AD Banker Comprehensive Exam Questions

A Broad Form Homeowners policy (HO-2) is used to insure Q's two-story home located on a three-acre lot. The home is insured for $350,000. One day during a bad storm, hail damages the home's roof and damages a large tree in Q's backyard. What is the limit of insurance available under the HO-2 policy for this loss to the tree? A. $0 B. $1,000 C. $500 D. $250

A. $0 Under the Trees, Shrubs, and Other Plants Additional Coverage, coverage is not provided for losses to trees caused by windstorm or hail, meaning no coverage is provided for this tree loss. If the tree was damaged by a covered peril, such as fire or lightning, the limit applicable to any one tree would be $500.

V has a Broad Form Homeowners Policy with the Special Provisions Endorsement. After a windstorm, a number of trees, including a neighbor's trees, have fallen and blocked V's driveway. In addition to the Additional Coverage for debris removal provided by the policy, the endorsement provides additional insurance for fallen tree removal up to: A. $500 B. $1,000 C. $100 D. $250

A. $500 The Special Provisions endorsement will provide an additional $500 for fallen tree removal when the trees block the insured's driveway, damage a covered structure, or block a ramp or fixture that assists a disabled person in entering a building. Additional limitations are included if the endorsement is attached to an HO-6 or HO-8 form.

What are the minimum policy limits that the Facility will cover a risk ceded by a member insurer? A. 30/60/25 B. 50/100/25 C.25/50/10 D. 15/30/5

A. 30/60/25 The Facility provides 100% reinsurance for 30/60/25, or $30,000 for bodily injury per person, $60,000 for bodily injury for 2 or more persons in any one accident, $25,000 for property damage per accident, and $1,000 for medical payments per person, except motorcycles and mopeds.

Following a complaint's final disposition, each insurer or its agents in North Carolina must maintain a record of all written complaints for at least how many years? A. 5 years B. 4 years C. 3 years D. 2 years

A. 5 years Each insurer or its agents must maintain a record of all written complaints for at least 5 years after the complaint's final disposition or, for domestic companies, until the Commissioner adopts a final report of a general examination that contains a review of these records, whichever is later.

Unendorsed Business Auto policies may be used to provide liability and physical damage insurance for: A. A semitrailer hired by the insured for use in their business B. Commercial-use automobiles held as stock C. A vehicle with a permanently attached cherry picker that is not self-propelled D. A customer's private passenger auto in the insured's care for servicing

A. A semitrailer hired by the insured for use in their business. The Business Auto Coverage Form may be used to cover autos that a business owns, uses, leases, hires, rents, or borrows. Covered autos can include private passenger autos, trucks, trailers, and semitrailers. Autos held for sale, non-owned autos in the insured's care or control, and mobile equipment are typically not covered by the BAP.

Under a Commercial General Liability policy, the maximum amount payable for certain types of losses within a policy period, regardless of the number of occurrences, is known as an: A. Aggregate limit B. Each occurrence limit C. Absolute limit D. Comprehensive limit

A. Aggregate limit. An aggregate limit specifies how much the policy will pay for certain types of losses during the policy period, regardless of the number of occurrences or persons entitled to payment. The CGL has 2 aggregate limits: the general aggregate limit and the products-completed operations aggregate limit.

Which of the following does not require an insurance agent's license in North Carolina? A. An agency clerk who maintains records for agents B. An individual who has earned the Chartered Life Underwriter (CLU) designation C. An individual wishing to represent purchasers of insurance D. An individual licensed in Virginia wishing to sell insurance in Winston-Salem

A. An agency clerk who maintains records for agents Administrative, managerial, or clerical employees of insurance producers do not require an agent license as long as they do not receive commissions from policies written or sold in the state. An individual licensed in another state is required to get a nonresident license before selling insurance in North Carolina. An individual representing purchasers requires a broker's license.

According to North Carolina regulations, a Motor Vehicle Liability Policy must meet all of the following requirements, except: A. Automatically cover a named insured's newly acquired auto for 40 days B. Provide Uninsured Motorist coverage C. Cover the named insured if using an auto they do not own D. Cover any person using any covered auto with the named insured's permission

A. Automatically cover a named insured's newly acquired auto for 40 days. A Motor Vehicle Liability Policy must automatically cover a named insured's newly acquired auto for 30 days. Under certain circumstances, a request for coverage is required in order for the vehicle to be insured beyond that 30 days.

Coverage provided by a standard property policy contains all of the following policy terms, except: A. Coverage is provided for losses resulting from a quality of the property that causes it to destroy itself B. If an earthquake starts a fire that causes a loss, the fire damage is covered C. When other property insurance applies to the same covered loss, the policies assume pro rata liability for claim payments D. Coverage is provided for indirect losses that follow a direct physical loss

A. Coverage is provided for losses resulting from a quality of the property that causes it to destroy itself. Property policies do not cover losses resulting from inherent vice, which is a quality within property that causes it to damage or destroy itself, like rusting or wear and tear.

A producer in North Carolina, who makes a derogatory statement about a competing insurer's financial statement is guilty of: A. Defamation B. Coercion C. Twisting D. Intimidation

A. Defamation Defamation is making a false or maliciously critical statement regarding the financial condition of any person, with the intent to injure such person.

Under Coverage C - Household Personal Property on a Farm Property policy, coverage is provided for: A. Furniture in the dwelling B. The insured's personal autos C. Animals, including pets and livestock D. Farm personal property

A. Furniture in the Dwelling Coverage C applies to personal property in the residential dwelling, not farm personal property. Like Coverage C on Dwelling and Homeowners forms, property not covered by Coverage C includes animals and autos.

All of the following insurers would be allowed to conduct insurance business in North Carolina, except: A. Insurer ABC is certified, but not admitted B. Insurer JKL legally provides coverage for risks not located in the state at the time of policy issuance C. Insurer DEF provides coverage for a nuclear electric generating plant D. Insurer GHI is a surplus lines insurer providing coverage that cannot be obtained through the open market from admitted insurers

A. Insurer ABC is certified, but not admitted. Unauthorized insurers are prohibited from conducting business in North Carolina. Insurers must be certified and admitted by the Commissioner, or qualify under an exception, such as providing coverage for a nuclear electric generating plant, covering subjects of insurance not located in the state at the time of issuance, or being a surplus lines insurer. Reinsurance and marine, aircraft, or liability insurance are also excepted from this rule.

