Casualty Insurance Exam
During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes
a) Defamation. b) Twisting. c) Coercion. *d) Misrepresentation. Making false or misleading statements with the intent to defraud another is misrepresentation.
Which of the following would NOT be considered a misrepresentation on the part of the insurer?
a) Embellishing the benefits provided in the policy b) Overstating returns on policy dividends *c) Backdating policies to secure a lower premium for the insured d) Implying that term insurance has cash value It is illegal to issue, publish, or circulate any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, or the payment of dividends. Demonstrating conservative returns in the illustrations would not be a violation.
How are surety bonds different from insurance?
a) Insurance guarantees specific duties or obligations will be fulfilled; surety bonds pay for losses. b) Surety bonds guarantee that losses will be paid; insurance pays for obligations to be fulfilled. c) Surety bonds are issued by the government; insurance is issued by private companies. *d) Surety bonds guarantee specific duties or obligations will be fulfilled; insurance pays for losses. Surety bonds are not insurance in the traditional sense. Unlike insurance, surety bonds do not expect to pay for losses. Instead, they guarantee specific duties or obligations will be fulfilled. Surety bonds may be issued by private companies.
All of the following are considered parts of the policy structure EXCEPT
a) Insuring clause. b) Conditions. *c) Provisions. d) Exclusions. Provisions is a broad term used to refer to the sections or clauses of an insurance policy that communicate the policy's benefits, conditions, etc. The essential parts of the policy are declarations, insuring clause, conditions and exclusions.
A policy condition that stipulates how the amount of damaged or lost property will be determined if the insured and the principal do not agree is known as
a) Loss payment. *b) Appraisal. c) Coinsurance. d) Loss valuation. Loss valuation is a factor in determining the premium charged and the amount of insurance required.
In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation?
a) Market value b) Agreed value c) Replacement cost d) Stated amount Agreed value is a property policy with a provision agreed upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the property at the time the insurance is written. When a loss occurs, the policy pays the agreed value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation.
Crime insurance is usually written on what basis?
a) Specific risk b) Named peril c) Closed risk d) All-risk Crime insurance is usually written on an all-risk, or open peril basis.
What is the deductible of a personal liability umbrella policy called?
a) The PIL b) The CGL c) The CPP d) The SIR The self-insured retention (SIR) is an initial part of a loss the insured pays before the umbrella pays if no other policy covers the loss.
Which of the following would be grounds for an insurer to surcharge or refuse to issue an automobile insurance policy?
a) The applicant does not have continuous auto liability insurance coverage at the time of application b) The applicant refuses to disclose their prior insurer *c) The applicant fails to provide the insurer with his or her loss experience with the prior carrier within 21 days after the application is filed. d) Any of the above An applicant must, upon request, provide the insurer with their loss experience with a prior insurer within 21 days of the application being filed.
Which of the following statements is true regarding the commercial general liability policy's Coverage C - Medical Payments?
a) The coverage is liability insurance because it pays only if the insured is legally liable. b) The coverage provides high limits of insurance for bodily injury losses. *c) The coverage is considered good will because payments are made without regard to fault. d) The coverage applies to bodily injury to the named insured. Coverage C - Medical Payments provides necessary medical, surgical, ambulance, hospital, nursing or funeral expenses for injuries to third parties. Payments will be paid without regard to the fault or negligence of the insured.
A business insurance policy generates a premium of $2,000 annually. The policyowner is financing the premium with a premium financing company. In addition to the premium balance and interest on that amount, the finance company may assess a carrying charge that may not exceed
a) $100 b) 10% of the unpaid balance c) $20 d) $40 In addition to the service charge on the amount financed, the financing company may apply a nominal carrying charge not to exceed $40.
If an insured requests forms that are necessary to present a claim, within how many working days must the insurer provide the forms?
a) 5 b) 10 c) 15 d) 20 Failing to provide forms necessary to present claims within 15 working days of a request constitutes improper claims practice.
An insurer cannot be required to recalculate an insurance score any more often than once every
a) 6 months. b) 12 months. c) 18 months. d) 3 years. An insurer need not recalculate an insurance score any more often than once every 12 months.
Employee theft coverage may be written as
a) Blanket coverage. b) Name schedule coverage. c) Position schedule coverage. d) Any of the above. Employee theft may be written as any of the above forms.
