Insurance Prelicensing Exam
Under the additional living expenses coverage, if a civil authority prohibits the insured from using the dwelling because of direct damage to a neighboring location from a peril covered in the insured's policy, loss would be covered for up to A 2 weeks. B 1 month. C 90 days. D 1 week.
2 weeks A dwelling policy will pay loss of use due to civil authority for a maximum of two weeks.
All of the following are examples of risk retention EXCEPT A Copayments. B Self-insurance. C Premiums. D Deductibles.
Premiums
The broad theft coverage endorsement on the dwelling form specifies all of the following limitations EXCEPT A$1,500 on jewelry. B$1,000 on silverware. C$200 on money. D$1,500 on securities.
1,000 on silverware The limit on silverware is $2,500.
A percentage of the loss as described on the declarations. B The excess over the self-insured retention. C The amount specified in the policy under the additional coverage provisions. D The amount in excess of the policy's limits of liability.
The excess over the self-insured retention Retention is the equivalent of a deductible in property insurance.
What is the license renewal period for a portable electronics insurance license? A6 months B1 year C2 years D4 years
2 years The license is valid for a 2-year period and no examination is required for licensure.
How much is covered for debris removal under the HO property additional coverages? A Nothing, unless added by an endorsement B All reasonable costs C 90% of the total cost of clean-up D Everything after a $200 deductible
All reasonable costs. If the debris was caused by a peril that is insured against, the reasonable cost of debris removal is paid by the insurer.
Which of the following types of agent authority is also called "perceived authority"? A Express B Implied C Fiduciary D Apparent
Apparent. Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
Which of the following would modify the original insurance contract by either adding or removing coverage? A Additional coverage form B Conditions C Flexible policy D Endorsements
Endorsements Endorsements change the policy's original terms, conditions, or coverages. Endorsements can add or delete coverage, or merely correct items such as the insured's name, address, etc.
Which of the following entities is responsible for paying the producer's appointment renewal fee? A Appointing insurer B Commissioner C The Guarantee Association D Producer
Appointing insurer An insurer must pay any applicable appointment and appointment renewal fees.
To legally transact insurance in this state, an insurer must obtain which of the following? A Business entity license B Certificate of Insurance C Certificate of Authority D Power of Attorney
Certificate of Authority. A Certificate of Authority is required in order to transact insurance.
Larry was involved in an automobile accident for which he was at fault. Which of the following coverages would pay for damage to Larry's automobile? A Property damage liability coverage B Comprehensive coverage C Collision D Other than collision
Collision The policy defines collision as the upset or impact of a covered vehicle with another vehicle or object.
What type of coverage do umbrella policies provide? A Property coverage for the basic perils of fire, wind, and hail B Primary coverage for risks that are difficult to insure C Excess coverage over an underlying or primary policy D Property coverage for those who do not qualify for homeowners insurance
Excess coverage over an underlying or primary policy Umbrella policies, sometimes called catastrophe insurance, provide excess coverage over the underlying or primary liability policy.
If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept? A Nonforfeiture B Indemnity C Reasonable expectations D Cease and desist
Reasonable Expectations. If, because of advertising or sales literature or statements by an agent, an insured could reasonably expect the coverage, the courts have held that the insurer must provide that coverage.
A policy that insures all property at multiple locations for a single amount is referred to as A Reporting. B Special. C Specific. D Blanket.
Blanket. Blanket coverage provides one limit of insurance for multiple locations or classes of property with the entire limit of insurance available to respond to any loss. No single item is assigned a specific amount of insurance. However, different amounts of insurance may be shown for buildings in general and contents in general.
All of the following are perils covered under the broad form dwelling policy EXCEPT A Collapse. B Theft. C Fire. D Lightning.
theft Theft is not a peril named in the policy.
A rating organization failed to submit its manuals of classifications, rules and rates. What is the maximum fine they face for this offense? A$100,000 B$100 C$10,000 D$1,000
10,000 In this case, they could be fined up to $10,000 for each offense, by imprisonment for up to 1 year or both.
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? A $100 per violation B Revocation of license C $2,500 D $1,000
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.
Any person who knowingly and willfully obtains under false pretenses information about an individual from an insurance institution, insurance representative, or insurance-support organization will be A Fined not more than $1000 per offense with a maximum fine not to exceed $25,000. B Have all insurance licenses revoked and be barred from the insurance industry in this state. C Fined not more than $10,000, imprisoned for not more than one year, or both such fine and imprisonment. D Guilty of insurance fraud and be imprisoned for not more than 3 years.
Fined not more than $10,000, imprisoned for not more than one year, or both such fine and imprisonment.
