Insurance Licensing Exam Questions to Study

Open Peril vs. Named Peril

"anything but this is covered" - Open peril "Only this is covered" - Named peril

Agent vs. Broker

A broker is an insurance producer who is not appointed by an insurance company, and is deemed to be a legal representative of the client. (e.g., their words and actions are not legally binding to the company.)

Indiana Property and Casualty Insurance Guaranty Association

A non-profit association established to help pay the valid claims of insolvent admitted insurers.

Comparative negligence

A rule in tort law, used in the majority of states, that reduces the plaintiff's recovery in proportion to the plaintiff's degree of fault, rather than barring recovery completely. (Both parties can be negligent)

Limited lines insurance producer

Authorized by the commissioner to solicit only specialty insurance products. (e.g., travel, title, credit, crop, etc.)

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe?

Conditional

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as what?

Consideration

Which of the following homeowners endorsements increases its limits each year by a selected percentage?

Inflation guard

Surplus lines

Insurance for which there is no readily available, admitted market.

The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the

Insuring agreement

An insured attends an auction at an estate sale. She bids on an original painting by Picasso and acquires it. Under the personal articles floater of her homeowners policy, what coverage is offered on her new painting?

It will be covered for its actual cash value or 25% of the scheduled limit

Bodily injury liability

Legal liability arising from death or physical trauma to a person as a result of a negligent or purposeful act and omissions by an insured.

Boatowners Policy Section II

Liability coverage

Mine Subsidence

Loss caused by the collapse or movement of structures resulting from the caving in of underground mines. (may be added to a homeowners policy at any time) available to anyone with basic fire coverage.

HO-4

Named peril; Occupied by tennant

HO-6

Named peril; condominium owner occupied

HO-8

Named peril; owner occupied but older more historic home

HO-2

Named peril; unit owner occupied

Implied Authority

Not written in contract, but is assumed

Uninsured Motorist or Underinsured Motorist coverage may be rejected by:

ONLY the named insured

The HO-3 homeowners policy provides

Open peril coverage on the dwelling and broad form coverage on personal property.

The purpose of the Mine Subsidence Fund is to:

Reinsure providers of mine subsidence coverage

HO-2, HO-3, HO-5 forms provide building coverage on a _____________________________________.

Replacement cost basis as long as the building is insured for 80% or more of its replacement cost.

Uninsured motorist limits must be at least equal to:

The state's financial responsibility limit for bodily injury

Assignment

The transfer of a legal right or interest in an insurance policy. In property and casualty insurance, assignments of policies are valid only with the prior written consent of the insurer.

An insured has decided to never drive another vehicle and wants to transfer his auto insurance policy to his wife. What does the insured need to transfer the policy?

The written consent of the insurer

Express Authority

Written in contract

A producer may act as a consultant if he/she: a.) Meets the compensation disclosure requirements b.) Receives both a fee and comission c.) Is approved by the comissioner d.) Holds a consultant's license

a.) Meets the compensation disclosure requirements

What does HO personal property coverage NOT cover? a.) Personal property of roomers not related to the insured b.) The spouse's personal property c.) The insured's personal property in another country d.) The resident's son's personal property

a.) Personal property of roomers not related to the insured

All of the following are examples of risk retention EXCEPT a.) Premiums b.) Deductibles c.) Copayments d.) Self-insurance

a.) Premiums - (retention is the planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance)

Warranties

absolutely true statement upon which the validity of the insurance policy depends

An insured has $5,000 of medical coverage under a personal auto policy at the time of a covered accident. The insured and 3 passengers are injured. The insured's medical expenses are $8,000. The first passenger's total $4,000; the second passenger's total $6,500; and the third passenger's total $1,200. How much will the policy pay under the medical payment coverage?

$15,200 - (The medical payment coverage is proved by a limit of liability per person. In this example, the limit for the policy is $5,000 per person. So the policy will pay the maximum ($10,000) for the insured and passenger 2 because their medical expenses exceed the limit. All of passenger 1's and passenger 3's expenses would be paid. The grand total paid under the medical expenses is $15,200)

What is the most that the insurer of a property could recover from the mine subsidence fund?

