Simulated Exam

An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

$30,000

An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today's prices. If the roof has been depreciating at $200 per year and his policy is ACV, how much will it pay toward the insured's new roof?

$5,000

How long is a waiting period upon purchase of flood coverage through NFIP?

30 Days

The dwelling insured on HO-2, HO-3, or HO-5 forms is covered for replacement, provided that it is insured for at least what percentage of replacement cost on the date of loss?

80%

What is a material misrepresentation?

A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

Which of these is defined as the maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims that may be made or the number of accidents that may occur?

Aggregate limit of liability

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

Agreed value

The insured with a homeowners policy has had damage to his property caused by a volcano. Which of the following is true?

All volcanic eruptions within a 72-hour period will be considered one occurrence.

Insurable interest in a property policy must be proven

At the time of loss

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

Binder

The ABC Corporation has $100,000 of coverage on its building through insurance Company A, and $50,000 of identical coverage on the same building through insurance Company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs and the pro rata method is used, how much will each insurer pay?

Company A will pay $16,000; Company B will pay $8,000

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT

Conditions

The extra expenses coverage form provides

Coverage that will permit the insured to continue in business without interruption following a property damage loss.

In property and causality insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit?

Deductible

Under the examinations of books and records condition, the insurance company has the right to examine and audit the insured's books and records related to the policy

During the policy period and for up to 3 years after the termination of the policy

Which of the following claims would be included under the dwelling policy?

Fire damage to the insured's rowboat stored in the attached garage

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

If it is intentional and material

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 reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?

Loss

When an insurance policy does not offer a continuation or replacement at its expiration date, it is considered a

Nonrenewal

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

Notify the insured in the event of a financial difficulty

The HO-3 homeowners policy provides

Open peril coverage on the dwelling and broad form coverage on personal property.

A customer was injured in a supermarket parking lot when a grocery cart collided with the customer's leg. Coverage for this claim would be provided under

Premises and operations

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

Premises liability exposure

The risk of loss may be classified as

Pure risk and speculative risk

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

Replacement cost at the time of the loss, less depreciation

How are surety bonds different from insurance?

Surety bonds guarantee specific duties or obligations will be fulfilled; insurance pays for losses.

Which of the following acts created a federal program that would share the risk of loss from potential terrorist attacks with the insurance industry?

TRIA

Burglary is defined as

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

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

The Principal

Negligence may be defined as

The failure to use reasonable and prudent care.

Losses that result from the freezing of a plumbing system while the dwelling is vacant would be EXCLUDED under a homeowners policy UNLESS

The insured had drained the plumbing system

Which of the following best expresses the purpose of a stated value contract?

To pre-establish the amount of coverage available for property items that are difficult to value

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

When an insurer's underwriter approves coverage

A house insured under a dwelling policy has been vacant for 70 consecutive days. Which of the following statements is true?

loss by vandalism and malicious mischief is excluded

For the purpose of insurance, risk is defined as

the uncertainty or chance of loss