Property and Casualty Insurance Guarantee Exam
Which of the following is NOT a classification of a hazard? a. Moral b. Morale c. Physical d. Speculative
D. Speculative
An insurer wants to cancel a personal auto policy for nonpayment of premium. The insurer must send the insured a notice of at least a. 10 days b. 15 days c. 30 days d. 60 days
a. 10 days
Which of the following is NOT an example of the company's location of incorporation? a. Foreign b. Alien c. Authorized d. Domestic
c. Authorized
What is a bailee responsible for? a. Property of others in his custody b. Rental property c. His own personal property d. Completed operations
a. Property of others in his custody
Which of the following is a licensee able to place insurance with unauthorized insurers? a. Surplus lines broker b. Mutual insurer c. Managing general agent d. Reinsurance broker
a. Surplus lines broker
If an agent suspects that a fraudulent insurance act has been committed in this state, whom should the agent notify first and foremost? a. The Insurance Fraud Unit of the Texas Department of Insurance b. The defrauded insureds c. The state police department d. The agent's insurer
a. The Insurance Fraud Unit of the Texas Department of Insurance
For there to be a negligent liability, all of the following must exist EXCEPT a. A reasonable expectation that the act may cause injury or damage. b. A breach of the legal duty which results in injury or damage to another person. c. A legal duty to act, or not act, under the circumstances. d. Proximate cause between the wrong and the injury or damage.
a. A reasonable expectation that the act may cause injury or damage.
What guarantees that the information explained in the insurance contract is true? a. A warranty b. A representation c. Utmost good faith d. A binder
a. A warranty
Which of the following stipulates the procedure that insureds and insurers can use when they cannot agree on the value of a loss? a. Appraisal clause b. Loss settlement clause c. Subrogation clause d. Fair value clause
a. Appraisal clause
In order to start coverage before a policy is issued, insurers can issue a(n) a. Binder b. Coverage authorization c. Indemnity certificate d. Subrogative agreement
a. Binder
Two men are partners in a moving company. They have two trucks used to move property of others. They should insure their trucks under a a. Business auto policy b. Personal auto policy c. Garage liability coverage form d. Commercial auto fleet policy
a. Business auto policy
An insured's home catches fire. As a result, the insured's family must stay in a motel until the home is repaired. The cost of the motel stay would be considered a a. Consequential loss b. Resulting loss c. Direct loss d. Negligent loss
a. Consequential loss
Which of the following exclusions would specifically fall under Coverage E in Homeowners insurance? a. Contractual Liability b. Bodily injury to a residence employee c. Falling Objects d. Land
a. Contractual Liability
During policy solicitation, an insurer exaggerates the financial condition of one of its competitors, and makes it sounds worse than it is. This is an example of an unfair trade practice of a. Defamation b. Twisting c. False Advertising d. Misrepresentation
a. Defamation
Which of the following duties is NOT required of the insured in the event of a loss? a. Immediately notify the insurer when the insured has filed for bankruptcy. b. Authorize the insurer to obtain records and assist the insurer in its investigation. c. Notify the insurer as soon as possible of the possibility of a claim d. Immediately record the specifics of any claim and notify the insurer.
a. Immediately notify the insurer when the insured has filed for bankruptcy.
An agreement that is enforceable by law is known as what kind of contract? a. Legal b. Conditional c. Adhesion d. Unilateral
a. Legal
Insured covered under a Mobile Homeowners Policy move their home to prevent it from being damaged by a fire. What is the maximum amount the policy will pay for this? a. $350 b. $500 c. $1,000 d. $5,000
b. $500
The limited theft endorsement designed for a landlord excludes all of the following EXCEPT a. Silverware stolen from the landlord's china cabinet b. A lawnmower the landlord owns and keeps at rented premises c. Jewelry stolen from the landlord's home d. Money stolen from the tenant's apartment
b. A lawnmower the landlord owns and keeps at rented premises
Which of the following would be considered a peril? a. Playing golf in a thunderstorm b. Fire c. Smoking d. Driving too fast for conditions
b. Fire
To have insurable interest in the person or property covered by a property insurance policy, which of the following potential risks must the policyowner face? a. Property damage b. Illness c. Financial loss d. Physical injury
c. Financial loss
Which of the following is the cause of loss? a. Exposures b. Risk c. Peril d. Hazard
c. Peril
Upon payment for a loss, the insured is obligated to surrender to the insurer the right to sue a negligent third party. This is called a. Insurable interest b. Entirety c. Subrogation d. Indemnity
c. Subrogation
Due to appreciation, the amount of insurance on a business is less than 80% of its actual value on the date of the loss. Which of the following is true? a. The full amount of the loss less any deductible is paid. b. The policyholder is responsible for twice the amount of the deductible. c. The coinsurance penalty applies. d. The policy pays nothing.
c. The coinsurance penalty applies
Which of the following is FALSE concerning liability coverage of a business auto policy? a. The company will ay any interest accruing between time of judgement and payment. b. The company will defend any suit alleging bodily injury (BI) or property damage (PD) covered by the policy. c. The company will reimburse the insured for all loss of earnings. d. The company will pay the premium on any appeal bond.
c. The company will reimburse the insured for all loss of earnings.