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? A A legal advertising strategy B Unfair Discrimination C Defamation D Illegal
Illegal It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.
Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as A Rebating. B Twisting. C False advertising. D Coercion.
Rebating
Paul is a producer in Vermont and wants to become a producer in Massachusetts. The Department will waive certain examination requirements, provided that Vermont would waive these same requirements if a Massachusetts producer sought licensure in Vermont. What term is used to describe this phenomenon? A Fair exchange B Equanimity C Reciprocity D Equality
Reciprocity "Reciprocity" occurs when the state in which the person resides accords the same privilege to residents of Massachusetts.
A type of policy that is used to provide a specific amount of replacement cost for a given risk after an insured property has been destroyed is called a(n) A Pro-forma appraisal policy. B Equitable sum policy. C Specific risk policy. D Valued policy.
Valued Policy. A valued policy provides for payment of the full policy amount in the event of a total loss WITHOUT regard to actual value or depreciation.
All of the following are requirements from the written application for a license to act as an insurance adviser EXCEPT A The application must also contain a statement as to the trustworthiness and competency of the applicant, signed by at least three reputable citizens of this commonwealth. B The application must state his residence, occupation, and all business affiliations for the ten years next preceding the date of the application. C The application must state his professional credentials and all political affiliations for which he has received compensation or served as a member. D The application must state the name, age, residence, and occupation of the applicant at the time of making the application.
the application must state his professional credentials and all political affiliations for which he has received compensation or served as a member. The application must state the name, age, residence, and occupation of the applicant at the time of making the application, his residence, occupation, and all business affiliations for the ten years next preceding the date of the application, a statement as to the trustworthiness and competency of the applicant, signed by at least three reputable citizens of this commonwealth, and such other information as the Commissioner may require.
Every policy of motor vehicle liability insurance issued by an insurer to an owner residing in this state will contain liability limits of at least A$25,000/$50,000/$25,000 B$50,000/$100,000/$10,000 C$15,000/$30,000/$5,000 D$20,000/$40,000/$5,000
$20,000/$40,000/$5,000 Massachusetts financial responsibility law requires that the insurance policy or bond provides coverage limits not less than the following: $20,000 on account of injury or death to any 1 person in a single accident; $40,000 on account of injury or death to 2 or more persons in a single accident; and $5,000 for damage to property of others arising out of a single accident.
Every insurer must file all rates, rating plans, and modifications to its plans with the Commissioner at least how many days prior to the effective date of use? A1 0 days B 15 days C 20 days D 30 days
15 Every insurer must file with the Commissioner all rates, every rating plan, and every modification of any of the foregoing which it proposes to use at least 15 days prior to the proposed effective date of such plan.
A hearing may NOT occur sooner than how many days after the notice of hearing is served? A 10 B 21 C 30 D 51
21 Whenever the Commissioner has reason to believe that any person has engaged or is engaging in any unfair method of competition or any unfair or deceptive act or practice, the Commissioner can issue a statement of the charges and a notice of a hearing to be held at a time and place fixed in the notice, which cannot be less than 21 days after the date the notice is served.
How long do rating organization's licenses remain in effect? A Indefinitely B 5 years C 1 year D 3 years
3 years Rating organization's licenses will remain in effect for 3 years.
An insured runs a day care in her home. She has purchased the home day care endorsement under her homeowners policy. Which of the following losses would her coverage cover? A child has bruises on her legs from receiving a spanking from the insured and must be seen by her pediatrician. B child riding the insured's horse falls off, breaking his collar bone. C child trips over a toy in the driveway, cuts her knee, and requires stitches. D child is playing in the insured's car, puts it in drive, and backs into the neighbor's mail box.
A child trips over a toy in the driveway, cuts her knee, and requires stitches.
A Notice of Information Practices must be given to the applicants for an insurance policy at all of the following intervals EXCEPT A At policy renewal. B At policy delivery. C Any time personal information is collected from additional sources other than the applicant. D At policy application.
At policy application A notice is not required at the time of application, since the information is being collected from the applicant personally.
If the insured owns a watch valued at $10,000, full coverage can be provided on a homeowners policy by purchasing the A Special limits of liability endorsement. B Personal property replacement cost endorsement. C Blanket personal property endorsement. D Scheduled personal property endorsement.
Scheduled personal property endorsement.
Which of the following would NOT be considered a flood? A Runoff of surface waters B Sewer backup C Overflow of tidal waters D Mudslides
Sewer backup Flood is defined by the National Flood Insurance Program. It does not include sewer backup.
