EXAM FX practice questions
With regards to a homeowners policy, which coverage provides for indirect or consequential losses? a)Coverage C b)Coverage D c)Coverage A d)Coverage B
Coverage D provide for loss of use, which is an indirect loss.
FAIR Plans are state insurance pools that provide property insurance to high risks areas, such as neighborhoods that have deteriorated or are in urban decay. What does the acronym FAIR stand for? a)Federal Association of Insurance Regulators b)Free Assistance for Insured Residents c)Fundamental Access to Insurance Regulations d)Fair Access to Insurance Requirements
Fair Access to Insurance Requirements FAIR Plans (Fair Access to Insurance Requirements) are state insurance pools that provide property insurance to high risks areas, such as neighborhoods that have deteriorated or are in urban decay.
An insured has an auto liability policy with limits of 25/50/15. The insured is involved in an accident caused by her negligence and is held legally liable for bodily injuries of 3 persons in the other auto as follows: "A" $15,000, "B" $30,000, and "C" $35,000. How much will her insurer pay in total for all injuries? a)$50,000b)$105,000c)$25,000d)$30,000
a)$50,000 The first limit shown is the most the policy will pay for injuries to any one person. The second limit is the most the policy will pay for all injuries if more than one person is injured in a single accident. The third limit is the most the policy will pay for property damage resulting from a single accident.
Which of the following would be included in the farm liability coverage forms? a)Bodily injury to a residence employee b)Any obligation of the insured under a workers compensation law c)Bodily injury to any person who is an insured d)Bodily injury to an employed farmhand
a)Bodily injury to a residence employee Just like HO liability, farm liability does not pay for injuries of anyone normally at the insured location except residence employees not covered by workers comp.
A producer who fails to separate premium monies from his own personal funds is guilty of a)Commingling .b)Larceny. c)Embezzlement .d)Theft.
a)Commingling. It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.
Which of the following authorities monitors the financial strength of insurers? a)Department of Insurance b)National Association of Insurance Commissioners (NAIC) c)Financial Industry Regulatory Authority (FINRA) d)Insurance companies
a)Department of Insurance The Commissioner and the Department of Insurance are charged with monitoring the financial strength and integrity of insurers authorized to conduct business in Pennsylvania in order to determine whether the continued operation of any insurer might be financially hazardous to policyholders, creditors, or to the public in general.
Directors and officers liability insurance defends actions against a corporation or its officers and directors alleging wrongful acts. With regard to the coverage provided, wrongful acts include any of the following EXCEPT a)Embezzlement. b)Misstatements. c)Neglect. d)Breach of duty.
a)Embezzlement. Embezzlement is a criminal act. There is no "standard" director and officers policy; however, most policies specifically exclude coverage for defense or payment of claims resulting in fines or penalties resulting from criminal acts, nor will they pay punitive damages.
If an employer in a state with elective workers compensation laws chooses not to be subject to those laws, what does the employer lose? a)Its common law defenses against liability suits b)Its ability to provide group health insurance c)Its right to hire persons with disabilities d)Its eligibility for workers compensation insurance
a)Its common law defenses against liability suits Elective law means the employer does not have to be subject to the state's workers compensation laws, but if the employer chooses not to be subject to the laws, it loses its common law defenses against liability suits.
Which rating method provides an insurer with that portion of a rate that does not include provisions of expenses (other than adjusting expense) or profit and is based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time? a)Loss costs rating b)Provision rating c)Profit rating d)Components rating
a)Loss costs rating Loss costs is a rating method developed by the Insurance Services Office Inc. (ISO) that provides an insurer with that portion of a rate that does not include provisions of expenses (other than adjusting expense) or profit and are based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time.
A business uses its own trucks to deliver their own products to the customer. Which commercial auto coverage form should the business buy to insure the trucks? a)Motor carrier coverage b)Business auto physical damage c)Commercial carrier coverage d)Truckers liability
a)Motor carrier coverage The motor carrier coverage form can cover anyone who transports goods. Private carriers can be insured under the business auto coverage form or the motor carrier coverage form.