An insurer filed a new policy and endorsements with the Commissioner 60 days ago. The insurer has not heard back from the Commissioner. What can the insurer assume? a. The insurer must send a follow-up request b. The Commissioner needs a 30-day extension c. The form has been approved d. The form has been rejected
c. The form has been approved
An insured was backing his car out of the driveway and hit a fire hydrant. The automobile sustained $1,300 of damage to the bumper. The insured's auto policy has a $500 deductible. Which of the following is true? a. The insured will receive a $500 discount on all repair work that is contracted by his insurer. b. The insured will pay all but $500 of any claims he makes on his policy. c. The insured is responsible for the first $500 of any claim that he makes on his policy. d. The insured is responsible for the total of $500 0n claims made for the calendar year on the policy.
c. The insured is responsible for the first $500 of any claim that he makes on his policy.
An insurer may decline to renew a Homeowners policy of the insured has filed how many claims under the policy in any 3-year period? a. One b. Two or more c. Three or more d. Five or more
c. Three or more
Your friend's dog that you are keeping while the friend is out of town bit a visitor in your home. Does your homeowners liability coverage apply? a. Yes, if the visitor has no health coverage b. No, because the dog is not yours. c. No, because injury to others by animals is not covered d. Yes, the coverage would apply for any animal in your care.
c. Yes, the coverage would apply for any animal in your care.
An insured was judged at fault in an automobile accident. He has the 100/300 bodily injury liability coverage. Three other individuals were injured in the vehicle hit by the insured. They were awarded damages of $150,000, $75,000, and $75,000. What amount, if any, was not covered by his insurance? a. $100,000 b. $150,000 c. All of the damages were covered by his insurance policy. d. $50,000
d. $50,000
A property and liability insurer may write business on all of the following EXCEPT a. Goods and merchandise b. Property transported on water c. Any home or building d. A person's life
d. A person's life
In order to obtain insurance through the Texas Automobile Insurance Plan Association, the applicant must provide proof that he or she has been rejected by a. A private insurer b. Any insurer 2 years in a row c. At least one auto insurer d. At least 2 auto insurers
d. At least 2 auto insurers
In order to receive transportation expenses under the personal auto policy following damage to your auto caused by collision, you must have a. Uninsured motorist property coverage b. Supplementary payments c. Other-than-collision coverage d. Collision coverage
d. Collision coverage
An insurance producer just sold an insurance policy to his sister. What transaction is this? a. Personal lines b. Internal commerce c. Illegal d. Controlled business
d. Controlled business
In reference to insurable interest, which of the following is NOT an element of insurable risk? a. Blood b. Financial c. Business d. Personal
d. Personal
A policy contains a consent to settle a loss provision, which requires the insurer to obtain the consent of an insured before the settlement of a claim. With this in mind, what kind of liability policy does the insured most likely have? a. Excess liability b. Protective liability c. Errors and Omissions d. Professional Liability
d. Professional Liability
Which of the following would NOT be covered under the directors and officers liability coverage? a. Wrongful acts while directors and officers are acting in an official capacity b. Neglect and breach of duty c. Misstatements made by the directors and officers d. Reimbursement for fines and penalties
d. Reimbursement for fines and penalties
Wagering on a sporting event is an example of what type of risk? a. Calculated b. Simple c. Pure d. Speculative
d. Speculative
Which of the following terms best describes the home of an insured who goes on vacation for 3 months? a. Condemned b. Temporary empty c. Vacant d. Unoccupied
d. Unoccupied
Which type of damage is intended as a form of punishment for negligent, willful, or outrageous intent? a. Punitive b. Special c. General d. Property
A. Punitive
Restoring an insured financially after a claim is known as a. Indemnity b. Adhesion c. Restoration d. Reasonable expectations
a. Indemnity
What kind of coverage does Form DP-3 provide? a. Open peril b. Basic peril c. Named peril d. Broad peril
a. Open peril
A liability policy that provides increased limits and expanded coverage over underlying casualty coverages is called a. Professional liability b. Umbrella liability c. Personal liability d. Pro-rata liability
b. Umbrella liability
When do binders expire? a. When an original policy is replaced. b. No later than 30 days c. As soon as the policy is issued. d. After 10 days
c. As soon as the policy is issued.
