Study review questions
The property condition that precludes the insured from simply turning over damaged property to the insurer and claiming a total loss is called? a) abandonment b) assignment c) appraisal d) arbitration
Abandonment
Under a businessowners policy an insured can cancel the policy ? a) only after the policy has been in force for 120 days b) only at the time of policy renewal c) at any time by mailing a written notice of cancellation d) at any time with 10 days advance written notice
At any time by mailing a written notice of cancellation
The members of a limited liability company are insureds under a businessowners policy if? a) each individual is listed as a named insured on the policy b) a single individual member of the limited liability company is listed as the named insured c) members of a limited liability company cannot be insureds under a BOP d) the limited liability company is designated as the named insured
The limited liability company id designated as the named insured
an insured couple owns a pontoon boat which situation would NOT be covered by their watercraft endorsement under their homeowners policy? a) one of the insureds is taking the boat out and injures her grandson b) a friend rents their boat and runs it into a neighbors dock c) the insureds granddaughter slips on the boat and needs stitches d) a friend borrows the bat and has an accident with another boater
b) a friend rents their boat and runs it into a neighbors dock
which of the following would NOT be classified as personal property for insurance purposes? a) furniture b) a house c) a vehicle d) equipment
b) a house
all of the following are optional coverage that may be attached to an ho 3 policy except a) dwelling replacement cost b) home day care coverage c) earthquake coverage d) personal property replacement cost
a) dwelling replacement cost
replacement cost is defined as a) full replacement of property at its current cost new and without reduction for depreciation b) the market value of property of like kind and quality c) full replacement of property with like kind and quality less an allowance for physical deterioration and depreciation d) payment of the full policy limits in the event of a total loss
a) full replacement of property at its current cost new and without reduction for depreciation
how soon after a direct loss does the period of restoration for extra expense coverage under a businessowners property insurance begin? a) immediately b) within 24 hours c) within 48 hours d) within 72 hours
a) immediately
using a air cooled engine a proposed insured has developed a new experimental aircraft if the inventor applies for liability insurance what rating type will the insurer most likely use? a) judgment b) class c) schedule d) merit
a) judgment
which of the following coverages is included in an unendorsed homeowners policy ? a) medical payment to others b) personal property replacement coverage c) fungi wet or dry rot or bacteria d) earthquake
a) medical payment to others
a businessowner has a liability policy for his business sometime during the policy period a loss occurs but the businessowner does not become aware of the loss until several years after his policy expires which of the following types of policies would cover the loss? a) occurrence policy b) claims made policy c) errors and omissions policy d) special policy
a) occurrence policy
what type of coverage is covered in E in homeowners polocies? a) personal liability b) additional coverage c) loss of use d) personal property
a) personal liability
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) reasonable expectations b) cease and desist c) nonforfeiture d) indemnity
a) reasonable expectations
which of the following insurance options would be considered a risk sharing arrangment? a) reciprocal b) stock c) mutual d) surplus lines
a) reciprocal
who is covered by an h0-4 policy a) tenants b) owners of a vehicle c) owners of a condominium d) owners of a home
a) tenants
when the condominium association coverage form and the condominium commercial unit owners form both cover the same loss. a) the association coverage form will be considered primary and pay the loss b) the unit owners coverage form will be considered primary and pay the loss c) each coverage form will pay a pro rata share d) neither will pay
a) the association coverage form will be considered primary and pay the loss
all of the following are characteristics of the dwelling policy except a) the dwelling must be owner occupied b) coverage includes the dwelling only contents only or both c) incidental occupancy of limited service type exposure is permitted d) dwelling up to four family units are eligible
a) the dwelling must be owner occupied
in farming an insurance contract when does acceptance usually occur? a) when an insurers underwritting approves coverage b) when an insurer delivers the policy c) when an insurer receives an application d) when an insured submits an application
a) when an insurers underwritting approves coverage