Which of the following statements is true regarding the commercial general liability policy's Coverage C - Medical Payments? a)The coverage is considered good will because payments are made without regard to fault. b)The coverage applies to bodily injury to the named insured. c)The coverage is liability insurance because it pays only if the insured is legally liable. d)The coverage provides high limits of insurance for bodily injury losses.
a)The coverage is considered good will because payments are made without regard to fault. Coverage C - Medical Payments provides necessary medical, surgical, ambulance, hospital, nursing or funeral expenses for injuries to third parties. Payments will be paid without regard to the fault or negligence of the insured.
The medical payments coverage in a personal auto policy will pay reasonable medical expenses for all of the following EXCEPT a)The insured is injured while exiting a friend's mobile home. b)The insured is injured by a motor vehicle while crossing the street. c)The insured's child sustains injuries when the car she is in accidentally rolls down a hill. d)A friend is injured while driving the insured's vehicle with permission.
a)The insured is injured while exiting a friend's mobile home. Medical payments only provide coverage to the insured and any passengers in the insured's vehicle. Injuries to other persons are covered by a personal auto policy (PAP) liability coverage.
Shipbuilders and repairers are covered by the a)U.S. Longshore and Harbor Workers Compensation Act .b)Jones Act. c)States' workers compensation laws d)Federal Employers Liability Act.
a)U.S. Longshore and Harbor Workers Compensation Act. The U.S. Longshore and Harbor Workers Compensation Act is a federal law offering workers compensation benefits for workers who are injured on navigable water who are normally not covered by state workers compensation laws.
Which of the following statements is INCORRECT? a)A licensee may charge a fee in addition to a commission to a person for the sale, solicitation or negotiation of a contract of insurance for commercial business. b)A licensee is barred from charging a fee in addition to a commission to a person for the sale, solicitation or negotiation of a contract of insurance for commercial business. c)No insurance producer may charge a fee for the completion of an application for a contract of insurance. d)The fee charged by the licensee must be disclosed in advance in writing to the person and must be reasonable in relationship to the services provided.
b) A licensee is barred from charging a fee in addition to a commission to a person for the sale, solicitation or negotiation of a contract of insurance for commercial business. A licensee may charge a fee in addition to a commission to a person for the sale, solicitation or negotiation of a contract of insurance for commercial business. The fee charged by the licensee must be disclosed in advance in writing to the person and must be reasonable in relationship to the services provided. Insurance producers cannot charge a fee for the completion of an application for a contract of insurance.
An insured has $5,000 of medical coverage on a personal auto policy at the time of a covered accident. The insured and two passengers are injured. Medical treatment costs $7,000 for the insured, $4,000 for the first passenger, and $8,000 for the second passenger. How much will the policy pay under medical payments coverage? a)$5,000 minus the policy deductible b)$14,000 c)$15,000 d)$5,000 maximum for the accident
b)$14,000 The limit is not more than $5,000 per person, per accident.
Under Coverage C of a farm policy, what is the limit payable on business property located away from the premises? a)$250 b)$500 c)$1,000 d)$100
b)$500 Business property located away from the premises is covered for up to $500.
If the actual values 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 a)10%. b)25%. c)30%. d)50%.
b)25%. The BOP contains a seasonal increase provision that automatically increases the limit of insurance for business personal property by 25% if the actual values exceed the limit of insurance.
An individual was just caught acting as an exclusive general agent - even though he is not properly licensed. Assuming that this occurred in a single day, what is the maximum penalty he faces? a)A second-degree felony and a $10,000 fine b)A third-degree misdemeanor and a $1,000 fine c)A second-degree misdemeanor and a $1,000 fine d)A third-degree felony and a $10,000 fine
b)A third-degree misdemeanor and a $1,000 fine In Pennsylvania, acting as a manager or exclusive general agent without proper licensing is punishable by a third-degree misdemeanor charge and a fine of up to $1,000 for each day of their offense.
Which of the following could be covered by an HO policy? a)Property of a tenant not related to the insured b)An oriental rug in an on-premises apartment c)Birds, fish, and animals d)A sports car kept in an attached garage
b)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.
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's a)Prior insurance. b)Ancestry .c)Credit history. d)Habits.
b)Ancestry. The Fair Credit Reporting Act regulates what information may be collected and how the information may be used. Consumer Reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources. Ancestry is not a relevant factor assessed in these reports.