An insured's diner suffered a fire loss. In addition to the damage caused by the fire, the floor covering had to be replaced because of the water damage. It took 4 weeks for the repairs to be completed. The insured was without income for that period of time. The insured's policy included both direct and indirect loss coverage. What part of the loss would be paid as indirect loss? a. Both the loss of income and the cost of the floor covering b. The entire loss would be paid as direct loss by fire c. The loss of income for the time the diner was closed d. The cost of replacing the floor covering due to the water damage
c. The loss of income for the time the diner was closed
An insured was told to leave his home because of endangerment by a brush fire that was out of control. The insured was able to have his personal property move to storage away from the endangered area. For how long will the homeowners policy provide coverage for the stored property? a. 30 days b. 90 days c. 3 days d. 10 days
a. 30 days
An insured is the owner of a clothing boutique. She has a Floor Plan Merchandise Floater to cover the property that is financed until it is sold. At closing time a month ago, she noticed that 3 very expensive dresses had been stolen. However, she did not file a report to her insurance company until recently. How much will her insurer pay for this loss? a. 90% of the limit written b. 100% of the limit written c. Nothing d. 50% of the limit written
a. 90% of the limit written
Which of the following risks would be eligible for coverage under dwelling policy form? a. A duplex that is occupied by two families, each of which have a bedroom rented to a boarder. b. A single-family dwelling occupied by a single person who operates a business of buying and selling firearms in the basement. c. A single-family dwelling that contains a beauty shop that employs three full-time operators. d. A single-family dwelling that is located on farm premises.
a. A duplex that is occupied by two families, each of which have a bedroom rented to a boarder.
The obligation to compensate injured workers without regard to fault or negligence is known as a. Absolute liability b. Employers liability c. Elective liability d. Compulsory liability
a. Absolute liability
The equipment breakdown coverage form provides coverage for all of the following EXCEPT a. Bodily injury liability b. Expediting expenses following a covered loss c. Damage to the insured's property d. Damage to property of others in the insured's care and custody.
a. Bodily injury liability
An insured believes that his insurer is not properly fulfilling its obligations regarding his policy. What section of the policy will give the insured more information about specific duties of the insurer? a. Conditions b. Endorsements c. Definitions d. Obligations
a. Conditions
The supplementary payments section of the commercial general liability policy would cover a. Court costs assessed against the insured in a suit. b. Loss of the insured's earnings, up to $300 a day c. Up to the policy limit for bodily injury or property damage. d. Up to $500 for the cost of required bail bonds
a. Court costs assessed against the insured in a suit.
An agent solicits insurance on behalf of the a. Insurance company b. Brokerage c. Insured d. Department of insurance
a. Insurance company
A structure may be eligible for coverage under the National Flood Insurance Program if it meets all of the following requirements EXCEPT a. Is entirely over water. b. Is not located within the Coastal Barrier Resource System c. Has 2 solid walls and a roof d. Is principally above ground
a. Is entirely over water
With respect to the commercial package policy, an interline endorsement is one that a. May apply to more than one line of insurance that is included in the package b. Never applies to all of the lines of insurance that is included in the package c. Applies to all of the lines of insurance that are included in the package d. Applies to only one line of insurance that is included in the package
a. May apply to more than one line of insurance that is included in the package
Which of the following is the other major coverage provided by the businessowners liability coverage form? a. Medical payments b. Personal liability c. Auto liability d. Employers liability
a. Medical payments
All of the following statements about mutual insurance companies are correct EXCEPT a. Policy dividends issued by mutual companies are guaranteed and not taxable b. Dividends allow policyholders to share in a mutual company's divisible surplus c. Dividends are a return of unused premiums d. Mutual companies issue policies referred to as participating
a. Policy dividends issued by mutual companies are guaranteed and not taxable
According to the Insured Duties after a Loss provision in homeowners policies, in the event of a loss, the insured must do all of the following EXCEPT a. Promptly hire an adjuster to evaluate the property damage. b. Allow the insurer to inspect the property as needed. c. Notify the policy if a loss is caused by theft. d. Protect the property from further damage.
a. Promptly hire an adjuster to evaluate the property damage.