$200,000

An insured was told to leave his home because of endangerment by a brush fire that was out of control. The insured was able to have his personal property moved to storage away from the endangered area. For how long will the homeowners policy provide coverage for the stored property?

30 days - Under the additional coverage property removed, a HO policy will insure property against direct loss from any cause while being removed from premises endangered by a peril insured against

Losses will be paid within __________ days of receiving proof of loss and coming to an agreement with the insured as to the amount payable.

60 days

Concurrent Causation

A situation where there are 2 causes resulting in a loss and 1 of the causes is excluded while the other cause is not excluded. Unless the policy specifies otherwise, the loss is covered. Example: a policy that excludes earth movement will still pay a loss due to for or explosion that ensues directly from the earth movement.

If a complaint has been filed against a producer who has been implicated in an unfair trade practice, the Commissioner will hold a hearing. When must the producer be notified of the charges?

At least 5 days prior to the hearing

Insurable interest in the property covered in a policy must be proven

At the time of loss

PAP Coverages

A. Liability coverage B. Medical payments coverage C. Uninsured/Underinsured motorist D. Coverage for damage to your auto E. Duties after an accident or loss F. General Provisions

HO-8 form provides coverage on a ________________________.

Actual cash value basis

Coverage E

Additional Living Expense (Up to 10% of Cov. A) -Pays to maintain normal standard of living for insured's household while said dwelling is unfit for use due to covered peril

Fair crediting Reporting Act

Administered by the federal trade commission, the purpose is to protect consumers against the circulation of inaccurate or obsolete personal financial information.

Right of salvage

After a total loss to insured property, the insured must transfer the title of the property to the insurer. (The insurer may then sell the property to reduce the loss)

DP-3 Special Form

All perils are insured against except those specifically excluded - The special and broad forms also include three other coverages: -Breakage of glass -Collapse -Lawn, tree, shrubs, etc.

Lawns, trees, shrubs, and plants

Also covered by DP2 = maximum of $500 per tree, and a maximum loss of %5 of the damage covered on the dwelling

Warranty

An absolutely true statement upon which the validity of the insurance policy depends.

Indiana Financial Responsibility Law

An individual must carry at least $25,000/$50,000/$25,000

Insurance Producers

Are licensed to sell, solicit, or negotiate insurance

Apparent authority

Based on the principal's actions or words

DP1

Basic named peril (Covers WHARVES)

DP2

Broad named peril - covers things such as damage done by burglars, falling objects, snow/ice damage, accidental discharge of water, freezing etc. (BB-BICE GOLF ----> remember this is basically DP1 plus+)

An insured has four separate but identical policies written by different insurers to cover her $100,000 building. Each policy is written for $100,000, and each has the pro rata liability other insurance clause. In the event of a total loss to the building, what would each insurer pay?

Each policy will pay $25,000 of the loss - but not more than the amount of the loss in total.

When would a misrepresentation on the insurance application be considered fraud?

If it is intentional and material

The mobilehome endorsement alters the homeowners policy to cover a mobilehome and other structures on land

Owned or leased by the resident of the mobilehome

Boatowners Policy Section I

Physical damage

If a person is usings an auto with the belief that he is entitled to do so, subrogation rights under a PAP would apply to all coverages EXCEPT

Physical damage - (Subrogation rights do not apply to physical damage coverage if the damage is caused by a person using the auto with a reasonable belief that they were entitled to do so)

FAIR Plans

Provide coverage exclusively to high-risk areas

DP3

Special open and named peril

The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called:

Subrogation

Consideration

The binding force in a contract that requires something of value to be exchanged for the transfer of risk. The consideration on the part of the insured is the representations made in the application and the payment of premium; the consideration on the part of the insurer is the promise to pay in the event of loss.

When an umbrella policy is broader than underlying insurance and it pays a loss

The excess over the self insured retention

Which of the following property clauses allows the extension of a major coverage, applying to specific losses not already insured?

