Quiz 1 P&C

After a loss has occurred, proof of loss must be filed with the company within: A)30 days. B)45 days. C)60 days. D)No time limit.

C)60 days

Insurance companies incorporated under the laws of foreign countries are called: A)Domestic companies. B)Foreign companies. C)Alien companies. D)None of the above.

C)Alien companies.

What procedure is prescribed by a fire policy when the insured and company fail to agree upon the amount of a loss? A)The disagreement must be settled by a court of law. B)The loss must be submitted to an independent adjusting firm. C)Each party selects an appraiser, who in turn, selects an umpire, and any two determine the amount of loss. D)The agent shall act as intermediary and arbitrate the loss.

C)Each party selects an appraiser, who in turn, selects an umpire, and any two determine the amount of loss.

Which of the following losses is covered under a SFP with the VMM endorsement? I. Theft of a TV set by vandals. II. Vandalism on February 1st of a property that has been vacant since January 1st. III. Damage caused by an individual spray painting graffiti on the dwelling. A)I only. B)II only. C)III only. D)I and III.

C)III only.

The practice of twisting: A)Is perfectly legal in this state. B)Involves writing insurance that is unacceptable by the company an agent is associated with. C)Involves inducing any policyholder to lapse a contract of insurance for the purpose of replacing the policy with another to the detriment of the policyholder. D)Occurs when an agent gives directly or indirectly to an insurance buyer any rebate of premiums as an inducement for the purchase of insurance.

C)Involves inducing any policyholder to lapse a contract of insurance for the purpose of replacing the policy with another to the detriment of the policyholder.

The Commissioner of Insurance has the power to: A)Set Fire and Liability rates charged in North Carolina. B)Revoke an agent's license(s) before a hearing. C)Issue subpoenas on behalf of individuals in order to conduct a hearing. D)Issue verbal Cease and Desist orders.

C)Issue subpoenas on behalf of individuals in order to conduct a hearing.

With property insurance, an insurable interest: A)Must be present at the time the policy is taken out and also at the time of the loss. B)Must be present at the time the policy is written but is not necessary at the time of the loss. C)It is not necessary at the time the policy is written but is necessary at the time of the loss. D)Is not necessary at the time the policy is written or when the loss occurs.

C)It is not necessary at the time the policy is written but is necessary at the time of the loss.

How many days will a fire policy provide coverage on property moved to another location to protect it from further damage? A)5 days. B)10 days. C)15 days. D)30 days.

A)5 days.

Which of the following is the correct term when a contract is prepared by one party and submitted to the other party on a take-it or leave-it basis and where there is no bargaining power on the wording of the contract? A)Adhesion. B)Aleatory. C)Conditional. D)Valued contract.

A)Adhesion.

Which of the following statements is true? A)Agents can bind coverage. B)Agents and brokers represent insurance companies. C)Brokers can bind coverage. D)Agents in the field of Property and Casualty insurance issue conditional receipts.

A)Agents can bind coverage.

A temporary contract of insurance is known as a(n): A)Binder. B)Warranty. C)Endorsement. D)Rider.

A)Binder.

The standard fire policy without endorsements provides coverage for: A)Fire, lightning and removal of endangered property. B)Fire only. C)Fire and lightning only. D)None of the above.

A)Fire, lightning and removal of endangered property.

All of the following procedures would reduce the risk of adverse selection EXCEPT: A)Inclusion of a deductible. B)Rating-up substandard risks. C)Common policy exclusions. D)Endorsements waiving a specific condition from the coverage.

A)Inclusion of a deductible.

Under the Insurance Information and Privacy Protection Act, an authorization for information disclosure in property and casualty insurance is in effect for: A)One year. B)Two years. C)Three years. D)Four years.

A)One year.

An insurance contract is a unilateral contract which means that: A)Only the insurer makes an enforceable promise. B)Both parties must give up something of value. C)Contract provisions are not required. D)Both parties must perform with utmost good faith.

A)Only the insurer makes an enforceable promise.