On the Personal Liability Supplement attached to a Dwelling policy, Coverage L includes coverage for all of the following, except: A. Medical payments to others B. Bodily injury liability C. Property damage liability D. Defense costs

A. Medical payments to others. In the event a claim or suit is brought against the insured because of bodily injury or property damage, Coverage L covers the damages for which the insured is liable and provides a defense. Coverage M provides medical payments to others.

Under flood insurance provided by the National Flood Insurance Program, which of the following statements regarding flood insurance is NOT correct? A. No deductible applies to loss of contents B. Coverage is provided for direct losses to property caused by the inundation of normally dry land C. The federal government is the reinsurer for all flood losses D. In order to qualify for a federal loan, a property owner located in a special flood hazard area must purchase flood insurance

A. No deductible applies to loss of contents Flood policies apply separate deductibles to buildings and contents.

Policyowner P has just finished painting the interior walls in their home, and stores leftover paint thinner in the basement near the furnace. What kind of hazard does the stored paint thinner present? A. Physical B. Moral C. Morale D. Peril

A. Physical Paint thinner near a furnace is a physical hazard, since it is a physical object that increases the chance of fire. Even if P had an attitude of indifference about where the paint thinner was stored, which would represent a morale hazard, the paint thinner itself is still a physical hazard.

The Other Insurance condition on the standard fire policy will use which basis to coordinate claim payments with other insurance that applies to a covered loss? A. Pro rata basis B. Contribution by equal shares C. Short-rate basis D. Proximate basis

A. Pro rata basis The most common method of coordinating other insurance applicable to a covered loss, as set by the standard fire policy, is using a pro rata basis. If two primary insurance policies apply to the loss, each policy will pay a proportion of the loss, equal to the amount of insurance the policy provides compared to the total insurance covering the loss.

For a loss to be covered under a standard property policy, the insured must do which of the following? A. Protect property from further damage B. Obtain a written appraisal of the damages C. Contact an independent claims adjuster D. Provide proof of loss within a year of the claim

A. Protect the property from further damage. Protecting property from further loss is a specific obligation of the insured in the event of a loss. A proof of loss is also required, but it typically must be provided within 60 days after the loss.

Statements that are believed to be true to the best of the applicant's knowledge and belief are known as: A. Representations B. Waivers C. Statements of adhesion D. Warranties

A. Representations Representations are statements that are believed to be true to the best of the applicant's knowledge and belief at the time of application. Warranties are guaranteed to be true.

Which of the following is not an element of a temporary total disability? A. The employee can work while recovering B. The employee is expected to recover and return to work C. Retroactive benefits will be paid if disability exceeds the waiting period D. The length of the disability must exceed the waiting period

A. The employee can work while recovering. An employee with a temporary total disability would be unable to do any work during recovery, as the disability is total, but is expected to make a recovery and return to work.

In addition to the named insured of a Homeowners policy, coverage is automatically provided for: A. The insured's resident spouse B. Persons who purchase the insured's property C. Persons who appraise the property D. The insured's employer

A. The insured's resident spouse The insured's spouse who is a member of the household is automatically considered an insured under the policy.

The BOP defines Your Product to include all of the following, except: A. Vending machines B. The insured's manufactured goods C. Instructions for use of the product D. Warranties about product quality

A. Vending machines. The definition of Your Product excludes vending machines. Goods or products manufactured, sold, handled, distributed, or disposed of by the insured are considered the insured's products, as are warranties about quality and instructions.

In order to use a policy form in North Carolina, the form must be: A. Filed prior to use and either approved or not disapproved within 90 days after filing B. Filed within 90 days after it is first used C. Filed prior to use and either approved or not disapproved within 120 days after filing D. Filed, and it can be used immediately upon filing, unless disapproved by the Commissioner

A. filed prior to use and either approved or not disapproved within 90 days after filing. The North Carolina Rate Bureau must file the form with the Commissioner prior to use. The form must be specifically approved or not disapproved within 90 days of the filing in order to be used by insurers.

Which of the following coverages is not included in a standard Homeowners policy? A. Personal injury liability B. Bodily injury liability C. Property damage liability D. Medical payments

A. personal injury liability Coverage for personal injury (such as libel or slander) is not automatically provided in a Homeowners policy. It is available by endorsement only. Coverage E insures against the insured's bodily injury and property damage liability. Coverage F provides medical payments to others, without needing to first establish negligence.

C's home has a replacement value of $125,000, and C insures the home for $75,000. A fire causes $40,000 in damages to C's home. If C's insurance policy requires C to insure the home for at least 80% of its replacement value, how much will the insurer pay for the loss? A. $10,000 B. $30,000 C. $0 D. $40,000

B. $30,000 C would need to insure the home for $100,000 to meet the policy's coinsurance requirement. Because C carries only 75% of the insurance required by the coinsurance clause, the policy will pay for 75% of the loss, meaning this insurer will pay $30,000 of the $40,000 loss.

S obtains motor vehicle liability and physical damage coverage for their pickup truck through a Personal Auto policy. S is injured when another motorist runs a red light and hits S's car, causing bodily injuries. Following the accident, how long does S have to submit a medical payments claim under Part B of their policy? A. Medical payments are only provided to others B. 3 years C. 48 hours D. 1 year

B. 3 years Under Part B - Medical Payments Coverage of a Personal Auto policy, the insurer will pay reasonable expenses incurred for necessary medical and funeral services incurred within 3 years of the date of the accident. This coverage is provided to insureds, not to others.

All of the following would be included in the definition of insured location, except: A. A summer vacation home rented by the insured B. A 5-family dwelling in which the insured lives in one of the units, including the structures and grounds C. Land upon which a 4-family dwelling is being built as a residence for the named insured D. A boat slip used by the named insured

B. A 5-family dwelling in which the insured lives in one of the units, including the structures and grounds. Eligible residential dwellings are those containing 1 to 4 residential units, so a 5-family dwelling would not be insured on a Homeowners policy or included in the definition of insured location.

