Insurance Test Prep
Excess Liability insurance
will provide excess coverage over the liability limits of an underlying primary policy
Actual Cash Value (ACV)
When losses are settled on an actual cash value basis, the policy will pay for the cost to repair or replace the damaged property at the time of loss, minus depreciation.
Tort
a civil wrong
indirect loss
also known as consequential loss, is a consequence of a direct physical loss. Indirect losses refer to financial losses, such as loss of income or additional expenses incurred while property is being repaired.
Which of the following best describes the principle of indemnity? A The insured is restored to the same financial condition as prior to the loss, with no loss or gain B The insured's position is not improved after sustaining a loss C The insured is restored to a financial condition as good as, or better than, the insured was before the loss D The insured compensates the insurer for any expenses it incurs in adjusting the loss
A Indemnity is the principle that restores an insured party to the economic position they held before sustaining a loss. It does not allow the insured to profit from a loss.
The transfer of the right of recovery from the insured to the insurance company is called: A Subrogation B Assignment C Hold harmless D Indemnity
A Subrogation allows the insurer to take legal action against the negligent third party.
A homeowner hires a contractor for a renovation project. Before officially hiring the contractor, the homeowner wants to see evidence of liability insurance the contractor has in place. The contractor could provide proof of coverage by: A Showing an expired binder B Showing a certificate of insurance C Having the homeowner contact the contractor's insurer D Promising the homeowner that a liability policy is currently in place
B A certificate of insurance is a document that proves that coverage is in place by specifying the type of insurance coverage in place and the limits of liability. Though a binder can also show evidence of coverage, as it represents temporary coverage, an expired binder would not be satisfactory.
Property policies will generally exclude all of the following perils from coverage, except: A Friendly fire B Flood C Inherent vice D Lightning
D Following the standards set in the standard fire policy, property policies must provide insurance against the perils of fire, lightning, and the removal of property endangered by fire or lightning. Friendly fires, which are intentional fires that burn within their intended boundaries, are generally not covered. Flood and inherent vice, like wear and tear, are common exclusions.
A legal contract is composed of all of the following elements, except: A Legal capacity B Consideration C Legal purpose D Indemnity
D The elements of a legal contract are competent parties (legal capacity), legal purpose, agreement (including an offer and acceptance), and consideration. Indemnity is a principle that guides the business of insurance and affects insurance contracts, but it is not an element of all legal contracts.
Which of the following methods of writing insurance is used to provide insurance on properties at different locations, using a single policy, and a single limit of insurance?
blanket
An agent has a fiduciary responsibility, meaning the agent: A Is responsible for investigating claims to determine the insurer's liability B Must comply with state and federal insurance regulations C Handles the insurer's funds in a position of trust D Is obligated to recommend policies to consumers only if they meet the consumer's needs
c
Insurance is an example of which type of risk management technique? A Reduction of risk B Element of risk C Transfer of risk D Retention of risk
c
Where can an insured find insurance coverage after being rejected by an insurer due to claims history? A Risk retention insurer B Reinsurance market C Residual market D Lloyd's of London
c (The residual market is a coverage source of last resort for businesses and individuals who have been rejected by voluntary (standard) market insurers.)
In the event a Personal Auto policy is to be terminated, which of the following provisions applies?
-Proof of mailing any notice is sufficient proof of notice. The insurer may also deliver the notice directly to the insured. - If the policy is cancelled and there is unearned premium, the insured is entitled to a refund, which will be computed according to the insurer's manuals. - The effective date of cancellation stated in the notice will become the end of the policy period.
Consumers tend to seek insurance for larger risks with a higher probability of loss, which are harder to insure, rather than average risks that have a lower probability of loss, which are more favorable for insurers. This describes which insurance principle? A Adverse selection B Estoppel C Residual markets D Law of Large Numbers
A Adverse selection is the tendency of consumers to want insurance for higher risks compared to average or lower risks, which creates an imbalance for insurers. Insurers can protect themselves from adverse selection by charging a higher premium for less favorable risks or by denying coverage, in which case the consumer may be able to find coverage in a residual market. The law of large numbers refers to a probability theory that states that a larger sample size of units makes loss predictions more accurate.
