What I missed on Practice Exams
Under Coverage C of a homeowners policy, the amount of insurance provided to cover personal property of the insured is
50% of amount provided as coverage A
What is a mandatory part of an insurance policy that varies with each individual policy?
Declarations
The amount an insurer will pay under Coverage D (Loss of Use) depends on
The amount of coverage on the dwelling.
Which of the following dwelling coverage forms would pay replacement cost for the dwelling? a) DP-3 only b) All dwelling property coverage forms c) DP-1 d) DP-2 and DP-3
d
Which of the following is NOT a government insurance program? a) Old-age, Survivors and Disability Insurance (Social Security) b) Medicare c) Medicaid d) Federal Deposit Insurance Corporation (FDIC)
d
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 passenger, and $8,000 for the second passenger. How much will the policy pay under medical payments coverage?
$14k
Several insureds have become liable because of a single loss. How will the policy's limit of liability be affected?
No more than the per occurrence limit applies, no matter how many insureds are involved.
Every office that transacts surplus lines insurance must have on staff a person who a) Is licensed as a surplus lines broker. b) Serves as a liaison between the office and the Director. c) Lobbies for favorable tax treatment by the state. d) Updates all terms of insurance according to state law.
a
Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages? a) Special b) Tort c) Normal d) General
a
The Director may require a producer to submit fingerprints in all of the following situations EXCEPT a) Upon insurer insolvency. b) Upon license suspension. c) Upon license renewal. d) In the process of a merger.
a
Which of the following personal auto coverages would pay for the insured's travel expenses and loss of earnings while involved in the settlement process of a covered loss? a) Liability coverage b) Medical payments c) Comprehensive coverage d) Collision coverage
a
You own a Harley Davidson motorcycle and also the black Ford F-150 pickup with the Harley Davidson trim package. Which could be insured on a PAP? a) Both the pick up and the motorcycle b) The pickup and the bike if the bike is in the back of the pick up c) Neither the pickup nor the bike on an auto policy d) Only the pickup
a
Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses?
additional coverage
How much is covered for debris removal under the HO property additional coverages?
all reasonable costs
All of the following are additional liability coverages automatically provided in a homeowners policy EXCEPT a) Loss assessment coverage. b) Personal injury. c) Claims expenses. d) Damage to the property of others.
b
In dwelling policies, automatic increase in insurance is a) Coverage for newly acquired property. b) Coverage by endorsement. c) Automatic coverage. d) Coverage without additional premium.
b
Which of the following policies does NOT contain an automatic reinstatement provision? a) Homeowners b) General liability written with an aggregate limit c) Business automobile liability d) Personal automobile liability with split limits
b
Which of the following statements would be correct if an insured failed to maintain the underlying limits as required by a personal umbrella policy? a) The insured would have to pay the self-insured retention limit. b) The insured would be responsible for the amount required as underlying limits in the event of a claim. c) It would have no effect on the umbrella policy. d) The policy will be cancelled.
b
All of the following are considered parts of the policy structure EXCEPT a) Insuring clause. b) Conditions. c) Provisions. d) Exclusions.
c
All of the following are examples of risk retention EXCEPT a) Copayments. b) Self-insurance. c) Premiums. d) Deductibles.
c
All of the following are parts of a personal auto policy EXCEPT a) Duties after an accident or loss. b) Liability coverage. c) Physical damage coverage. d) Medical payments coverage.
c
An insured has a homeowners policy and is required to be a member of the homeowners association in her neighborhood. The association's 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?
$1000
An insured suffers a windstorm loss in which the insured's driveway is blocked by two of the insured's trees and two of the neighbor's trees. The total amount of the removal adds up to the following: three trees at $300 per tree, and one tree at $600. How much will the insurer pay for the loss?
$1000
The amount it would currently cost to repair covered property with new material of like kind and quality, minus an allowance for physical deterioration is the definition of
ACV
The part of a policy that clarifies terms in the policy is the
Definitions
All of the following are conditions commonly found in the insurance policy EXCEPT a) Insuring agreement. b) Cancellation and nonrenewal. c) Subrogation. d) Appraisal.
a
All of the following statements regarding a boatowners policy are true EXCEPT a) 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. b) Watercraft liability protects up to specified limits for claims against a "covered person" for damages due to bodily injury caused by a watercraft. c) Physical damage coverage is provided on an actual cash value (ACV) basis. d) Perils are insured on an open-peril basis, providing that the insurer will pay for direct and accidental loss to the property insured.