M and C both have Personal Auto policies with liability limits of 20/30/10. If M borrows C's car and injures a pedestrian, causing injuries that will cost $5,000 to treat, which policy will provide coverage for the injured party? A. M's policy B. C's policy C. Both policies will share the loss on a pro rata basis D. Neither policy, since C's car is not scheduled on M's policy

B. C's policy Under Personal Auto policies, the auto owner's coverage is primary insurance, and coverage for non-owned autos is excess insurance. Since C is the owner, C's policy will cover the loss first, and M's policy will provide excess insurance if necessary. This is established in the Other Insurance condition of both policies. If multiple primary policies applied to the loss, such as if C had two auto policies on the car, then those primary policies would share the loss on a pro rata basis.

Coverage for catastrophic exposures commercial businesses may face is provided by which kind of policy? A.Employers Liability policy B. Commercial Umbrella Liability policy C. Commercial General Liability policy D. Businessowners policy

B. Commercial Umbrella Liability policy. Commercial Umbrella Liability insurance provides coverage for catastrophic losses and coverage that is more comprehensive than that which is contained in underlying insurance.

Which of the following is an example of special damages? A. Damages assessed by the court as a penalty for gross negligence B. Compensation to an injured party for actual medical expenses and loss of earnings C. Compensation to a party for the loss of companionship of a spouse D. Compensation for pain, suffering, and disfigurement

B. Compensation to an injured party for actual medical expenses and loss of earnings. Special damages are an award to an injured party for actual and known expenses such as bills, loss of earnings, and the costs of repairing or replacing damaged property. Special damages are paid for tangible loss or damage.

All of the following are duties of the Commissioner of Insurance of North Carolina, except: A. Conducting examinations, investigations, and hearings as necessary to administer state insurance laws B. Creating insurance laws to protect the public C. Administering oaths D. Issuing, refusing, suspending, or revoking certificates of authority to insurers and licenses to insurance agents

B. Creating insurance laws to protect the public. While the Commissioner of Insurance can establish rules and regulations necessary to fulfill North Carolina insurance laws, they cannot make insurance laws, which is the responsibility of the state legislature.

Coverage for a mobile home or its contents could be added by endorsement to all of the following Homeowners forms, except: A. HO-3 B. HO-8 C. HO-2 D. HO-4

B. HO-8 The Mobile Home Endorsement can be added to a Broad Form or Special Form Homeowners Policy. If the insured is a tenant of a mobile home, coverage for personal property may be sought under an HO-4 if the insurer's underwriting guidelines permit.

Under Part A - Liability Coverage of a Personal Auto policy, which of the following statements regarding the limit of liability is incorrect? A. A combined single limit is the maximum the policy will pay in any one accident for bodily injury and property damage B. If the loss is covered under more than one part of the policy, payment will be duplicated C. The limit of liability is the maximum the policy will pay regardless of the number of vehicles involved in the accident D. The limit of liability is the maximum the policy will pay regardless of the number of insureds

B. If the loss is covered under more than one part of the policy, payment will be duplicated. Payment will not be duplicated if a loss is covered under multiple parts of the policy. The limit shown in the Declarations is the most the policy will pay, regardless of the number of insureds, claims made, vehicles or premiums shown in the Declarations, or vehicles involved in the accident.

Which of the following must participate in a Workers' Compensation Assigned Risk Plan? A. Only insurers that exclusively write Workers' Compensation insurance. B. Insurers that are authorized to write Workers' Compensation in the voluntary market. C. All domestic insurers in the state D. All insurers authorized to do business in the state

B. Insurers that are authorized to write Workers' Compensation in the voluntary market. Because the Workers' Compensation Assigned Risk Plan provides coverage for those employers unable to obtain voluntary coverage due to their prior loss experience or the hazardous nature of their operations, all companies that write Workers' Compensation coverage in the voluntary market are required to participate. Risks are apportioned among insurers in relation to market share. Private insurers that do not write Workers' Compensation coverage do not need to participate in the plan.

The Commissioner of Insurance may suspend, place on probation, revoke, or refuse to renew a license for all of the following reasons, except: A. Cheating on an insurance exam B. Knowingly accepting business from an appropriately licensed broker C. Forging another's name on an insurance document D. Committing dishonest or fraudulent practices in the insurance business

B. Knowingly accepting business from an appropriately licensed broker. Knowingly accepting business from an unlicensed or inappropriately licensed broker would be a reason the Commissioner of Insurance may suspend, place on probation, revoke, or refuse to renew a license.

Which is NOT a Common Policy Condition under a Commercial Package policy? A. Premiums B. Liberalization C. Inspection and Surveys D. Transfer of Your Rights and Duties Under This Policy

B. Liberalization Liberalization is a Commercial Property Condition, applicable to coverages included in the commercial property coverage part. The Common Policy Conditions, which apply to the CPP in its entirety, are: Cancellation, Changes, Examination of Your Books and Records, Inspections and Surveys, Premiums, and Transfer of Your Rights and Duties Under This Policy.

An underwriter chooses a rating based on how the applicant fits into a certain class of insureds who have similar exposures. This describes which rating method? A. Loss cost rating B. Manual rating C. Merit rating D. Judgment rating

B. Manual rating Manual rating (or class rating) establishes rates based on classes of insureds with similar exposures. These base rates are maintained by the insurer in a manual.

An insured has a Commercial Package policy with commercial property coverages. When writing the property coverages, the Building and Personal Property Coverage Form: A. Must be written with building and personal property coverages at scheduled limits. B. May be written to include building coverage, personal property coverage, or both, as chosen by the insured C. Must be written with a blanket limit on the insured's buildings D. May be written to include personal property coverage, but building coverage is required

B. May be written to include building coverage, personal property coverage, or both, as chosen by the insured. The insured may choose specific categories of property for the Building and Personal Property Coverage Form to apply to. The limits of liability applying to coverages chosen by the insured may be written on specific, blanket, or scheduled basis.

