Simulated Exam Missed Questions

An insured has an automobile policy with limits of 100/300/50 and a deductible of $1,000. He is involved in an auto accident and crashes into another driver's auto. The other driver is awarded $125,000 for his injuries and $25,000 to damage to his car. The insured's vehicle has damage in the amount of $1,200. The total payment made under the insured's policy is

$125,200 The amount of coverage for the other driver's injuries is limited to $100,000. The damage to the other driver's car, $25,000 is covered in full. The damage to the insured's car is covered minus $1,000 deductible. Thus, the total of the payment is $125,200.

A policyholder has an equipment breakdown policy with a $200,000 limit. If a boiler explosion causes $100,000 damage to the boiler itself, $50,000 damage to the insured's building, and $30,000 of expediting expenses, how much will the insured collect under the policy?

$175,000 The limit of the equipment breakdown policy applies to property of the insured, property of others, and expediting expenses in any combination as long as expediting expenses does not exceed $25,000.

A $100,000 house insured on a policy with an 80% coinsurance requirement has a fire that caused $40,000 of damage; the owner has a policy with $60,000 coverage. How much can the owner collect for his loss?

$30,000 For the total amount of a partial loss to be paid, a house must be insured for at least 80% of its value on the date of loss. In this case, because the house is insured for only $60,000 (75% of the minimum requirement), the policy will pay only 75% of the loss, or $30,000

An insured was judged at fault in an auto 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 policy?

$50,000 The number 100 in the 100/300 limit means that only ONE individual will be awarded for bodily injury is $100,000. The $150,000 leaves $50,000 unpaid.

Insureds covered under a Mobile Homeowners Policy move their mobile home to prevent it from being damaged by a fire. What is the maximum amount the policy will pay for this?

$500 A mobile homeowners policy will pay up to $500 if the insured moves the mobile home to a safer area to protect it from loss by a covered peril.

Duties required of the insured in the event of a loss

- Authorize the insurer to obtain records and assist the insurer in its investigation - Notify the insurer as soon as possible of the possibility of the claim - Immediately record the specifies of any claim and notify the insurer.

For there to be negligent liability all of the following must exist:

- breach of the legal duty which results in injury to another person - legal duty to act, or not to act, under the circumstances - proximate cause between the wrong and the injury or damage

Space Age Rockets makes model rockets supplies and has 12 employees. The company is located in Atlanta GA. Georgia has compulsory workers compensation laws. Space Age's owner think that his company is too small and unprofitable to carry the workers comp plan mandated by the state. Possible consequences of noncompliance include all of the following:

- closure of the business as public nuisance by state officials - payment for injuries in monetary amounts stipulated by the state with respect to workers compensation plans - payment of fines and penalties as dictated by state compliance authorities

Supplementary payments under the personal auto policy include:

- costs of appeal bonds - loss of earnings up tp $200 a day - defense costs

Insurable interest is broken into three categories:

- financial (monetary) - blood (relative) - business (business partner)

All of the following are considerations in determining which state's law applies when a worker is required to travel into another state and is injured while working in the other state

- place where the accident occurred - the normal location where the employee works - the state where the employee was hired

Liability coverage of a business auto policy

- the company will pay the premium on any appeal bond - the company will pay interest accruing between time of judgement and payment - the company will defend any suit alleging bodily injury (BI) or property damage (PD) covered by the policy

The businessowners liability coverage form will cover medical expenses incurred and reported within what maximum time period after the accident?

1 year The medical expense insurance covers medical expense for bodily injury caused by an accident. Medical expenses incurred and reported within 1 year of the accident are covered.

If the actual cash value exceed the limit of insurance, the businessowners policy (BOP) contains a seasonal increase provision that automatically increases the limit of insurance for business personal property by

25%

Insurers must file all rates and forms for Commissioner's approval within how many days prior to use?

60 days Each filing of rates and forms must be made no later than 60 days before the date of delivery or use.

What is the maximum portion of the state average weekly wage that workers compensation will pay for impairment income benefits?

70% When an employee reaches the status of "maximum medical improvement," he or she is entitled to impairment income benefits. This is typically equivalent to 70% of the state average weekly wage. The employee will receive benefits for a period of time that is consistent with his or her impairment rating.