The exact, direct, uninterrupted cause of loss is the a. Proximate cause b. Actual cause c. Intervening cause d. Absolute cause
a. Proximate Cause
In a liability policy with split limits of 25/50/25, which number is the maximum amount that would be payable in the event of damage to a person's property? a. The amount of the third number, $25,000 b. The amount of all three numbers, $100,000 c. The amount of the first number, $25,000 d. The amount of the second number, $50,000
a. The amount of the third number, $25,000
What information is found in the conditions part of an insurance policy? a. The description of the duties and obligations of the insured b. The persons or risks not covered under the policy c. The identity of the named insured d. The amount of coverage provided by the policy
a. The description of the duties and obligations of the insured
An insurer may cancel a homeowners insurance policy that has been in effect for more than 60 days for any of the following reasons EXCEPT a. The insured submits a claim against the policy b. Increase in the hazard that is within the control of the insured that would require an increase in the premium rate c. The named insured does not pay the premium when due d. The insured submits a fraudulent claim
a. The insured submits a claim against the policy
If an insurance policy has the additional coverage provision, how does it affect the policy premium? a. There is no additional premium b. Premium will be recalculated when a specific loss covered by this provision occurs c. Additional premium will be assessed d. Premium will be calculated on a pro rata basis based on the amount of additional coverage
a. There is no additional premium
What is the main distinction between a hired auto and a nonowned auto? a. Who owns the auto b. The length of time the insured uses the auto c. The amount of premium d. Whether a payment is made for the use of the auto
a. Who owns the auto
Which of the following would be considered a covered auto on your personal auto policy? a. Your farm wagon being towed by your pick up truck b. Your pickup truck used for deliveries of your retail business c. Your farm tractor d. Your farm wagon being towed by your tractor
a. Your farm wagon being towed by your pick up truck
NFIP flood insurance policies have a term period of a. 6 months b. 1 year c. 2 years d. 10 years
b. 1 year
An insurer who transacts insurance in this state but whose articles of incorporation are registered in Canada is considered what type of insurer? a. Foreign b. Alien c. Unauthorized d. Surplus lines
b. Alien
A general liability policy will respond against an insured when bodily injury or property is caused by a. A third party's negligence b. An insured's negligence c. Acts of God d. Chance
b. An insured's negligence
Which of the following components is NOT part of a policy structure? a. Definitions b. Benefits c. Declarations d. Additional Coverage
b. Benefits
Which of the following is NOT an indicator of a competent party? a. Comprehension of a contract b. Business profession c. Legal age d. Mental proficiency
b. Business profession
If the State Insurance Department believes that a producer may be in violation of an insurance law or regulation, what may be issued? a. Call to Obey b. Cease and desist order c. Arrest warrant d. Writ of noncompliance
b. Cease and desist order
Which of the following would be an example of an insurer participating in the unfair trade practice of discrimination? a. Charging the insured higher premiums based on life expectancy b. Charging the insured higher premiums based on her race c. Making malicious statements about the insured based on his race d. Charging different premium rates to the insureds in different insuring classes
b. Charging the insured higher premiums based on her race
How is a professional liability policy written? a. Occurrence b. Claims-made c. Open peril d. Excess liability
b. Claims-made
Which of the following elements of an insurance contract requires payment of premium? a. Offer and acceptance b. Consideration c. Legal purpose d. Competent parties
b. Consideration
Which of the following perils is NOT covered by the DP-2? a. Damage caused by falling objects. b. Damage to pets, birds, or fish c. Damage caused by burglars d. Damage caused by weight of ice and snow
b. Damage to pets, birds, or fish
A sworn statement must usually be furnished by the insured to an insurer, and must include what information about the occurrence and the amount of indemnity claimed? a. Type and frequency b. Date and description c. Category d. Extremity
b. Date and description
Which of the following does NOT describe endorsements? a. Endorsements must be signed by an executive officer. b. Endorsements may only add coverage to a current policy, not remove. c. Endorsements may be added during the policy term d. Endorsements are printed addenda to a policy
b. Endorsements may only add coverage to a current policy, not remove.
What would a business owner whose business fills scuba tanks most likely need to insure unfired pressure vessels and compressors? a. Contractors equipment floater b. Equipment breakdown c. Inland marine scuba floater d. Commercial General liability
b. Equipment breakdown
If a license is revoked, the licensee will NOT be eligible for a new license a. For up to 6 months b. For 5 years c. Except by special permission of the Commissioner d. Ever again
b. For 5 years
Which of the following injuries may be covered under Coverage C - Medical Payments of a commercial general liability policy? a. Injuries to an independent contractor on the premises. b. Injuries to a member of the general public that occurs on the premises. c. Injuries to an employee due to participation in an athletic event d. Injuries to an employee during performance of his or her job
b. Injuries to a member of the general public that occurs on the premises.
All of the following are factors in the determination of actual cash value EXCEPT a. Property type b. Insurance premium paid c. Age of property d. Replacement cost
b. Insurance premium paid
How does insurance distribute the financial consequences of individual loss? a. It transfers the risk to a small number of persons insured. b. It transfers the risk to all persons insured. c. It retains the financial consequences. d. It transfers the risk to associates of the insured.
b. It transfers the risk to all persons insured.