After Company B's computer is physically damaged during an intrusion by hackers, which coverage would indemnify the loss? A. Forgery or Alteration B. No coverage is available for this loss C. Employee Theft D. Computer and Funds Transfer Fraud

B. No coverage is available for this loss. Physical damage to a computer in the commission of a crime is a property damage loss, not a crime loss.

If the amount of liability insurance coverage is divided between bodily injury and property damage claims, the policy limits are which of the following? A. Combined B. Split limits C. Per person limits D. Per occurrence limits

B. Split Limits Policies with split limits provide separate limits for different types of losses, often with a combination of per occurrence and per person limits. For example, a policy's limits might be represented as 100/300/100 ($100,000 is the per person limit for bodily injury liability, $300,000 is the per occurrence limit for bodily injury, and $100,000 is the per occurrence limit for property damage liability).

The North Carolina Insurance Underwriting Association is responsible for: A. Supervising the market of last resort for basic property insurance B. Supervising the market of last resort for beach area property C. Protecting consumers from insolvent insurers D. Acting as the residual market for auto liability risks

B. Supervising the market of last resort for beach area property The North Carolina Insurance Underwriting Association (NCIUA) governs the Coastal Property Insurance Pool, which is the market of last resort for property insurance specifically for North Carolina's beach area. The North Carolina Joint Underwriting Association (NCJUA) oversees the FAIR Plan, which is the market of last resort for basic property insurance, not including the beach area.

In which of the following circumstances would the insured be required to pay the self-insured retention of a Personal Umbrella Liability policy? A. The insurance carrier is declared insolvent B. The Umbrella drops down to act as the primary policy C. The limits of the underlying policy have been exhausted D. There is a substantial change in the risk

B. The Umbrella drops down to act as the primary policy. The insured is only required to pay a self-insured retention when the Umbrella drops down to serve as the primary policy, which happens when the underlying policy does not cover a loss. If the Umbrella policy is activated after the limits of the underlying policy have been exhausted, the Umbrella policy provides excess liability coverage, and the retention would not apply.

An insured has a Businessowners policy, and the Declarations page designates the insured as a corporation. Based on this designation, who is considered an insured under Section II of the policy? A. Trustees B. The corporation's executive officers, directors, and stockholders C. Members and their spouses D. Partners and their spouses

B. The corporation's executive officers, directors, and stockholders. If a corporation is designated on the Declarations page, the named insured and their executive officers, directors, and stockholders are all considered insureds.

P insures an auto on a Personal Auto Policy that includes Comprehensive and Collision coverages. If P purchases a second vehicle and wants to add it to the policy, the same coverage applying to the first auto will be provided automatically if: A. The insured provides notice within 60 days of purchase B. The insured provides notice within 30 days of purchase C. The new auto is insured on a separate policy D. The insured provides notice by policy renewal or termination

B. The insured provides notice within 30 days of purchase. Newly acquired autos being added to a Personal Auto Policy will have the broadest coverage applied to an auto already on the policy if notice is provided within 30 days of becoming the owner.

Employee M was hired by ABC Jewelers to guard and protect store property during its hours of operation. Under the terms of the Commercial Crime policy, Employee M would be known as a(n): A. Messenger B. Watchperson C. Custodian D. Janitor

B. Watchperson A watchperson is defined as any person the insured retains specifically for the purpose of having care and custody of property inside the premises, and who has no other duties.

A flood damages a single-family home that is in a community in the early stages of participation with the NFIP. What is the maximum amount a resident may receive for damages to personal property? A. Up to the Coverage C limit on the insured's Homeowners policy B. $100,000 C. $10,000 D. No coverage is provided.

C. $10,000 The home is part of the Emergency Program of the NFIP. One- to four-family dwellings are eligible for personal property coverage up to $10,000. Nonresidential buildings in the Emergency Program are eligible for personal property coverage up to $100,000.

ABC Industries carries a Claims-Made Commercial General Liability policy with a general aggregate limit of $300,000 and an each occurrence limit of $100,000. After an occurrence resulting in a $200,000 loss, followed by a second occurrence resulting in a $100,000 loss, how much of the general aggregate limit remains available against future claims? A. None B. $200,000 C. $100,000 D. $300,000

C. $100,000 $100,000 of the general aggregate limit remains. Because of the each occurrence limit, the policy is only liable for $100,000 of the first occurrence's loss. The second occurrence is fully covered. Both of these $100,000 payments will reduce the general aggregate limit. $300,000 - $100,000 - $100,000 = $100,000.

What is the maximum the Business Auto Coverage Form will pay per day for loss of use of a hired auto? A. $30 B. $25 C. $20 D. $35

C. $20 If the insured hires a vehicle per a written rental contract or agreement, and without a driver, the Loss of Use Coverage Extension pays for loss of use expenses to the hired auto if loss is caused by a covered loss. The most paid for loss of use is $20 per day, up to a maximum $600.

An insured, whose Personal Auto policy has 25/50/10 limits, is at-fault in a car accident. Claimant A has bodily injuries in the amount of $25,000. Claimant B has bodily injuries equaling $20,500. Claimant C has bodily injuries equaling $4,000. What is the insurer's liability for this accident? A. $60,000 B. $25,000 C. $49,500 D. $50,000

C. $49,500 The amounts awarded to each claimant meet the policy's $25,000 per person limit for bodily injuries. The sum of all three claims also meets the policy's $50,000 per accident limit for bodily injury: $25,000 + $20,500 + $4,000 = $49,500. The policy will pay $49,500 total under Part A for this accident.

After a 4-car accident caused by the insured, Claimant A has bodily injuries in the amount of $49,500, Claimant B has bodily injuries equaling $19,500, and Claimant C has bodily injuries equaling $14,000. If the insured's Personal Auto policy limits are 25/50/10, what will the insurer pay? A. $49,500 B. $58,500 C. $50,000 D. $83,000

C. $50,000 Regardless of the individual claim amounts, because the total of the individual claims ($83,000) exceeds the per accident limit of $50,000, the insurer's liability is limited to $50,000 for all three claimants.