Which of the following would NOT be covered under the liability section of a personal auto policy? a)Property damage to a store front while the insured driver is under the influence b)Bodily injury caused by the insured's negligence while driving a three-wheel all-terrain vehicle c)Property damage caused by a trailer detaching from an insured vehicle d)Bodily injury resulting from an accident while a person other than the named insured is operating the vehicle
b)Bodily injury caused by the insured's negligence while driving a three-wheel all-terrain vehicle Vehicles with fewer than four wheels are not eligible for coverage under a PAP.
All of the following are licensing requirements for a business entity, EXCEPT a)Applying for a license in the same lines of authority as held by licensed designees. b)Having all employees complete continuing education courses once every 2 years. c)Demonstrating general fitness, competence, and reliability. d)Maintaining on staff at least 1 licensed person in good standing.
b)Having all employees complete continuing education courses once every 2 years. When applying for insurance producer licenses, business entities must have at least 1 designated licensee, in good standing with the Department; apply for licensure in the same lines of authority held by the designated licensees; have not committed any prohibited acts; be owned, operated, and managed by persons possessing general fitness, competence, and reliability; and pay all applicable fees.
A Mobile Homeowners Policy is structured the same as a)Commercial Package Policy. b)Homeowners Policy .c)Personal Auto Policy. d)Dwelling Policy.
b)Homeowners Policy. The coverage structure of the Mobile Homeowners Policy follows the structure of the Homeowners policy.
Rates that are established based on the similarities of the risk with other risks are known as a)Merit rates .b)Manual rates. c)Experience rates. d)"A" rates.
b)Manual rates. Rates that are established by similarity of risk are manual rating or class rates.
What type of information would be found in a policy's insuring agreement? a)Insurer's address b)Renewal dates c)Location of premises d)Policy limits
b)Renewal dates An Insuring Agreement establishes the obligation of the insurance company to provide the insurance coverages as stated in the policy. The insuring agreement lists the parties to the contract, effective and renewal dates, the description of coverage provided, and perils (among other things). Location of premises, policy limits, supplemental representations, and insurer's name and address can all be found in the Declarations.
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must a)Send an actual certified copy of the entire report to the consumer. b)Respond to the consumer's complaint .c)Defend the report if the agency feels it is accurate. d)Change the report.
b)Respond to the consumer's complaint. The consumer has the right to request the information on the report, the reasons for turn down and any adverse underwriting decisions. The reporting agency is required to respond to the consumer's complaint, and, if necessary, to reinvestigate the report.
Workers compensation statutes require employers to meet capital reserves requirements sufficient to pay any claims that might arise. Employers can meet such obligations through all of the following EXCEPT a)Competitive state funds. b)Second injury funds programs. c)Self-insurance plans. d)Assigned risk plans.
b)Second injury funds programs. Second injury funds are a method by which employers manage the risks associated with the hiring of previously injured potential employees.
When an insurer cancels, midterm, a commercial property or casualty insurance policy for an allowable reason, they must a)Send or deliver a "Notice of Nonrenewal" 30 days prior to the effective date of cancellation. b)Send or deliver a "Notice of Cancellation" at least 60 days prior to the effective date of cancellation and state the reason for the cancellation. c)Refund unearned premiums prior to the effective date of cancellation. d)None of the above
b)Send or deliver a "Notice of Cancellation" at least 60 days prior to the effective date of cancellation and state the reason for the cancellation. In the event of midterm cancellation, the insurer must send to the first named insured "Notice of Cancellation" form by first class or registered mail or deliver directly to the insured by the insurer, advanced notice of at least 60 days prior to the effective date of the cancellation, with the specific reason(s) for the cancellation.
A specific coverage part is listed on the commercial package policy declarations page, but there is no premium shown. What does that mean? a)Coverage is automatic. b)There is no coverage. c)Coverage applies without premium. d)This must be a misprint on the form.
b)There is no coverage. If no premium amount is shown, there is no coverage for that coverage part.
Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within what maximum time period? a)90 days b)1 year c)3 years d)5 years
c)3 years A coverage requirement in the policy states that medical expenses must be incurred within three years of the accident. The services also must be rendered within that time period.
A licensed producer moving to Pennsylvania may become licensed as a resident if the producer submits a completed application within how many days of establishing residence in Pennsylvania with proof of licensing from their prior home state? a)30 b)60 c)90 d)180
c)90 Nonresident producers may become resident producers if they submit a completed application within 90 days of establishing residence in Pennsylvania with proof of licensing from their prior home state.