The extensions of coverage clause

First named insured

The individual whose name appears first on the policy's declaration

Contributory negligence

The injured party must be completely free of fault in order to collect.

Experience rate

The insured's own past loss experience enters into the determination of the final premium

Which loss listed below would be fully covered by a homeowner's policy? a.) $2,000 silver tea set stolen b.) $1,200 pedigreed golden retriever stolen c.) $24,000 bass boat destroyed in a tornado d.) $5,000 firearm collection stolen

a.) $2,000 silver tea set stolen - (tea sets are covered with a special limit of $2,500) (firearms are covered for no more than $2,500)

Homeowners policies consider all of the following insured locations EXCEPT a.) A strawberry patch owned by the insured b.) Land owned by the insured on which his new home is under construction c.) An individual cemetery plot d.) The hotel ballroom rented by the insured for a family reunion

a.) A strawberry patch owned by the insured - (Insured location cannot include farmland or any premises used for business purposes.)

Combined Single Limit

auto insurance liability coverage that combines both bodily injury and property damage liability

All of the following are special personal property limits under a homeowners policy EXCEPT a.) $2,500 for theft of firearms b.) $500 for business personal property on the injured premises c.) $1,500 for securities, accounts, deeds, and evidences of debt d.) $1,500 for trailers not used with watercraft

b.) $500 for business personal property on the injured premises

In Indiana, controlled business is a.) Illegal b.) Completely unregulated c.) Limited to 25% of a producer's annual commission income d.) Limited to 25% of a producer's annual gross premium income

c.) Limited to 25% of a producer's annual commission income

Which statement best describes agreement as it relates to insurance contracts? a.) All parties must be capable of entering into a contract b.) Each party must offer something of value c.) One party accepts the exact terms of the other party's offer d.) The intent of the contract must be legally acceptable to both parties

c.) One party accepts the exact terms of the other party's offer - (In insurance contracts, there must be a definite offer by one party, and this offer must be accepted in its exact terms by the other party. Agreement includes both an offer and its acceptance.)

Which provision defines how the policy will respond if there is other valid insurance written on the same risk? a.) overinsurance b.) Concurrent coverage c.) Other insurance d.) Coinsurance

c.) Other insurance

Which of the following statements is not true? a.) A consultant is licensed to give advice for a fee b.) A consultant may not be compensated by a producer c.) A producer may act as a consultant d.) A licensed consultant may hold a producer license

d.) A licensed consultant may hold a producer license

Coverage F (medical payments) under a homeowners policy would cover: a.) A tenant who is injured while on the premises b.) A family member who is injured while residing in the insured premises c.) The insured for injuries sustained while working at home d.) A residence employee who is injured on the job

d.) A residence employee who is injured on the job

Dwelling Policy

provides protection for individuals and families against loss to their dwelling and personal property

An insured suffers a windstorm loss in which the insured's driveway is blocked by two of the insured's trees and two of the neighbor's trees. The total amount of the removal adds up to the following: three trees at $300 per tree, and one tree at $600. How much will the insurer pay for the loss?

$1,000 - (It is important to pay particular attention to coverages that have a maximum amount of coverage and an additional sublimit for one particular item. The most the policy will pay for this loss is $1,000)

Split limit 25/50/25

$25,000 for bodily injury per person, $50,000 max for all bodily injuries, and $25,000 property damage coverage per accident

In Indiana, what is the minimum, required limit for Underinsured Motorist coverage?

$50,000

Broad Form Perils

-Damage by burglars -Falling objects -Weight of ice, snow, or sleet -Accidental discharge or overflow of water or steam -Sudden and accidental damage from electrical current -Freezing

Insured locations for Homeowners policies:

-The residence premises -Part of other premises used by named insured as a residence -A premises not covered by insured, but where the insured is living temporarily (e.g., a motel room) -Vacant land owned or rented by insured (except farmland) -Land owned by insured where dwelling is being constructed -Cemetery plots or burial vaults -Any part of a premises occasionally rented to an insured, but NOT for business purposes (e.g., a wedding hall)

An insured failed to pay the premium on her auto policy for 2 months, so the insurer is cancelling the policy. How many days notice must the insurer provide prior to policy cancellation?