In order to be eligible for flood coverage, communities must join the NFIP within what time period after being notified by FEMA that the community is in a flood-prone area? A. 30 days B. 2 years C. 1 year D. 6 months

C. 1 year Communities in flood-prone areas must join the NFIP within 1 year of being notified of their eligibility for flood protection. Communities that join are known as participating communities.

Under a Dwelling Policy, an insured tenant may use up to what percentage of the Coverage C limit of insurance for a covered loss to improvements, alterations, and additions made at the insured's expense to that part of the described location occupied by the named insured? A. 0% B. 20% C. 10% D. 5%

C. 10% An insured tenant may use up to 10% of the Coverage C limit for a covered loss to improvements, alterations, and additions made at the insured's expense to that part of the described location occupied by the named insured.

The North Carolina Rate Bureau assesses and recommends rates for property and casualty insurance against loss to residential contents and real property with not more than how many housing units? A. 8 B. 10 C. 4 D. 6

C. 4 The North Carolina Rate Bureau assesses and recommends rates for property and casualty insurance against loss to residential contents and real property with not more than 4 housing units. The Bureau also assesses and recommends rates for theft, physical damage, and liability coverage for nonfleet private passenger motor vehicles, and coverage under Workers' Compensation and Employers Liability insurance.

The right to sue a person to recover property is called: A. Voir dire B. Common law C. A chose in action D. Litigation

C. A chose in action. A chose in action is the right to sue a person to recover property, money, goods, or debts. This is relevant to North Carolina's laws regarding false pretenses and cheating, which makes it a felony to use false pretense to obtain or attempt any money, property, chose in action, or other thing of value from another person.

he Loss Assessment Additional Coverage provided by Section II of a . Homeowners policy will cover the insured's share of loss assessments charged by any of the following, except: A. A homeowners association B. An organization of homeowners C. A governmental body D. A corporation of property owners

C. A governmental body The Loss Assessment Additional Coverage does not apply to assessments charged against a homeowners association by a governmental body. Instead, it covers the insured's share of loss assessments charged by a homeowners association or corporation to the member property owners. The coverage under Section II applies to liability losses for which the association is legally liable. Section I of Homeowners policies also contain a Loss Assessment Additional Coverage for physical losses to commonly owned property.

All of the following statements regarding SDIP surcharges are correct, except: A. A major accident is an at-fault accident resulting in bodily injury, death, or property damage of at least $3,850 B. A subclassification plan surcharge must be applied to a policy for 3 policy years C. A person with less than 3 years driving experience may not be surcharged D. SDIP points must be equal to the severity of the claimant's injury

C. A person with less than 3 years driving experience may not be surcharged An insurer may provide for premium surcharges for insureds having less than 3 years' driving experience as licensed drivers.

All of the following are true of a Yacht Policy, except: A. Lay-up warranties are permitted B. It includes both property and liability coverage C. A yacht is covered regardless of its location D. Protection and Indemnity is an included coverag

C. A yacht is covered regardless of its location. A yacht is not covered if it is navigated outside the policy's navigational limits.

Under Employers Liability coverage, the Doctrine of Dual Capacity applies to which of the following? A. An employee brings action against the employer for a workplace injury, but the employer does not have Workers' Compensation insurance or self-insurance in place B. An employee brings action against the employer after the employer's failure to abide by health and safety laws results in a workplace injury C. After an employee is injured during the course of employment, the employee brings action against the insured in a capacity other than as an employer D. After an employee is injured while working, the employee's spouse brings action against the insured for consequential injuries

C. After an employee is injured during the course of employment, the employee brings action against the insured in a capacity other than as an employer. The Doctrine of Dual Capacity refers to times when workers, who are injured in the course of employment, bring action against the insured in a capacity other than as an employer. For example, an employee injured by the insured's product may bring action against the company as a manufacturer, rather than as their employer.

The Equipment Breakdown Protection Coverage Form would not cover which of the following? A. Spoilage of refrigerated materials following a transformer failure B. Explosion of a steam boiler or steam engine C. An air conditioning unit intentionally disabled by an employee D. Accidental smoke damage to a machine caused by an employee

C. An air conditioning unit intentionally disabled by an employee

If the public or a third party is falsely led to believe that an agent is able to perform a certain duty, this is known as the producer's: A. Assumed authority B. Express authority C. Apparent authority D. Implied authority

C. Apparent authority Apparent authority is created when the producer acts in a way that exceeds their express authority and the principal does nothing to suggest that the producer is not able to act in that way. In other words, it appears to others that an act is allowed, even though the act is neither expressed in the contract, nor considered necessary and reasonable to perform the expressed duties. Acts that fall under an agent's apparent authority still bind the principal.

Which of the following terms best describes the crime of taking of property from inside the premises or a locked safe or vault by a person who commits forcible entry? A. Robbery B. Shoplifting C. Burglary D. Theft

C. Burglary Burglary involves trespassing and entering or exiting a locked premises. Robbery involves direct confrontation and the use of force. Shoplifting is not defined in a policy, but it is covered under theft, which is a general term for larceny.

The means by which insurers can encourage insureds to maintain insurance to value is known as: A. Deductible B. Subrogation C. Coinsurance D. Agreed valuation

C. Coinsurance Coinsurance is the condition on a property policy that encourages insureds to maintain insurance to value, at least to a specified percentage of the building's full replacement cost.

The limit of liability applying to medical payments coverage on a Personal Auto policy applies to: A. All claims during the policy term B. All persons injured in any one accident C. Each person injured in any one accident D. Each occurrence that results in bodily injury

C. Each person injured in any one accident The Part B - Medical Payments Coverage limit is a per person limit that applies to each accident.

What is the term for tangible property that cannot be used because it contains the insured's product or work that is defective, inadequate, deficient, or dangerous? A. Fungible property B. Abandoned property C. Impaired property D. Assumed property

C. Impaired property Impaired property is tangible property, other than the insured's product or work, that cannot be used because it contains the insured's product or work that is thought or known to be defective, inadequate, deficient, or dangerous.