The clause in the standard fire policy that specifies the amount of recovery when more than one policy exists on the same property is called: A)Pro-rata liability. B)Co-insurance. C)Actual cash value. D)Pro-rata distribution

A)Pro-rata liability.

All of the following are methods of handling risk EXCEPT: A)Risk elimination. B)Risk transfer. C)Risk retention. D)Risk reduction.

A)Risk elimination.

When property is insured under two standard fire insurance policies, payment of a loss is: A)Shared proportionately according to the total amount of insurance. B)Paid first by the initial policy and then any excess by the second policy. C)Paid independently according to the limits of each policy. D)Shared equally until the limit of the lower policy is exhausted, then the other policy pays the remainder up to its face amount

A)Shared proportionately according to the total amount of insurance.

When the Commissioner intends to hold a hearing concerning an agent's trade practices, notice of the hearing must be given at least: A)5 days in advance. B)10 days in advance. C)20 days in advance. D)30 days in advance.

B)10 days in advance.

Coverage under a vandalism and malicious mischief endorsement added to the standard fire policy is suspended if a building is left vacant for more than: A)15 consecutive days. B)30 consecutive days. C)60 consecutive days. D)90 consecutive days.

B)30 consecutive days.

Smith carries $60,000 fire insurance on his building with company "A" and $40,000 with company "B". Smith suffers a loss of $10,000 and "B" goes bankrupt. Smith will collect how much from company "A"? A)Nothing. B)$4,000. C)$6,000. D)$10,000.

C)$6,000.

Which of the following practices are considered unfairly discriminatory? A)Refusal to issue property coverage due to the occupancy (use) of the structure. B)Adding a surcharge on automobile liability insurance due to the age of the operator. C)Placing coverage in a residual market due to information supplied by a consumer reporting service. D)Reducing rates for a specific class of insureds without reducing rates for all insureds.

B)Adding a surcharge on automobile liability insurance due to the age of the operator.

The ________________ permits an insurer to transact insurance in North Carolina. A)Agent's agreement. B)Certificate of authority. C)Agent's appointment. D)Binder.

B)Certificate of authority.

Which of the following is NOT an insurance company adverse underwriting decision under the "Insurance Information and Privacy Protection Act"? A)Canceling a policy. B)Charging a higher rate because of changing loss exposure at the insured's property. C)Declining an application for insurance coverage. D)Placing coverage in a residual market mechanism.

B)Charging a higher rate because of changing loss exposure at the insured's property.

Which of the following would NOT be considered a consequential loss? A)Loss of rental income. B)Damage to personal property. C)Additional living expenses incurred while the damaged property is being restored. D)Loss of business income while a business is closed because of a fire loss.

B)Damage to personal property.

The extended coverage endorsement: A)Increases the recovery limits of the SFP. B)Has a premium stated for the broadening of perils. C)Suspends its coverage after 30 days of unoccupancy. D)Covers any explosion.

B)Has a premium stated for the broadening of perils.

Which of the following terms means that the purchaser of insurance must be in a position to lose money or something of value if the contingency insured against should happen? A)Adhesion. B)Insurable interest. C)Indemnification. D)Indirect loss.

B)Insurable interest.

Which of the following parts of an insurance contract would identify the nature of the coverage provided by the insurer? A)Endorsements. B)Insuring agreements. C)Conditions. D)Exclusions.

B)Insuring agreements.

Obtaining information through a personal interview where the agent does not accurately identify themselves is known as a(n): A)Consumer report. B)Pretext interview. C)Survey scam. D)Investigative consumer report.

B)Pretext interview.

What is the meaning of actual cash value (ACV)? A)Replacement cost (new for old) without any deduction for depreciation. B)Replacement cost less depreciation. C)Today's appraisal value less depreciation. D)The appraised value.

B)Replacement cost less depreciation.

A peril can be defined as: A)The transfer of pure risk. B)The cause of a loss. C)A one-time event definite in time and place. D)A condition increasing the chance of loss.

B)The cause of a loss.

