Test Questions

There are three elements to a loss exposure. What can be defined as a cause of loss? Peril Risk Asset exposed to loss Liability

A peril is defined as the cause of loss. A peril, along with the asset exposed to loss and the financial consequence of the loss, all make the elements of a loss exposure.

A tenant who does not need to buy coverage for the dwelling itself but would like to cover his own personal property should obtain which type of homeowners policy? HO-5 HO-2 HO-4 HO-6

An HO-4 is designed to cover a tenant's personal property, but does not cover the dwelling itself. This coverage is provided on a named-perils basis.

47. What type of Ocean Marine insurance covers goods while they are in transit over water? A. Cargo B. Freight C. Hull D. Protection And Indemnity

B. Freight

2. The purpose of insurance is to A. Retain Risk B. Reduce Risk C. Transfer Risk D. Eliminate Risk

C. Transfer Risk

The DP-3 Dwelling Form contains all of the following coverages EXCEPT: Coverage A - Land Coverage B - Other Structures Coverage C - Personal Property Coverage D - Fair Rental Value

Coverage A - Land

3. The type of insurance company that is owned by stockholders and does not allow its policyholders to share in company profits is a A. Reciprocal Company B. Fraternal Organization C. Mutual Company D. Stock Company

D. Stock Company

Vandalism and Malicious Mischief (VMM) is an optional coverage that can be added by endorsement to which policy? DP-2 DP-1 DP-3 DP-4

DP-1 policies are able to add VMM coverage by endorsement. VMM is automatically included in the other dwelling policy forms.

Broad form provides coverage for which of the following perils? Smoke Theft Glass breakage Riot

Glass breakage is a peril that is covered on a broad-perils-form basis. Additional perils covered on broad form include ice and snow weight, freezing of pipes, collapse, falling objects, and electrical damage.

HO-2, HO-3, HO-4, HO-5, HO-6, and HO-8 are all types of homeowners policies. Which two sets of policies are not solely designed for owner-occupied dwellings? HO-2 and HO-8 HO-4 and HO-6 HO-5 and HO-8 HO-3 and HO-4

HO-4 and HO-6 are not designed to be exclusive for owner-occupied dwellings. HO-4 was formed to cover a tenant's personal property. An HO-6 provides personal property coverage for an owner-occupied condominium, and also can provide coverage for co-owners of this condominium who reside there.

To obtain the broadest coverage available for an owner-occupied dwelling, the insured should purchase which type of homeowner's policy? HO-8 modified coverage form HO-6 unit-owners form HO-2 broad form HO-5 comprehensive form

HO-5 provides dwelling, other structures, and coverage on an open-perils basis. The HO-5 provides the broadest coverage form of all the HO policy forms.

1. An increase in the possibility that a loss might occur is a/an A. Hazard B. Exposure C. Peril D. Risk

Hazard

Which hazard is defined as intentionally causing, fabricating, or exaggerating a loss? Legal hazard Physical hazard Moral hazard Morale hazard

Moral Hazard

Sara is the owner of a gift shop that was struggling to make enough money to cover its bills. Sara knew there were reports of robberies in the area but continued to leave the doors to the store unlocked after she would leave at night. Sara figured if her store was robbed she could collect the insurance money and pay off some debt. Sara's carelessness is an example of what type of hazard? Moral hazard Morale hazard Physical hazard Legal hazard

Morale Hazard

Special forms coverage is coverage on a DP policy form that combines broad form perils with what other form of perils? Basic form perils Open perils Modified perils Special perils

Open Perils

There are four types of hazards that cause a loss. An insured failing to salt and shovel her sidewalk after a snowstorm presents what type of hazard? Legal hazard Morale hazard Moral hazard Physical hazard

Physical Hazard

Risks can be classified as pure or speculative. Which of the two, pure or speculative, is always undesirable? Neither Pure Speculative Speculative and pure

Pure risk is always undesirable. A pure risk results in either a loss or no loss. A speculative risk has the chance there will be a gain.

The HO-8, also known as the modified coverage form, is designed to meet the needs of what type of insured? Subsidized housing owners Owners of seasonal rental locations where the value of the dwelling exceeds the replacement cost value Owners of a historic home whose replacement cost value exceeds the value of the home itself Tenant-occupied locations in a poor protection class area

The HO-8 policy form. This policy form is designed to provide dwelling, personal property, and other structures coverage for an owner-occupied dwelling. The dwellings eligible for an HO-8 do not meet the standards that insurers require for the other five policy forms.

An unendorsed DP-3 policy does not provide coverage for which of the following exposures? Garages Theft Storage sheds Debris removal

Theft

Coverage C - Personal Property provides coverage for the insured's personal property under what circumstance? Worldwide coverage While in the possession of the insured While on the covered premises When the insured knowingly loans the property to a family member off premises

While on the covered premises