An insured is the owner of a clothing boutique. She has a Floor Plan Merchandise Floater to cover the property that is financed until sold. At closing time a month ago, she noticed that 3 very expenses 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.

90% of the limit written

Which of the following is most likely INELIGIBLE for coverage under the business owners policy?

A bank The businessowner policy is a prepackaged policy designed to fit the needs of small to medium businesses.

In a participation plan, the insured may be eligible for which of the following?

A partial premium refund The insured is eligible for dividends (partial premium refund) if the experience during the policy terms falls within guidelines established by the insurer at the inception of the policy term. Dividends are not guaranteed, and not be eligible for participation, the account must generate minimum amount of premium.

In a personal auto policy, the medical payments coverage is similar to

Accident insurance, because it pays medical expenses regardless of fault. Medical payments will pay for accidental bodily injury of an insured, regardless of fault or auto. It will pay medical expenses of others occupying the insured auto

Following a property loss that is covered under a businessowners policy, if the insurer and insured cannot agree on the amount of the loss, what method is used to resolve the issue?

Appraisal The appraisal clause provision allows an insured and insurer that cannot reach an agreement on the amount of a loss settlement to each select its own appraiser. The appraisers then select a disinterested umpire. Disagreements between the appraisers are settled by the umpire. The umpire's decisions are usually binding on both parties.

An insurance contract must contain all of the following to be considered legally binding EXCEPT

Beneficiary's consent. The four essential elements of all legal contracts are offer and acceptance, consideration, competent parties, and legal purpose.

A producer who fails to segregate premium monies from his own personal funds is guilty of

Commingling. It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.

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.

What are the two types of utility service endorsements?

Direct damage and time element

Another person has alleged that you are responsible for damage to their property. You notify your homeowners insurer. The insurer will

Either pay or defend as it decides. The insurer will decide whether to pay or defend.

Which of the following would modify the original insurance contract by either adding or removing coverage?

Endorsements Endorsements change the policy's original terms, conditions, or coverages. Endorsements can add or delete coverage, or merely correct items such as the insured's name, address, etc.

All of the following are found in the declarations section of a policy EXCEPT the

Exclusions. Declarations state who is insured, what is insured, where the property is located, when the policy begins and ends, how much insurance and how much premium. The exclusions tell what is not covered.

Which of the following would be named on the declarations page of a property or liability policy?

First named insured First named insured is the individual whose name appears first on the policy's declaration.

The homeowners policy covers collapse caused by all of the following except?

Foundation cracks Collapse must be caused by some sudden unexpected reason. The foundation cracks would take years to cause collapse, meaning there would be plenty of time to find and repair them.

Which of the following provisions is usually found in homeowner's policies and provides a replacement cost settlement to policyholders who carry adequate insurance?

Insurance to Value The insurance to value provision provides a replacement cost settlement to the policyholder who carries adequate insurance

Which of the following statements concerning the builders risk coverage form is correct?

It may be written on a reporting form for the completed value of the structure. Builders risk insurance is a property insurance form that provides direct damage coverage on structures while they are under construction. Coverage may be written on a completed value form (requires 100% coinsurance) or reporting form (values are reported as completed).

A health care provider wants to provide medical professional liability insurance for its employees. Unfortunately, the provider has searched unsuccessfully for an insurance carrier that can provide this insurance. Which of the following will most likely be able to provide this insurance?

Joint Underwriting Association The Joint Underwriting Association (JUA) is a voluntary association of admitted insurers whose members have been authorized by the state to provide a particular type of insurance to the public. This type of insurance is not available from a private insurer in the voluntary market.

Which of the following is the type of property NOT covered by the homeowners policy?

Land on which the property is located HO policies do not cover land on which the property is located.

Which of the following is a common exclusion found in Part D: Coverage for Damage to Your Auto of a PAP?

Mechanical breakdown Damage due to wear and tear, freezing, mechanical or electrical breakdown, and road damage to tires is a common exclusion to the physical damage coverage section.