under the commercial crime coverage inside the premises robbery or safe burglary of other property what is the special per occurance limit that applies to loss or damage to precious metals precious and semiprecious stones pearls furs manuscripts drawings or records? a) $ 1,000 b) $5,000 c) $10,000 d) $25,000
b) $5,000
under coverage C of a homeowners policy the amount of insurance provided to cover personal property of the insured is a) 50% of the amount provided as coverage B b) 50% of the amount provided as coverage A c) equal to the amount provided as coverage B d) equal to the amount provided as coverage A
b) 50% of the amount provided as coverage A
The commercial general liability coverage form excludes bodily injury or property damage that the insured has assumed under any contract or agremment however the exclusion does not apply to certain types of contracts as long as the injury or damage occurs a) before the contract expires b) after the execution of the contract c) after the contract expires d) before the execution of the contract
b) after the execution of the contract
retroactive dates in claims made cgl policies apply to a) bI and PD only b) both BI and PD and PIL and Advertising liability c) BI and PD PIL and advertising liability and med pay d) PIL and advertising liability only
b) both BI and PD and PIL and Advertising liability
which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance? a) slandering b) defamation c) undercutting d) twisting
b) defamation
when employees are injured in the course of employment and are paid workers compensation benefits they are barred from bringing a legal action against the employer for further damages. this is known as a) double indemnity b) exclusive remedy c) assumption of risk d) hold harmless agreement
b) exclusive remedy
courts will interpret any ambiguity in an insurance contract a) based on the prudent person rule b) in favor of the insured c) in favor of the insurer d) through arbitration
b) in favor of the insured
which of the following statements is NOT true regarding a personal umbrella liability policy? a) it provides excess liability coverage over underlying personal liability b) it provides errors and omissions coverage for an agency c) it may cover certain exposures not provided under the primary layer d) it may require the payment of a self insured retention
b) it provides errors and omissions coverage for an agency
a policy condition that states if a policy is broadened with no additional premium then the expanded coverage will be automatically applied to all policies of the same type is known as a) limit of insurance clause b) liberalization clause c) maximum indemnity clause d) loss control clause
b) liberalization clause
an insured purchases a difference in conditions policy it may contain all of the following characteristics EXCEPT a) exclusion for named perils b) low deductable c) no coinsurance clause d) flood and earthquake coverage
b) low deductable
which of the following commercial crime coverages would cover a loss resulting from theft of the companys money and securities from the armored vehicle making a delivery? a) inside the premises b) outside the premises c) forgery or alteration d) robbery and safe burglary
b) outside the premises
which of the following is true regarding the fire department service charge under the builders risk form a) it is not available in this form b) it is a high deductable endorsement c) it is an additional coverage d) it is an automatic coverage for $500
c) it is an additional coverage
rates that are established based on the similarities of the other risks are known as a) a rates b) merit rates c) manual rates d) experience rates
c) manual rates
What is not a consideration when playing an inland marine claim? a) actual cash value on date of loss b) cost to repair or restore the property c) market value when the property was first purchased d) cost to replace the property
c) market value when the property was first purchased
which of the following covers a carrier for liability for loss to cargo while its being transported in a truck? a) trip transit policy b) truckers coverage c) motor cargo policy carriers form d) motor truck cargo policy owners form
c) motor cargo policy carriers form
several insureds have become liable because of a single loss how will the policy's limits of liability be affected ? a) a homeowners policy can have no more than one insured b) the full limit applies to each insured individually c) no more than per occurrence limit applies no matter how many insureds are involved d) pro rata liability applies
c) no more than per occurrence limit applies no matter how many insureds are involved
what type of insurance policy insurers against all risks of loss that are not specifically excluded by the policy? a) binder policy b) named peril policy c) open peril policy d) specified peril policy
c) open peril policy
The causes of loss insured against in an insurance policy are known as a) risks b) hazards c) perils d) losses
c) perils
