EXAM 4

#1. Circulating deceptive sales material to the public is what type of Unfair Trade Practice? a) False advertising b) Defamation c) Coercion d) Misrepresentation

a) False advertising This is considered to be false, deceptive or misleading advertising.

#50. A policyholder has an equipment breakdown policy with a $200000 limit. If a boiler explosion causes $100000 damage to the boiler itself $50000 damage to the insured's building and $30000 of expediting expenses how much will the insured collect under the policy? a) $175000 b) $180000 c) $200000 d) $100000

a) $175000 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 expense does not exceed $25,000.

#17. Using an air-cooled engine a proposed insured has developed a new experimental aircraft. If the inventor applies for liability insurance what rating type will the insurer most likely use? a) Judgment b) Class c) Schedule d) Merit

a) Judgment Because there are few similar aircraft, it is not possible to rate the risk based upon history or experience. For those reasons, a judgment rating is the most likely system.

#30. Under the dwelling policy if an insurer chooses to repair or replace damaged or lost property it must inform the insured within how many days of receiving proof of loss? a) 10 days b) 30 days c) 45 days d) 60 days

b) 30 days The insurer has 30 days to tell the insured that it has chosen to repair or replace the covered property.

#19. The commercial property declarations page contains which of the following information? a) Interline endorsements b) Cause of loss forms c) Description of the property insured d) Common policy conditions

c) Description of the property insured The declarations page provides the information as to who, what, when, where, and how much. The interline endorsements, policy conditions, and cause of loss forms are modular parts that are combined to create the contract.

#48. Which of the following will be covered by the contractors equipment floater in an unfiled inland marine insurance? a) Mobile equipment owned by construction equipment dealers b) Any type of mobile equipment c) Mobile equipment during transportation to and from the job site d) Mobile equipment only while it is located on the job site

c) Mobile equipment during transportation to and from the job site The contractors equipment floater is an unfiled inland marine coverage form used to insure mobile equipment and contractor's equipment owned, rented, or borrowed by contractors (as opposed to dealers).

#22. According to the loss payment condition in HO policies losses must be paid within how many days of the insurer receiving proof of loss? a) 30 days b) 60 days c) 90 days d) 120 days

b) 60 days All losses will be paid within 60 days of receiving the proof of loss.

#96. Professional photographers and musicians may insure their equipment with a) A commercial articles floater. b) A theatrical property coverage form. c) A contractors equipment floater. d) An installation floater.

a) A commercial articles floater. The commercial articles form covers photo equipment or musical instruments used commercially, such as by a professional band.

#25. The part of the policy that sets forth the rules of conduct duties and obligations of the parties is called the a) Conditions. b) Exclusions. c) Declarations. d) Insuring clause.

a) Conditions. The conditions is the part of an insurance policy that sets forth the obligations and duties of the insurer and the insured.

#38. Which of the following dwelling policy forms primarily insures a structure on an actual cash value basis? a) DP-1 b) DP-2 c) DP-3 d) All DP forms

a) DP-1 DP-1 insures the structure on an actual cash value basis. DP-2 and DP-3 insure the structure on a replacement cost basis.

#28. In forming an insurance contract when does acceptance usually occur? a) When an insurer's underwriter approves coverage b) When an insurer delivers the policy c) When an insurer receives an application d) When an insured submits an application

a) When an insurer's underwriter approves coverage In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

#27. What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? a) Revocation of license b) $2500 c) $1000 d) $100 per violation

b) $2500 An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2,500.

#60. Elaborate homes and those with detailed designs or decorative architecture with replacement costs greater than ACV or market value are insured on a) HO-3 with an HO-15 endorsement. b) HO-8. c) HO-8 with an inflation guard endorsement. d) HO-3.

b) HO-8. HO-8 is used to insure houses with replacement cost more than market value and those built with irreplaceable materials. It is a modified HO-1 and provides ACV coverage for Coverage A.

