Exam 8

Under the business auto policy, the endorsement used to protect the owner of a leased vehicle is: Named Owner endorsement Employers Non Owned Auto Joint Ownership Endorsement Additional Insured - Lessor

Additional Insured - Lessor. Explanation: The actual owner of the leased vehicle needs to be listed as an additional insured on the lessee's policy by using the Additional Insured—Lessor endorsement.

A fur coat that is insured by a personal articles floater is damaged by a pet. Coverage for the coat would be provided because the policy is written on: An open perils basis. A named perils basis. A broad form. A specific form.

An open perils basis. is correct. Explanation: Personal article floaters insure against the open perils (all risk) method. The form does not list the perils. If not excluded, all losses are covered.

A dead tree beside Jerry's home is best described as which of the following types of hazards? Physical hazard Proximate hazard Moral hazard Morale hazard

Physical hazard. Explanation: This is obviously a physical hazard to the house. Broken branches or a downed tree can cause injuries.

Which of the following is excluded on the commercial property special causes of loss form? Personal property less than 100 feet from the premises Smoke from industrial operations Fire damage if the building has been vacant more than 60 days Fire damage if the building has been unoccupied more than 60 days

Smoke from industrial operations. Explanation: Smoke, vapor, or gas from industrial operations is excluded on the special causes of loss form. Personal property is a subject of the building and personal property coverage form. Fire damage is fully covered when a building is unoccupied. When a building is vacant 60 or more days, fire damage is covered, but settlement will be reduced by 15%.

What endorsement may be used on the dwelling policy to keep values current with the replacement cost of the buildings? The Automatic Increase Endorsement The Automatic Replacement Cost Coverage Construction Cost Increase Endorsement The Automatic Market Value Increase Endorsement

The Automatic Increase Endorsement is correct. Explanation: The "automatic increase endorsement" is used to keep the coverage current as a result of inflation on construction costs.

Under the Underinsured Motorist Limit, how much will be paid on a claim providing the insured has proper limits in place? The amount of the claim, up to the limit of coverage. 50% of the underinsured limit. A percentage of the claim. Nothing unless the other party is not insured.

The amount of the claim, up to the limit of coverage. is correct. Explanation: The insured is entitled to the full limit of coverage provided he/she can prove damages to that extent.

John has commercial property coverage written on a value reporting form. The maximum limit of coverage for inventory values is $150,000. The insured has reported an inventory value of $75,000 when the actual value was $100,000. A $20,000 loss occurs. The insurer will pay: $15,000. $10,000. $20,000. $13,333.

The correct answer is: $15,000.. Explanation: The insured is required to carry a 100% coinsurance clause when the reporting form method is used. The insured is also required to report 100% of the actual inventory values. This insured reported less than the actual inventory by 25% and will only receive 75% of a partial loss or $15,000.

Under Coverage E - Scheduled Farm Property, how is the property covered? For the limit shown in the policy declarations Unlimited Blanket coverage Replacement cost basis

The property is covered for the limit shown on the declarations page of the policy for the property specifically scheduled.

When a direct casual relationship is established between a breach of duty and damage sustained, this breach of duty is known as the: Approximate cause. Proximal causation. Primal causation. Proximate cause.

This is called the proximate cause of the loss. It is commonly referred to as an unbroken chain of events that lead to the cause of loss.

Which of the following best describes the purpose of an "insuring agreement?" To describe the promises of the insurer and the insured and the coverages provided. To identify the named insured To explain the duties of the named insured To set forth the conditions and exclusions

To describe the promises of the insurer and the insured and the coverages provided. is correct. Explanation: Insuring agreements are the promises or obligations of the insurer and the insured. In property insurance, it also contains the coverage the insured has purchased.

A homeowner policy has been issued with $75,000 coverage on a dwelling. What is the automatic amount of insurance on personal property? $37,500 $7,500 $15,000 $45,000

$37,500 is correct. Explanation: Personal property is automatically covered for 50% of the amount of the dwelling limit. If replacement cost coverage is purchased on the personal property, the limit of insurance will be increased. The insured can always increase the contents limit for an additional premium.