A person disclosing personal or privileged factual information to the Director concerning an investigation of suspected fraud or arson shall be free from a cause of action in the nature of
a) Defamation. b) Invasion of privacy. c) Negligence. *d) All of the above. No cause of action shall arise against any person furnishing personal or privileged information to the Director, however, there shall be no immunity for the disclosing or furnishing false information with malice or willful intent to injure any person.
A bond is written for a set limit, and the surety will be liable only for this amount of the limit. This limit is known as the
a) Limit of liability. *b) Penalty. c) Face value. d) Stated amount. A bond is written for a set limit, sometimes called the penalty. If the principal's obligation exceeds the limit, the surety will be liable only for the amount of the limit.
With which entity must a corporation register before it will be allowed to operate as an insurance agency?
a) MIB b) Director c) National Federation of Insurers d) Federal Board of Insurance Any corporation or partnership transacting insurance as an insurance agency must register with the Director before it will be allowed to operate.
In the personal auto policy, owned trailers being towed by an insured auto are automatically covered for
a) Towing coverage. b) Comprehensive (other-than-collision) coverage. c) Collision coverage. *d) Uninsured motorist coverage. Trailers, while being towed by an insured auto, are covered automatically for bodily injury (BI), property damage (PD) and uninsured motorist (U/M) under Part A of a personal auto policy.
Who is responsible for filling out a notice of claim form?
*a) Insured b) Adjuster c) Agent d) Insurer Notice of claim is a form or statement from an insured to an insurer, informing the insurer that events leading to a possible claim have occurred.
Which of the following is NOT true regarding a Premium Fund Trust Account?
*a) It could be used as a claim payment account. b) It is a fiduciary account. c) It may be a depository for service fees and late charges. d) It is established to maintain all the premiums. PFTA cannot be used as a general operation or a claim payment account. It is a fiduciary account into which all collected premiums or other monies, such as service fees, later charges and inspection fees must be deposited.
Workers compensation rating is developed by applying a rating bureau job classification rate to each
a) $250 of payroll. b) $500 of payroll. c) $1,000 of payroll. d) $100 of payroll. Workers compensation rating is developed by applying a rating bureau job classification rate to each $100 of payroll.
Alan has a Personal Auto Policy with Part C limits of $100/$300 Uninsured/Underinsured Motorist. Alan is injured by Ben who has Part A limits of $50/$100. The police determine that Ben is at fault for the accident and Alan's $125,000 of medical expense. How much will Alan's Part C pay?
a) $75,000 *b) $50,000 c) $25,000 d) $125,000 Underinsured motorist coverage acts as excess over the at fault motorist's coverage. Because the per person limits of B's underinsured motorist coverage, the policy will pay the amount necessary to bring payment up to the per person limit.
A producer receives notice that his license has been terminated. If the producer wants to have the charges reviewed in court, within what time period must the request be made?
a) 15 days b) 30 days c) 45 days d) 60 days If a producer receives notice that its license has been terminated, and if the producer wants to have the charges reviewed or challenged in court, the request must be made within 30 days of the notice.
In the event of a loss covered by the policy, if the insurer requests a signed sworn proof of loss, the named insured is required to submit it within
a) 30 days. *b) A specified time. c) 1 year. d) 5 business days. In the event of a loss covered by the policy, the named insured is required to submit to the insurer a signed sworn proof of loss within the allotted time (usually 60 days, but may vary).
Which of the following correctly describes controlled business?
a) A producer obtaining a license for the purpose of selling 20% to his or herself and his or her spouse, 80% to the public *b) Anytime more than 50% of the total premiums collected by a producer comes from themselves, his or her spouse, employer, or own business c) A producer obtaining a license and never selling insurance d) A producer obtaining a license for the purpose of selling to the general public Producers must obtain licensure for the purpose of selling insurance to the general public, not controlled business. Controlled business includes selling insurance to oneself, his or her spouse, employer, and/or own business. Any time controlled business is greater than 50% of the total premiums collected by the producer, a violation has occurred.
The Director issued a written notice about a hearing for a business entity. The hearing is scheduled for May 1st. The affected business entity should receive the notice no later than
a) April 1st. b) 3 business days before the hearing. c) 2 weeks in advance. *d) April 20th. The notice about a hearing must be given to the person or organization whose interests are affected no later than 10 days prior to the hearing.