Which of the following best describes both the premium paid by the insured and the promise by the insurer to pay a covered loss and defend the insured in a lawsuit? A Consideration B Acceptance C Offer D Legal Purpose
A Consideration in legal contracts is the exchange of value between the contract's parties. In insurance contracts, insureds pay a premium in exchange for the insurer's promise to indemnify in the event of a covered loss. The insured's premium is also part of their offer, or works as the acceptance when the insurer makes a counteroffer, but the insurer's promise to pay is always an example of consideration, making consideration the best answer.
The Assignment condition of an insurance policy states that: A The insured may not transfer ownership of the policy without the insurer's written permission B The naming of parties other than the insured on loss payment checks is prohibited C The insured must give prompt notice to the insurer upon loss D No requirements may be placed upon the insured without legal action
A If the insured wishes to assign the policy to another party, such as a new owner of the property, written permission of the company is necessary.
Property insurance policies exclude losses resulting from inherent vice, which would include all of the following perils, except: A Explosion B Mechanical breakdown due to age C Rusting D Wear and tear
A Inherent vice is a quality within property that causes it to damage or destroy itself, including mechanical breakdown, rusting, and wear and tear. Explosion is generally not considered inherent vice, and is a common peril covered by property policies.
Statements that are believed to be true to the best of the applicant's knowledge and belief are known as: A Representations B Waivers C Statements of adhesion D Warranties
A Representations are statements that are BELIEVED to be true to the best of the applicant's knowledge and belief at the time of application. Warranties are GUARANTEED to be true.
Which of the following most accurately describes the Abandonment condition? A The insured cannot abandon damaged property to the insurer B Abandoned property must be protected from further damage C The insured must make reasonable and necessary repairs to protect the property D The insured must cooperate with the company in the investigation of a claim
A The Abandonment condition provides that the insurer will not accept property abandoned by an insured, such as the insured surrendering property to the insurer for disposal.
Policyholder A's insurer is providing coverage on too many homes subject to wind losses. As a result, the company decides to reinsure those policies to share the high risk of wind loss. The reinsurance contract can best be described as which of the following? A An agreement between A's agent and the insurance company B An agreement between the insurance company and the reinsurer C An agreement between A, the insurance company, and the reinsurer D An agreement between A and the reinsurance company
B (A reinsurance contract is between the insuring company and the reinsurer, and does not involve the insured.)
All of the following statements regarding liability losses are correct, except: A Loss of consortium means the loss of companionship of a spouse B Bodily injury includes personal injury, sickness, and disease C Advertising injury includes defamation and copyright infringement D Property damage includes physical damage to tangible property, including loss of use of that property
B Bodily injury does not include personal injury, which are injuries that affect a person's reputation or emotional well-being.
Which of the following best describes both the premium paid by the insured and the promise by the insurer to pay a covered loss and defend the insured in a lawsuit? A Acceptance B Consideration C Offer D Legal Purpose
B Consideration in legal contracts is the exchange of value between the contract's parties. In insurance contracts, insureds pay a premium in exchange for the insurer's promise to indemnify in the event of a covered loss. The insured's premium is also part of their offer, or works as the acceptance when the insurer makes a counteroffer, but the insurer's PROMISE to pay is always an example of consideration, making consideration the best answer.
A named insured on a property insurance policy may transfer their rights and duties under the policy, even without the insurer's permission, to which of the following people? A No insured may assign the policy to another person B Only their legal representative upon the death of the named insured C Only someone who is considered an insured on the policy D No one, because only the first named insured may assign the policy to another
B Named insureds may specify their legal representative on the policy, and if the named insured dies, their rights and duties are transferred to that legal representative to the extent that the representative acts within the scope of their duties. If a named insured were to assign the policy to anyone else in any other circumstance, they would need the insurer's written consent.
