PA Property & Casualty License Practice Exam

How much does a Personal Injury endorsement attached to a homeowners policy add in loss assessment coverage for the named personal injury offenses?

$1000

Which of the following can not be issued a temp license?

A person selling insurance for the estate of a deceased producer.

What is the term to describe how an insurer appoints an individual to act on its behalf.

Agency Contract

What must occur in order to pay for funeral expenses?

Death within 24 hours of accident

A Changes provision in a commercial package policy allows the first named insured to make alterations to the policy through which of the following?

Endorsements

Which of the following types of insurance is commonly found in a commercial package policy?

Equipment breakdown insurance

An individual whose position and responsibilities involve a high degree of trust and confidence (trustees, guardians, and executors).

Fiduciary

A means of transferring the risk of loss

Insurance

What is the name for the watchdog group whose member companies agree to adhere to and enforce ethical principles.

Insurance Standards Association (IMSA)

Any written or oral statement that does not accurately describe a policy's features, benefits, or coverage.

Misrepresentation

Which of the following is something that differentiates a motor carrier coverage form from a trucker coverage form? Select one: a. Motor carriers coverage can apply to a loss of a covered auto caused by someone tricking an insured to parting with the auto b. Motor carriers coverage can apply to a loss to a covered auto left with an insured for repair c. All of these are correct d. Motor carriers coverage can apply to a commercial operation that transports passengers

Motor carriers coverage can apply to a commercial operation that transports passengers

The cause of the loss

Perils (i.e. Fire, Flood, Collision, Theft)

Coverage E of a homeowners policy deals with which of the following?

Personal Liability

Non-public personal financial information about individuals.

Privacy of Consumer's Financial information

Chance of a loss

Risk

Why would a business need a business income coverage form with an extra expense section?

To minimize a suspension of business and allow operations to continue at another location after the business's primary location has been damaged or destroyed

What is the primary intent of the Special Coverage Form (DP-3)?

To offer a broadened contract that will include miscellaneous and undefined incidents that cannot be anticipated

An exclusion that states that an insurer will not pay any claim in which an individuals property is damaged as a result of an earthquake, mudslide, landslide, or sinkhole.

an Earth movement exclusion

Term for instruction by the consumer to the licensee no to disclose non-public personal financial information about the consumer to a non-affiliated third party.

opt-out

If the salvage provision is invoked...

the insurer is allowed to take possession of damaged property and use that property to recoup some money

The insurer of a homeowners policy will pay, on replacement cost basis, up to ____________ for property damage to the property of others caused by an insured.

$1,000 per occurrence

A car crashes into a storage container which holds industrial waste materials located at a factory. As a result, a large amount of industrial waste ends up being released onto the property. The cost to clean up the waste totals $23,000. If the owner of the factory has a commercial property policy with additional coverage for pollutant clean-up and removal, how much does the insurance policy pay out to insured?

$10,000

The owner of courier service establishes an insurance policy for the vans used by the business. The insurer has a requirement that insurance for any vehicle used for commercial purposes should be insured for 75% of its value. The owner of the courier service decides to cut costs by purchasing a policy that only cover 60% of the van's value. The van ends up in a major traffic accident that results in $25,000 in damage and liability costs. If the policy has a $15,000 deductible and the van was worth $80,000, how mush does the owner of the van end up paying out of pocket? (Value of the Policy = .6 x $80,000) (Required Value of the Policy = .75 x $80,000) (Insurer's Reimbursement = (Value of the Policy / Required Value of the Policy) x (Total Loss - Deductible)) (Out of Pocket Payment = Total Loss - Insurer's Reimbursement)

$17,000

In addition to the limits of bodily injury liability set forth in the policy declarations, the policy will also pay out up to _____ for the cost of bail bonds required because of an accident.

$250

A resident producers license must meet what 2 requirements?

1.) May either reside in PA -or- 2.) Have their principal place of business in PA

In what 2 situations is it not required to be a licensed as a manager or exclusive general agent?

1.) The licensee who has limited underwriting authority - or- 2.) A manager or agent who has started before Dec. 22, 1965

A bungalow that was purchased 12 years ago for $465,500 is nearly destroyed during a hurricane. The building was expected to depreciate by 9% each year. If the insurer determines that the actual cash value of the bungalow was $638,000 at the time of the loss, what was the replacement cost of the building? (Purchase Cost x Rate of Depreciation = Annual Depreciation) (Annual Depreciation x # of Years Owned = Total Depreciation) (Replacement Cost - Total Depreciation = Actual Cash Value)

1140740

If an insured's drivers license has been suspended, the insurer may cancel the auto insurance policy by giving how many days notice?

15 days

What are the minimum limits of liability any individual must provide for bodily injury and property damage?