10 days

Insurance Consultant

A person who, for a fee, offers any advice, counsel, opinion, or service regarding the benefits, advantages, or disadvantages promised under any policy of insurance that could be issued in indiana. License is good for 2 years.

A sworn written statement that must be furnished by the insurer before any loss under a policy can be paid is called:

A proof of loss

Additional insured

An individual or business that is not named as an insured on the declaration page, but is protected by the policy

According to the doctrine of contributory negligence, when an individual is found to have contributed to his or her loss in any way, another party

May not be held liable

HO-3

Open & Named peril; unit owner occupied

Abandonment

Relinquishing of insured property into hands of another

A driver who has an auto policy with limits of liability lower than required by state law would be considered:

Un-Insured

Which of the following limited lines producer's licenses would require life producer's prelicensing education and examination? a.) Funeral director insurance b.) Baggage insurance c.) Title insurance d.) Credit insurance

a.) Funeral director insurance - (Although most limited lines producer's licenses do not require prelicensing education and exam, Funeral Director license is subject to standard life insurance)

Which of the following coverages is included in an unendorsed homeowner's policy? a.) Medical payments to others b.) Personal property replacement coverage c.) Fungi, wet, or dry rot, or bacteria d.) Earthquake

a.) Medical payments to others

A contractor who builds homes has never made a claim on his business insurance policy. His agent discovers that his policy is written on a scheduled rating. If the contractor changes to an experience rating policy, which is most likely? a.) Premiums would go down b.) Premiums would go up c.) Premiums would be unchanged

a.) Premiums would go down

All of the following people would be considered insureds under the liability section of a HO policy EXCEPT: a.) The 22 year old niece of the insured who is visiting b.) A 15 year old foster child residing in the premises c.) The mother of the insured who is residing in the household d.) The legal representative of a deceased insured

a.) The 22 year old niece of the insured who is visiting - (relatives of the insured of any age are considered insureds only if they are residents of the household)

If an insurance policy has the additional coverage provision, how does it affect the policy premium? a.) There is no additional premium b.) Premium will be recalculated when a specific loss covered by this provision occurs c.) Additional premium will be assessed d.) Premium will be calculated on a pro rata basis based on the amount of additional coverage

a.) There is no additional premium

A house insured with a homeowner's policy has been blown off its foundation by a tornado. It must be demolished and removed so a replacement house can be built. Which of the following is true about debris removal? a.) HO policies do not cover debris removal. b.) An additional 5% of the policy limit may be paid for debris removal c.) Because the full policy limit must be paid for the house, there is no coverage for debris removal. d.) It will be paid if the debris removal endorsement has been added

b.) An additional 5% of the policy limit may be paid for debris removal

Which of the following could be covered by a 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 - (HO contents coverage doesn't 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)

Which statement regarding insurable risks is NOT correct? a.) An insurable risk must involve a loss that is definite as to cause, time, place, and amount. b.) Insureds cannot be randomly selected c.) Insurance cannot be mandatory d.) The insurable risk needs to be statistically predictible

b.) Insureds cannot be randomly selected

While engaged in a pick-up soccer game in the neighborhood park, the insured collides with another player, breaking his nose. Would the insured's homeowners medical payments cover the injury? a.) No, the insured was not negligent b.) Yes, medical payments coverage also applies off the insured premises. c.) No, because even though it was a pick-up game, it was an organized event. d.) No, personal liability applies on-premises only

b.) Yes, medical payments coverage also applies off the insured premises.