X's neighbor shoots off fireworks on July 4th and puts the shells in X's trash can, causing a fire and damaging X's garage. X's insurance company pays the loss and contacts the neighbor for reimbursement. This is an example of: A Reimbursement B Subrogation C Loss Settlement D Appraisal
B Subrogation rights apply when a negligent third party causes a loss. Since the insurance company has paid the loss, it is granted the insured's right to recover payment from the third party.
In Florida, which of the following is not a duty of the Department of Financial Services? A Impose penalties for Insurance Code violations B Enforces the Insurance Code by administering criminal penalties C Investigate fraud D Supervise methods of obtaining business
B The Department of Financial Services also handles licensing insurance companies, and investigating applicants for an insurance license.
An insured should not profit from an insurance transaction. This describes which of the following principles? A The principle of subrogation B The principle of personal aspect C The principle of indemnity D The principle of utmost good faith
C When the insurer indemnifies the insured after a covered loss, the insurer restores the insured to the same financial condition as before the loss. In other words, the insured does not profit from the loss.
Under the Other Insurance condition, when two property policies cover the same property on a pro rata basis, how is a loss apportioned? A Neither policy will pay because of overinsurance B The first policy will pay up to its limits, then the second policy acts as excess coverage C Each policy will pay an equal share of a loss D Each policy will share losses proportionately according to the total insurance provided for the property
D For a property policy, the Other Insurance condition generally states that two policies covering the same loss at the same coverage level (primary or excess) will pay on a pro rata basis, meaning the policies will pay proportionally by comparing their limits of insurance to the total amount of insurance provided by both policies together. In other words, the loss is prorated between the two insurers.
All of the following statements regarding property insurance terminology are true, except: A An insurance policy that pays only after primary coverage has been exhausted is said to be excess B A deductible is a specified amount of loss that is retained by the insured C Words, terms, or phrases that are described in an insurance policy are definitions D Proximate cause is a secondary cause of loss
D Proximate cause is the primary cause of loss, or the first event in the unbroken chain of events
M has a liability policy insuring M's flower shop. After M sells the shop, the buyer asks if M can transfer the liability policy as part of the sale. Which condition prevents M from making this transfer without the insurer's consent? A Liberalization B Assumption of Risk C Subrogation D Assignment
D The Assignment condition states a policyholder cannot transfer policy ownership without the insurer's written consent.
Which state entity is responsible for approving a certificate of authority for an insurance company? A State legislature B Department of Financial Services Division C State judicial system D Office of Insurance Regulation
D The Commissioner of the Office of Insurance Regulation also regulates insurance licensing, rates, policy forms, market conduct, claims, and company solvency.
An insured's home is insured on a Homeowners policy. During a storm, a tree falls and crashes into the side of the home. The Homeowners policy states that the insured must promptly notify the insurer of the loss. The requirement for prompt notice of loss is found in the policy's: a Endorsements B Declarations C Insuring Agreement D Conditions
D The Conditions section of the policy specifies the obligations of the insured and insurer. Providing a notice of loss is found under the Duties in the Event of Loss condition, which is common for property and casualty insurance policies
A policy contains a provision stating that after the insurer pays for a covered claim, the insurer will reinstate the policy limit to its initial value. This is provided by which policy condition? A Loss Settlement B Loss Payment C Limit of Liability D Restoration of Limits
D The Restoration of Limits condition specifies the circumstances under which the insurer will restore the limit of liability to its initial value after the insurer pays a covered claim.
Which state entity decides conflicts between insurance companies and policyholders? A Department of Financial Services Division B Office of Insurance Regulation C State legislature D State judicial system
D The State judicial system also enforces the code by administering criminal penalties and decides if new laws are constitutional.
