assignment C. appraisal D. subrogation

D

Pro-rata cancellation occurs when: A. a policy is nonrenewed B. a mortgage has been satisfied C. an insured cancels a policy at inception D. an insurer cancels a policy at any time

D

The National Flood Insurance Program provides coverage for losses caused by all of the following occurrences EXCEPT: A. mudslides B. runoff from heavy rain C. overflow of tidal waters D. water-main breakage

D

The Personal Liability section of a Homeowners policy covers which of the following options? A. Damage to an insured's property caused by a visitor B. Bodily injury to a resident caused by a neighbor's dog C. Property damage caused by war D. Bodily injury caused by the personal activities of an insured

D

Which of the following businesses would be eligible for a Businessowners policy? A. Auto body shop B. Theater C. Branch bank D. Barber shop

D

Which of the following statements about a mortgagee's rights under the Dwelling Property Basic Form (DP-1) is INCORRECT? A. No act by the insured will jeopardize the mortgagee's rights. B. The mortgagee may file a Proof of Loss if the insured fails to do so. C. The mortgagee is entitled to receive prior notice of a policy's cancellation. D. The mortgagee may abandon the insured property to the insurer.

D

Which of the following statements is CORRECT about the Fair Credit Reporting Act? A. It requires an insurer to send to an applicant a copy of the applicant's credit report. B. It requires an insurer to obtain a credit report on an applicant. C. It allows an insurer to obtain a credit report without the applicant's permission. D. It provides a method for an applicant to correct any incorrect information in the credit report.

D

Which of the following terms BEST describes continuous and repeated exposure to conditions that are neither expected nor intended by the insured? A. Negligence B. Liability C. Accident D. Occurrence

D

Which of the following terms can be defined as a policy provision that omits certain risks from coverage? A. Declarations B. Insuring Agreement C. Conditions D. Exclusions

D