15/30/5 $15,000 per person bodily injury $30,000 per accident for bodily injury $5,000 per accident for property damage

An insurer must notify an insured at least how many days before increasing the premium on a commercial casualty insurance policy.

30 days

When a auto policy is cancelled for a reason other than non-payment of premium, how many days notice must be provided to the insured?

30 days

When a personal fire insurance policy is cancelled because the insured's acts increased the hazard insured against, how many days notice must be provided to the insured.

30 days

After an accident, what is the waiting period before the insured can apply for income loss benefits?

5 working days

What is the loss ratio of an insurance company that, in the span of a year, pays out $35,900 in benefits and collects $69,550 in premiums? (Loss Ratio = (Benefits Paid Out / Premiums Collected) x 100)

51.6

What percent can crops be insured of their expected value?

75%

Personal injury or advertising liability that arises from which of the following is not covered by a commercial general liability policy?

A breach of contract; Written material that was published before the insurance policy took effect; A product not living up to a statement of quality found in one of the insured's advertisements

Which is NOT a reason for a licensed to be suspended or revoked? a.) Making factual by subjective comparisons of 2 policies. b.) Intentionally violating a cease and desist order. c.) Making false statements in a license application. d.) Violating an insurance regulation.

A.

Which of the following is an exclusion that applies only to auto dealers? Select one: a. The insurer will not pay for loss to any covered auto displayed or stored at a location not listed in the declarations, if the loss occurs more than 45 days after the insured begins using the location Correct b. The insurer will not pay for bodily injury that results from dispersal of any pollutant c. The insurer will not pay for property damage that is expected by an insured d. The insurer will not pay for property damage that arises out of the named insured or another insured participating in a prearranged racing contest

A.

What happens when an actual cash value endorsement is attached to an equipment breakdown policy?

After a loss the insurer will pay the insured the lesser of the replacement cost or the actual cash value of the loss

Legal term that describes the relationship between parties.

Agency

Which of the following are included as "buildings" in a businessowners policy, as long as they are not covered by other insurance?

Alterations to a building

A dwelling policy lacks which of the following?

An occupancy requirement

Deciding not to produce a produce due to serious potential side effects.

Avoidance (avoid the risk of being sued)

What is the downside of managing risk through avoidance?

Avoiding risk may mean losing out on a gain that could have been achieved if the risk had been accepted

What term describes a producer who converts premiums for his own use?

Breach of Fiduciary Duty

Who regulates insurance rates to avoid excessive, inadequate, or unfairly discriminatory rates?

Casualty & Surety Rate Regulatory Act

What means conducting business in accordance with current rules and laws set by government regulatory agencies and the courts.

Compliance

What is given when the applicant pays the initial premium at the time the application for a policy is signed.

Conditional Receipt

_______________ of a homeowners policy includes other buildings that are rented to tenants as dwellings or for use by a non-tenant as a private garage.

Coverage B

If a person is off an insured location and suffers bodily injury from an animal owned by an insured, the insured's liability for the person's injuries can be covered by which of the following?

Coverage F of a homeowners policy

Which of the following homeowners coverages are property coverages? Select one: a. Coverage D b. Coverage A c. Coverage B d. All of these are correct

D.

Any false, maliciously, critical or derogatory communication that injures another's reputation, fame, or character.

Defamation

Liability for property damage could be covered by coverage ___ of a homeowners policy. Select one: a. G b. E c. F d. D

E

Standards of conduct and moral judgement.

Ethics

An individual is injured during a white water rafting trip. The rafting company claims they are not liable for the injury because the individual signed a waiver relieving the rafting company of any responsibility for any injuries that happen while people are using their boats. This is an example of which of the following?

Expressed assumption of risk

What is the term for informing the prospect or client of all facts involving a specific policy or plan so that an informed decision can be made.

Full Disclosure

What insurance option lets the insured seek recovery for all medical and other out-of-pocket damages, pain & suffering, and other non-monetary damages as a result of injuries caused by other drivers?

Full Tort Option

Which HO Form covers damage to the DWELLING & PROPERTY inside the dwelling that occurs as an result of any event that is not specifically excluded in the policy.

HO - 5 Comprehensive Form

Which HO form covers damage to the DWELLING that occurs as the result of any event that is not specifically excluded in the policy and damage to the property inside the dwelling that results of an aircraft, civil commotion, explosion, fire, hail, lightning, smoke, theft, vandalism, vehicles, and/or wind.

HO-3 Special Form

Which Home Owner's form covers damage to a TENANT'S property that occurs as a result of an aircraft, civil commotion, explosion, fire, nail, lightning, smoke, theft, vandalism, vehicles and/or wind.

HO-4 Content's Broad Form

Which Home Owner's form covers damage to a condo owner's PROPERTY that occurs as the result of any event that is not specifically excluded in the policy.