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? A Unfair Trade Practices Law B The Guaranty Association C Consumer Privacy Act D The Fair Credit Reporting Act
The Fair Credit Reporting Act The purpose of the Fair Credit Reporting Act is to protect consumers against the circulation of inaccurate or obsolete information and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers.
How much coverage can be available for watercraft damage in the homeowners policy? A Unlimited amount B No more than $1,000 C Homeowners policies do not cover watercraft. D Up to $1,500
Up to $1,500 Homeowners policies limit the amount of property and liability coverage available for watercraft. Only $1,500 of coverage is provided in the homeowners policy for damage to watercraft, accessories, equipment and trailers, and liability for watercraft is limited by the size of the boat.
Any individual insurance producer who allows his license to lapse may, within 12 months from the due date of the renewal fee, reinstate the same license A Without the necessity of passing a written examination, but a penalty fee of double the unpaid renewal fee must be paid. B By passing a written examination and the unpaid renewal fee plus interest accrued must be paid. C By passing a written examination and a penalty of double the unpaid renewal fee must be paid. D Without the necessity of passing a written examination, but the unpaid renewal fee plus interest accrued must be paid.
Without the necessity of passing a written examination, but a penalty fee of double the unpaid renewal fee must be paid. Any individual insurance producer who allows his license to lapse may, within 12 months from the due date of the renewal fee, reinstate the same license without the necessity of passing a written examination, but a penalty in the amount of double the unpaid renewal fee will be required for any renewal fee received after the due date.
An individual was just caught making a false affidavit in connection with a policy's cancellation. What is the greatest prison sentence this individual faces? A 2 years B 5 years C 10 years D 1 year
1 year In this case, the individual may be imprisoned for up to 1 year.
What is the fee for a rating organization's license? A$50 B$15 C$25 D$35
25 The fee for rating organization's license is $25.
First aid costs for others injured on the insured's premises A Apply only if the insured is legally liable. B Also cover injuries to the insured's family members. C Are deducted from the liability limit. D Are paid in addition to the liability limit.
Are paid in addition to the liability limit
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be A Approved. B Authorized. C Certified. D Qualified.
Authorized. Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.
An insured condominium unit owner wants to purchase fire and extended coverage for personal property and liability coverage for himself and his family members. He should purchase HO-2. HO-3. HO-4. HO-6.
HO-6. The H0-6 is designed specifically to provide both property and personal liability coverages for a condominium unit owner.
An individual was just caught making a false affidavit in connection with a policy's cancellation. What is the greatest fine this individual faces? A$5,000 B$1,000 C$100 D$500
1000 In this case, the individual may be fined between $100 and $1,000.
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is A Conditional. B Aleatory. C Personal. D Unilateral.
Conditional. The contract is formed on the basis that certain conditions are met.
When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement? ADefamation BTwisting CRebating DFalse financial statement
false financial statement False financial statements are made when insurance companies attempt to hide their financial troubles from the public and government officials.
An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today's prices. If the roof has been depreciating at $200 per year and the insured's policy is written on the actual cash value(ACV), how much will the policy pay toward the insured's new roof? A$1,000 B$4,000 C$5,000 D$6,000
5,000. ACV is calculated as replacement cost less depreciation.
Comprehensive coverage would cover financial losses due to A Damage to your car caused by wind or hail. B Damage to your neighbor's mailbox which was caused by your pickup. C Damage to your car in an accident for which you were found at fault. D Legal action brought against you for an accident.
Damage to your car caused by wind and hail Comprehensive coverage includes losses caused by falling objects, fire, theft, windstorms, hail, and vadalism
The requirement that agents not commingle insurance monies with their own funds is known as A Accepted accounting principal. B Fiduciary responsibility. C Premium accountability. D Express authority.
Fiduciary responsibility. Money collected with respect to an insurance transaction must be held in a position of trust by the agent or broker.
A boatowners policy does NOT cover A Nuclear hazards. B Damage to the boat and trailer. C Liability. D Medical payments.
Nuclear Damage Boatowners policies, like homeowners policies, cover property, liability, and medical payments.
All of the following statements regarding a boatowners policy are true EXCEPT A Replacements for the boat listed in the Declarations are automatically covered, if the insured notifies the insurer within 60 days and pays the additional premium. B Watercraft liability protects up to specified limits for claims against a "covered person" for damages due to bodily injury caused by a watercraft. C Physical damage coverage is provided on an actual cash value (ACV) basis. D Perils are insured on an open-peril basis, providing that the insurer will pay for direct and accidental loss to the property insured.