Which of the following types of property would be covered in homeowners coverage forms? a.) Animals, birds, or fish b.) landlord furnishings in an on-premises apartment c.) Structures used for business purposes d.) Structures rented to others who are not tenants of the dwelling

b.) landlord furnishings in an on-premises apartment

An insured has a liability policy that sets the amount for all claims that arise from a single incident at $50,000. Which type of limit of liability does this insured's policy have? a.) split b.) per occurrence c.) per person d.) aggregate

b.) per occurrence - (per occurrence sets the amount for all the claim that arise from a single incident at a certain number)

Which of the following statements would be correct if an insured failed to maintain the underlying limits as required by a personal umbrella policy? a.) the insured would have to pay the self-insured retention limit b.) the insured would be responsible for the amount required as underlying limits in the event of a claim c.) It would have no effect on the umbrella policy d.) The policy would be cancelled

b.) the insured would be responsible for the amount required as underlying limits in the event of a claim

All of the following are perils covered under the broad form dwelling policy EXCEPT a.) collapse b.) theft c.) fire d.) lightning

b.) theft - (theft is not a peril named in the policy)

How does the mobilehome endorsement affect the other coverage of law or ordinance in a homeowners policy? a.) It limits the coverage b.) It has no effect on the coverage c.) It removes the coverage d.) It broadens the coverage

c.) It removes the coverage - (the mobilehome endorsement makes the other coverage of law or ordinance inapplicable to the policy)

Which of the following is true regarding a hearing upon the nonrenewal of a producer's license? a.) A hearing guarantees the renewal of the license b.) The Commissioner may request a hearing within 63 days of the nonrenewal date c.) The hearing must be held within 30 days of the written demand d.) After the hearing, the Commissioner may impose a criminal penalty on the applicant

c.) The hearing must be held within 30 days of the written demand

Which of the following personal auto coverages would pay for the insured's travel expenses and loss of earnings while involved in the settlement process of a covered loss? a.) Medical payments b.) Comprehensive coverage c.) Collision coverage d.) Liability coverage

d.) Liability coverage

A temporary insurance producer license a.) Only expires at the end of the term b.) May not be revoked c.) May be issued for up to 1 year d.) May be issued to the surviving spouse of a diseased producer

d.) May be issued to the surviving spouse of a diseased producer - (a temporary insurance producer license may be issued for a max period of 180 days to the surviving spouse or another qualified and appointed individual

Several insureds have become liable because of a single loss. How will the policy's limit of liability be affected? a.) Pro rata liability applies b.) A homeowner's policy can have no more than one insured c.) The full limit applies to each insured individually d.) No more than the per occurrence limit applies, no matter how many insureds are involved

d.) No more than the per occurrence limit applies, no matter how many insureds are involved

The mobilehome endorsement alters the homeowner's policy to cover a mobilehome and other structures on land a.) owned or leased by a landlord who does not reside on the premises b.) Owned by a landlord who does not use the mobilehome located on it c.) Leased by the owner of the land d.) Owned or leased by the resident of the mobilehome

d.) Owned or leased by the resident of the mobilehome

Which of the following liability coverages must be added by endorsement to a homeowners policy in order to apply? a.) Bodily injury b.) Property damage liability c.) Medical payments to others d.) Personal injury

d.) Personal injury

Which of the following best describes the amount of loss assessment coverage included under a homeowners policy liability coverage section? a.) Up to $2,500 per occurrence b.) Up to $10,000 aggregate for the policy period c.) Up to $5,000 aggregate for the policy period d.) Up to $1,000 per occurrence

d.) Up to $1,000 per occurrence

No benefit to bailee

excludes any assignment or granting of any policy provision to any person or organization holding, storing, repairing, or moving insured property for a fee.

Controlled business

insurance written on the interest of the licensee, licensee's immediate family, or licensee's employer, or insurance covering the licensee. If in any 12-month period, commissioners earned on all business exceeded 25%.

An insured has a personal umbrella with a $2,000 self-insured retention. Assuming no other policy is involved, how much would the umbrella pay after a $12,000 personal injury liability claim.

$10,000 - If no other policy pays, the insured must pay a SIR

Reinsurance

A contract which one insurance company indemnifies another insurance company for part or all of its liabilities.

