Chapter 3

A Standard Mortgage Clause: A) Addresses the legitimate security interest of real property B) Addresses the legitimate security interest of personal property C) Addresses the ownership interests in temporary property D) Addresses the lease interests in contingent property

A) Addresses the legitimate security interest of real property

Which of the following policy structure components sets forth the insured's and insurer's rights and duties? A) Conditions B) Declarations C) Insuring Agreement D) Exclusions

A) Conditions

Which of the following policy structure components describes insurance terms? A) Definitions B) Declarations C) Insuring agreement D) Exclusions

A) Definitions

The Pro-rata Other Insurance Provision provides: A) Proportional coverage to losses when two or more policies apply B) Excess coverage to losses when two or more policies apply C) Primary coverage to losses when two or more policies apply D) Contribution by equal shares when two or more policies apply

A) Proportional coverage to losses when two or more policies apply

An insurance contract feature that permits all ambiguous areas to be construed in favor of the insured is: A) Aleatory B) Adhesion C) Utmost good faith D) Fraud

B) Adhesion

The insured, under contract of insurance, includes: A) only the named insured as listed in the declarations B) Anyone that may be covered by the insurance C) Only the owners of the property insured D) None of the above

B) Anyone that may be covered by the insurance

Which of the following policy structure components indicates the named insured, address, policy, and related specifics about the risk insured? A) Endorsements B) Declarations C) Insuring Agreement D) Exclusions

B) Declarations

Excess coverage would apply to a loss after: A) Agreed value coverage B) Primary coverage C) Named peril coverage D) Special form coverage

B) Primary coverage

The voluntary relinquishment of a known right is: A) Estoppel B) Waiver C) Subrogation D) Arbitration

B) Waiver

The type of authority that is specifically defined in a producer's agreement is: A) implied authority B) express authority C) apparent authority D) waiver authority

B) express authority

Which of the following is a common provision found in liability policies that promotes claim settlements and helps in reducing legal expenses? A) Subrogation B) Adhesion C) Arbitration D) Abandonment

C) Arbitration

The authority granted by an insurer that allows a producer to put coverage into effect before it is approved by the insurer, BEST describes: A) agency authority B) implied authority C) Binding authority D) Apparent authority

C) Binding authority

What term describes the failure of an applicant to disclose a material fact in the application for insurance? A) Representation B) Misrepresentation C) Concealment D) Aleatory

C) Concealment

A provision found in some professional liability policies that requires the insurer to secure approval of the insured prior to settlement is the: A) Approval provision B) Professional provision C) Consent to settle provision D) Concurrence provision

C) Consent to settle provision

Which of the following are primary components that make up the typical property casualty insurance policy? A) Declarations, Insuring agreement, Conditions, and Exemptions B)Declarations, Implied agreement, Conditions, and Exclusions C) Declarations, Insuring agreement, Conditions, and Exclusions D) Definitions, Insuring agreement, Conditions, and Exclusions

C) Declarations, Insuring agreement, Conditions, and Exclusions

All of the following are essential elements of a contract EXCEPT: A) Consideration B) Legal purpose C) Incompetent parties D) Agreement (offer and acceptance)

C) Incompetent parties

Policies that cover the same property but on a different coverage basis is: A) Similar coverage B) Concurrent coverage C) Nonconcurrent coverage D) Open Peril coverage

C) Nonconcurrent coverage

Which of the following is NOT required of an insured after a loss? A) Notify the insurer as soon as possible B) Protect property from further loss C) Notify a public adjuster D) Notify police in case of theft

C) Notify a public adjuster

All of the following are examples of the underwriting process EXCEPT: A) Gathering of information for an underwriting decision B) Reviewing MVR's consumer reports and loss histories on prospective insureds C) Paying the insured a fair settlement after a loss occurs D) Approving submission for coverage

C) Paying the insured a fair settlement after a loss occurs

The legal right of an insurer to seek reimbursement from a negligent third party is: A) Parol Evidence Rule B) Warranty C) Subrogation D) Adhesion

C) Subrogation

The Transfer of Rights and Duties Provision under a typical policy: A) is never permitted B) is only permitted with the written consent of the insured C) is only permitted with the written consent of the insurer D) is only permitted with the consent of the Insurance Commissioner

C) is only permitted with the written consent of the insurer

All of the following are correct statements concerning first named insureds EXCEPT: A) First named insured is the primary person responsible for contractual duties B) First named insured is responsible for paying insurance premiums C)First named insured is responsible for pursuing subrogation D) First named insured is responsible for canceling the policy