Replacements for the boat listed in the declarations are automatically covered, if the insured notifies the insurer within 60 days and pays the additional premium Automatic coverage is provided on replacements for the boat listed in the declarations provided the insured notifies the insurer within 45 days of purchase and pays any additional premium required.
Which of the following is NOT considered a residual market? A Assigned risk auto plan B State Property and Casualty Guaranty Association C Joint underwriting association D FAIR plan
State property and casualty guaranty association FAIR plans, assigned risk plans, and a joint underwriting association are all considered residual markets. The state Guaranty Association is a mechanism for assisting the policyholders of bankrupt insurers and would not be called a residual market.
With respect to the business of insurance, a hazard is A The risk taken when performing something dangerous. B The tendency of poorer risks to seek insurance more often than better risks. C The basic reason for an insured to purchase insurance. D Any condition or exposure that increases the possibility of loss.
Any condition or exposure that increases the possibility of loss. A hazard is any condition or exposure that increases the possibility of loss occurring. Hazards are generally classified as either physical, moral, or morale.
A policy condition that stipulates how the amount of damaged or lost property will be determined if the insured and the principal do not agree on the value of a property loss is known as A Third-party provision. B Appraisal. C Coinsurance. D Loss valuation.
Appraisal If there is a disagreement between the insured and the insurer on the value of any property loss, either party can make a written demand for an appraisal.
Johanna purchased a National Flood Insurance policy 10 days after her community entered an emergency program. When would her coverage be effective? A 30 days after the application has been accepted B 12:01 pm on the 5th day after the endorsement request has been mailed C 5 days after the application and premium payment are mailed D 12:01 am the day after the application and premium payment are mailed
12:01 am the day after the application and premium payment are mailed During the first 30 days after a community enters the emergency or normal programs, coverage on a flood policy begins at 12:01 a.m. the day after application and premium payment have been mailed.
Lisa has $5,000 of medical coverage on her Massachusetts Automobile Insurance Policy at the time of a covered accident. Lisa and two passengers are injured, and medical treatment costs $7,000 for Lisa, $4,000 for Paul, and $8,000 for Steve. How much will the policy pay under medical payments coverage? A$5,000 maximum for the accident B$5,000 minus the policy deductible C$14,000 D$15,000
14,000 The limit is not more than $5,000 per person, per accident.
Under the Massachusetts Assigned Risk Plan, insurers would be required to provide insurance to which of the following? A A driver who has received a moving violation B A person who does not hold a driver's license C A person who is not eligible for a driver's license D A driver who has failed to pay insurance premiums due in the previous 12 months
A driver who has received a moving violation In the Massachusetts Assigned Risk Plan insurers are not required to provide insurance to a person who is not eligible for a driver's license, does not hold a driver's license or have failed to pay insurance premiums in the previous 12 months.
Which loss listed below would be fully covered by a homeowners policy? A. 1,200 pedigreed golden retriever stolen B. $24,000 bass boat destroyed in a tornado C. $5,000 firearm collection stolen D $2,000 silver tea set stolen
$2,000 silver tea set stolen
What is the deductible of a personal liability umbrella policy called? A The CPP B The SIR C The PIL D The CGL
The SIR The self-insured retention (SIR) is an initial part of a loss the insured pays before the umbrella pays if no other policy covers the loss.
An insurer recently canceled a motor vehicle policy. Shortly thereafter, the insured requested payment of all money she was due. How long does the insurer have to comply with this request? A 10 days B 30 days C 3 months D 6 months
30 days In this instance, the insurer has 30 days to refund all money due to the insured.
How long is a waiting period upon purchase of flood coverage through NFIP? A 10 days B 30 days C 60 days D There is no waiting period.
30 days Upon purchase of a flood policy, a 30-day waiting period is in place beginning from the time of application and premium payment.
An insured has a special form dwelling policy written for $100,000 on a dwelling. The dwelling's replacement cost is $115,000. Fire causes $75,000 in damage to the dwelling, $15,000 damage to a separate garage, and kills 10 trees valued at $600 each. How much will the policy pay for the trees? A$5,000 B$10,000 C$60,000 D$75,000
5,000 In the broad and special form, Coverage B (Other Structures) is an additional amount of insurance, limited to 10% of Coverage A (in this example, $10,000). Trees, shrubs, and plants are covered, limited to not more the $500 for any one tree or plant, and not to exceed 5% of Coverage A in total (in this example, $5,000).
Vandalism and malicious mischief would be covered if the insured's premises have been vacant for no more than how many days? A 30 B 60 C 100 D 365
60 Vandalism and malicious mischief will not be covered if the insured's premises have been vacant for more than 60 days immediately prior to the loss.