Fiduciary

A producer who handles insurer funds in a trust capacity.

Additional or Supplementary Coverage

A provision in an insurance policy that provides an additional amount of coverage for specific loss expense, at no additional premium.

Extensions of coverage

A provision in some property policies which allows the extension of a major coverage to certain types of loss to property not specifically insured.

Retrospective rating

A self-rating plan under which the actual losses during the policy period determine the final premium (subject to a minimum and maximum premium).

The transfer of legal right or interest in an insurance policy is called

Assignment

Dwelling Policy Limitations

Can be purchased to insure properties solely for residential purposes in the following situations: -Up to 5 roomers or boarders -Up to 4 residential units -Properties in the course of construction -Owner occupied, tenant occupied, or both -Mobile homes on the basic form only, if they contain no more than one apartment, and are located at a permanent location listed in the policy -Seasonal dwellings unoccupied for 3 or more months -Not farms

Under which legal defense is there an apportionment of damaged based upon the degree of fault of each of the plaintiffs and defendant?

Comparative negligence - The recovery is lessened or increased depending on each party's level of negligence

Difference between DP-2 and DP-3

DP-2 doesn't include theft or property that is part of the dwelling or other structure, the accidental discharge or overflow of water and steam, and will provide coverage for damage to a roof caused by freezing or thawing of water under roof shingles

Collapse

DP2 - Covers collapse of a building or part of a building if the loss is the result of hidden decay, insect or vermin, or weight of personal property, use of defective materials in construction. (does not cover settling, cracking, shrinkage, bulging, or expansion.)

Coverage A

Dwelling - 1.) Dwelling on the described premises listed in the declarations page and all attached structures 2.) Any materials or supplies located on or next to the described premise used to construct, alter, or repair dwelling or other structures on the premise 3.) Building equipment and outdoor equipment located on the premise and used to service the location unless insured elsewhere (Land is not covered)

General exclusions to DP properties

Earth movement, Water damage by flood, power failure, neglect, war, nuclear hazard, intentional loss, and government action

Coverage D

Fair Rental Value (Up to 10% of Cov. A) -Pays Landlord for damages due to covered peril -Pays for loss in rents landlord would have collected -Monthly basis pay is 1/12 of coverage amount

Appraisal

If there is a disagreement between the insurer and the insured, an unbiased third party can umpire and help settle the dispute

Personal Injury

Injury, other than bodily injury, arising from intentional torts such as libel, slander, or invasion of privacy.

Risk retention group

Liability insurance company that is owned by its members. The members are exposed to similar liability risk by virtue of being in the same business or industry. The goal is to assume and spread out part or all of the liability among all its group members.

Unilateral contract

Only one of the parties is legally bound to do anything

Coverage B

Other structures- (10% of coverage A) Covers the other separate structures at the same location, such as detached garages and other outbuildings. ----> so basically a garage, can cover other people's things too as long as its not used as tenant purposes

Mutual Companies

Owned by policy holders and issue PARTICIPATING policies. Policyowners are entitled to dividends, which are a return of excess premiums, and are nontaxable.

Stock Companies

Owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses. These are NONPARTICIPATING companies - in this case, these companies do not pay dividends to policyowners; however taxable dividends are paid to stockholders

Coverage C

Personal property- (50% of coverage A)

Risk retention

Planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.

Liberalization

Property insurance clause that extends broader legislated or regulated coverage to current policies, as long as it does not result in a higher premium.