Under the Building and Personal Property Coverage Form, all of the following may be covered by Coverage Extensions, except: A. Valuable papers and records pertaining to the business B. Damage to non-owned trailers in the insured's care, custody, or control C. Increased costs of construction to comply with an ordinance regulating repair D. The insured's newly acquired property

C. Increased costs of construction to comply with an ordinance regulating repair. Increased Cost of Construction is an Additional Coverage, which is provided automatically by the policy. The insured's newly acquired or constructed property, valuable papers and records that need to be replaced or restored, and non-owned detached trailers may be covered if the insured meets the 80% coinsurance requirement and elects to extend coverage.

Which of the following indicates a disrupted chain of events that frees the defendant from liability? A. Lost cause B. Concurrent causation C. Intervening cause D. Proximate cause

C. Intervening cause Intervening cause breaks a natural and continuous sequence of events that are necessary to establish negligence.

Following the filing of a petition, any order the Commissioner issues is subject to: A. Trial B. Internal investigation C. Judicial review D. Public hearing

C. Judicial review All orders or decisions made, issued, or executed by the Commissioner are subject to a judicial review in the superior court if a petition is filed within 30 days of the delivery of the order or decision.

The insurer may void an insurance policy for all of the following reasons, except: A. The insured intentionally withheld information that would have increased the policy premium B. Breach of warranty C. Legal action is taken against the insurer by the insured D. The insured included material misrepresentations on their application for insurance

C. Legal action is taken against the insurer by the insured. Material misrepresentations, material concealments, and breaches of warranty are all reasons for an insurer to void an insurance policy. Legal action brought against the insurer is not cause for policy voidance.

Which type of state provides Workers' Compensation insurance only through a state fund? A. Elective B. Compulsory C. Monopolistic D. Competitive

C. Monopolistic In monopolistic states, Workers' Compensation insurance is only available through a state fund.

Commercial General Liability policies define bodily injury to refer to all of the following, except: A. Disease B. Sickness C. Personal injury D. Death

C. Personal injury Bodily injury refers to bodily harm, sickness or disease, or any resulting death sustained by a person. Personal injury, such as defamation, is not a kind of bodily injury, and coverage for personal injuries is listed separately on the CGL.

All of the following are general duties of the Commissioner, except: A.Issuing licenses to insurance agents B. Reporting any violation of insurance law to the attorney general C. Selling contracts of insurance D. Administering and enforcing insurance laws and rules

C. Selling contracts of Insurance The Commissioner does not sell insurance. The Commissioner administers and enforces the state's insurance laws, including issuing licenses to agents and reporting violations of the law to the attorney general.

Under a Businessowners policy, all of the following statements about limits applying to liability coverage are correct, except: A. The limit applying to personal and advertising injury losses applies per person or organization B. The Medical Expenses limit applies per person C. The Damage to Premises Rented to You limit is written on a per person basis D. The limit applying to bodily injury and property damage losses is written on a per occurrence basis

C. The Damage to Premises Rented to You limit is written on a per person basis. The Damage to Premises Rented to You limit, which applies when coverage is provided for the insured's fire legal liability, may be written on a per fire or per premises basis, but it may never be written on a per person basis.

A pickup truck may be eligible for coverage under a Personal Auto policy even if it is used for any of the following incidental business purposes, except: A. Transporting tools to a customer's home to repair an appliance B. Delivering goods to install furnishings C. Transporting people for a fee D. Transporting materials used for ranching

C. Transporting people for a fee. Carrying passengers for a fee is not an approved incidental business use of a private passenger auto. Approved uses include delivering or transporting goods and materials for farming or ranching purposes, and delivering or transporting goods and materials incidental to a business that involves installing or repairing furnishings or equipment.

Which of these statements is not true about Uninsured Motorist coverage on a Personal Auto Policy? A. A hit-and-run driver is considered uninsured B. Bodily injury and property damage must be caused by another person who is legally responsible C. Uninsured Motorist coverage is optional for auto policies issued in North Carolina D. A driver is considered uninsured when their insurer denies a claim

C. Uninsured Motorist coverage is optional for auto policies issued in North Carolina. UM coverage is required in North Carolina, and Underinsured Motorist coverage is optional. Coverage will be provided for bodily injury and property damage caused by an uninsured motorist, but some exceptions exist, such as there being no property damage coverage under Part C1/C2 for accidents involving hit-and-run vehicles.

B is running errands. While crossing the street, they are struck by H's car, causing bodily injuries. When B brings a legal claim against H for damages, it is discovered that the insurer that issued H's Personal Auto policy went bankrupt and is unable to pay any claims. The amount B is owed in damages may be covered by: A. Liability coverage under B's Personal Auto policy B. Collision coverage under H's Personal Auto policy C. Uninsured motorists coverage under B's Personal Auto policy D. Uninsured motorists coverage under H's Personal Auto policy

C. Uninsured motorists coverage under B's Personal Auto policy. When B is struck by H, an uninsured motorist, uninsured motorists coverage under Part C of B's policy steps in to cover damages owed to them by the negligent motorist.

A home owned and occupied by P and the contents of the home are insured by a property policy issued by XYZ Insurer. The carrier has all of the following rights and responsibilities under the insurance policy, except: A. Policy changes provided through an endorsement must be made in writing by XYZ Insurer B. If a new edition of the policy form used to write P's policy provides broadened coverage without an additional premium, XYZ Insurer must apply those changes to P's policy C. XYZ Insurer must notify the police in the event of a theft loss D. XYZ Insurer must provide written consent in order for P to assign the policy to someone else

C. XYZ Insurer must notify the police in the event of a theft loss. P is responsible for notifying the police in the event of a theft loss, not the insurer. This is provided for by the Duties in the Event of Loss condition. The Assignment condition requires the carrier's consent before the insured may transfer ownership of the policy to another. The Waiver or Change condition requires the carrier to make policy changes in writing. The Liberalization clause is an insurer provision that automatically applies broadened coverage to existing policies when a new edition of the policy form broadens coverage without increasing premiums.

In North Carolina, a violation of the Privacy Protection Act is punishable by all of the following, except: A. License suspension B. License revocation C. Up to $10,000 per violation D. $100,000 fine

D. $100,000 fine Violation of the Privacy Protection Act is punishable by a fine up to $50,000 may be imposed if multiple violations occur with such frequency that it is considered a general business practice.