a
An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have? a) Specific b) Schedule c) Blanket d) Special
a
Because an insured owns a lot of expensive jewelry, her insurance agent has advised her to purchase a scheduled personal property endorsement. If the insured adds this endorsement to her homeowners policy, which of the following statements would be correct? a) Coverage C limits will no longer apply to the jewelry insured by the endorsement. b) The amount of coverage will be doubled. c) The endorsement becomes excess coverage. d) The endorsement becomes primary coverage and the HO contract is secondary.
a
An insured carries a property policy on her home in the amount of $250,000. A bank is shown as the mortgagor in the policy. Last month the insured made her final mortgage payment, but did not remove the bank from the policy. In the event of a covered loss to her home, how much will the bank receive? a) The standard minimum of 10% that is paid to lenders b) All of the payment would be made to the mortgagor shown in the policy. c) Nothing d) Up to the amount of debt that the insured has with the bank
c
An individual was just caught violating the state's laws regarding insurance information's privacy protection. What is the largest fine he could be issued? a) $120,000 b) $210,000 c) $10,000 d) $500
c
An insured couple owns a pontoon boat. Which situation would NOT be covered by their watercraft endorsement under their homeowners policy? a) The insured's granddaughter slips on the boat and needs stitches. b) A friend borrows the boat and has an accident with another boater. c) One of the insureds is taking the boat out and injures her grandson. d) A friend rents their boat and runs it into a neighbor's dock.
d
What type of coverage is Coverage E in homeowners policies? a) Additional coverage b) Loss of use c) Personal property d) Personal liability
d
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? a) They provide additional information from an outside source about a particular risk. b) They provide information about a customer's character and reputation. c) The customer has no knowledge of this action. d) The customer's associates, friends, and neighbors provide the report's data.
d
In insurance transactions, fiduciary responsibility means a) Maintaining a good credit record. b) Being liable with respect to payment of claims. c) Commingling premiums with agent's personal funds. d) Handling insurer funds in a trust capacity.
d
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
The excess over the self-insured retention.
Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as a) Cancellation. b) Rescission. c) Nonrenewal. d) Cessation.
a
The insurer may suspect that a moral hazard exists if the policyholder a) Is not honest about his health on an application for insurance. b) Is prone to depression. c) Is indifferent to activities that may be dangerous. d) Always drives over the speed limit.
a
The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the a) Insuring agreement. b) Conditions. c) Exclusions. d) Declarations.
a
Under the personal auto policy, liability for bodily injury resulting from the insured's use of a nonowned automobile is a) Provided by the insured's policy on an excess basis. b) Not covered. c) Shared on a pro rata basis. d) Provided by the insured's policy on a primary basis.
a
All of the following are optional coverages that may be attached to an HO-3 policy EXCEPT a) Personal property replacement cost. b) Dwelling replacement cost. c) Home day care coverage. d) Earthquake coverage.
b
An insurance policy or countersignature endorsement must be signed by any of the following EXCEPT a) Licensed insurance producer. b) Director of Insurance. c) Bail bond agent. d) Managing general agent.
b
Duties of the insurer found in property policy conditions include all of the following EXCEPT a) Return any premiums to the insured. b) Notify the insured in the event of financial difficulty. c) Pay covered losses. d) Provide advance notice of cancellation.
b
How much is the premium for the dwelling under construction endorsement under the dwelling policy? a) 50% of the actual value premium b) The average amount of insurance during construction c) 75% of the gross premium d) The full value of the house
b
In Arizona, under the conditions of the dwelling policy, within how many days does an insurer have to pay for a loss once a proof of loss form has been received and an agreement with the insured as to the amount payable has been reached? a) 20 days b) 30 days c) 45 days d) 90 days
b
Rates that are established based on the similarities of the risk with other risks are known as a) Merit rates. b) Manual rates. c) Experience rates. d) "A" rates.
b
The pro rata liability clause is designed to protect the principle of a) Waiver and estoppel. b) Indemnity. c) Subrogation. d) Insurable interest.
b
Under a dwelling policy, which of the following is NOT a factor in determining a loss? a) The amount necessary to repair or replace the property b) The amount negotiated by the insured c) The policy limit d) The amount reflecting the insured's interest in the property at the time of loss
b
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? a) Revocation of license b) $2,500 c) $1,000 d) $100 per violation
b
When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written as a) Specific insurance. b) Stated amount. c) Replacement cost. d) Actual cash value. In stated amount coverage, the value of the insured property is determined at the time the policy is written. In the event of a loss, that amount is paid without regard to any coinsurance provision. However, if the loss is less than total, the insurer has salvage rights with the insured having first right of refusal of the salvage.