Schedule rating

Rates are developed by applying a schedule of charges and credits to some base rate

Judgement Rating

Rating used by underwriters to rate one-of-a-kind risks. (Built airplane, with not a lot in comparison)

Nonconcurrency

Refers to other insurance written on the same risk, but not on the same coverage basis

HO-5

SUUUUPER open peril; owner occupied

The amount of loss the insured is willing to absorb without insurance protection is known as:

Self-insured retention

Which of the following risks would be eligible for covereage under a dwelling policy form? a.) A duplex that is occupied by two families, each of which have a bedroom rented to a boarder b.) A single family dwelling occupied by a single person who operates a business of buying and selling firearms in the basement c.) A single-family dwelling that contains a beauty shop that employs three full-time operators d.) A single-family dwelling that is located on farm premises

a.) A duplex that is occupied by two families, each of which have a bedroom rented to a boarder

A personal umbrella policy may act as excess over any of the following insurance coverage policies EXCEPT a.) Auto collision coverage b.) Homeowners Section II coverage c.) Auto liability coverage d.) Comprehensive personal liability

a.) Auto collision coverage - Auto collision is not liability coverage, therefore, the personal umbrella will not act as excess

Which of the following exposures is not covered under a homeowner's policy? a.) Medical payments to an insured b.) Unscheduled personal property damage c.) Bodily injury to others d.) Personal liability

a.) Medical payments to an insured - (Section II of the homeowner's policy provides medical payments to others but excludes coverage for the payment of medical expenses of an insured)

Eligibility requirements for obtaining property coverage in the FAIR plan include all of the following EXCEPT: a.) Risk must be owner occupied b.) Risk must be insurable c.) The applicant must have made an unsuccessful effort to obtain coverage in the normal market d.) Risk must be located in a specific area

a.) Risk must be owner occupied

Fair rental value coverage in the dwelling policy is similar to which homeowner's policy form? a.) Contents b.) Loss of use c.) Dwelling d.) Structure

b.) Loss of use

Among people in the same class and life expectancy, which of the following factors can be used to influence premium rates? a.) Race b.) Occupation c.) Ancestry d.) Marital status

b.) Occupation

In a personal auto policy, a covered auto includes all of the following EXCEPT: a.) A farm implement being towed behind the insured's pickup b.) A non-owned temporary substitute vehicle c.) A van used in the delivery business d.) A trailer owned by the insured

c.) A van used in the delivery business 0 If used primarily for deliveries, a PAP cannot insure the vehicle

What type of insurer uses a formal sharing agreement? a.) Mutual insurers b.) Fraternal Benefit Societies c.) Reciprocal insurers d.) Stock Insurers

c.) Reciprocal insurers

Which of the following cancellation notices fails to meet the minimum time standards under the Indiana Insurance Code? Assume that all of the policies have been in effect for more than 60 days. a.) Francis was advised by his insurance company on Feb. 20 that his policy was being cancelled effective Mar. 20 because his driver's license was revoked b.) Albert was notified on Jul. 25 that his auto policy was being cancelled effective Aug. 15 because he moved to a state where the insurer does not sell insurance c.) When Adam failed to pay his insurance premium, the insurance company sent him a letter on May 1 advising that his policy would be canceled effective May 14 d.) Allison received a letter from the insurer on June 3 cancelling her auto policy on June 13 because her application failed to list two prior accidents

d.) Allison received a letter from the insurer on June 3 cancelling her auto policy on June 13 because her application failed to list two prior accidents (An insurer is required to provide the named insured 10 days advance notice of cancellation in the event of nonpayment, and 20 days advance notice when the cancellation is for any other reason)

Which form insures both buildings and personal property on an open peril basis? a.) HO-2 b.) HO-3 c.) HO-4 d.) HO-5

d.) HO-5 (HO-3 only does the building whereas this one does both)

An insured is injured while driving his own car. Which of the following coverages will pay for the loss? a.) Part C - Uninsured motorists b.) Part D - Damage to your auto c.) Part A - Liability d.) Part B - Medical payments

d.) Part B - Medical payments - ( Medical payments coverage pays all necessary medical and funeral expenses incurred and services rendered to the insured or any other person while occupying a covered auto)

Contract of adhesion

the insured must accept the entire contract with all of its terms and conditions - TAKE IT OR LEAVE IT!