C)First named insured is responsible for pursuing subrogation

If Policy A's limit is $75,000 and Policy B's limit is $25,000, how much would each policy pay under contribution by equal shares in the event of a $100,000 loss? A) Policy A pays $50,000 and policy B pays $50,000 B)Policy A pays $25,000 and policy B pays $75,000 C)Policy A pays $75,000 and policy B pays $25,00 D)Policy A pays $100,000 and policy B pays $0

C)Policy A pays $75,000 and policy B pays $25,00

If Policy A's limit is $75,000 and Policy B's limit is $25,000, how much would each policy pay under proration by face amount in the event of a $100,000 loss? A) Policy A pays $50,000 and policy B pays $50,000 B)Policy A pays $25,000 and policy B pays $75,000 C)Policy A pays $75,000 and policy B pays $25,000 D)Policy A pays $100,000 and policy B pays $0

C)Policy A pays $75,000 and policy B pays $25,000

The purpose of being named as an additional insured is: A)To avoid purchasing insurance B)To eliminate liability when responsible C)To have the responsible entity provide primary coverage in the event of claim D)To secure protection from criminal prosecution

C)To have the responsible entity provide primary coverage in the event of claim

Which of the following policy structure components alters the initial policy declarations A) Definitions B) Declarations C) Insuring Agreement D) Endorsements

D) Endorsements

Which of the following policy structure components specifically eliminates coverage? A) Definitions B) Declarations C) Insuring Agreement D) Exclusions

D) Exclusions

All of the following are characteristics of insurance contracts EXCEPT: A) Aleatory contract B) Personal contract C) Adhesion contract D) Exculpatory contract

D) Exculpatory contract

Which of the following is NOT a type of warranty? A) Affirmative warranty B) Continuing or promissory warranty C) Implied warranty D) Guaranteed warranty

D) Guaranteed warranty

The principle of insurance that restores one to approximately the same condition that they enjoyed prior to their loss is: A) Valued contracts B) Subrogation C)Retention D) Indemnification

D) Indemnification

Which of the following is CORRECT of the Contribution by Equal Shares provision? A) Losses are paid equally by all policies B) After one policy is exhausted, all other policies cease payment C) Contributions are proportional based upon face amount D) Losses are paid equally until one policy is exhausted, requiring the second policy to pay until the claim is satisfied or the second policy is exhausted

D) Losses are paid equally until one policy is exhausted, requiring the second policy to pay until the claim is satisfied or the second policy is exhausted

Which of the following is sufficient enough to have an insured deny a claim? A) a misstatement B) An untrue statement C) Not advising a producer of a loss D) Making a material misrepresentation

D) Making a material misrepresentation

Which of the following is NOT a duty of the insured? A) Pay the premium B) Provide prompt notice of loss C) Protect property from further damage D) Pursue subrogation

D) Pursue subrogation

All of the following are duties of the insurer EXCEPT: A) Pay losses according to provisions of the policy B) Advise the insured in writing of cancellation C) Return premiums due the insured D) Reject losses without proper notification

D) Reject losses without proper notification

What term describes the statement made by an individual at application? A) warranty B) concealment C) Misrepresentations D) Representations

D) Representations

The Transfer of Rights of Recovery Provision under a typical policy provides for all of the following EXCEPT: A) Provides the insurer the authority to bring legal action against negligent third parties only to the extent of the insured loss B)Subrogation is closely related to the Principle of Indemnity C) Subrogation eliminates the possibility of the insured collecting twice D) Subrogation is only provision of commercial policies

D) Subrogation is only provision of commercial policies

All of the following are characteristics of the Law of Agency EXCEPT: A) The legal relationship that exists when one acts for another B) It is a fiduciary relationship consisting of a principal and an agent C) When agency is legally formed, the agent binds the principal to his actions D) The knowledge of the agent is not imputed to the principal

D) The knowledge of the agent is not imputed to the principal

All of the following are types of authority that a producer may be granted, or may assume EXCEPT: A) Express authority B) Implied authority C) Apparent authority D) Waiver authority

D) Waiver authority

Which of the following is NOT part of the claims process? A) Appraisal B) Subrogation C) Submit a Proof of Loss D) Warranty

D) Warranty

If Policy A's limit is $100,000 and Policy B's limit is $50,000, how much would each policy pay under proration by face amount in the event of a $100,000 loss? A) Policy A pays $50,000 and policy B pays $50,000 B)Policy A pays $33,333 and policy B pays $33,333 C)Policy A pays $33,333 and policy B pays $66,667 D)Policy A pays $66,667 and policy B pays $33,333

D)Policy A pays $66,667 and policy B pays $33,333