HO-6 Unit Owner's Form

Increases a chance for loss

Hazard (i.e. leaving a door unlocked)

When a producer shares a commission with an unlicensed person.

If a license was held at a time of sale; Referring a person can receive a one time nominal set fee

The insurer of an equipment breakdown policy reserves the right to do which of the following if a piece of covered equipment is found to be in an unsafe condition?

Immediately suspend coverage on the unsafe piece of equipment

What does an Individual Named Insured endorsement do to the standard policy language of a commercial auto policy?

Includes a spouse under the definition of "You" (the first named insured) and adds coverage for personal use vehicles owned by the insured and not used for business

Which of the following is not a power and duty of the insurance commissioner?

Issuing a cease and desist order, prosecuting producers who violate state insurance laws, conducting complaint hearings, appointing examiners.

States that there must be an adequate spread of risk for insurance to be effective.

Law of Large #s

Which of the following is affected by the general aggregate limit associated with commercial general liability coverage?

Medical expenses

The name for the fact a producer must sell the kind of policies that best fit the prospects needs and in amounts that the prospects can afford.

Needs Selling

An exclusion that states that an insurer will not pay any claim in which an individuals property is damaged as a result of the fact that the individual did not maintain the property.

Neglect exclusion

If an individual causes property damage while working as a valet driver for a private parking garage, will her liability be covered by coverage B of her personal auto policy?

No

If a commercial property policy has a replacement cost endorsement, damage to or loss of which of the following will be valued on a replacement cost basis?Statuary; Personal property of others; The contents of a residence?

None

In regards to a personal auto policy, what is comprehensive coverage?

Open perils coverage that provides coverage for damages to a vehicle as a result of any peril

Which of the following is included as part of an insured building under a commercial property policy? Select one:

Outdoor fixtures

Which of the following is not a type of auto covered under a trucker coverage form?

Owned private passenger autos

Which agency provides motor vehicle coverage insurance to those who would be otherwise un-insurable?

PA Auto Assigned Risk Plan

Purchased in the normal of standard market.

PA Fair Plan Act

Which of the following is the formula use to determine risk?

Probability - Reduction

While on display at an industry convention, a business's prototype of a new product is critically damaged. Which commercial property coverage extension would provide insurance protection for this situation?

Property off-premises

Which of the following is not one of the six classes of property that can be covered under a marine policy?

Public property floater risks

The potential for an individuals house to light on fire is best classified as what type of risk?

Pure Risk

What is the term if the buyer of an insurance policy receives any part of the producers commission or anything else of significant values as an inducement to purchase a policy.

Rebating

What unfair practices is when a producer offers, promises, allows, gives, sets off, or pays a rebate on the contract of insurance.

Rebating

Installing an automatic sprinkler system is an example of

Reduction (can not avoid risk but can reduce it)

Under what regulation in PA does it state that insurers must maintain a specific minimum levels of capital stock and surplus?

Regulation of Insurer Solvency.

Person in good health cancels health insurance policy...What is risk management

Retention (retaining the risk)

When an employer must provide worker's compensation insurance but is unable to do so through normal channels, which organization can provide the required coverage?

State Worker's Insurance Fund

A homeowners HO-4 form does not offer coverage for which of the following?

Structures

Business liability coverage provided by a businessowners policy includes insurance for which of the following?

Supplementary payments, Damages claimed by an organization for loss of services that results from physical injuries, Personal injury

Who must an insurer notify when they terminate a producer's appointment?

The Commissioner and producer.

What does commercial crime insurance primarily protect an insured from?

The dishonesty of others

Which section of an insurance policy details the obligations of the insurer in the event of a covered loss?

The insuring agreement

In regards to "other insurance" situations, what is nonconcurrency?

The multiple policies covering the same risk do not match up in some way

In regards to a commercial property policy with a mortgage holder condition, what happens if the insurer pays the whole principal on the mortgage, plus any accrued interest, to the mortgage holder?

The named insured's mortgage and note will be transferred to the insurer and the named insured will pay the remaining mortgage debt to the insurer

A contract must have a legal purpose in order to be enforceable. What does it mean for a contract to have legal purpose?

The performance of the contract is not in and of itself unlawful, and the performance of the contract will not result in a violation of law

When does coverage from a builder's risk coverage form end?

The property is accepted by the purchaser

What unfair insurance practice is the purchase of insurance from a financial institution or from a designated insurer or producer as a condition of any loan or deposited transaction.

Tie-In Sales

The unethical act of persuading a policy owner to drop a policy solely for the purpose of selling another policy without regard to the possible disadvantages to the policy owner.

Twisting.

What Act deals with the inappropriate use of advertising.

Unfair Trade Practices Act

The insolvency of an insurer is one reason why a normally insured individual involved in a car accident will be considered to be...

an uninsured motorist