An insured owns and operates a commercial business. He has included a business income coverage form with his commercial package policy. When the insured's business is severely damaged by fire, the business income coverage will pay fo

Net income plus continuing expenses of the business. In the event of a covered loss, the business income coverage will pay those profits that would have been realized if there had been no loss and the expenses of the business that continue, even though the business is not operating.

How is the premium paid for the businessowners policy?

One invisible premium The premium for the businessowners policy is indivisible, meaning there is no separate premium for property and for liability

The garage coverage form is written to cover the insurance needs of an insured in the business of selling, repairing, servicing or storing automobiles. Which of the following coverages are not included in a garage policy?

Physical damage on a customer's auto The garage policy has a care, custody, and control exclusions which would eliminate coverage for any damages to a customer's auto. This exposure would need to be covered under a gragekeepers policy.

Policy limits are the maximum amount an insured may collect, or for which an insured is protected under the terms of the

Policy

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

Replacement cost at the time of the loss, less depreciation A loss valuation method used in many property forms is determined by today's replacement cost minus depreciation for age and obsolescence

Which of the following is included under the physical damage coverage of a personal auto policy?

Sound reproduction equipment permanently installed in the covered auto Sound reproduction equipment is covered if installed by the manufacturer or installed later where the manufacturer would have installed the equipment.

Payments for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages

Special The two types of classes of compensatory damages that may be awarded are special and general damages. Special damages are tangible damages that can be specifically measured in dollar amounts (such as out of pocket expenses for medical, miscellaneous expenses, and loss of wages)

An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have?

Specific Specific insurance provides a specific amount of coverage for each property. A blanket insurance policy provides coverage for more than one property with a single limit of coverage.

Surety bonds are written for a definite limit called

The bond penalty If the specific obligation guaranteed by the bond is not fulfilled, a sum of money, known as a penalty, becomes payable as damages.

An employee is entitled to impairment income benefits beginning

The day after the employee reaches maximum medical improvement. An employee is entitled to impairment income benefits beginning the day after he or she reaches maximum medical improvement.

An employee may be eligible for supplemental income benefits upon

The expiration of the impairment income benefit period. An employee is entitled to supplemental income benefits if, on the expiration of the impairment benefit period, the employee has an impairment rating of 15% or more from a compensable injury, has not returned to work or returned to work earning less than 80% of the employee's average weekly wage as a direct result of the impairment, or has attempted in good faith to obtain employment commensurate with the employee's ability to work.

A temporary license holder can receive a commission from a sale made to all of the following EXCEPT

The license holder's sister-in-law. A temporary license holder sale to a family member or an individual the temporary license holder has an employment or business relationship with will not pay commission

The cancellation provision in a businessowners policy specifies all of the following EXCEPT

The method of transferring the owner's rights. The assignment provision outlines the method of transfer of all or a portion of the policyowner's right under an insurance contract.

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.

The business income coverage form covers consequential loss of business income that occurs when a business must suspend operations because of a direct loss. Which of the following terms best describes the nature of this type of coverage?

Time element The business income coverage form covers the consequential loss of business income that occurs when a business must suspend operations because of a direct loss. These forms are also called time element forms because of the direct relation of the time a business is unable to operate to the amount of the loss.

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 The value of the insured items is determined at the time the policy is written, not at the time of loss.

Which of the following is NOT settled on an actual cash value basis while covered under the business property coverage form?

Valuable papers and records Valuable papers and records are valued at the cost of blank materials for reproducing the records and labor to copy the records.

Personal business property out in the open is covered under commercial property policy only while

Within 100 feet of the described premises Business personal property is defined in the policy as property located in the insured structure or within 100 feet of that structure.

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).

Which of the following would be considered a covered auto on your personal policy?

Your farm wagon being towed by your pick up truck Agricultural equipment is not insured on auto policies except farm wagons or farm implements being towed by a covered auto, in which case the rules for trailers apply.

Which of the following is consideration on the part of the insurer?

paying a claim

Coverage B - Personal and Advertising Injury Liability responds to claims arising from

suits infringement of a copyright

All of the following statements concerning coinsurance are true EXCEPT

the coinsurance formula will also be applied to total losses. In the event of a total loss, the coinsurance clause does not operate and the face amount of the policy is paid.