Which insurance company department determines the probability of loss and determines premium rates? A Sales department B Underwriting department C Claims department D Actuarial department
D The actuarial department interprets statistical information to determine the probability of losses and determine the premium rates used by the insurer. The underwriting department, on the other hand, selects the risks and selects the premium rate that will determine the premium for a specific insured.
The maximum amount payable for all losses within a policy period is known as the: A Per person limit B Per occurrence limit C Combined single limit D Aggregate limit
D The aggregate limit is reduced by the amount paid each time a claim is paid during the policy term.
An insured has a property policy that provides $50,000 of personal property coverage and $100,000 of coverage for the building, with a $1,000 deductible and an 80% coinsurance requirement. If furniture sustains $500 of covered fire damage, how much does the insurer pay? A $1,000 B $500 C $400 D Nothing
D The property loss would be subject to the policy deductible. Since the amount of loss does not exceed the deductible amount, the insurer would not pay for this loss. This is an example of a deductible reducing the frequency of small claims.
L and an insurer have entered into a legal insurance contract. Though L pays a set premium to the insurer, neither L nor the insurer knows if L will receive any claim payments in return, as the parties cannot predict whether or not a loss will occur during the policy period. This unequal exchange of value contngent on uncertain events best describes which type of contract? A Conditional contract B Contract of adhesion C Unilateral contract D Aleatory contract
D The unequal exchange of value contingent on the uncertainty of an event describes an aleatory contract. A contract of adhesion is one where one party drafts the contract without negotiations with the other party.
Who do producers represent when transacting the business of insurance? A Themselves B The insured C The Commissioner of Insurance D The insurer
D Though producers still have certain ethical responsibilities to applicants and insureds, they represent and act on behalf of the insurer, also known as the principal. Brokers, on the other hand, act on behalf of applicants.
An insured needs to submit a claim after a property loss, and their insurer requires them to submit a notice of loss. All of the following statements about the notice of loss are true, except: A The notice of loss contains an inventory of damaged property B The notice of loss contains details about the circumstances of the loss C The notice of loss must be submitted promptly D The notice of loss is a written notice that a loss occurred
A The notice of loss is the initial notice that a loss occurred that includes basic details, such as the name of the insured, the policy number, details about the circumstances of the loss, and the contact information of witnesses. The proof of loss is more extensive, and would include inventories of damaged property and their receipts.
What is the term for a cause of loss, such as the theft of a car? Peril B Hazard C Accident D Risk
A (A peril is a cause of loss. For example, property insurance insures against certain perils that cause a loss to property, such as fire, hail, or theft.)
Deductble
A deductible is a specified amount of each loss that the insured must bear as a way to share the cost of a loss, often applicable to each occurrence. Deductibles are an underwriting tool that the insurer uses to reduce the number of small claims.
What is the general structure of a policy?
D Declarations I Insuring Agreement C Conditions E Exclusions + L Limitations E Endorsements A Additional Coverages D Definitions
what is on the conditions?
The Conditions section specifies the obligations that the insured and insurer agree to follow in order for the policy provisions to take effect, as well as other conditions of coverage. For example, a policy may require an insured to protect their property following a partial loss, and failing to do so may void any coverage for that property.
what is on the insuring agreement?
The Insuring Agreement is the insurer's promise of protection to the insured, affirming that the insurer will indemnify the insured for covered losses. The perils insured against by the policy are specified in the Insuring Agreement
Parts of a legal contract
These essential elements include competent parties, legal purpose, offer and acceptance, and consideration.
Coinsurance
To encourage insureds to purchase and maintain insurance to value, many property policies include a Coinsurance provision. This provision requires an insured to carry a certain percentage of the property's total valuation (usually 80%) in order for losses to be paid in full. If the insured carries less than the required percentage, the policy will only pay an amount proportionate to the amount of insurance carried.
Split Limits
indicate the most the policy will pay for different types of losses that occur as a result of any one loss, regardless of other limits. These are often seen in auto insurance policies to provide a per person limit for bodily injury, a per occurrence limit for bodily injury, and a per occurrence limit for property damage.
what is on the declaration page?
who, what, where , when, how much
What do umbrella liability policies cover?