which method of loss valuation is contrary to the basic concept of indemnity? a) market value b) agreed value c) replacement cost d) functional replacement cost
c) replacement cost
when an employee benefit plan pays the premium for a fiduciary liability policy what provisions must be included in that policy? a) waiver of premium b) surety bond c) subrogation d) designated beneficiary
c) subrogation
all of the following property is insured under coverage A of a farm policy except a) material on premises to be used for repair or alter the insured structure b) a snowblower owned by the insured used to service the premises c) the dwelling described in the declaration page d) personal lawnmower of a tenant used to service the described location
d) personal lawnmower of a tenant used to service the described location
if a person is using an auto with the belief that he is entitled to do so subrogration rights under a personal auto policy would apply to all coverages except a) uninsured motorist b) no fault medical payments c) liability d) physical damage
d) physical damage
Which of the following is NOT one of the four primary elements considered in establashing negligence? a) proximate cause b) legal duty c) standard of care d) proof of carelessness
d) proof of carelessness
If an employer is unable to find workers comp insurance in the normal market, which of the following may assign the employer to a servicing carrier? a) the uninsured employers fund b) the guaranty association c) the fair plan d) the assigned risk pool
d) the assigned risk pool
when a regular bill of landing is issued who will be responsible for the invoice cost of any damaged property? a) the person to whom the goods are being shipped b) the shipper c) the driver of the truck d) the carrier
d) the carrier
which of the following best describes negligence ? a) a situation that creates a probability of loss b) a latent defect or fault in property c) the inability to meet the burden of proof d) the failure to use reasonable and prudent care
d) the failure to use reasonable and prudent care
When ABC appliances marketing stated that its mowing machine was the only safe mower available for purchase in town ABC was sued by XYZ Lawn and Garden. Abcs coverage would come from which part of its general liability coverage? a) premises and operations b) product liability c) personal and advertising injury liability d) this claim would not be covered
Personal and Advertising injury liability
All of the following statements regarding a boatowners policy are true EXCEPT ? a) watercraft liability protects up to specified limits for claims against a covered person for damages due to bodily injury caused by a watercraft b) physical damage coverage is provided on an actual cash value acv basis c) perils are insured on an open peril basis providing that the insurer will pay for direct and accidental loss to the property insured d) replacements for the boat listed in the declarations are automatically covered if the insured notifies the insurer within 60 days and pays the additional premuim
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
When an umbrella policy is broader than underlying insurance and it pays a loss that is not covered by the underlying policy it usually only pays a) a percentage of the loss 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 policys limits of liability
The excess over the self insured retention
The medical payments coverage in a personal auto policy will pay reasonable medical expenses for all of the following EXCEPT a) the insured is injured while exiting a friends mobile home b) the insured is injured by a motor vehicle while crossing the street c) the insureds child sustains injuries when the car she is in accidentally rolls down a hill d) a friend is injured while driving the insureds vehicle with permission
The insured is injured while exiting a friends mobile home
What is the maximum dollar amount an insurer will pay for loss to sound equipment permanently installed in a vehicle insured under a business auto policy? a) $250 b) $500 c) $1,000 d) $2,000
$1,000
Coverage J under farm coverage agrees to pay reasonable medical expenses, regardless of fault, caused by an accident if the expenses are incurred and reported to the insurer within how many years of the accident date? a) 3 years b) 4 years c) 5 years d) 2 years
3 years
the designation symbols used in commercial auto policies can be fund in which policy section a) covered auto b) liability coverage c) definitions d) conditions
a) covered auto
Expenses that an organization would not have incurred if business interruption had not existed are known as? a) continuing expenses b) additional expenses c) all inclusive expenses d) extra expenses
Extra expenses
Which of the following is a statement that is guaranteed to be true and if untrue may breach an insurance contract? a) representation b) warranty c) concealment d) indemnity
Warranty