ABC Industries has insured a factory building for $80,000. The replacement value is $150,000. If the commercial property policy insuring the building has an 80% coinsurance clause, how much will ABC's insurer pay for a $12,000 covered loss? A. $10,000 B. $9,600 C. $12,000 D. $8,000

D. $8,000 The insurer will only pay for $8,000 (two-thirds) of the covered loss. The coinsurance requirement specifies that ABC Industries must maintain insurance equal to 80% of the replacement cost. 80% of $150,000 equals $120,000. Because the amount of insurance the insured holds is only two-thirds of the required amount ($80,000 of the required $120,000), the loss payment is subject to a comparable penalty.

Whenever an insurer changes the coverage, other than at the request of the insured, or changes the premium rate for a Homeowners policy, the insurer must give the insured at least how many days' advance written notice of the change? A. 5 B. 7 C. 10 D. 15

D. 15 Whenever an insurer changes the coverage, other than at the request of the insured, or changes the premium rate, the insurer must give the insured at least 15 days' advance written notice. This does not apply to Workers' Compensation or Employers Liability insurance.

Under the Broad Form (DP-2), what limit of insurance is available for fair rental value and additional living expenses coverages? A. 30% of the Coverage A limit B. 10% of the Coverage A limit C. 50% of the Coverage A limit D. 20% of the Coverage A limit

D. 20% of the Coverage A Limit The Broad and Special forms provide up to 20% of the Coverage A limit of insurance for indirect losses covered under Coverage D and E. The Basic Form, which does not have Coverage E - Additional Living Expenses, provides up to 20% of the Coverage A limit for Coverage D losses.

Which statement about watercraft coverage provided by a Homeowners policy is correct? A. Theft of a boat while away from the premises is covered by the policy B. Liability coverage is provided when a sailing vessel the insured owns is rented out to others C. Hail losses to watercraft located outdoors are covered by the policy D. A $1,500 special limit applies to watercraft damaged by a covered peril

D. A $1,500 special limit applies to watercraft damaged by a covered peril. Watercraft and their trailers, furnishings, equipment, engines, and motors are subject to a $1,500 special limit under Coverage C. Coverage is not provided for watercraft liability while the watercraft is rented out to others. Off-premises theft of watercraft is not covered by the policy. Wind and hail losses are covered only while the watercraft is located in a fully enclosed building.

The HO-3 covers losses to other structures causes by which of the following perils? A. Wear and tear B. Smoke from agricultural smudging C. Smog or rust D. Abrupt collapse from defective construction materials

D. Abrupt collapse from defective construction materials Collapse is covered as an Additional Coverage on Homeowners policies, subject to specific terms, like the collapse being abrupt and resulting from specified perils. Wear and tear, smog, rust, and smoke from agricultural smudging are named exclusions on the HO-3.

Agent U sells an insurance policy on behalf of an unauthorized insurer, despite knowing that the insurer is unauthorized in North Carolina. When the policyholder submits a claim, the insurer only pays for a portion of it. Agent U is subject to all of the following consequences, except: A. Agent U's license may be suspended, put on probation, revoked, or nonrenewed B. Agent U is convicted of a Class H felony C. Agent U is strictly liable for the unpaid portion of the claim D. Agent U is jointly liable with the unauthorized insurer to pay the remainder of the claim

D. Agent U is jointly liable with the unauthorized insurer to pay the remainder of the claim Anyone who transacts insurance for an unauthorized insurer is strictly liable for any unpaid claim. Knowingly placing insurance with an unauthorized insurer is a Class H felony, and unknowingly doing so is a Class 1 misdemeanor, with both instances making the agent subject to license suspension, probation, revocation, or nonrenewal.

Which of the following is considered a hostile fire? A. A fireplace containing a roaring wood fire B. The fire in the firebox of a furnace C. The fire in a trashcan being used to burn leaves D. An uncontrolled campfire in the woods

D. An uncontrolled campfire in the woods. Fire insurance is intended to insure against uncontrolled or hostile fires. Friendly fires, which are those fires that are confined to their intended place, are not subject to coverage.

All of the following are methods of loss valuation, except: A, Replacement cost B. Stated amount C. Actual cash value D. Blanket value

D. Blanket value There is no valuation basis called blanket value. A blanket limit is a method of writing insurance limits.

A company is building a new farm structure and wants to protect it during the construction process. Which Inland Marine form provides this coverage? A. Inland Marine forms do not cover farm structures B. Contractors Equipment Floater C. Bailee Customers Form D. Builders Risk Coverage

D. Builders Risk Coverage Builders Risk Coverage Form insures buildings and structures in the course of construction, including commercial, residential, and farm buildings. Coverage is provided on an open perils basis.

The insured can request the following initial information be added to a property policy issued in North Carolina, except: A. Basis rate B. Deficiency charge C. Property improvement credits D. Claim surcharge

D. Claim surcharge Upon request from the insured, the basis rate, deficiency charge, property improvement credits, and the rate at which the policy was written must be added to a property policy and provided upon request after any changes to the policy.

Yacht policies provide what kind(s) of coverage? A. Liability coverage only B. Hull coverage only C. Hull, protection and indemnity, and personal injury coverages D. Hull coverage and protection and indemnity coverage

D. Hull coverage and protection and indemnity coverage. Yacht policies will provide coverage for physical damage to the hull and protection and indemnity coverage for the insured's legal liability for bodily injury and damage to property of others.

The Insurance Guaranty Association provides coverage under which of the following circumstances? A. Applicant for insurance is ineligible due to claim history B. Applicant has been rejected by at least 2 property insurers C. Insurance company guarantees renewal of property and casualty policies D. Insurance company is insolvent

D. Insurance company is insolvent. The Insurance Guaranty Association provides a mechanism for the payment of covered claims to avoid financial loss to claimants or policyholders because of the insolvency of an insurer.