-It covers claims for bodily injury, property damage, and personal injury in excess of the insured's underlying policy limits. - Umbrella Liability policies usually cover losses worldwide, including auto losses.
About Personal Umbrella Policy
-It is an excess coverage. -It provides an additional layer of liability insurance after the limits of underlying primary policies are exhausted due to paid claims -It provides coverage on a broader basis than the primary policies, so that when a primary policy does not cover a claim, the Umbrella policy drops down to provide first-dollar coverage, as though it is a primary policy -A single Umbrella policy will apply to both Homeowners and Personal Auto liability losses when adequate primary insurance limits are maintained.
If the insured does not agree with the insurer's decision regarding a claim, what process helps decide the outcome? A Consequential hearing B Insurance company conference C Inspection D Arbitration
D During arbitration a neutral third party decides the outcome of a claim.
When an individual faces the risk of economic loss in the event of property damage, this indicates which of the following? A Merit rating B Subrogation C Limit of recovery D Insurable interest
D Typically, if there is a risk of financial loss, there is an insurable interest.
For a claim to be paid, insurable interest for a property or casualty contract must exist at the time of: A Loss B Premium payment C Policy delivery D Policy issuance
A
Insurers often publish their standard rates in their manuals. These general rates are determined by: A Actuaries B Executives C Underwriters D Managing general agents
A (Actuaries determine the premium rates used by the insurer, based on statistical information gathered and interpreted by the actuarial department. Underwriters would select the rate appropriate for an applicant or policyholder.)
A contract prepared by one party and submitted to the other party on a take-it-or-leave-it basis, without negotiations, is called a(n): A Contract of adhesion B Conditional contract C Personal contract D Aleatory contract
A A contract of adhesion is one that is prepared by one party and presented to the other party on a take-it-or-leave-it basis. Any ambiguities in this contract will be legally interpreted in favor of the party that did not write the contract.
An insured puts $50,000 of covered inventory into storage, where the items are later damaged by a covered peril. What provision on the insured's property policy prevents the storage facility from collecting any payment from the insured's claim? A No Benefit to Bailee B Garage Coverage Form C Assignment rule D Liberalization clause
A The No Benefit To Bailee clause ensures that other than insureds, no one with care, custody, or control can collect on a claim. The storage facility would need its own insurance that applies to losses to customers' property.
Which provision stipulates that coverage will not benefit a party that is holding, storing, or moving insured property for a fee? A No Benefit to Bailee B Assignment C Loss Settlement D Limit of Liability
A The No Benefit To Bailee condition makes clear that the insurer has no obligation to a bailee. The bailee's own insurance would apply in the event of a loss to property in its care, custody, or control.
Which of the following is true of the Insuring Agreement? A The promise to indemnify an insured for a covered cause of loss B It provides the name and address of the insured and the name of the insurer C It provides the policy conditions D It lists the policy premium amount
A The insuring agreement is the company's commitment (promise) of protection to the insured. It specifies the types of property covered, and the perils insured against. Policy conditions are specified in a separate Conditions section.
Which of the following is stated in the Insuring Agreement? A The Other Insurance provision B The perils insured against C The perils excluded by the policy D The location of insured property and the named insured's mailing address
B The Insuring Agreement states the insurance company's promise to pay the insured, including the exact perils insured against by the policy.
The Severability condition of a casualty insurance policy states: A That the insured transfers its rights of recovery to the insurer B That policy coverage considers each insured separately, except for the limit of liability C The procedures for transferring policy ownership rights to another person or organization D Policy termination procedures
B The Severability condition states that coverage considers each insured separately (severally), except for the limits of liability. For example, each named insured is treated as the only named insured when it comes to fulfilling policy conditions.