An insurance company that is owned by the policyholders is called a a. Reciprocal insurer b. Mutual insurer c. Fraternal insurer d. Stock insurer
b. Mutual Insurer
An insurance policy form that lists specific covered perils provides a. Blanket coverage b. Named peril coverage c. Open peril coverage d. Special peril coverage
b. Named peril coverage
An insured as extended coverage on her dwelling that includes coverage for vandalism and malicious mischief. One evening, she is sitting in her living room when she hears a crash and the sound of glass breaking. She runs to the door and discovers a brick has been thrown through her glass door. To inform her insurer of a possible claim she fills out a form detailing the vents leading to the loss. What is the name of the form? a. Mortgagee rights forms b. Notice of claim form c. Appraisal form d. Proof of loss form
b. Notice of claim form
What term includes losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended not expected? a. Additional Coverage b. Occurrence c. Accident d. Incident
b. Occurrence
Which of the following is consideration on the part of an insurer? a. Underwriting b. Paying a claim c. Decreasing premium amounts d. Paying the premium
b. Paying a claim
What statement must an insurer receive before it will pay benefits for a loss? a. Loss estimation b. Proof of loss c. Loss verification d. Proof of inspection
b. Proof of loss
Which of the following would NOT be covered by commercial inland marine policies? a. Bridges and tunnels b. Property lost due to a military action c. Commercial property floater risks d. Loss caused by weather conditions
b. Property lost due to a military action
All of the following are requirements for an individual to be licensed EXCEPT a. Be a state resident or a resident of a reciprocal state b. Provide a financial statement c. Be at least 18 years of age d. Have education and training regarding claims
b. Provide a financial statement
Which of the following is a method of establishing a premium on large commercial accounts? a. Experience modification factor b. Retrospective rating c. Premium discount d. Merit rating plan
b. Retrospective rating
Which of the following perils will be EXCLUDED form coverage under HO-4 Tenant Broad Form of a homeowners policy? a. Volcanic action b. Sewer water backup c. Weight of ice, snow, or sleet d. Fire or lightning
b. Sewer water backup
A corporation is insured under a commercial general liability (CGL) policy and is named in a lawsuit to recover expenses for bodily injury and property damages from a claim. The insurance company is obligated to provide coverage for all of the following named in the suit EXCEPT a. Employees of the corporation b. Spouses of officers and stockholders c. Officers of the corporation d. Stockholders
b. Spouses of officers and stockholders
When an insured acquires the insured's rights against a third party for the purposes of receiving indemnification for loss, this is called a. Liberalization b. Subrogation c. Indemnity d. Transfer of liability
b. Subrogation
A small appliance manufacturer in this state provides products around the globe. A customer in Switzerland is injured using one of its products. If the appliance manufacturer is found liable for the damages, why would its commercial general liability policy cover the customer's claim for bodily injury? a. The appliance manufacturer is negligent. b. The appliance was manufactured in the United States c. The commercial general liability policy extends rights to Switzerland. d. The appliance manufacturer did not have a permit to sell globally.
b. The appliance was manufactured in the United States
An insured was having a new home built. While digging the footings for the foundation, the contractor struck a solid rock formation and found that was necessary to blast the formation in order to remove the rocks. The force of the blast broke several windows and some chinaware in a neighbor's home several blocks away. Who pays for this damage? a. The insured's insurer, regardless of negligence b. The contractor c. The neighbor's insurer d. The insured's insurer, if the neighbor proves that the insured was negligent
b. The contractor
Coverage for loss by some perils under a building and personal property form is suspended if a. An uninsured peril causes a partial loss b. The insured building is vacant for over 60 days c. A loss occurs while a hazard beyond the insured's control is increased d. The insured fails to satisfy the coinsurance provision
b. The insured building is vacant for over 60 days
Reports required by the Texas Department of Insurance based on complaints about unfair settlement practices must contain information about all of the following EXCEPT a. How the claim was settled b. The resident state of the claimants c. The total number of claims d. The total number of complaints
b. The resident state of the claimants
Two individuals of the same age, health status, and life expectancy apply for individual insurance coverage. When policies are issued by the same insurer, the premium rates are different based on the insured's race. What practice does this describe? a. Misrepresentation b. Unfair discrimination c. Defamation d. Negligent underwriting
b. Unfair discrimination
A structure that is not inhabited by anyone and stores no property is considered a. Derelict b. Vacant C. Unoccupied d. Empty
b. Vacant
An insured has a personal umbrella with a $2,000 self-insured retention (SIR). Assuming no other policy is involved, how much would the umbrella pay after a $12,000 personal injury liability claim? a. $2,000 b. $1,000 c. $10,000 d. $12,000
c. $10,000
The Texas Property and Casualty Insurance Guaranty Association will cover all other claims arising from the same occurrence except Workers Compensation claims, up to what limit? a. $10,000 b. $1,000 c. $300,000 d. The full amount of any covered claim
c. $300,000
According to the Motor Vehicle Safety Responsibility Law in Texas, which of the following coverage amounts would satisfy proof of financial responsibility? a. 25/50/10 b. 15/50/15 c. 30/60/25 d. 20/40/20
c. 30/60/25
In order for Wild Life of Havana to do business in this state, it must apply for and obtain a. A local waiver. b. Four corporate character references. c. A certificate of authority. d. A state proclamation.