Which situation could be covered by Kim's general liability insurance? Mitch slips and falls on Kim's slippery kitchen floor. Kim drives her Dodge sedan into a picket fence, and the fence is destroyed A client slips and falls in Kim's design studio. Kim is injured when she falls from a stepladder at work in her design studio

A client slips and falls in Kim's design studio. is correct. Explanation: The CGL policy is designed to cover premises liability.

ABC Office Temps and Clean-Rite Dry Cleaning are both located in a strip mall and share a common party wall. Fire begins in the dry cleaners and damages the party wall. Clean-Rite decides to go out of business. How will the BOP policy of ABC Office Temps respond regarding the party wall? Each policy will split the cost of the repair to the party wall Clean-Rite will be responsible for the entire loss ABC's policy will repair the party wall and subrogate against Clean-Rite ABC will be responsible for the entire loss

ABC's policy will repair the party wall and subrogate against Clean-Rite is correct. Explanation: Normally, when there is loss to a party wall, the companies will share the loss in the cost to repair. If one party chooses not to make the repair, then the insurer for the other party will pay the entire cost of the loss and maintain subrogation rights against the other party.

The Insurance Guaranty Association does not pay claims for which of the following? All of the Responses are Correct Life Insurance Health Insurance Ocean Marine

All are correct responses. There are certain types of insurance claims of insolvent insurers that are not addressed by the Insurance Guaranty Association.

Which of the following autos are eligible for coverage under a business auto policy? A sedan A truck-tractor A trailer All would be eligible

All would be eligible is correct. Explanation: Basically any type of licensed motor vehicle is eligible for the business auto policy

Which of the following is a true statement regarding crime insurance with computer fraud coverage? Applies to criminal activity wherein the perpetrator gave false electronic instructions to remove insured's funds from a bank account Covers acts of employees Covers losses that occur as the result of a messenger of the insured Does not provide coverage on a "worldwide basis"

Applies to criminal activity wherein the perpetrator gave false electronic instructions to remove insured's funds from a bank account is correct. Explanation: Computer fraud covers loss of or damage to money, securities and other property due to the use of a computer to fraudulently transfer that property from inside the premises of a banking premises to a place or person (other than a messenger) outside the premises.

Coverage D - Loss of Use on a farm policy will include coverage for: I. Additional living expenses incurred by the resident family. II. Loss of rental income of the owner for tenants who cannot live there due to a covered loss. I only II only Both I and II Neither I nor II

Both I and II is correct. Explanation: Similar to the loss of use coverage on the homeowner policy, Coverage D on the farm policy will pay both the additional living expenses of the owner occupant and any loss of rental income if a tenant is also unable to live there after a covered loss.

Uninsured Motorist coverage includes the named insured's: I. Medical bills and pain and suffering. II. Lost wages.

Both I and II. Explanation: Coverage C (Uninsured Motorists) provides for payments to or on behalf of the named insured for injuries sustained through the negligence of an uninsured driver.

Which of the following is NOT true regarding the legal effect of a mistake in an insurance contract? Coverage can be voided by the insurer under any circumstance involving a mistake Coverage is not necessarily voided by a mistake A mistake does not constitute a defense for the insurance company The insurer can void coverage if the mistake was due to misrepresentation or concealment

Coverage can be voided by the insurer under any circumstance involving a mistake is correct. Explanation: The coverage is usually not voided by a mistake unless it was due to misrepresentation or concealment.

The limits of liability are found in which of the following sections of a casualty policy? Declarations Insuring Agreement Definitions Conditions

Declarations is correct. Explanation: The declarations section of a policy includes the identity and address of the named insured, the policy term or period, the amount of insurance or limits of liability, the policy premium, and any applicable deductibles. The conditions section spells out the duties of the insured in case of a loss. Insuring agreements are the promises and obligations of the insurer. Definitions are in the policy to add clarification to the meaning of certain important terms.

Which of the following auto endorsements would include family members as insureds? Extended non-owned auto. Named non-owned auto. Family members as insureds. Household members as insureds.

Extended non-owned auto.. Explanation: The extended non-owned auto endorsement includes members of the household when driving a non-owned vehicle.