By definition an "uninsured motor vehicle" includes all of the following EXCEPT A The vehicle has no liability bond or insurance enforce. B A vehicle being used for public livery. C The accident was a "hit and run" and the driver cannot be identified. D The insurance company denies coverage.
A vehicle being used for public livery A vehicle being used for public livery is a standard exclusion in uninsured motorist coverage not a category of type of uninsured motor vehicle.
Which of the following would be considered causes for flood conditions covered by the National Flood Insurance Program? A Overflow of inland or tidal waters B Unusual and rapid accumulation or runoff of surface waters from any source C A mudflow D All of the above could be considered flood sources
All of the above could be considered flood sources A flood, as defined by the National Flood Insurance Program, is a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties from overflow of inland or tidal waters, unusual and rapid accumulation or runoff of surface waters from any source, or mudflow.
On a DP-3 Dwelling Property Special Form policy, the coverage provided for personal property is A The same as provided on the DP-2 Broad Form. B All risk. C Open peril. D The same as provided on the DP-1 Basic Form.
The same as provided on the DP-2 Broad Form. Although Coverages A and B on a DP-3 are written on an open peril or all-risk basis, the coverage for personal property is written on a named or specified peril.
Which of the following risks would NOT be eligible for coverage under a homeowners policy? A An applicant who owns and lives in a single-family dwelling that also contains incidental business activities B An applicant who owns and lives on a commercial farm C An applicant who lives in a duplex that she does not own D An applicant who owns and lives in a duplex
An applicant who owns and lives on a commercial farm
The fine for impersonation of a licensed producer is A At least $100, but no more than $500. B At least $500, but no more than $1,000. C No more than $50. D At least $10, but no more than $100.
At least $10, but no more than $100 Impersonation of a licensed producer is punishable by a fine of $10 to $100.
Insurable interest in a property policy must be proven A When a claim is paid. B At the time of application. C At the time of loss. D When a policyowner is changed.
At the time of loss, Between the time a policy is issued and when a loss occurs, ownership may have changed, mortgages may have been put into place, etc. Therefore, in property and casualty insurance, insurable interest must exist at the time of loss.
Which of the following types of insurers must participate in the Massachusetts Joint Underwriting Association? A Workers compensation companies B Non-admitted companies C Authorized property insurance companies D Automobile insurance companies
Authorized property insurance companies Only authorized property insurance companies must participate. The Auto and Workers Compensation carriers have a separate Assigned Risk plan to which they belong. Non-admitted companies do not participate.
If an insured has an umbrella liability policy in addition to his personal auto policy, which would be considered the underlying policy? A Umbrella policy B Excess policy C General liability policy D Auto policy
Auto Policy
If an insured has an umbrella liability policy in addition to his personal auto policy, which would be considered the underlying policy? A Umbrella policy B Excess policy C General liability policy D Auto policy
Auto policy The underlying policy is the primary liability policy. In this scenario, it's the insured's personal auto policy.
If an insurer makes a change to broaden coverage in a dwelling policy while it is in effect, the changes will apply A Within 60 days. B Automatically. C When the new policy is written. D When the policy is up for renewal.
Automatically Changes made to broaden coverage in a dwelling policy, if made while the policy is in effect or 60 days before it goes into effect, will apply automatically and will not need to be endorsed to the policy.
Which of the following statements regarding coverage for the flood and earthquake perils is true? A Both flood and earthquake are excluded perils in all property policies. B Flood and earthquake coverage is available in all policies. C Flood and earthquake coverage is available only through government insurance. D Flood insurance is usually provided in property policies, but earthquake coverage is available by endorsement only.
Booth flood and earthquake are excluded perils in all property policies
The Business Pursuits endorsement under Section II of a homeowners policy will cover all of the following EXCEPT A All business pursuits. B Business liability. C Insured's activities. D Bodily injury to the insured.
Business Liability. By endorsement, an insured may extend the Section II liability coverage to certain business pursuits that occur away from the premises. It would cover the activities of the insured, but would not cover the liability of a business owned by an insured
Homeowners policies provide coverage for A Property of tenants, roomers, or boarders not related to any insured. B Business property while on the residence premises. C Losses caused by off-premises power failure. D The land under the residence.
Business property while on the residence premises.
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as A Coercion. B Rebating. C Misleading advertising. D Defamation.
Coercion These are all considered to be Unfair Trade Practices, which are major violations that can lead to heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you agree to buy auto insurance from them.