b
Which of the following best expresses the purpose of a stated value contract? a) To provide a maximum limit for which the insurance company may become liable in casualty losses b) To pre-establish the amount of coverage available for property items that are difficult to value c) To ensure that the principle of indemnification applies d) To establish the value of property subject to loss by theft or robbery
b
Which of the following terms refers to other insurance that is written on the same risk, but not on the same coverage basis? a) Contribution by equal shares b) Nonconcurrency c) Primary and excess d) Pro rata
b
Which of the following would NOT be accepted as a document showing that an applicant for a license is in the United States legally? a) A United States certificate of naturalization b) A Social Security card c) A United States certificate of birth abroad d) An Arizona driver license
b
All of the following are true regarding physical damage coverage EXCEPT a) The policy will pay up to $20 per day up to a maximum of $600 for rental transportation. b) The insurer will pay for direct and accidental loss to a covered auto minus any applicable deductible. c) The limit of liability is the greater of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle. d) Losses to nonowned autos will be covered the same as the broadest coverage available for any covered auto, except nonowned trailers are limited to $1,500.
c
An insured was involved in an automobile accident for which the insured was at fault. Which of the following coverages would pay for damage to the insured's automobile? a)Property damage liability coverage b) Comprehensive coverage c) Collision d) Other-than-collision
c
An insured's home is mortgaged by the local bank. The insured is required to carry insurance on the home, showing the bank as the mortgagee. If the home is damaged by a covered peril, which of the following is true? a) The mortgagee must settle with the mortgagor in the event of a loss. b) The additional premium required for the mortgage endorsement must be paid by the mortgagee. c) Losses will be paid to the mortgagee and mortgagor as their interest appears. d) Coverage is suspended if the building is mortgaged and the insurer is not told of this indebtedness.
c
If a producer waits more than 1 year to renew a license after it has expired, what is the producer required to do to be licensed again? a) Submit a license renewal application to the Director b) Become appointed by an insurer c) Retake a licensing exam d) Pay a late fee of $100
c
In which of the following situations would off-premises coverage in a broad theft endorsement apply? a) The insured's jewelry is stolen from her vacation home after she returns home. b) The insured's vacuum cleaner is stolen from her apartment. c) The insured's camera is stolen from his vacation home while he is there. d) The insured's live-in maid's quarters are burglarized.
c
Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called a) Blanket coverage. b) Described coverage. c) Specific coverage. d) Schedule coverage.
c
Under the dwelling policy, Coverage C - Personal Property is a) A prohibited coverage in the dwelling form. b) Limited to 50% of the amount of insurance that is written as Coverage A. c) Limited to covering a servant's property while at the insured location. d) Automatically provided as 50% of Coverage A.
c
What type of information would be found in a policy's insuring agreement? a) Policy limits b) Insurer's address c) Renewal dates d) Location of premises
c
When must an applicant be notified that an insurer is gathering information about him or her? a) The insurer has the right to contact any source deemed necessary without having to inform the insured. b) The insured is considered to be informed upon receipt of a Notice of Investigation, which is delivered at the time of application. c) When consulting a source other than the applicant or public records d) When consulting any source except for the applicant
c
Which of the following is NOT true concerning the fair rental value coverage provided in a dwelling policy? a) Coverage continues until repairs are completed. b) The period of time to repair or replace is not limited by the expiration date of the policy. c) Loss or expense caused by the cancellation of a lease is covered. d) It pays for the loss of rent you would have collected less any expenses that would not have continued.
c
Which of the following is a common exclusion found in Part D: Coverage for Damage to Your Auto of a PAP? a) Riot or civil commotion b) Towing and labor c) Mechanical breakdown d) Glass breakage
c
Which of the following is an example of a producer's fiduciary duty? a) A duty to base all transactions upon the principle of Utmost Good Faith. b) The obligation to tell the truth to the best of one's knowledge c) The trust that a client places in the producer in regard to handling premiums. d) An obligation to state every known fact about the policy the producer is selling
c
Which of the following statements is true concerning the special form dwelling policy? a) Both Coverage A and Coverage C are provided for the broad form perils. b) Coverage A is for all-risk perils, and Coverage C is for basic perils only. c) Coverage A is for all-risk perils, and Coverage C is for the broad form perils. d) Both Coverage A and Coverage C are provided on an all-risk basis.