A producer sold an insurance policy. Subsequently, his license was suspended. In this case, how much of the commission will the producer receive? a)Quarter b)None c)All d)Half
c)All An insurance entity or licensee cannot pay a commission or fee to a person if the person's license is suspended or revoked. However, a commission may be paid if the person was licensed at the time of the sale.
Which of the following would be considered an insured under a business auto coverage form? a)Anyone using a covered auto while working in a business of selling, servicing, repairing, or parking autos if it is not the named insured's business b)A partner of the named insured for any covered auto owned by that person or a member of his or her household c)Anyone while using, with permission, a covered auto owned by the named insured d)The owner or anyone else from whom the named insured hires or borrows a covered auto
c)Anyone while using, with permission, a covered auto owned by the named insured The business auto coverage form provides coverage on covered autos while used by the insured or employees of the insured (or others using the covered auto with permission) but does not cover the exposure of other autos not owned, hired, or leased by the named insured.
In which of the following sections of a commercial auto policy will you find specific information about the policy period? a)Selected endorsements b)Definitions c)Conditions d)Additional coverages
c)Conditions The conditions section of an auto policy defines coverage in greater detail and determines such things as policy period, coverage territory, and how coverage will apply in certain situations.
All of the following are supplemental payments found in liability policies EXCEPT a)Reasonable expenses incurred by the insured. b)Limited amounts for bail bonds and other bonds related to a claim. c)Costs the insured incurred in hiring an attorney. d)All expenses and defense costs incurred by the insurer.
c)Costs the insured incurred in hiring an attorney. Supplemental payments pay the insurance company's expenses and will not pay expenses incurred by the insured unless incurred at the insurer's request.
Which of the following is a mandatory part of an insurance policy that varies with each individual policy? a)Exclusions b)Insuring agreement c)Declarations d)Conditions
c)Declarations Because the declarations tell who, what, when and where, this information is different in each contract.
All of the following are conditions commonly found in the insurance policy EXCEPT a)Subrogation .b)Appraisal. c)Insuring agreement. d)Cancellation and nonrenewal.
c)Insuring agreement. The insuring agreement provides information on the policy's coverages. Conditions state the legal obligations and duties of the parties to the contract.
A loss has occurred before the first report has been filed on a value reporting coverage form. Which is NOT true? a)Full amount of loss up to the policy limit is paid if the loss occurs before the first report due date. b)75% of the loss is paid if the loss occurred after the first report due date. c)Never more than 75% of the loss is paid. d)Provisional premium is based on 75% of the full amount of coverage.
c)Never more than 75% of the loss is paid. If the loss is before the first report is due, full amount of the loss will be paid. Because provisional premium is based on 75% of the full amount of coverage, only 75% of the loss is paid if the first report is overdue.
What is the term for the entity that an agent represents regarding contractual agreements with third parties? a)Designee b)Insured c)Principal d)Client
c)Principal An agent represents the principal, acting on the entity's behalf in contractual agreements with third parties.
The most the insurer will pay for a loss under a businessowners policy is a)80% of the loss. b)20% of the loss. c)The limit of insurance after the deductible is paid. d)The amount of the loss minus the deductible.
c)The limit of insurance after the deductible is paid. For losses covered under a businessowners policy, the insured must pay a deductible, after which the insurer will pay up to the limit of insurance.
An insured hits a deer and crashes his car into a tree. The total damage to the vehicle is $6,000. How will this loss be covered? a)$3,000 would be paid under other-than-collision; $3,000 would be paid under collision coverage. b)$6,000 would be paid under collision coverage. c)This would not be a covered loss. d)$6,000 would be paid under other-than-collision coverage.
d)$6,000 would be paid under other-than-collision coverage. Because the proximate cause of the loss was contact with an animal, all of the damage would be paid under other-than-collision coverage.
A producer has successfully completed 52 hours of continuing education (CE). How many hours can the producer apply to her current reporting period, and how many hours can she carry toward the next reporting period? a.)24 hours will be applied to the current reporting period, and 28 can be applied to the period immediately following. b)26 hours will be applied to the current reporting period, and the remaining 26 can be applied to the period immediately following. c)Only 24 hours of the 52 earned may applied to this reporting period. d)24 hours will be applied to the current reporting period, and 24 can be applied to the period immediately following.
d)24 hours will be applied to the current reporting period, and 24 can be applied to the period immediately following. Excess hours accumulated during the 2-year period may be carried forward only to the next 2-year period. A maximum of 24 hours may be carried forward.