c. A certificate of Authority
What is a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected nor intended called? a. Peril b. Hazard c. Accident d. Burglary
c. Accident
An insured has a maximum limit of coverage available under her liability during a policy year, regardless of the number of the claims made of the number of accidents. Her limits are restored at the policy anniversary. What type of limit does this insured have? a. Combined single b. Per occurrence c. Aggregate d. Split
c. Aggregate
When would uninsured motorist coverage apply under a personal auto policy? a. A family member of the insured is at fault for an auto accident with another motorist whose auto coverage limits are not adequate to pay for all damages. b. An insured is at fault for an auto accident with another motorist, but the insured's limits are not adequate to pay for damages. c. An insured is involved in an auto accident with another motorist who is at fault and does not have any insurance. d. An insured in an auto accident with another motorist who is at fault but has limits of insurance that are not adequate to cover all medical expenses.
c. An insured is involved in an auto accident with another motorist who is at fault and does not have any insurance.
When an insured and her insurer could not agree on the amount of liability loss after her accident, the settlement was submitted to someone whose decision was then binding on both parties. What policy condition was applied? a. Fair value b. Third party c. Arbitration d. Appraisal
c. Arbitration
A personal umbrella policy may act as excess over any of the following insurance coverage policies EXCEPT a. Auto liability coverage b. Comprehensive personal liability c. Auto collision coverage d. Homeowners section II coverage
c. Auto collision coverage
An insured owns an automobile liability policy with bodily injury limits of $200,000 and an umbrella policy with a limit of $1,000,000. The insured is involved in an automobile accident and is found liable for injuries totaling $900,000. Which of the following examples best describes how the benefits will be paid? a. Automobile liability policy = $450,000; umbrella liability policy = $450,000 b. Auto liability policy = $0; umbrella liability policy = $900,000 c. Auto liability policy = $200,000; umbrella liability policy = $700,000 d. Automobile liability policy - $200,000; umbrella liability policy = $200,000
c. Auto liability policy = $200,000; umbrella liability policy = $700,000
In a DP-1. if the insured elects to apply Coverage B to a covered garage, Coverage A will a. Only be applicable if the insured pays an additional premium. b. Be increased by 10% c. Be reduced by 10% d. Only be applicable if the insured pays a higher deductible.
c. Be reduced by 10%
A lender who conditions approval of a loan on the condition that the borrower purchase insurance from that lender may be guilty of a. Unfair discrimination b. Illegal inducement c. Coercion d. Misrepresentation
c. Coercion
To be valid, an insurance company must have all of the following EXCEPT a. Consideration b. Offer c. Countersignature d. Acceptance
c. Countersignature
Other-than-collision would cover financial losses due to a. Damage to an insured's car in an accident for which the insured was found at fault. b. Legal action brought against an insured for an accident. c. Damage to an insured's car caused by wind or hail. d. Damage to an insured's neighbor's mailbox that was caused by the insured's pickup.
c. Damage to an insured's car cause by wind or hail.
Which of the following conditions allows the insurer to examine the insured's records at the end of a policy term to make sure an adequate fee is being collected for the exposure? a. Underwriting b. Excess Liability Evaluation c. Deposit Premium Audit d. Insurable Interest Evaluation
c. Deposit Premium Audit
Loss valuation is best described as the process of a. Defining the replacement costs of property in relation to other insurers' costs of the same type. b. Accepting or denying coverage based on historical evidence of an applicants property losses. c. Determining the premium charged and the amount of insurance required on a specific property. d. Providing equal benefits for a wide array of covered properties
c. Determining the premium charged and the amount of insurance required on a specific property.
Which of the following is covered by auto other-than-collision (comprehensive) coverage? a. Portable CD player b. Awning attached to car for camping c. Electric equipment required for the normal operations of the car d. Radar detector
c. Electric equipment required for the normal operations of the car.