All of the following are true about "insurable risk" EXCEPT: A)The law of large numbers should apply. B)The loss must not be definite and definable. C)The loss must not be catastrophic in nature. D)The loss must be large enough to create hardship.

B)The loss must not be definite and definable.

In order for two fire policies to be concurrent, they must cover: A)All real and personal property, as well as liability for an individual. B)The same interest against the same perils. C)All real and personal property of an individual. D)For both direct and indirect losses.

B)The same interest against the same perils.

When the extended coverage endorsement is attached to a standard fire policy: A)It is not written for the same amount as the fire policy. B)It does not apply to all items covered by the fire policy. C)It must apply to all items covered by the fire policy. D)It does not cost additional premium.

C)It must apply to all items covered by the fire policy.

A property insurance policy that provides open peril coverage will: A)Pay loses caused by only those perils which are named in the insuring agreement. B)Be issued pending the addition of an endorsement which will establish the perils to be covered. C)Pay for any loss except those caused by perils that have been specifically excluded in the insuring agreement. D)Place no restrictions on the types of losses that will be covered but will restrict loss settlement to actual cash value (ACV).

C)Pay for any loss except those caused by perils that have been specifically excluded in the insuring agreement

Documentation required by an insurer from an insured to substantiate the specifics of a claim is known as a(n): A)Certificate of authority. B)Endorsement. C)Proof of loss. D)None of the above.

C)Proof of loss.

Which of the following acts may an agent legally conduct? A)Depositing collected premiums into the agent's own bank account. B)Conduct a pretext interview to verify information supplied on an application. C)Represent multiple insurance companies. D)Charge an application fee based upon a written notification posted in the office.

C)Represent multiple insurance companies.

All statements given by applicants on an insurance application are considered: A)Concealments. B)Warranties. C)Representations. D)Depositions.

C)Representations.

A deductible in an insurance contract is an example of which means of handling risk? A)Control. B)Avoidance. C)Retention. D)Transfer.

C)Retention.

Which of the following acts of an agent would be considered an Unfair Trade Practice? A)Offering to review the applicant's insurance coverages annually. B)Allowing an existing customer to use the agent's season tickets to a sporting event. C)Stating that the marketing activities of another agent are under investigation. D)Informing the applicant that having a pool on the property may increase premiums.

C)Stating that the marketing activities of another agent are under investigation.

A building, insured under a standard fire policy, is damaged by fire for which another person is responsible. From whom will the insured receive payment for the loss? A)The insured has to try to collect from the person responsible. B)The insured can collect from the person responsible and also from the insurance company. C)The company will pay the loss,and will then require the insured to assign to them their right of recovery from the person responsible for the loss, to the extent paid by the company. D)The company will pay the insured the amount of the loss, and will expect the insured to collect from the person responsible, and then reimburse the company.

C)The company will pay the loss,and will then require the insured to assign to them their right of recovery from the person responsible for the loss, to the extent paid by the company.

All of the following statements concerning property, casualty and personal lines insurance agents are true EXCEPT: A)They act on behalf of the insurer. B)They are authorized by contract to solicit insurance policies. C)They act on behalf of the insured. D)Their actions and knowledge are binding on the insurance company.

C)They act on behalf of the insured.

The Standard Fire policy insuring agreement covers: I. Lightning. II. Removal of contents from endangered premises. III. Water damage caused by firemen putting out a fire at the insured premises. A)I only. B)II only. C)I and II. D)I, II, III.

D)I, II, III.

Each of the following possess a valid insurable interest EXCEPT: A)A person who owns a home. B)A bank holding a mortgage on someone's home. C)A condominium unit owner. D)A father concerned about insuring the home of his son.

D)A father concerned about insuring the home of his son.

Subrogation does all of the following EXCEPT: A)Gives the insurance company whatever rights the insured possessed against responsible third parties. B)Prevents the insured from collecting twice on the same loss. C)When paying an insured for a loss, allows the insurer to attempt collection from the person whose negligence may have caused the loss. D)Allows the insurer to file suit against the insured.