The ABC Corporation has $100,000 of coverage on its building through insurance Company A, and $50,000 of identical coverage on the same building through insurance Company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs and the pro rata method is used, how much will each insurer pay? A Company A will pay $20,000; Company B will pay $4,000. B Company A will pay $12,000; Company B will pay $12,000. C Company A will pay $24,000; Company B will pay $0. D Company A will pay $16,000; Company B will pay $8,000.
Company A will pat 16,000; Company B will pay 8,000. Each policy pays its pro rata share of the loss based upon each policy's share of the total amount of coverage.
Which of the following Massachusetts Auto Coverages would pay for damage to a covered auto due to colliding with a deer? A Property damage liability coverage B Bodily injury liability coverage C Comprehensive coverage D Collision coverage Damage caused by contact with a bird or animals is paid under Comprehensive.
Comprehensive coverage Damage caused by contact with a bird or animals is paid under Comprehensive.
Which of the following dwelling coverages would provide coverage to a garage not attached to the primary insured dwelling? A Coverage C B Coverage E C Coverage A D Coverage B
Coverage B Coverage B covers other structures not attached to the primary dwelling, except by fence or utility line, or something similar.
With regards to a homeowners policy, which coverage provides for indirect or consequential losses? A Coverage B B Coverage C C Coverage D D Coverage A
Coverage D. Coverage D provide for loss of use, which is an indirect loss.
If a newly acquired auto replaces a vehicle shown in the Declarations, which of the following is true regarding coverage for that vehicle? A Coverage must be added by an endorsement. B Coverage is automatic. C New coverage must be requested from the insurer. D Coverage is not provided for the first 30 days.
Coverage is automatic If a newly acquired auto replaces a vehicle shown in the Declarations, coverage is provided for this vehicle without having to ask the company to insure it.
The part of a policy that clarifies terms in the policy is the A Definitions. B Insuring agreement. C Conditions. D Exclusions.
Definitions The component of a policy that clarifies terms is the definitions.
All of the following are other coverages under the dwelling policy EXCEPT A Debris removal. B Improvements, alterations, and additions. C Earth movement. D Other structures.
Earth movements Earth movement is not included in the other coverages of the dwelling policy.
When an insured is operating a nonowned auto, the coverage afforded by the Use of Other Autos - Broad Form is considered to be A Excess over the auto owner's coverage. B Primary over the auto owner's coverage. C Pro rata with the auto owner's coverage. D None of the above.
Excess over the auto owner's coverage Use of Other Autos - Broad Form endorsement is excess over any coverage provided by the auto owner's insurance coverage.
Which of the following claims would be included under the dwelling policy? AFire damage to a garage located on the insured premises used as an auto repair shop BTheft of the insured's auto from the detached garage CDeath to the insured's pet caused by smoke inhalation DFire damage to the insured's rowboat stored in the attached garage
Fire damage to the insured rowboat stored in the attached garage. Rowboats and canoes are covered under the dwelling policy as personal property.
The homeowners policy covers collapse caused by all of the following EXCEPT A Weight of snow. B Hidden insect or vermin damage. C Weight of too many people attending an event hosted in the house. D Foundation cracks.
Foundation Cracks
What insurance concept is associated with the names Weiss and Fitch? A Guides describing company financial integrity B Policy dividends C Types of mutual companies D Index used by stock companies
Guides describing company financial integrity
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 predictable.
Insureds cannot be randomly selected. Granting insurance must not be mandatory, selecting insureds randomly will help the insurer to have a fair proportion of good risks to poor risks. All other statements are true.
Which of the following is NOT true regarding a Certificate of Authority? A It is equivalent to an insurance license. B It is issued by the state department of insurance. C It is issued to group insurance participants. D It may be necessary for transacting business in a specific state.
It is issued to group insurance participants. Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.
What method do insurers use to protect themselves against catastrophic losses? A Reinsurance B Indemnity C Pro rata liability D Risk management
Reinsurance Insurers use reinsurance to protect themselves from catastrophic losses. This is a method where the reinsurer indemnifies the ceding insurer for part or all of the losses it sustains related to a policy issued previously.
A building is insured, but no one has lived or worked in it for 10 years. The building is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered A Closed. B Vacant. C Unoccupied. D Condemned.
Vacant An insured structure in which no people have been living or working and no contents have been stored for the period of time required as stated in the policy (usually 60 days) constitutes vacancy.
All of the following are true regarding the Massachusetts Mandatory Automobile Insurance Endorsement M-0099-S, EXCEPT A It is a mandatory endorsement. B It waives the collision deductible if the insured is legally parked. C It adds a $500 minimum collision deductible. D It causes the limits of insurance to comply with the minimum limits of any state in which the vehicle is being operated.