c
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as what?
consideration
A property insurance policy that is not subject to any coinsurance requirements but has a set amount of insurance scheduled for the property would use what loss valuation method? a) Actual cash value b) Replacement cost c) Reproduction cost d) Stated amount
d
All of the following would be considered unfair settlement practices EXCEPT a) Not attempting to affect prompt and equitable settlements. b) Failing to act upon insurance claim communications in a reasonable timeframe. c) Withholding affirmation or denial of claims coverage after proof of losses submitted. d) Denying coverage to the terminally ill or disabled.
d
An agent's license expired on December 1, 2015. His renewal application was not received until July 31, 2016. Which of the following is true regarding the license's renewal? a) The Director will not accept the agent's renewal application because it was submitted after 6 months of expiration. b) Expired licensed cannot be renewed. c) The Director will renew the license, provided that the agent passes the licensing exam again. d) The Director may accept the application, provided that the agent pays the appropriate renewal fees plus a $100 late fee.
d
An insured decides to store some heavy boxes in the attic. While moving them around, he accidentally drops a heavy box that crashes through the ceiling, causing $1,000 of damage. The insured's HO-3 policy form will pay a) $500. b) $1,000. c) $500 minus the deductible. d) $1,000 minus the deductible.
d
Compared with other drivers in his age group, a driver has had more minor accidents and traffic violations. Which of the following rating types would most accurately reflect the driver's true insurance risk? a) Class b) Special c) Schedule d) Experience
d
Extended nonowned coverage endorsement in a PAP broadens which of the following coverages? a) Duties after an accident or loss b) Uninsured motorists c) Physical damage d) Liability and medical payments
d
First aid costs for others injured on the insured's premises a) Apply only if the insured is legally liable. b) Also cover injuries to the insured's family members. c) Are deducted from the liability limit. d) Are paid in addition to the liability limit.
d
Homeowners policies provide coverage for a) Losses caused by off-premises power failure. b) The land under the residence. c) Property of tenants, roomers, or boarders not related to any insured. d) Business property while on the residence premises.
d
If a person is using an auto with the belief that he is entitled to do so, subrogation 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
In order to get a non-resident license is this state a producer must a) Pass the non-resident State Exam and satisfy their continuing education requirements. b) Represent an agency located is this state. c) Surrender their license in their state of residence. d) Apply and pay a fee to a non-resident state that reciprocates.
d
On a DP-3 Dwelling Property Special Form policy, the coverage provided for personal property is a) All risk. b) Open peril. c) The same as provided on the DP-1 Basic Form. d) The same as provided on the DP-2 Broad Form.
d
The Business Pursuits endorsement under Section II of a homeowners policy will cover all of the following EXCEPT a) Insured's activities. b) Bodily injury to the insured. c) All business pursuits. d) Business liability.
d
The personal injury liability endorsement to an HO policy applies to all the following EXCEPT a) Slander. b) Invasion of privacy. c) False arrest. d) A third party breaks a leg when the insured knocks him down.
d
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report a) Are entitled to obtain a copy of the report from the party who ordered it. b) Must be advised that a copy of the report is available to anyone who requests it. c) May sue the reporting agency in order to get inaccurate data corrected. d) Must be informed of the source of the report.
d
What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk? a) Valid insurance b) Nonconcurrency c) Primary and excess d) Other insurance
d
Which of the following is NOT true concerning the fair rental value coverage provided in a dwelling policy? a) It pays for the loss of rent you would have collected less any expenses that would not have continued. b) Coverage continues until repairs are completed. c) The period of time to repair or replace is not limited by the expiration date of the policy. d) Loss or expense caused by the cancellation of a lease is covered.
d
Which of the following is used in the formula for calculating the actual cash value of a property? a) Stated value b) Fair market value c) Agreed value d) Replacement cost
d
Which of the following perils is covered by the HO-2 and HO-3? a)Loss due to power interruption that occurs off the premises b) Flood c) War d) Sudden and accidental rupture of a heating system
d
An insured has a liability policy that sets the amount for all claims that arise from a single incident at $50,000. Which type of limit of liability does this insured's policy have?
per ocuurence
Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe?
reduction
Theft coverage under an HO-8 is restricted to
the ACV of what was stolen, with limits for certain classes of property