Which of the following is correct in regard to market conduct examinations in Florida? A The costs of examinations are paid by the Market Investigation Division B All accounts, records, documents, files, etc. must be freely available to the examiners C The division may only make investigations every 5 years D The Special Investigations Unit conducts market conduct examinations
B The costs of an examinations will be paid by the person or entity examined. The Special Investigations Unit investigates allegations of unauthorized and illegal insurance activity. The Division of Market Investigations conducts market conduct examinations.
Which of the following statements regarding deductibles is true? A Deductibles tend to increase premiums B Deductibles help reduce the number of frivolous or small claims C Deductibles reduce the total amount of insurance available D Deductibles apply only to larger losses
B The deductible is the amount of each loss that the insured must bear before the policy responds to the loss. Deductibles eliminate the expense of processing small claims, resulting in reduced premiums.
Combined Single Limit
Policies with combined single limits have one per occurrence limit of insurance, which may be applied to either bodily injury or property damage, or a combination of the two, as needed.
When forming a legal contract, its legal purpose refers to: A The capacity of the contract's parties to enter into the contract B The parties entering into the contract in good faith, without violating public policy C The exchange of value between the contract's parties D A meeting of the minds between the contract's parties
B The legal purpose of a contract refers to the contract's being made in good faith and without violating the law. For example, illegal activities cannot be covered by an insurance contract because that coverage would incentivize the illegal act.
Which condition states that a suit may not be filed by the insured against the insurer if the insured has not complied with policy terms? A Claim Settlement B Legal Action Against Us C Ordinance or Law D Loss Payment
B Unless all terms of the policy have been complied with by the insured, the insured cannot file suit against the insurer. An insured cannot ignore their responsibilities under the policy, then subsequently bring legal action against the insurer. This is stated in the Legal Action Against Us (or Suit Against Us) condition.
F's home is in the middle of a severe storm. During the storm, lightning strikes F's barn and starts a fire. The fire ignites a gas can stored inside the barn, causing the fire to grow and totally destroy the barn. Which of the following is the peril? The gas can B The barn C The lightning D The threat of the storm
C Because lightning specifically caused the loss, lightning is the peril. The gas can is a physical hazard that increased the likelihood and severity of the loss.
Before closing on a mortgage, N is required by the mortgagee to have Homeowners insurance in place. After evaluating the risk, XYZ Insurer issues a Homeowners insurance binder to N. All of the following statements about the binder are correct, except: A The binder offers temporary coverage B The binder does not guarantee full policy issuance C The binder must be written in order to be valid D Once XYZ Insurer issues the full policy, the binder will be terminated
C Binders are written or oral contracts that offer temporary insurance coverage. Binders expire either after a specific time period or at the time the full insurance policy is issued.
Appraisal
Appraisal addresses disputes about the amount of a property loss, and it may be requested by either the insurer or the insured.
Which of the following is not essential in determining if an action is due to negligence? A The injured party must prove the alleged wrongdoer owed a duty to the injured party or to the public B The injured party must prove the actual injuries or damages were foreseeable C The injured party must prove the wrongdoer committed a criminal act D The injured party must prove the wrongdoer failed to act in a reasonable and prudent manner
C Negligence is the commission of a civil or private wrong, not a criminal wrong.
The purpose of the Fair Credit Reporting Act is to do all of the following, except: A Ensure information is accurate and used for a specific purpose B Allow insurers to use consumer credit reports as the only rating factor C Protect the consumer from overly intrusive information collection practices D Protect the consumer's right to privacy
B
Customers of an insurer must be provided with a notice of the insurer's privacy policies and practices regarding customers' nonpublic personal information at least: When the customer relationship is established and only when the privacy policy is revised B When the customer relationship is established and annually thereafter C Prior to disclosing any nonpublic personal information and every 2 years thereafter D At policy delivery and annually thereafter
B Under the Gramm-Leach-Bliley Act's financial privacy rule, notice of information-sharing practices must be provided when the customer relationship is established and annually thereafter. An updated notice is also required if the privacy policy changes.