What is the maximum amount an insurer will pay under the equipment dealers pollution cleanup and removal extensions of an inland marine policy? a) $10,000 For all expenses incurred during a 12-month period b) $15,000 all expenses incurred during a12-month period c) $20,000 all expenses incurred during a 12-month period d) $5,000 for all expenses incurred during a 12- month period
a) $10,000 for all expenses incurred during a 12 month period
if a persons auto policy is being cancelled by the insurer for nonpayment of premium how much notice must the insurer provide to the policyowner? a) 10 days b) 15 days c) 20 days d) 30 days
a) 10 days
under the additional living expenses coverage if a civil authority prohibits the insured from using the dwelling because of direct damage to a neighbouring location from a peril covered in the insureds policy loss would be covered for up to a) 2 weeks b) 1 month c) 90 days d) 1 week
a) 2 weeks
which of the following would be considered an uninsured vehicle? a) a vehicle fleeing a hit and run accident b) a vehicle owned by a self insurer c) a government owned vehicle d) a vehicle operated by an insureds family member
a) a vehicle fleeing a hit and run accident
a farmer is remodeling his 100 year old farmhouse he is in the process of painting the porch and hanging shutters he keeps his ladder paint and other materials used to remodel his home under the porch which of the following provides coverage for his remodeling materials? a) coverage A b) coverage B c) coverage C d) coverage D
a) coverage A
which of the following statements is true concerning the special form dwelling policy? a) coverage A is for all risk perils, and coverage C is for the broad form perils b) Both coverage A and coverage C are provided on all risk basis c) Both coverage A and coverage C are provided for the broad form perils d) Coverage A is for all risk perils and coverage C is for basic perils only
a) coverage A is for all risk perils, and coverage C is for the broad form perils
all of the following statements regarding parts used in the repair of an insured vehicle are true except a) parts used in the repair of an insured vehicle by other than the original manufacturer must be at least equal in like kind of quality in terms of fit quality and performance b) parts used in the repair of an insured vehicle by other than the original manufacturer must use replacement parts from the manufacturer only c) all aftermarket parts installed on the vehicle must be clearly identified on the repair estimate d) insurers or repair facilities must disclose to the insured if used parts were installed on a vehicle
b) parts used in the repair of an insured vehicle by other than the original manufacturer must use replacement parts from the manufacturer onl
which inland marine coverage condition states that payment of any claim will not reduce the limit of insurance except in case of a total loss on a scheduled item ? a) transfer of rights of recovery b) reinstatement of limit c) legal action against the insurer d) privilege to adjust with the owner
b) reinstatement of limit
When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be a) an intervening cause b) the proximate cause c) the direct cause d) strict liability
b) the proximate cause
employees who are entitled to workers comp benefits but cannot collect them due to workers comp related fraud or negligence of their employer are paid by a) the new mexico workers compensation fund b) the uninsured employers fund c) the guaranty association d) the workers compensation assigned risk pool
b) the uninsured employers fund
an insurance company receives an application with some information missing and issues the policy anyway. what is this called? a) aleatory b) waiver c) estoppel d) subrogation
b) waiver
an insurer neglects to pay a legitimate claim that is covered under the terms of policy which of the following insurance princaples has the insurer violated? a) adhesion b)consideration c) good faith d) representation
b)consideration
An insured has a homeowners policy and is required to be a member of the homeowners association in her neighborhood. The associations community house has burned down and the insured has been assessed $1200 for her share of the rebuilding cost. How much of the assessment will her homeowners policy pay? a) None b) $500 c) $1,000 d) $ 1,200
c) $1,000
in new mexico under an assigned risk plan what is the highest deductable that an insured could pay a) $2,500 b) $500 c) $10,000 d) $5,000
c) $10,000
the pollutant cleanup and removal coverage in the businessowners policy has a limit of a) $5,000 in any 6 month period b) $20,000 in any 6 month period c) $10,000 in any 12 month period d) $2,500 in any 12 month period
c) $10,000 in any 12 month period
an insured has $5,000 of medical coverage on a personal auto policy at the time of a covered accident. the insured and two passengers are injured. medical treatment costs $7,000 for the insured $4,000 for the first passanger and $8,000 for the third passanger how much will the policy pay under medical payments coverage? a) $5,000 maximum for the accident b) $ 5,000 minus the policy deductable c) $14,000 d) $15,000