In liability insurance policies, supplementary payments are made
a) As part of the limit of liability. b) At the option of the insured. c) At the option of the insurer. d) In addition to the limit of liability. Supplementary payments are the insurer's claim-related expenses and are made in addition to the limits of liability.
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. The insuring agreement is the part of the policy structure that describes the insured perils and the method of indemnification.
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?
a) Making comparisons between different policies b) Stating that the insurance policy is a share of stock c) Exaggerating the benefits provided in the policy d) Stating that the competitors will arbitrarily increase their premiums each year Making accurate comparisons of policies is not illegal.
Which of the following types of valuation works best for property whose value does not fluctuate much?
a) Market value b) Stated amount c) Inflation guard d) Agreed value Agreed value works best for items whose value does not fluctuate much. When a loss occurs, the policy pays the agreed value as specified on the policy schedule, regardless of the insured item's appreciation or depreciation.
Directors and officers liability insurance defends actions against a corporation or its officers and directors alleging wrongful acts. With regard to the coverage provided, wrongful acts include any of the following EXCEPT
a) Neglect. b) Breach of duty. *c) Embezzlement. d) Misstatements. Embezzlement is a criminal act. There is no "standard" director and officers policy; however, most policies specifically exclude coverage for defense or payment of claims resulting in fines or penalties resulting from criminal acts, nor will they pay punitive damages.
Which of the following liability exposures is most likely for a small specialty clothing retail boutique?
a) Operations liability exposure b) Product liability exposure c) Completed operations liability exposure *d) Premises liability exposure The premises liability exposure exists when there is use of the premises. Operations liability exposure relates to activities in addition to use. Product liability exposure is the possibility that the public might be injured by the product. Completed operations liability refers to liability for work already performed or completed. For a boutique retail store, the only possible liability would arise from customer injury while on the premises.
Most insurance policies exclude losses by
a) Robbery. *b) Mysterious disappearance. c) Theft. d) Burglary. Losses by mysterious disappearance are excluded by most insurance policies.
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 Defamation is making statements that are false as to the financial condition of any insurer and which are calculated to injure any person engaged in the business of insurance.
The policy conditions define
a) The excluded perils. b) The amount of coverage. *c) How parties to the contract must act following a loss. d) The basic underwriting information. Conditions is an essential part of a policy structure. Conditions define what each party to the policy is required to do contractually in the event of a loss.
What consequences will occur if a producer acts without a bond that is required?
a) The producer's license will be maintained without fee. b) The producer will be fined $350. c) The producer will be required to fulfill extra CE requirements. d) The producer's license may be revoked. The producer's license may be revoked if the producer acts without a bond that is required.
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. Once the aggregate has been reached, the insurer will not be responsible for paying further claims; therefore, the insurer no longer pays to defend.
Which of the following is NOT a duty of the Director of Insurance?
a) Issuing Certificates of Authority *b) Setting premium rates c) Examining authorized insurers d) Enforcing the Insurance Code The Director reviews rates to make sure that they are fair, adequate, and not unfairly discriminating, but does not develop the rates.
A sworn written statement that must be furnished by the insured to the insurer before any loss under a policy can be paid is called
a) Notice of claim. b) Claim report. c) Binder. *d) Proof of loss. Proof of loss is a sworn statement that must usually be furnished by the insured to an insurer before any loss under a policy can be paid. Proof of loss must be in writing.
A claim is considered to have been made
a) When notice is received by any insured. b) When notice is received and recorded by the insurer. *c) When notice is received and recorded by any insured or the insurer, whichever comes first. d) When received in writing or telephonically by the insurer. This is a standard claims-made condition.
Which of the following would be considered an unfair claims settlement practice?
*a) A claims adjuster advises the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered b) Requesting the insured to submit a signed, proof of loss statement, after the insured has already verbally advised the insurer of the claim c) Requesting the insured swear under oath concerning the facts of the claim d) The settlement of the claim is delayed for 30 days in order for the insured to conduct an investigation This act is a violation as defined in the Unfair Settlement Practices.
An insured is applying for a casualty insurance policy. One of the conditions of the policy allows the insurance company to inspect the insured's books at the end of the policy term to make sure sufficient premium has been collected for the exposure she plans to insure. Which condition is part of the insured's policy?