The National Flood Policy would not cover losses caused by which of the following? A. Mudslide caused by accumulation of water B. Overflow of inland or tidal waters C. Unusual and rapid accumulation or runoff of surface water D. Leakage of underground water systems

D. Leakage of underground water systems Underground leakage is not considered a flood. The NFIP definition of flood focuses on natural flood sources that result in the inundation of normally dry land.

R insures their home on a Broad Form Homeowners policy. When the dwelling is endangered by a fire on the neighboring premises, R removes personal property from the home to protect it from the potential loss. While removed, the personal property is covered on a(n): A. Broad Form perils basis B. Named perils basis C. Basic Form perils basis D. Open perils basis

D. Open Perils basis For all Homeowners policies, when property is removed from the premises because it is endangered by a covered peril, the property is insured on an open perils basis for up to 30 days while removed. This is provided by the Property Removed Additional Coverage.

An insured with comprehensive coverage under Part D of their Personal Auto policy would be protected in the event of all of the following physical damage losses, except: A. Earthquake B. Flood C. Theft D. Overturn of the vehicle

D. Overturn of the vehicle Part D - Coverage for Damage to Your Auto offers other than collision (comprehensive) coverage in the event the insured's auto is physically damaged or lost by theft, flood, or earthquake, among other perils. Overturn of the vehicle is included in the definition of collision, so overturn losses are excluded by comprehensive coverage.

After an auto accident, an at-fault driver, C, owes damages to Q for bodily injury. If the amount of damages owed to Q exceeds C's liability limits, Q's Personal Auto policy will: A. Apply its medical payments coverage to pay the remaining damages B. Provide excess liability coverage over the at-fault driver's policy C. Not provide coverage D. Pay to the insured the remaining damages under underinsured motorists coverage

D. Pay to the insured the remaining damages under underinsured motorists coverage. If one party is liable for paying damages for bodily injury to another party but does not have enough insurance to pay the full amount owed, the remaining amount is then covered by the injured party's underinsured motorists coverage, under Part C of their PAP. UIM coverage applies when the at-fault motorist has insurance meeting their state's minimum requirements, but not enough to cover the claims connected to the accident. Uninsured motorists coverage would apply if the at-fault motorist did not have insurance meeting the minimum requirements. In many states, UIM coverage might not be automatically provided by the policy.

The risk management technique of an insured who continues to have responsibility for a loss is known as: A. Transfer B. Reduction C. Avoidance D. Retention

D. Retention When the risk is retained, the insured party continues to have responsibility for covering the loss, as with self-insurance or a deductible. It is the opposite of risk transfer, which is when another party becomes responsible for the risk.

On an unendorsed property insurance policy, in the event of total loss to property as a result of a fire, the insurer is not liable beyond: A. The actual cash value of the property at the time of policy inception B. The replacement cost of the property at the time of loss C. The functional replacement cost of the property at the time of policy inception D. The actual cash value of the property at the time of loss

D. The Actual cash value of the property at the time of loss. The insurer is only liable up to the actual cash value of the insured property at the time of the loss, in the event of total loss. The insurer may pay up to the replacement cost or functional replacement cost if the insured has an endorsement to change the policy's loss settlement basis.

X is the named insured on a Personal Auto policy. After an uninsured motorist causes an accident, all of the following people could collect payments under Part C of X's Personal Auto policy, except: A. X's spouse, who was operating X's auto B. X, who was acting as a pedestrian when injured in the accident C. A passenger in X's auto D. The operator of the uninsured motor vehicle

D. The operator of the uninsured motor vehicle Part C - Uninsured Motorists Coverage provides coverage for insureds who suffer bodily injuries as a result of an accident caused by an uninsured motorist. Part C does not provide payments to the uninsured motorist. Insureds include the named insured and any family member. Passengers occupying the named insured's covered auto are also insureds. The owner or operator of the uninsured motor vehicle must be found to be legally responsible for bodily injury for coverage to apply.

Under Coverage C special limits of liability, Homeowners policies cover: A. Fire loss to money up to $500 B. Theft of guns up to $3,000 C. Fire loss to watercraft up to $2,500 D. Theft of furs and jewelry up to $1,500

D. Theft of furs and jewelry up to $1,500. The limit for loss by theft of jewelry and furs is $1,500. Money is covered up to $200, theft of firearms and related equipment is covered up to $2,500, and watercraft are covered up to $1,500.

All of the following statements about supplementary payments provided by Commercial General Liability policies are correct, except: A. they pay claim-related expenses incurred by the insurer. B. They include the cost of bail bonds up to $250. C. They apply to costs incurred when a claim is made against the insured for their bodily injury and property damage liability. D. They reduce the limits of insurance.

D. They reduce the limits of insurance. Supplementary payments do not reduce the limits of insurance. This coverage only applies to Coverage A - Bodily Injury and Property Damage Liability and Coverage B - Personal and Advertising Injury Liability, as only Coverages A and B include the insurer's duty to defend.

L and S own and occupy a single-family home that they insure on a Special Form Homeowners policy. If the policy includes no endorsements, L and S may have up to how many roomers or boarders and still maintain their eligibility for Homeowners insurance? A. Five B. None C. Three D. Two

D. Two Eligible dwellings include those that have 1 to 4 residential units with no more than 2 roomers or boarders per family.

The insurer's duty to defend the insured, as provided by Section II of a Homeowners policy, ends: A. If the claim is groundless B. If the insured becomes bankrupt or insolvent C. When the insured admits they were negligent D. When the damages awarded against the insured exhaust the personal liability limit

D. When the damages awarded against the insured exhaust the personal liability limit. Once the Coverage E limit is exhausted by the payment of damages for bodily injury or property damage awarded against the insured, the insurer's duty to defend ends. Under the Bankruptcy condition, bankruptcy or insolvency of the insured does not relieve the insurer of its obligations under the policy.

C is at fault in a major car accident and is subject to a $100 surcharge on C's auto policy. C is then convicted of a traffic violation related to the accident, which is subject to a $75 surcharge. What surcharge is assessed on C's policy? A. $75 B. $100 C. $150 D. $175

b. $100 If an insured is at fault in an accident and is then convicted of a moving traffic violation in connection to the accident, only the higher premium surcharge between the accident and conviction may be assessed on the policy.