The federal act that provided more favorable benefits for interstate railroad workers by allowing the injured worker to sue the employer for negligence is the a. Federal Black Lung Compensation Act b. Jones Act c. Federal Employers Liability Act (FELA) d. U.S. Longshore and Harbor Workers Compensation Act
c. Federal Employers Liability Act (FELA)
Statistical probabilities of loss for a particular class of insureds best predicted when the insured group is a. Older b. Smaller c. Larger d. Diverse
c. Larger
Which of the following describes the insurer's responsibility for payment under a policy, as stated in the common policy provisions? a. Utmost good faith b. Premiums c. Limits of liability d. Consideration
c. Limits of liability
An insured as involved in an accident that was caused by a tire blowing out. The insured was severely injured and incurred medical expenses of $100,000. The insured brought a recovery action against the manufacturers of the auto and the tires. The court held that the tire was the cause of the accident. Who is required to pay for this loss? a. Neither manufacturer would have to pay because of the "buyer beware" doctrine. b. Manufacturer of the auto c. Manufacturer of the tire d. Both manufacturers would share the loss
c. Manufacturer of the tire
Lost Treasures has a guard dog in a fenced lot to protect the salvage yard. The dog scared a passerby, who now claims that it was a traumatic experience and that he now suffers from recurring nightmares. A claim for personal injury of $5,000 is filed against Lost Treasures. Why will the personal and advertising injury liability section (Coverage B) of the CGL policy cover this claim? a. The injury was expected or intended. b. The occurrence was off premises c. Mental anguish is a covered injury. d. Animals are excluded from coverage.
c. Mental anguish is a covered injury.
An example of an alien insurer doing business in this state is one formed under the laws of a. Arizona b. Puerto Rico c. Mexico d. District of Columbia
c. Mexico
Which provision defines how the policy will respond if there is other valid insurance written on the same risk? a. Overinsurance b. Concurrent coverage c. Other insurance d. Coinsurance
c. Other insurance
A stock insurer is defined as an insurer a. That invests in at least 20% of its premium income in the stock market b. Who pays dividends to its policyholders c. Owned by its stockholders d. Owned by its policyholders
c. Owned by its stockholders
The declarations section in a homeowners policy provides all of the following information EXCEPT a. Amount of deductible applied to a loss b. Insured locations c. Policy exclusions d. Basic underwriting information
c. Policy exclusions
Which of the following is NOT available in a package policy? a. Fire legal liability b. Medical payments c. Professional liability d. Business auto liability
c. Professional liability
the purpose of the Fair Credit Reporting Act is to a. Ensure the consumers receive a copy of investigative consumer reports. b. Ensure coverage for all applicants. c. Protect consumers against the circulation of inaccurate or obsolete personal or financial information. d. Protect the insurer from adverse selection.
c. Protect consumers against the circulation of inaccurate or obsolete personal or financial information.
What are the types of compensatory damages? a. Unique and general b. Special and punitive c. Special and General d. Punitive and reward
c. Special and General
In contrasting stock insurers with mutual insurers, which statement is true? a. Nonparticipating policies can pay out dividends to the policyholders b. Mutual insurers are owned by the shareholders and issue participating policies c. Stock insurers are owned by the shareholders and issue nonparticipating policies d. Stock dividends are tax free while policy dividends are taxable
c. Stock insurers are owned by the shareholders and issue nonparticipating policies
If the premiums collected by an insurer participating in the WYO flood program are insufficient to cover losses, which of the following would be true? a. The insurer must apply for disaster relief funds. b. Federal Insurance Administration will remove the insurer from the NFIP. c. The insurer will be reimbursed for the excess costs by the NFIP. d. The insurer must cover the loss out of its surplus.
c. The insurer will be reimbursed for the excess costs by the NFIP.
The owner of a rental dwelling, insured under a DP-2, turns off the heat in the insured dwelling during the winter months because the dwelling is not occupied. The building's water pipes freeze and break, causing damage. How will the policy react to this loss? a. The DP policy will pay for the pipes, but not the labor. b. The DP policy will pay for the labor, but not the pipes c. The loss is excluded from coverage. d. This loss is covered.
c. The loss is excluded from coverage
Which of the following statements regarding surety bonds is true? a. The principal is the designated beneficiary of the holder of the surety bond b. The person who promises to fulfill the obligation of the bond is known as the obligee c. The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled d. A surety bond is also known as a third-party guarantee insurance because it always involves three parties
c. The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled.
When does the insurer's duty to defend a suit or claim end in a commercial general liability policy? a. When both loss payments and defense costs equal the applicable policy limit b. When the insured agrees to the settlement c. When loss payment equal the applicable limit of insurance d. When defense costs equal the applicable limit of insurance
c. When loss payment equal the applicable limit of insurance
The personal property off-premises extension of dwelling forms provides limits of coverage up to a. 10% of Coverage A anywhere in the U.S. or Canada b. 10% of Coverage A anywhere in the world c. 10% of Coverage C anywhere in the U.S. or Canada d. 10% of Coverage C anywhere in the world
d. 10% of Coverage C anywhere in the world
Which of the following best describes a rebate? a. A producer misrepresenting policy provisions or coverages at issue b. A producer requiring an insured to buy insurance from her as a condition to a loan c. A producer selling insurance primarily to himself, his family and his friends d. A producer returning part of her commission to her client, as an inducement to buy.
d. A producer returning part of her commission to her client, as an inducement to buy.