*a) Deposit premium audit b) Excess liability coverage c) Contract Bond d) Errors and Omissions insurance Deposit premium audit is a condition that allows an insurer to inspect the insured's books at the end of the policy term to make sure sufficient payment has been collected for the exposure.
If an employer in a state with elective workers compensation laws chooses not be to subject to those laws, what does the employer lose?
*a) Its common law defenses against liability suits b) Its ability to provide group health insurance c) Its right to hire persons with disabilities d) Its eligibility for workers compensation insurance Elective law means the employer does not have to be subject to the state's workers compensation laws, but if the employer chooses not to be subject to the laws, it loses its common law defenses against liability suits.
Losses caused by continuous or repeated exposure to conditions resulting in injury persons or damage to property that is neither intended nor expected is the definition of which of the following terms?
*a) Occurrence b) Peril c) Hazard d) Accident An occurrence includes those losses caused by continuous or repeated exposure to conditions resulting in injury persons or damage to property that is neither intended nor expected.
Which of the following would be named on the declarations page of a property or liability policy?
a) Additional insureds *b) First named insured c) Beneficiaries d) All insureds First named insured is the individual whose name appears first on the policy's declaration.
Workers Compensation laws provide all of the following types of benefits EXCEPT
a) Rehabilitation benefits. b) Death benefits. *c) Compensatory benefits. d) Medical benefits. Award for pain and suffering is not compensated under workers compensation.
All of the following are true regarding physical damage coverage EXCEPT
*a) 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. b) 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) The policy will pay up to $20 per day up to a maximum of $600 for rental transportation. d) The insurer will pay for direct and accidental loss to a covered auto minus any applicable deductible. The limit of liability is the lesser of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle.
A group insurance policy was solicited by a limited insurance representative. Which of the following is true according to the disclosure regulation?
*a) The representative's name and signature must appear on the master policy. b) Disclosure regulation does not apply to limited insurance representatives. c) Disclosure regulation does not apply to group insurance. d) The name of the representative must be displayed on each certificate of insurance. Any policy solicitation which involves an insurance producer, limited insurance representative, or temporary insurance producer must identify the name of the producer, representative, or firm on the policy.
Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within what maximum time period?
a) 90 days b) 1 year *c) 3 years d) 5 years A coverage requirement in the policy states that medical expenses must be incurred within three years of the accident. The services also must be rendered within that time period.
Which of the following statements would be an example of a product liability claim?
a) An insured, while delivering product to a customer, hits another car with the delivery truck causing bodily injury and property damage. b) Someone tampers with the insured's product causing the insured to have to recall all products that are on the shelf. c) The insured's product has to be recalled because of an expiration date. *d) Faulty packaging of a cereal caused spoilage that resulted in someone getting sick. Product liability covers damage done by the product but not damage to the product.
Under the coverage of which of the following liability policies may an insured require the insurer to defend a claim?
a) Auto liability b) General liability c) Personal liability *d) Professional liability Because the reputation of the professional, as well as the monetary amount is at risk, if the insured feels certain that they are not at fault, even though it might be less expensive to pay the amount of loss sought, they can require the insurer to defend the claim. Usually there is a significant discount of premium to the insured if they will give up this right.
Medical benefits under Workers Compensation statutes are provided
a) For up to $100,000 per injury or disease. *b) Without limit. c) For up to $500,000 per injury or disease. d) For a certain percentage of the workers annual income. There is no maximum set for necessary medical expense.
All of the following are correct regarding misrepresentation EXCEPT
a) The fines for misrepresentation range from $200 up to $10,000. b) Misrepresentation includes the guarantee of dividends. c) Misleading advertisements are considered misrepresentations. *d) The fines for misrepresentation range from $50 to $1,000. Misrepresentations include guaranteeing dividends and creating misleading advertisements. Penalties for misrepresentation include fines of $200 up to $10,000.
A Homeowners policy that has been in effect for more than 5 years may be canceled for any of the following reasons, EXCEPT
a) The insured fails to pay a renewal premium when due. *b) Insured uses a space heater to heat the insured structure. c) The policy was obtained through misrepresentation. d) The insured conducts activities that measurably increase the risk of loss that did not exist when the risk was accepted by the insurer. Illinois law specifies that no insurer may refuse to renew a Homeowners policy because the owner or tenant of a dwelling uses a space heater in the dwelling.