D)Allows the insurer to file suit against the insured.

Company A has 5,000 policyholders. Company B has 25,000 policyholders. Company B is able to make more accurate predictions concerning the number of claims it will have to pay than Company A because: A)As the number of risks increases, the ability to make accurate predictions increases also. B)The law of large numbers. C)Quantity accumulation. D)Both A and B.

D)Both A and B.

All of the following are essential elements in an insurance contract EXCEPT: A)Agreement. B)Consideration. C)Competent parties. D)Counter-offer.

D)Counter-offer.

Something that increases the chance of a peril occurring is a: A)Warranty. B)Deductible. C)Peril. D)Hazard.

D)Hazard.

Misrepresentation and concealment prevent recovery under an insurance contract if: I. Fraud is involved. II. They are material to the acceptance of the risk. III. The insurer would have declined the application had the facts been known. A)I only. B)II only. C)II and III. D)I, II and III.

D)I, II and III.

Examples of direct losses covered under the standard fire policy include: I. Damage to the insured's home caused by lightning. II. Damage to the insured's furniture due to fire caused by sparks from the fireplace. III. Damage to property removed within 3 days to protect it from damage after a fire. A)I only. B)II only. C)I and II. D)I, II, III.

D)I, II, III.

A mutual insurance company is: I. Controlled by stockholders. II. Owned by policyholders. III. Controlled by trustees and officers. A)I only. B)II only. C)III only. D)II and III.

D)II and III.

One of the following is considered to be a misrepresentation and is illegal: A)Circulating any derogatory statement calculated to injure any person engaged in the business of insurance. B)Issuing a true statement about the terms of a policy issued or to be issued. C)Returning a portion of the premium to the insured on a basis not specified in the contract. D)Issuing a statement that is not entirely true about the terms of a policy issued or to be issued.

D)Issuing a statement that is not entirely true about the terms of a policy issued or to be issued.

All of the following are true regarding a reciprocal insurance company EXCEPT: A)If funds are insufficient to pay claims, the subscribers can be assessed for additional revenue. B)It is managed by an attorney-in-fact. C)Each subscriber assumes part of the risk of all other subscribers. D)Members are grouped into syndicates.

D)Members are grouped into syndicates.

Rebating is: A)Issuing any statement that is not entirely true about the terms of a policy issued or to be issued. B)Committing any act that infringes on a purchaser's freedom to choose insurers. C)Making untrue statements about a policyholder's present policy. D)Offering any special inducements or valuable consideration, whatever, not specified in the contract.

D)Offering any special inducements or valuable consideration, whatever, not specified in the contract.

Which of the following best defines "risk"? A)The chance for gain or loss. B)The original cause of loss. C)The decrease in economic value. D)The uncertainty of loss.

D)The uncertainty of loss.

Which statement concerning the cancellation of a fire policy is true? A)If an insured requests cancellation of a fire policy, the unearned premium calculated on a pro-rated basis will be returned upon return of the policy to the company. B)When a company cancels a fire policy, it must give the insured 45 days notice before cancellation becomes effective. C)When a company cancels a fire policy, the unearned premium will be returned to the insured on a short-rate basis. D)When the company cancels a fire policy, the unearned premium calculated on a pro-rated basis will be returned to the insured.

D)When the company cancels a fire policy, the unearned premium calculated on a pro-rated basis will be returned to the insured.

A potential agent must have satisfied all of the following requirements prior to effectuating insurance coverage in this state EXCEPT: a) Received an appointment from an admitted insurer. b) Completed an educational course from an approved school. c) Posted a $50,000 surety bond. d) Received an insurance license from the Department of Insurance.

c) Posted a $50,000 surety bond.

Smith and Jones own a building equally with an actual cash value of $100,000. It is insured for $100,000 in the name of Smith only, and burns to the ground. I. Smith gets all $100,000. II. Smith and Jones share equally in the $100,000. III. Smith gets $50,000. IV. Jones gets nothing. a) I only b) I and IV c) III only d) III and IV

d) III and IV