It waives the collision deductible if the insured is legally parked. The collision waiver is not a part of M-0099-S. That coverage is added by a separate endorsement.
All of the following are true regarding physical damage coverage, EXCEPT A Losses to non-owned autos will be covered the same as the broadest coverage available for any covered auto, except non-owned trailers are limited to $500. B The insured and insurer may agree to a different deductible amount than that set by state law. C The insurer will pay for direct and accidental loss to a covered auto minus any applicable deductible. D The limit of liability is the lesser of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle.
Losses to non-owned autos will be covered the same as the broadest coverage available for any covered auto, except non-owned trailers are limited to $500. The Massachusetts Automobile Insurance Policy does not automatically provide coverage for non-owned trailers.
An insured's home is mortgaged by the local bank. The insured is required to carry insurance on the home, showing the bank as the mortgagee. If the home is damaged by a covered peril, which of the following is true? A The additional premium required for the mortgage endorsement must be paid by the mortgagee. B Losses will be paid to the mortgagee and mortgagor as their interest appears. C Coverage is suspended if the building is mortgaged and the insurer is not told of this indebtedness. D The mortgagee must settle with the mortgagor in the event of a loss.
Losses will be paid to the mortgagee and mortgagor as their interest appears. If a mortgagee is shown on a property policy, in the event of loss, the insurer agrees to pay its financial interest of the loss up to the policy limits. If the policy is to be cancelled, the insurer agrees to give the mortgagee at least 10 days' prior notice of the cancellation.
The continuing education requirement for licensees, during the initial licensing period, is a A Minimum of 30 hours of instruction to include 4 hours of ethics training. B Minimum of 60 hours of instruction. C Minimum of 45 hours of instruction. D Minimum of 45 hours of instruction to include 6 hours of ethics training.
Minimum of 60 hours of instruction During the first 36-month period following the date of original issue of the license, the person must satisfactorily complete courses or programs of instruction or attend seminars equivalent to a minimum of 60 hours of instruction.
In a dwelling policy, which of the following other structures would be covered? A Used by the insured in which to operate a retail business B Used by the insured to house a manufacturing operation C Rented to a neighbor for use as a private garage D Used as part of a farming operation
Rented to a neighbor for use as a private garage Under Coverage B, other structures may not be rented to anyone except a tenant of the main dwelling. However, a garage that is used for a private garage does not come under this exclusion of rented property and is covered even if it is rented to someone other than the occupant of the dwelling.
Section I of a boatowners policy covers A Death. B Physical damage. C Liability. D Medical payments.
Physical damage Section I of a boatowners policy covers physical damage.
Who would participate in a Write Your Own (WYO) flood insurance program? A Lloyd's associations B Government insurance companies that write and service National Flood Insurance policies C Businesses requiring National Flood Insurance policies D Private insurers that wish to write and service National Flood Insurance policies on a no risk-bearing basis
Private insurers that wish to write and service National Flood Insurance policies on a no risk-bearing basis A WYO program is made up of private insurers that write and service National Flood Insurance policies on a no risk-bearing basis through a special arrangement with the Federal Insurance Administration. WYO programs retain part of the flood insurance premium to pay for commissions and administrative costs. The remaining premiums, plus investment, are used to cover losses.
Limited fungi, wet or dry rot, or bacteria endorsement in HO policies applies to A Specified losses B Property losses only C Liability losses only D Property and liability losses
Property and liability losses
Installing deadbolt locks on the doors of a home is an example of which method of handling risk? A Transfer B Self-insurance C Reduction D Avoidance
Reduction. Steps taken to prevent losses from occurring are called risk reduction.
In a personal umbrella policy, the amount paid by the insured for certain losses not covered under the primary coverage is called A Self-insured retention. B Stop-loss. C Coinsurance. D Participation requirement.
Self-insured retention In casualty insurance, the portion of a claim not paid by insurance is called a retention. In property insurance, it is called a deductible.
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 Replacement cost. B Actual cash value. C Specific insurance. D Stated amount.
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.
Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting? A Reciprocal B Fraternal C Stock D Mutual
Stock. Only stock insurance companies are owned and controlled by stockholders.
An apartment occupant's personal property would be insured under which homeowners form? A Unit-owners form (HO-6) B Tenant broad form (HO-4) C Comprehensive form (HO-5) D Broad form (HO-2)
Tenant broad form (HO-4) The HO-4 form (tenant broad form) is for the apartment dweller. It covers what the insured owns, their contents, and has no coverage for the apartment.