#90. The policy conditions define a) The amount of coverage. b) How parties to the contract must act following a loss. c) The basic underwriting information. d) The excluded perils.

b) How parties to the contract must act following a loss. Conditions is an essential part of a policy structure. Conditions define what each party to the policy is required to do contractually in the event of a loss.

#68. The businessowners policy liability coverage will pay for necessary medical expenses of others incurred within what maximum time period? a) 90 days b) 120 days c) 1 year d) 3 years

c) 1 year Medical payments coverage of a businessowners policy (BOP) will pay medical dental hospital and funeral services incurred within one year from the date of an accident to a person who suffers bodily injury by accident on or next to the insured's premises or because of the insured's operations.

#70. Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to a) 3 years. b) 5 years. c) 10 years. d) 12 years.

c) 10 years. Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.

#63. Which of the following could be covered by an HO policy? a) A sports car kept in an attached garage b) Property of a tenant not related to the insured c) An oriental rug in an on-premises apartment d) Birds fish and animals

c) An oriental rug in an on-premises apartment Homeowners contents coverage does not apply to animals, cars, or property of those who pay to be at your house it does provide up to $2,500 for a loss of landlord's furnishings in an on-premises apartment.

#81. Homeowners policies provide coverage for a) The land under the residence. b) Property of tenants roomers or boarders not related to any insured. c) Business property while on the residence premises. d) Losses caused by off-premises power failure.

c) Business property while on the residence premises. Your contents coverage will cover up to a $2,500 for loss of business property on premises.

#61. Which of the following is true regarding the fire department service charge under the builders risk form? a) It is not available in this form. b) It is a high-deductible endorsement. c) It is an additional coverage. d) It is an automatic coverage for $500.

c) It is an additional coverage. The fire department service charge is considered an additional amount of insurance. Up to $1,000 coverage is included.

#91. An insured unintentionally accepted forged currency during the course of regular business. Which of the following crime coverages protects against such a loss? a) Inside the premises - theft of money or securities b) Forgery or alteration c) Money orders and counterfeit paper currency d) Employee theft

c) Money orders and counterfeit paper currency Money orders and counterfeit paper currency provides coverage for loss resulting directly from the insured having accepted, in good faith, money orders issued by any post office, express company, or bank that are not paid upon presentation.

#4. In what way can an agent demonstrate a high standard of ethics? a) Setting and meeting monthly production goals b) Recommending qualified retirement plans to each client c) Putting the client's best interests before their own d) Making enough commissions to cover personal expenses

c) Putting the client's best interests before their own The needs of the client(s) are the priority to a highly ethical agent.

#43. When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss the coverage is said to be written as a) Actual cash value. b) Specific insurance. c) Stated amount. d) Replacement cost.

c) Stated amount. In stated amount coverage, the value of the insured property is determined at the time the policy is written. In the event of a loss, that amount is paid without regard to any coinsurance provision. However, if the loss is less than total, the insurer has salvage rights with the insured having first right of refusal of the salvage.

#87. Which of the following statements regarding coverage for the flood and earthquake perils is true? a) Flood and earthquake coverage is available in all policies. b) Flood and earthquake coverage is available only through government insurance. c) Flood insurance is usually provided in property policies but earthquake coverage is available by endorsement only. d) Both flood and earthquake are excluded perils in all property policies.

d) Both flood and earthquake are excluded perils in all property policies. Flood and earthquake are both excluded perils in all property policies. However, coverage for both or either one usually can be purchased separately for an additional premium (by endorsement).

#49. When does a property's fair value determined? a) Upon policy cancellation b) When a claim is submitted c) Upon a loss d) On the effective date of the policy

d) On the effective date of the policy The fair value is determined as of the effective date of the insurance or the effective date of policy renewal.

#77. An insured relocated to another state for work. However she still owns and insures a house in this state but has had no one living in it for 3 months. She is also storing some furniture and clothes in the house. From an insurance standpoint the insured's house is considered a) Condemned. b) Under repair. c) Vacant. d) Unoccupied.

d) Unoccupied Unoccupancy refers to an insured structure in which no people have been living or working within the required period of time, but the structure contains contents.