Dividends issued by stock insurers are paid to: A Directors B Members C Stockholders D Policyholders
C Stock insurers issue taxable corporate dividends to stockholders, but not policyholders. Mutual insurers may issue dividends to policyholders.
Under the Fair Credit Reporting Act, if a consumer reports to a consumer reporting agency that they are a victim of fraud, the agency must put a fraud alert on the consumer's file for at least how long? A 60 days B 6 months C 90 days D 1 year
C The consumer reporting agency must include the fraud alert in the consumer's file for at least 90 days. If the consumer makes a request to remove the alert prior to the end of that 90-day period, the alert may be taken off at that time.
Which of the following is correct in regard to the Financial Services Commission? A Appoints agents and adjusters B Audits all state departments C Protects the public through oversight of insurance company solvency D Directly regulates financial planners
C The Financial Services Commission is made up of the governor, Chief Financial Officer, attorney general, and Commissioner of Agriculture, and appoints the Commissioner of the Office of Insurance Regulation. The Financial Services Commission does not directly regulate financial planners.
What is the correct term for a secondary loss that occurs as a result of a direct loss from a covered peril? A Proximate loss B Secondary loss C Consequential loss D Provisional loss
C The direct loss to the property is the damage to the property caused by an insured peril. The indirect, or consequential, loss is further financial loss that results from the loss of use of the damaged property.
A basic form property insurance policy protecting a building and its contents provides which of the following? A All-risk coverage for building losses B An agreed value loss settlement basis for losses to the building C Coverage against limited named perils D The right of the insured to abandon property to the insurer
C Basic forms will provide limited coverage, meaning only a few named perils will be covered.
Dishonest tendencies that increase the probability of loss are known as: A Pure risks B Morale hazards C Moral hazards D Legal hazards
C (A morale hazard is an attitude of indifference that increases the probability of loss.) (physical hazard: A physical condition that increases the probability of loss, including the use, condition, or occupancy of property. Physical hazards may often be seen, heard, felt, tasted, or smelled.)
What is the name for a type of policy that does not pay benefits until the limits of the primary policy has been exhausted? A Common law policy B Surplus lines policy C Excess policy D Liberalization policy
C An excess policy makes payment only after all other insurance in place exhausts its limits or denies coverage.
Insurers are subject to all of the following liability policy terms, except: A When this policy and another liability policy through a different insurer cover the same risk on a pro rata liability basis, each insurer must pay its proportion of a covered loss B If the insurer broadens coverage without an increase in premium, that broadened coverage must automatically apply to the insured's policy C The insurer is relieved of its obligations if the insured is bankrupt D The insurer is not required to provide a defense if the insured's policy limits have been exhausted
C Bankruptcy or insolvency of the insured does not relieve the insurer of its obligations under the policy, according to the Bankruptcy condition.
Which of the following is correct regarding the valued policy law in Florida? A The valued policy payment applies even, if unknown to the insurer, the risk has increased B The insurer must pay the value of the policy in the event of fraut on the part of the insured C The insurer's liability under the policy is the amount of money for which the property was insured D The insurer's liability is the market value of the property insured
C The insurer's liability under the policy is the amount of money for which the property was insured. The valued policy payment does not apply if there has been any increase in the risk without the insurer's consent. If the loss is less than the total amount insured, the insurer must return the unearned premium for the excess of insurance over the appraised or agreed loss.
An underwriter will consider each of the following factors when evaluating a risk, except: A Nature of the risk B Hazards C Rates D Claim history
C The underwriter protects the insurer against adverse selection by evaluating the factors likely to contribute to a loss. Rates do not have such an impact.
