State Simulator Exam - 200 Questions Practice Exam

Jim has homeowners insurance with a $100,000 liability limit. He also carries an umbrella policy for $1,000,000 with a RETENTION LIMIT of $10,000. If an accident occurs at his home that is excluded under his homeowners policy, how much is Jim responsible for paying out-of pocket before the umbrella policy takes over?

$10,000 RETENTION LIMITS act as deductibles which in turn help lower the premium for the policy. Any retention limits must be paid by the insured before the insurance company pays the remainder of the claim.

The special Coverage C limit on business property on the insured premises is

$2500 Business equipment coverage is limited under Coverage C to $2500.

Which of the following are correct regarding additional, supplementary payments under a garage coverage form?

$3,000 in bail bonds

S has a UIM limit of $75,000 and is injured by at-fault driver F who has a single B.I limit of $25,000. S sustain $55,000 of loss. How much will the policy of S pay toward the total loss suffered by S under their UIM clause?

$30,000 UIM - B.I. = UIM payment amount. The actual loss is $55,000. Subtract the B.I. limit of F, the at-fault driver, which is $25,000; the result is that the policy of S will pay the difference between the two, or $30,000. Simplified, in this case: $55,000 - $25,000 = $30,000

If an applicant needed $20,000,000 of coverage for a new amusement park, but was only able to get $15,000,000 through authorized insurers, how much could be bought through a surplus lines carrier?

$5,000,000 The applicant can purchase enough insurance from an eligible surplus lines carrier to fill the gap in coverage between what is needed and what can be purchased through an authorized insurer.

If they insured's equipment breakdown policy has a $500 deductible on property damage and a $250 on spoilage, how much deductible would be applied if the insured's boiler blew up and damaged his company's storage facility?

$500 The only applicable deductible is the $500 for equipment damage.

If an insurer collects $500,000 in premiums and has reserves totaling $250,000, what is the expense ratio of the insurer?

50% The expense ratio is calculated by dividing the total of all incurred losses by all earned premiums with the resulting percentage expressing the expense ratio of the carrier. In this case, $250,000 of earned premiums is divided by the reserves of $500,000 which is an expense ratio of 50%.

In a state that has rules a injured party cannot be more than Half at fault for their own injuries to collect damages from a negligent part is known as 50% rule

50% rule In a 50% rule state, the injured party can be no more than half at fault for their own injuries to be allowed to collect. In a 49% rule state, the at-fault party must be more responsible for the loss than the injured party to collect damages.

K owns a factory and has an Equipment Breakdown Policy on his business. Which of the following would be covered as a pure accident under the contract language? A boiler malfunctions and blows up

A boiler malfunctions and blows up In an Equipment Breakdown Policy, a pure accident is defined as the result of the loss was UnINTENDED - UnPLANNED - and an UnFORESEEABLE event. Employee negligence (vs. error) or damage to a vacuum tube or machines are explicitly not covered by the contract.

Which of the following insured property would be covered under a replacement cost basis in a Business Owner Policy under Coverage B?

A copier leased by the insured. Coverage B of the BOP pays for loss to business personal property of the insured, including business personal property leased by the insured for which the insured is contractually liable. The remaining answers are coverages that would be afforded under Coverage A of a BOP.

Which of the following physical damage to a car is considered a collision?

A driver is distracted by a billboard warning against texting while driving and runs his car into a traffic signal post.

Under Farm Coverage, which of the following would meet the contractual definition of insured location?

All of the answers listed "Insured location" means: The farm premises (including grounds and private approaches), vacant land owned or rented to the insured and land owned by the insured that is being constructed for occupancy to the insured, farm employees or residence employees.

Wha part of the policy would list the rights such as subrogation, nonrenewal, liberalization, or cancellation.

Conditions

All of the following elements are included in the definition of fire under a homeowner policy, EXCEPT\

Consequential loss from a hostile fire is covered.

How are coverage D and Coverage E paid in both the Broad and Special forms under the Dwelling Program?