Which of the following losses would NOT be covered by a homeowners policy? a)A $550 utility trailer blown away by a tornado b)A stolen silver tea set worth $2,000 c)A $800 outboard motor destroyed by hail d)A coin collection valued at $500 lost in a fire
d)A coin collection valued at $500 lost in a fire An HO policy will pay up to $2,500 for silverware by theft, $1,500 for boats, motors, trailers, $1,500 for loss of trailers not used with boats, but no more than $200 for coins.
Which of the following would NOT be considered an insured under a homeowners policy? a)Residents of the household that are blood relatives of the insured b)An individual under age 21 in the care of but not related to the insured c)Individuals named in the policy declarations d)A divorced spouse living in another state
d)A divorced spouse living in another state Insureds are defined as the named insured and spouse, if a resident of the same household, and persons related to the named insured by blood or marriage who are residents of the household, as well as persons under age 21 not related to but in the care of the insured.
Homeowners policies provide coverage for a)Losses caused by off-premises power failure .b)The land under the residence. c)Property of tenants, roomers, or boarders not related to any insured. d)Business property while on the residence premises.
d)Business property while on the residence premises. Your contents coverage will cover up to a $2,500 for loss of business property on premises.
The designation symbols used in commercial auto policies can be found in which policy section? a)Liability Coverage b)Definitions c)Conditions d)Covered Auto
d)Covered Auto Section I - Covered Auto of a commercial auto policy explains the designation symbols used in that coverage.
Which of the following is true regarding the fire department service charge under the builders risk form? a)It is an automatic coverage for $500 .b)It is not available in this form. c)It is a high-deductible endorsement. d)It is an additional coverage.
d)It is an additional coverage. The fire department service charge is considered an additional amount of insurance. Up to $1,000 coverage is included.
Which of the following injuries would be compensable under Workers Compensation insurance? a)Joe went to work intoxicated. Because of his intoxication, Joe fell from a scaffolding and broke his leg. b)Bill is furnished a truck to use at his job. He is allowed to drive it to and from work during the week. Last weekend, he used the truck to haul his trash to the landfill. He had an accident and was injured. c)Tim's wanted to watch the World Series. Tim didn't have vacation time, so he put his hand in a chemical solution and allowed it to be burned enough to justify time off work during the series. d)None would be compensable.
d)None would be compensable. Intentionally self-inflicted injuries, injuries resulting from intoxication, and injuries resulting from the operation of an employer's vehicle while not in the course of employment are all specifically excluded from coverage under Workers Compensation law.
Which of the following homeowners endorsements covers liability exposures arising from an incidental business conducted within a building on the residence premises? a)Special limit of liability b)Professional liability c)Business income - report of values d)Permitted incidental occupancies
d)Permitted incidental occupancies A permitted incidental occupancies endorsement covers liability exposures arising from an incidental business conducted within a building on the residence premises.
Who is responsible for paying producer appointment fees? a)The Commissioner's office b)The Department of Insurance c)The producer d)The appointing insurer
d)The appointing insurer A fee of $15 will be billed to the insurer annually for each producer appointed during the previous year.
In order for a Protection and Indemnity policy to cover a loss which of the following must be TRUE? a)The insured must have been the person operating the vessel b)The insurer must conduct an investigation into the loss. c)The loss must total. d)The insured must be legally liable for the loss.
d)The insured must be legally liable for the loss. For the P&I policy to cover a loss, the insured must be legally liable for the loss. The vessel owner may be held liable for the actions of the master, officers, and crew of their ship.
All of the following are supplemental payments included in the liability section of a personal auto policy EXCEPT a)Up to $200 a day for loss of earnings due to attendance at hearings or trials .b)Premiums on appeal bonds in any suit the insurer defends .c)Up to $250 for bail bonds required because of a covered accident. d)Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident.
d)Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident. A personal auto policy does not pay the cost of the release of a vehicle impounded by a law enforcement agency.
In forming an insurance contract, when does acceptance usually occur? a)When an insurer delivers the policy b)When an insurer receives an application c)When an insured submits an application d)When an insurer's underwriter approves coverage
d)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.