c) $14,000
other structures are covered for what amount under the coverage B other structures of a homeowners policy ? a) $1,000 b) $10,000 c) 10% of coverage A d) 10% of coverage C
c) 10% of coverage A
coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within a) 90 days b) 1 years c) 3 years d) 5 years
c) 3 years
in this state agents must be appointed by an insurer within how many days of obtaining a license? a) 10 days b) 30 days c) 60 days d) 90 days
c) 60 days
an automobile that is owned by multiple individuals who are not spouses or otherwise in the same household may be insured under a personal auto policy if a) an extended ownership endorsement is added b) seperate policies are written for each individual involved c) a joint ownership coverage endorsement is added d) a miscellaneous type vehicle endorsment is added
c) a joint ownership coverage endorsement is added
which of the following vehicles is NOT exempt from the mandatory financial responsibility act ? a) any motor vehicle when the owner has submitted to the department a signed statement declaring that the vehicle will not be operated on the highways of new mexico b) a motor vehicle operated upon a highway only for the purpose of crossing such highway from one property to another c) a recreational vehicle d) a motor vehicle owned by the u.s. government
c) a recreational vehicle
all subject to applicable eligibility criteria what coverages will be offered by the new mexico fair plan a) actual cash value coverage only b) replacement cost coverage only c) actual cash value coverage with optional replacement coverage d) replacement cost coverage with optional actual value coverage
c) actual cash value coverage with optional replacement coverage
insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions, what contract characteristics does this describe? a) conditional b) personal c) adhesion d) unilateral
c) adhesion
which of the following would be considered an insured under a business auto coverage form? a) anyone using a covered auto while working in a business of selling servicing repairing or parking autos if it is not the named insureds business b) a partner of the named insured for any covered auto owned by that person or a member of his or her household c) anyone while using with permission a covered auto owned by the named insured d) the owner or anyone else from whom the named insured hires or borrows a covered auto
c) anyone while using with permission a covered auto owned by the named insured
which of the following is NOT a primary property coverage in a homeowners coverage ? a) other structures b) loss of use c) collapse d) dwelling
c) collapse
all of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT a) stocks securities or bonds b) an offer to share in commissions generated by the sale c) dividends from a mutual insurer d) an offer of employment
c) dividends from a mutual insurer
all of the following are true statements regarding the supplementary payments of a commercial general liability policy except a) they pay pre judgment and post judgment interest b) they pay all reasonable costs incurred by the insured in helping to investigate or defend a claim c) they pay defense costs even after the aggregate limit has been reached d) they pay all expenses incurred by the insurer
c) they pay defense costs even after the aggregate limit has been reached
which of the following exposures is insured under coverage I personal and advertising injury liability a) statements made by an insured during their farm radio show b) breach of a written contract c) unintentional acts arising from the operation of a farming business d) failure of goods to perform
c) unintentional acts arising from the operation of a farming business
Which of the following best describes the amount of loss assessment coverage included under a homeowners policy liability coverage section? a) up to $10,000 aggregate for the policy period b) up to $5,000 aggregate for the policy period c) up to $1,000 per occurrence d) up to $2,500 per occurrence
c) up to $1,000 per occurrence
when a replacement auto is acquired during the policy period what coverage will apply to it automatically under a personal auto policy? a) pysical damage coverage only b) no coverage applies automatically c) whatever coverage applied to the vehicle being replaced d) liability coverage only
c) whatever coverage applied to the vehicle being replaced
which of the following would not be covered by medical payments to others in section II of your ho policy a) you are walking your neighbors dog and it bites someone b) you allow the neighborhood kids to play flag football in your yard one is injured c) you cut your leg while whacking weeds in your backyard with your neighbors weed whacker d) your childs nanny falls while walking down your steps
c) you cut your leg while whacking weeds in your backyard with your neighbors weed whacker