Which of the following losses are covered under the H0-2 form? Select the Correct Answer Damage to the foundation of the house caused by freezing Fire damage to the interior of a house that has been vacant for 15 days prior to the loss Vandalism to the exterior of a house that has been vacant for 90 days Water damage caused by the overflow of a river

Fire damage to the interior of a house that has been vacant for 15 days prior to the loss . Explanation: The only loss that is covered is the damage to the house that has been vacant for 15 days. Dwellings that are vacant for more than 60 days and sustain a vandalism loss would not be covered. Flood damage - overflow of a river - is not covered under any of the HO forms.

James purchases an outboard motor boat. He will have automatic coverage for the boat under his homeowner policy under which of the following circumstances? I. He reports the purchase of the boat to his insurer within 60 days. II. The boat is in storage on his premises. III. He reports the purchase of the boat to his insurer within 45 days.

II and III only is correct. Explanation: The homeowner policy will cover a newly acquired boat as long as the insured reports it to the insurer within 45 days of the purchase or if it is in storage on his premises. However, be aware of the limitations on the hull value, horsepower limitations and size and use of the watercraft. A watercraft or yacht policy may be a better choice.

Agent Rice informs the insured that he needs to secure motor vehicle records on all of the drivers in the household based on company requirements. This is an example of Agent Rice's: Fiduciary Authority Expressed Authority Apparent Authority Implied Authority

Implied authority is the authority the agent believes he has in order to do his job properly. In order to write auto insurance, the agent needs to know what is on the motor vehicle driving record of all the drivers in the household.

What is the difference, if any, between self-insurance and private insurance? There is no difference In private insurance, the employer pays for claims; in self-insurance, the employee pays In private insurance, the insurer pays for claims, in self-insurance, the employer pays In private insurance, the state fund pays; in self-insurance, the employer pays

In private insurance, the insurer pays for claims, in self-insurance, the employer pays is correct. Explanation: All states allow employers who qualify to self-insure their workers compensation exposures. These employers pay for workers compensation claims. Private insurance refers to insurers writing policies to cover an employer's workers compensation exposures. Most states allow private insurers to write the coverage.

All of the following are true regarding the "write your own" program under flood insurance, EXCEPT: Insurers must participate in the program. Rates are determined by the NFIP. The WYO Program operates as part of the NFIP, and is subject to its rules and regulations. Participation in the program is voluntary.

Insurers must participate in the program. is correct. Explanation: Insurers voluntarily participate in the program; they are not required to do so.

In the general liability occurrence form, to be a covered a products liability claim the claim must: Be made, and the product must be sold, during the policy period Occur within the policy period regardless of when the product was sold Be caused by a product that was used in the USA or Canada Be for a claim which occurred prior the policy period, regardless of when the product was made or sold

Occur within the policy period regardless of when the product was sold is correct. Explanation: Occurrence form general liability applies to occurrences that occur during the policy period. For products liability it doesn't matter when the product was manufactured or sold by the insured. Products manufactured or sold in the covered territory are covered.

An earthquake causes damage to a home. Moments later an explosion causes a fire. What damage would be covered? All damage is excluded All damage is covered Only the damage caused by the explosion and fire are covered Only the damage caused by the earthquake is covered

Only the damage caused by the explosion and fire are covered. Explanation: The ensuing fire and explosion damage caused by the earthquake would be covered. Other damage caused by the earthquake would be excluded unless earthquake coverage is in place.

The BOP provides liability coverages. Which of the following is a correct statement regarding the limits of coverage? The BOP only provides a Per Occurrence limit. The BOP only provides Aggregate Limits of Liability coverage. The BOP Liability section provides for Split Limits of Liability coverage. The BOP contains two Aggregate limits, one for Premises and Operations Liability and one for Products and Completed Operations. The coverage also has a Per Occurrence limit.

The BOP contains two Aggregate limits, one for Premises and Operations Liability and one for Products and Completed Operations. The coverage also has a Per Occurrence limit. is correct. Explanation: The BOP contains both a Per Occurrence Limit and Aggregate Limits for Premises/Operations and Products/Completed Operations.