Coverage D and E are paid up to 20% for both combined, not each separately, of the dwelling coverage amount DP-2 and DP-3, Coverage D & E are paid in addition to the dwelling amount but only up to a maximum of 20% of Coverage A combined and not 20% each for Coverage D and E separately.

All of the following would be covered loss is under transportation expense of Garagekeepers form coverage EXCEPT

Coverage for temporary transportation begins 24 after theft Temporary transportation expense starts 48 hours after theft

When an outdoor sign attached to the building was destroyed by lightning, Carl's Builder's Risk Policy

Covered up to $2500 of the cost to replace the sign Starting with the 2007 edition of the builder's risk policy, the coverage increased from $1000 to $2500

Which additional benefit in a builders risk policy will provide up to an additional $25,000 per location per occurrence under certain conditions?

Debris removal Generally, debris removal is limited to 25% of the amount paid + 25% of the deductible. In certain cases, it can cause the insurer to pay up to $25,000 additional per occurrence.

The federal statute that protects retirement money that employees contribute throughout their working career by enforcing rules and procedures for employers to adhere to specific guidelines is known as

ERISA The 1974 federal statute known as ERISA - Employee Retirement Income Security Act - to make certain employees putting wages into various company sponsored employee pension and welfare plans pay the retirement benefits promised to the workers. Remember that there may be no legal duty for an employer to offer retirement plans for workers, ERISA forces the employer to follow certain legal duties mandated by the law.

Extended Business Insurance indemnifies the insured company

For lost income during the time lag from when operations resume and operations returned to normal.

Which of the following losses will not be covered by Section 1 of a BOP?

Grass that is part of a roof covered by a lawn and a garden This loss is specifically excluded. All the other items are covered, either on a limited basis or because they follow from a covered loss (damaged roof allows water damage to occur)

V has just had surgery and must spend two nights in the hospital . On the second day there was a mix-up and the hospital gave her the wrong medicine in error which caused her to become very ill. If V sues the hospital, which policy would protect the hospital for not delivering the required professional service?

Hospital Professional Liability Insurance Malpractice insurance is designed to protect people who work in the health care industry. In this case, because the hospital made the mistake, it would be covered under their Hospital Professional Liability Insurance.

All the following are true about the Supplemental Extended Reporting Period Endorsement are true, EXCEPT

It extends a midi- tail to 10 total years instead of only 5 years The Supplemental Extended Reporting Period Endorsement effectively alters the claims made form to an occurrence form allowing the insured who selects it a reporting period which is of unlimited duration

K Is developing an area to build a structure that will have split used as both personal dwellings and retail/office space. K will most likely have which type of construction according to ISO construction guidelines?

Joisted Masonry Joisted Masonry (ISO 2) consists of structures with concrete blocks and stone with wood framing. This construction is typically used for split use of personal and business tenants. This construction has higher fire ratings than frame, but not as high as non-combustible materials.

Which of the following would be covered under the identity theft endorsement?

Lost wages to meet with parties needed to resolve the identity theft A standard homeowners policy will only pay a limit of $500 for credit card or forgery loss. Therefore, if an insured would like more coverage, they have to add an identity theft endorsement which will cover such losses as: · Lost wages to meet with parties needed to resolve the identity theft · attorneys fees - if the carrier approves them · notarizing document cost

Which concept pertaining to medical benefits under the Workers Compensation policy is NOT true?

Medical benefits are limited to actual, reimbursable expenses subject to a lifetime limit that is established by state law. BECAUSE Medical benefits under the Workers Compensation Policy are NOT subject to any limit as all medical expenses will be paid regardless of the dollar amount.

Which of the following perils will an HO-3 policy cover?

None of the answers listed All of the answers listed are excluded (not covered) under HO-3 policies who carry more exclusions than other homeowners contracts (other than HO 5) since their coverage is open peril.

A garage coverage form will cover which of the following losses?