Coinsurance

the sharing of expenses by the policyholder and the insurance company - this encourages the insured to insure the property closer to its full value

Policy Structure

-Declarations (who, what, when, how much?) -Definitions (clarifies terms used in policy) -Insuring Agreement (Establishes obligation of insurance company to provide coverages stated in policy) -Additional coverage -Conditions (indicates general rules or procedures agreed to follow) -Endorsements (printed addendums that can be used to change a policy's original terms) -Exclusions and policy limits (what is not covered)

Basic Form Perils (almost always covered)

-Fire -Lightning -Explosion -Windstorm or hail -Riot or civil commotion -Aircraft -Vehicles -Smoke -Vandalism & Malicious mischeif -Volcanic eruption -Sprinkler leakage (commercial only) -Sinkhole collapse (commercial only)

Elements of establishing Negligence

1.) Legal Duty 2.) Standard of care 3.) Unbroken chain of events 4.) Actual loss or damage

Other DP1,2,3, coverages

1.) Other structures on insured premises 2.) Debris removal (reasonable costs) 3.) Improvements, alterations, additions 4.) Worldwide coverage (While away in the world) 5.) Rental value and additional living expense 6.) Reasonable repairs 7.) Property removed 8.) Fire department service charge - <=$500 9.) Lawns, trees, shrubs, and plants - $500 per tree or 5% of coverage on dwelling per loss 10.) Breakage of glass 11.) Collapse 12.) Ordinance or law - Designed to provide insurance on changes or codes after a covered loss

You are at fault in an auto wreck out of state. How does your company adjust? a.) By the other state's highest form b.) Will not pay at all c.) At least to the minimum required by that state d.) The limit of your policy, no matter what the other state's minimum

c.) At least to the minimum required by that state

Coverage provided by the NFIP will not cover a.) The damage done by the freezing of floodwaters b.) Personal property incidental to occupancy of the dwelling c.) Fences, outdoor swimming pools, retaining walls, and bulkheads d.) Damage done by sewer backup as a direct result of the flood

c.) Fences, outdoor swimming pools, retaining walls, and bulkheads

The extended nonowned coverage provides protection to a.) The person named and his or her spouses only b.) Anyone who is given permission to drive by the named insured c.) Only the person(s) named on the policy d.) The person named on the policy and all residence family members

c.) Only the person(s) named on the policy - Only the persons named is covered. There is no automatic coverage for spouse or other family members.

Elements of Insurable Risk

1. Due to chance 2. Definite and measurable 3. Statistically predictable 4. Not catastrophic 5. Loss exposure to be insured must be large 6. Insurance must not be mandatory

Element of a Legal Contract

1.) Agreement - offer and acceptance 2.) Consideration 3.) Competent parties 4.) Legal purpose

An insured's limit of liability applies to a total of damages for bodily injury and property damage resulting from one accident, which may be used in any combination of amounts, not to exceed the single limit. What type of limit does this insured have? a.) Aggregate b.) Per occurence c.) Combined single d.) Split

c.) Combined single - A single dollar limit of liability applying to the total of damages for bodily injury and property damage combined resulting from one accident or occurence. The limit may be used in any combination of amounts, not to exceed the single limit.

All of the following are additional coverages under a homeowner's policy EXCEPT a.) Coverage for trees, shrubs, and other plants b.) Payment for reasonable repairs and debris removal following a covered loss c.) Outbuildings d.) Fire department service charge

c.) Outbuildings

The deductible under earthquake coverage is stated as what? a.) Percentage of policy premium b.) Half of the policy premium c.) Percentage of loss d.) Flat dollar amount

c.) Percentage of loss

For an additional premium, the extended coverages written on the basic form dwelling policy would cover which of the following? a.) Vandalism b.) Glass breakage c.) Fire d.) Riot

d.) Riot

An insured carried underinsured motorist limits of $100,000. She is involved in an accident with a driver whose Part A limits are only $25,000/$50,000/$25,000. The insured suffered $90,000 worth of bodily injury. If the other driver is found 100% negligent, how much would the insured's policy pay towards those medical expenses?

$65,000 - The insured's policy acts as excess over the underinsured drivers. The other driver will pay $25,000 (the per person limit), and the insured's policy will pay the difference.