All of the following are options for managing risk, except: A Avoiding the risk B Transferring the risk C Retaining the risk D Subrogating the risk
D
An insurer with capital that is divided into shares, and is owned by shareholders, is considered a: A Fraternal Benefit Society B Reciprocal insurer C Mutual insurance company D Stock insurance company
D
The taking of property from inside the premises by a person committing forcible entry defines a: A Robbery B Shoplifting C Mysterious disappearance D Burglary
D
Insurance is designed to provide protection against which of the following? A Involuntary risk B Certain risk C Speculative risk D Pure risk
D (Insurance is meant to provide protection against loss, not gain. With pure risks, the only consideration is the possibility of either loss or no loss. Speculative risks, on the other hand, include a chance of gain in addition to the possibilities of loss or no loss.)
Contributory negligence
a common law defense, prevents the claimant from recovering damages for negligence because the claimant was also negligent to any extent
The means by which insurers can encourage insureds to maintain insurance to value is known as: A Subrogation B Deductible C Agreed valuation D Coinsurance
D Coinsurance is the condition on a property policy that encourages insureds to maintain insurance to value, at least to a specified percentage of the building's full replacement cost.
When a claimant brings a negligence claim against the insured, the court determines that the claimant is partially responsible for the loss, and the damages they are owed is reduced by the amount of their responsibility. This describes which defense against negligence? A Contributory risk B Comparative risk C Contributory negligence D Comparative negligence
D Under comparative negligence, the award to the injured party is reduced by the amount of their own negligence.
Which of the following is an example of vicarious liability? A The liability of a negligent party whose identity cannot be determined B The liability of any group of people, acting together C Liability assigned to a chatroom host for the acts of its users D An employer's liability for the acts of an employee
D Vicarious liability is the liability assigned to one party for the conduct of another, based solely on a relationship between the two. Examples include employer/employee relationships and parent/child relationships
Which of the following is not an example of a pure risk? A A tornado destroying a mobile home park B A fire causing a home to be uninhabitable C A slip and fall injury at a large department store D Wall Street's decline in the stock market
D.
what would be covered by collision coverage under Part D - Coverage for Damage to Your Auto of a Personal Auto policy?
If glass breakage results in a loss, but the breakage of glass was caused by a collision, then the insured may elect to have the loss by glass breakage be considered a collision loss, rather than an OTC loss.
Replacement Cost
Replacement cost is the cost to replace property with property of like kind and quality, at current pricing, without a deduction for depreciation.
Who is insured under a HO policy?
The named insured and their spouse if the spouse is a member of the named insured's household Other residents of the named insured's household who are: □ Relatives of the named insured, meaning they are related by blood, marriage, or adoption □ Under the age of 21 and in the care of any insured, such as a foster child A student enrolled in school full time who was a resident of the named insured's household before moving out to attend school, provided the student is a relative under the age of 24, or under 21 and in an insured's care
Termination of an auto policy
The policy automatically terminates if the insurer offers to renew the policy but the insured does not accept the offer, such as by failing to pay the renewal premium. Coverage also terminates if the named insured obtains other auto insurance on a covered auto.
what is primary cause of loss?
The primary cause of loss is known as the proximate cause. If only one peril caused the loss, the proximate cause is the first event in the unbroken chain of events that resulted in loss—in other words, the peril directly caused the loss. I
Who is insured under a HO policy under section ll?
With respect to a motor vehicle to which coverage applies, persons using the vehicle on an insured location with the insured's consent and persons while engaged in the employment of the named insured or a resident relative Any person or organization legally responsible for covered animals or watercraft owned by an insured, unless custody of such animals or watercraft is in the course of business as defined by the policy or the person or organization has custody without the owner's consent
Which of the following is an example of a physical hazard? A The storage of flammables in a fireproof container B The storage of flammables near a furnace C Dishonesty on the part of an insured D The insured's attitude that good housekeeping is not important
b
blanket limit
insures more than one property for a single amount of insurance that applies to all covered properties. The properties could be located at different locations (such as two buildings at separate locations), different types of property (such as the building and the personal property it contains), or both.
direct loss
one that is the immediate result of a peril. Property policies typically require a direct physical loss to covered property for coverage to be triggered.