what is the maximum dollar amount an insurer will pay for loss to sound equipment permanently installed in a vehicle insured under a business auto policy? a) $250 b) $500 c)$1,000 d) $2,000
c)$1,000
under a businessowners policy a loss of earnings is subject to a) a coinsurance limit of 80% b) $500 deductable c) 90 day time limit for ordinary payroll d) 12 month time limit for business income
d) 12 month time limit for business income
jean owns a craft store the protective safeguards endorsement of her BOP requires the store to have a functional automatic sprinklers system a winter storm freeezes the pipes to the sprinkler system causing the system to shut down how many hours does jean have to restore the system before she must notify her insurer a) 12 hours b) 24 hours c) 36 hours d) 48 hours
d) 48 hours
which of the following describes a contributory negligence? a) the time period in which a claim must be filed b) negligence is apportioned between both parties in an accident c) the voluntary assumption of exposure to risk d) any degree of negligence by the injured party may bar recovery
d) any degree of negligence by the injured party may bar recovery
the purpose of the new mexico motor vehicle assigned risk plan is to provide a) a method to assure that everyone has affordable auto insurance b) a method to assure every insurer a share of the auto insurance market c) auto insurance to everyone in the state d) auto insurance to those who otherwise qualify but are unable to purchase coverage in the normal market
d) auto insurance to those who otherwise qualify but are unable to purchase coverage in the normal market
an insurance contract must contain all of the following to be considered legally binding EXCEPT a) offer and aceptance b) consideration c) competent parties d) beneficiarys consent
d) beneficiarys consent
which of the following risks is eligible for coverage under a businessowners policy? a) banks b) automobile dealers c) bars or Tavers d) condominiums
d) condominiums
the difference in the contents coverage of an ho 3 and ho 5 is which of the following? a) contents are covered open peril on ho3 and named peril on ho 5 b) contents are covered for replacement cost on ho 5 and acv and ho 3 c) contents are covered for replacement cost on ho3 and acv on ho5 d) contents are covered open peril on ho5 and named peril on ho 3
d) contents are covered open peril on ho5 and named peril on ho 3
in addition to the common policy conditions all of the following conditions apply to liability coverage except a) separation of insured b) legal action against insurer c) bankruptcy d) employers liability
d) employers liability
which of the following is the federal body that regulates truckers who travel across state lines a) motors carriers commerce agency b) truckers and trade commission c) federal trade commission d) federal motor carrier safety administration
d) federal motor carrier safety administration
a specialized type of insurance that guarantees the faithful performance of a trustee of employee benefit plans is called a) surety bond b) directors and officers insurance c) employee benefit plan comprehensive coverage d) fiduciary liability insurance
d) fiduciary liability insurance
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? a) apparent b) assumed c) express d) implied
d) implied
Under the provisions of the business income coverage form all of the following are true EXCEPT a) if the insured and the insurer are unable to come to agreement as to the value of the loss either party may make a written demand for an appraisal b) the insured agrees to resume all or part of operations as quickly as possible c) the insured is reimbursed for payroll that continues after the loss begins d) the insured is reimbursed for the loss from the date of loss to date of restoration or policy expiration date whichever comes first
d) the insured is reimbursed for the loss from the date of loss to date of restoration or policy expiration date whichever comes first
the voluntary compensation endorsement in a workers comp policy provides that the insurer will pay statutory benefits to the insured person in exchange for what? a) the insured person must use the physician of the insurers choosing b) the insured person must pay a deductable before medical care is received c) the insured person may file only one claim per year d) the insured person must release the employer and the insurer from further liability
d) the insured person must release the employer and the insurer from further liability
an insured is driving her auto and strikes a large pothole causing a flat tire which coverage of the insureds personal auto policy will pay for the repair a) comprehensive b) collision c) other than collision d) this loss is not covered
d) this loss is not covered
for which of the following reasons can a temporary license be issued ? a) to solicit new business b) to negotiate short term insurance contracts c) to provide temporary help to a licensed producer d) to service the existing business
d) to service the existing business