Which of the following would NOT be considered part of the insured location under the liability section of a homeowners policy? A A residence where an insured is temporarily residing B A family cemetery plot C A lakeside cabin rented by the insured for vacation D Vacant farmland owned by the insured
Vacant farmland owned by the insured
Replacement cost coverage is provided in both the broad and special form dwelling policies when A The amount of insurance on both the dwelling and personal property is at least 80% of its replacement cost when the policy is written. B The amount of insurance on the dwelling is at least 90% of its replacement cost when the policy is written. C The dwelling is insured for 100% of its replacement cost at the time of a loss. D The amount of insurance on the dwelling is at least 80% of its replacement cost at the time of loss.
The amount of insurance on the dwelling is at least 80% of its replacement cost at the time of loss. It is always a requirement on property forms that provide replacement cost coverage that insurance on the dwelling be at least 80% of its replacement cost at the time of loss.
How much is the premium for the dwelling under construction endorsement under the dwelling policy? A The average amount of insurance during construction B 75% of the gross premium C The full value of the house D 50% of the actual value premium
The average amount of insurance during construction The premium is based on the average value of the house and building materials from the first day of construction until completion.
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible? A The insured can transfer the policy to his friend and then notify the insurer of the change. B The insured will need a written consent of the insurer. C It is impossible to transfer a policy. D The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it.
The insured will need a written consent of the insurer. A personal insurance contract is written between an insurance company and an individual, and the company has a right to decide with whom it will and will not do business. An insured can transfer an insurance contract to another person, but he or she must first obtain the written consent of the insurer.
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 will be cancelled.
The insured would be responsible for the amount required as underlying limits in the event of a claim. The amount of insurance required as underlying limits in other policies is treated as a deductible amount to the umbrella for that particular exposure, so if underlying limits are not maintained, it is the insured's responsibility.
Chapter: Other Coverages and Options Question 6 of 15 An insured invites his neighbors out for a day on the water in his boat powered with a 150 hp outboard motor. While attempting to tie the boat to dock, his neighbor's hand is broken when caught between the boat and dock. What coverage would apply to the broken hand? A The insured's outboard boat and motor policy B Homeowners personal liability coverage C Homeowners property coverage D The insured's boatowners policy
The insured's boatowners policy Outboard boat and motor policies are property coverage only. Homeowners liability does not apply to outboards with more than 25 hp. Boatowners policies contain property, liability, and medical payments coverage.
In which of the following situations would off-premises coverage in a broad theft endorsement of the insured's dwelling policy apply? A The insured's live-in maid's quarters are burglarized. B The insured's china set is stolen from her home while she's traveling on business. C The insured's vacuum cleaner is stolen from her apartment. D The insured's camera is stolen from his suitcase while he is on vacation.
The insured's camera is stolen from his suitcase while he is on vacation. A broad theft endorsement on the off-premises coverage covers property that is either owned or used by the insured when the property is away from the insured premises.
A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true? A The entire loss is payable to the insured. B The loss is payable to the insured and the mortgagee. C The mortgagee should submit a claim to its insurer, and the insured should submit a claim to the HO policy. D The entire loss is payable to the mortgagee.
The loss is payable to the insured and the mortgagee. Loss is payable to the insured and mortgagee to protect the mortgage company's interest. This prevents the insured from cashing the check and not completing repairs.
Which of the following claims does NOT fall under the scope of liability coverage of Section II of a homeowners policy? A The named insured's dog bites the neighbor, tearing his clothes and causing him to be treated by a doctor. B A visitor slips on some ice causing him to be injured when falling down the porch steps. C The named insured is borrowing a friend's jacket which is later damaged. D The named insured's 8-year-old son throws a rock and strikes a neighbor's child, breaking her eye-glasses and cutting her face.
The named insured is borrowing a friend's jacket which is later damaged. Damage to property of others in the care, custody or control of the insured is specifically excluded.
When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be A The proximate cause. B The direct cause. C Strict liability. D An intervening cause.
The proximate cause The proximate cause of a chain of events resulting in injury is one that is sufficiently related to an injury that the courts determine it is in fact the cause of that injury.
Which of the following losses would most likely NOT be covered under Coverage A in the dwelling policy? A Supplies used for repair of the dwelling B Theft of a renter's lawnmower used to service the premises C Fire damage to building material on the premises D Outdoor personal property of the insured
Theft of a renter's lawnmower used to service the premises Coverage A on the dwelling includes all attached structures and outdoor personal property or equipment used to maintain or service the premises if not covered elsewhere. The lawnmower most likely would not be covered because the dwelling insured is rented to others without content coverage. If the landlord furnishes lawnmowers or other equipment to service the premises, there is no need to schedule a small amount of content coverage.