None of the answers listed Garage form has many exclusions such as: workers compensation losses, rental car businesses unless a rental is incidental to servicing the garage customer, waste disposal activities, racing, defective products, pollution, war, and liquor liability (limited covered may apply to a hosting function where liquor is served but not sold)

All of these statements correctly describe an aleatory contract EXCEPT

Only one party makes any kind of legally enforceable offer Insurance contracts are ALEATORY, which means there is an unequal exchange. The premiums paid by the applicant are small in relation to the amount that will be paid by the insurance company in the event of a loss.

The Yacht Coverage form is available to ensure all the following crafts, EXCEPT

Outboard Motorboats Outboard motorboats are generally smaller and are insured with a Boatowners' form or a Watercraft Policy form. It should be noted that craft covered by a yacht policy are for personal / pleasure use. They are not commercial vessels, even if they have a professional crew. Yachts, Sailboats, and Inboard Motorboats are used solely for private leisure purposes.

These are examples of coverages that would be afforded under Coverage A of a BOP.

Outdoor fixtures An addition under construction Equipment that is permanently built into one portion of an inside room of the insured premises

If a landlord inappropriately enters the apartment of a tenant with no legal right to do so, this is an example of what kind of injury to the tenant?

Personal Unlawful entry or eviction of the premises of another is an injury to a person that is not bodily injury so therefore it is personal in nature, or non-physical.

The Browns have a basic level of coverage on their farm property policy. Which of the following perils would become would be a covered cause of loss?

Sinkhole collapse Sinkhole collapse is a covered loss under a basic farm property policy.

Which of the following regarding motor carrier insurance is not true?

Specialized carriers are contracts that will deliver goods when common carriers are unable to meet their delivery time due to a covered peril. Specialized Carrier coverage is for firms that are either common or contract carriers who perform transportation to the public for goods that require specialized services such as hauling away dangerous materials.

Which of the following descriptions of Dwelling Program coverage forms is Incorrect?

The Basic forms pays for loss to dwelling and detached other structures on a replacement cost basis. Because The Basic form, DP-1, pays dwelling and other structure loss under Coverages A & B on an ACV - Actual Cash Value - basis, and not on a replacement cost basis.

Which of the following statements regarding a standalone windstorm policy is correct?

The maximum deductible is usually 10%. The windstorm policy deductible is usually a percentage no greater than 10%.

Protection and indemnity insurance protects against which of the following losses?

While trying to save damaged cargo a ship's crew gets repeatedly hit with waves which causes the crew to become ill P & I (Ocean Marine) insurance protects against: o illness o death o injury of passengers o injury of members of a ship's crew o injury of some other 3rd parties-the most significant losses PLUS other liabilities such as damage to cargo on board, collision, expenses due to quarantine and costs related to mutiny resistance and misconduct. Protection and Indemnity insurance WILL NOT COVER loss of personal effects of: o passengers o illegal activities, war, riots, bad debts, and o fraud to name a few

Which of the following losses WOULD BE COVERED under either personal injury or advertising injury contractual clauses?

an insured has liability losses but they are not spelled out in a contract. Under personal/advertising contracts, contractual legal liability is excluded. However, if liability is assumed by the insured without a contract, then there is coverage. The remaining answers are ALL EXCLUDED under this coverage.

The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a(n)

contract of adhesion But why? Because Insurance contracts are contracts of adhesion, meaning that one party to the contract has significantly more power when setting the terms and conditions of the agreement. Regarding insurance, the Insurance Company develops the contract, and the insured must either accept or reject the contract in full. Because the insured has no power to bargain or negotiate over the wording of the policy, they are required to adhere to the terms offered by the insurer. Which is why the courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear.

When Valerie's Dry Cleaner was Destroyed by fire, the Coverage A of her BOP policy covered the replacement cost of

her specialized equipment, which was permanently installed. Permanently installed equipment is covered as part of the building, which is insured under Coverage A.

Which of the following is covered by a contractor's equipment floater?

portable heavy machinery is covered as it is being transported Under the contractor's equipment floater, heavy machines are covered as they are going from site to site. However, this coverage does not include trucks or autos.