To obtain a Texas producer license, an applicant must do all of the following EXCEPT a. Pass an Exam b. Be 18 years of age c. Submit fingerprints d. Complete prelicensing training
d. Complete prelicensing training
All of the following are exclusions that apply in all three types of Dwelling policies EXCEPT a. Government action b. Water damage c. Earth Movement d. Fire or lightning
d. Fire or lightning
A homeowner has misplaced some of her insured personal property and has no idea what may have happened to it. Which HO policy form would cover such a loss? a. HO-2 b. HO-3 c. HO-4 d. HO-5
d. HO-5
Which of the following contract elements best describes insurance written in support of public policy? a. Consideration b. Offer and acceptance c. Competent parties d. Legal purpose
d. Legal purpose
Which of the following terms means termination of an insurance policy at its expiration date by not offering a policy continuation or replacement? a. Suspension b. Cessation c. Cancellation d. Nonrenewal
d. Nonrenewal
Which of the following documents notifies the insurer of events that may lead to a possible claim? a. Subrogative statement b. Binder c. Appraisal statement d. Notice of claim
d. Notice of claim
What is designed to assume risks that are generally unacceptable to the normal insurance market? a. All-risk plans b. Multi-risk plans c. Limited risk capacity d. Residual markets
d. Residual markets
Homeland Housing Corp holds a mortgage on a property that John and Carol Thomas purchased. John and Carol have a Homeowners policy with Home Protection Insurance which has a mortgagee clause naming Homeland as a loss payee. If John and Carol suffer a fire to their home a. Homeland will be considered the sole claimant and receive loss reimbursement from Home Protection Insurance b. The Thomases will be considered sole claimants and receive loss reimbursement from Home Protection Insurance. c. John and Carol will be considered co-claimants and receive loss reimbursement from Home Protection Insurance d. The Thomases and Homeland will be considered co-claimants and receive loss reimbursement from Home Protection Insurance.
d. The Thomases and Homeland will be considered co-claimants and receive loss reimbursement from Home Protection Insurance.
Which of the following would NOT be covered by uninsured motorist coverage? a. The insured's neighbor borrowed the insured's car and was hit by an uninsured motorist. b. The insured's car is hit by someone whose auto insurer is insolvent. c. The insured's family member is struck by a hit-and-run driver. d. The insured causes a head-on collision with the car of an uninsured motorist.
d. The insured causes a head-on collision with the car of an uninsured motorist.
Which of the following statements is true regarding personal injury protection (PIP) coverage in auto liability policies issued in this state? a. The maximum amount of coverage is $1,000 b. PIP does not cover funeral expenses c. Insurers may offer the coverage upon the insured's request d. The insured may reject this coverage in writing
d. The insured may reject this coverage in writing
Which of the following statements is correct regarding the debris removal coverage under the businessowners policy (BOP)? a. It pays for cleanup or removal of pollutants from land or water. b. It pays for removal of the debris of the insured's damaged automobile. c. The debris of covered property must be reported in writing within 270 days of the loss. d. The insured's limit of liability is 25% of the sum of the direct loss payment plus the deductible amount
d. The insured's limit of liability is 25% of the sum of the direct loss payment plus the deductible amount
Which of the following best depicts the law of large numbers? a. Larger groups produce healthier applicants b. Large groups offer less opportunity for loss c. The larger the group is, the more likely it will be to get a good choice. d. The larger the pool of risk under study, the more accurate the predictions will be.
d. The larger the pool of risk under study, the more accurate the predictions will be.
If an applicant submits the initial premium with an application, which action constitutes acceptance? a. The applicant submits a statement of good health. b. The producer delivers the policy. c. The insurance company receives the application and initial premium d. The underwriters approve the application
d. The underwriters approve the application
What type of loss is NOT covered by the personal injury protection (PIP) in auto policies? a. Essential services b. Rehabilitation c. Loss of Income d. Workers compensation
d. Workers compensation
While engaged in a pick-up soccer game in the neighborhood, the insured collides with another player, breaking his nose. Would the insured's homeowners medical payments cover the injury? a. No, because even though it was a pick-up game, it was an organized event. b. No, personal liability applies on-premises only. c. No, the insured was not negligent. d. Yes, medical payments coverage also applies off the insured premises.
d. Yes, medical payments coverage also applies off the insured premises.
