ExamFX Study Guide

Insurance companies in Nevada must offer insureds under policies covering the use of passenger cars the option of purchasing how much coverage to pay for reasonable and necessary medical expenses resulting from an accident?

$1 thousand An insurance company transacting automobile insurance in Nevada must offer insureds under policies covering the use of a passenger cars the option of purchasing at least $1 thousand of coverage to pay for reasonable and necessary medical expenses resulting from an accident.

What is a penalty for transacting insurance without a proper license?

$1 thousand Anyone that transacts insurance without a license is subject to an administrative fine of $1,000 for each violation.

Should any person willfully engage in an unauthorized insurance transaction, the Commissioner may impose an administrative fine or penalty of up to

$10 thousand for each and every act. This fine will be in addition to any other administrative fine or penalty, except where specifically provided by the Insurance Code.

What is the minimum required liability limit for property damage in an auto liability policy?

$10,000 Nevada requires a minimum liability limit of $10,000 for property damage.

Under the businessowners policy, the coverage for the newly acquired property is limited to

$100,000. The newly acquired or constructed property extension applies to business personal property with a limit of $100,000 at each location. Coverage will apply only for 30 days after the insured acquires the property or the end of the policy period, whichever comes first.

A dwelling policy has a standard deductible that applies to all property coverage, except fair rental value, additional living expense, and the fire department service charge. How much is this deductible?

$250 A standard deductible of $250 applies to all property coverage, except fair rental value, additional living expense, and the fire department service charge.

An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40 thousand loss occurs. How much will the policy pay?

$30 thousand This insured only carried 75% of the amount of insurance he had agreed to carry ($120,000. of the agreed $160,000), so the insurer will pay only 75% of the loss, or $30 thousand If the insured had carried the required amount of insurance, partial losses would be paid in full. In the event of a total loss, the face of the policy would be paid. If the full amount is not carried, divide the actual amount carried by the amount that should be carried (the coinsurance amount), and multiply it by the loss.

A $1 thousand house insured on a policy with an 80% coinsurance requirement has a fire that caused $40 thousand of damage; the owner has a policy with $60,000 coverage. How much can the owner collect for his loss?

$30,000 For the total amount of a partial loss to be paid, a house must be insured for at least 80% of its value on the date of loss. In this case, because the house is insured for only $60,000 (75% of the minimum requirement), the policy will pay only 75% of the loss, or $30,000.

The insured's home is covered by an HO-3. Two years ago, the insured bought the home for $58,000. Today, its replacement value is $60,000. How much Coverage A does the insured need to qualify for replacement cost coverage?

$48 thousand A house must be insured for at least 80% of its value on the date of loss to qualify for replacement coverage. In this example, 80% of $60,000 is $48,000.

If a driver is required to provide proof of insurance, that proof must be maintained for

3 years. If a driver is required to provide proof of insurance, that proof must be maintained for 3 years.

How many days does a nonresident producer have to file a change of address when the agent moves to Nevada from another state?

30 A nonresident producer that moves from 1 state to another must file a change of address within 30 days of this change.

How much notice must an insurer give to an insured when canceling a personal policy that was issued for a 3 year term?

30 days before any anniversary. Personal policies issued for a term longer than 1 year may be cancelled with notice 30 days before any anniversary date of the policy.

The Mail Coverage Form is always written on a reporting form basis; after the end of each reporting period shown in the declarations, reports are due within

30 days. The Mail Coverage Form is always written on a reporting form basis, with reports due within 30 days after the end of each reporting period shown in the declarations.

Commercial policies issued for a term longer than one year may be cancelled by the insurer by giving notice of cancellation

60 days before any anniversary date of the policy. Commercial policies issued for a term longer than one year may be cancelled by the insurer by giving notice of cancellation 60 days before any anniversary date of the policy.

How many days after cancellation of a license in another state does a new resident agent have to apply for Nevada producer license without having to fulfill licensing examination and education requirements?

90 days A person licensed in another state who moves to Nevada and wants to become licensed as a resident producer with the benefit of the exemption provided above must apply for licensing within 90 days after establishing legal residence.

In a participation plan, the insured may be eligible for which of the following?

A partial premium refund The insured is eligible for dividends (partial premium refund) if the experience during the policy term falls within guidelines established by the insurer at the inception of the policy term. Dividends are not guaranteed, and to be eligible for participation, the account must generate a minimum amount of premium.

An insurer cannot delay making payments for any claim involving damage to a motor vehicle after receiving

A statement of charges from any garage previously authorized to perform the repairs required by that claim.. An insurer cannot delay making payments for any claim involving damage to a motor vehicle after receiving a statement of charges from any garage previously authorized by the insured to perform the repairs required by that claim.

What is a Certificate of Insurance?

A written document showing the types and amounts of insurance that have been issued to the insured.- A Certificate of Insurance is a written document showing the types and amounts of insurance purchased by the insured; it does not obligate the insurer to the person to which the certificate was issued.

A person who is not named as an insured on the declaration page of a policy but is protected by the policy, usually in regard to a specific interest is known as a

Additional insured. An additional insured is usually added by endorsement and is not named on the declaration page, but is protected by the policy.

When transacting business in this state an insurer formed under the laws of another country is known as a/an

Alien insurer. Alien insurer is defined as an insurer formed under the laws of another country.

Which of the following is required for a producer to transact business on behalf of an insurer?

An agent appointment A producer cannot transact insurance on behalf of an insurer until the producer is appointed by the insurer.

Rebating is an unfair trade practice and is regulated by law. All of the following would be considered to be rebating EXCEPT

An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him.

Who can countersign a policy issued in this state?

An appointed and licensed agent Any appointed and licensed agent of Nevada can countersign the policy.

Workers compensation statutes provide coverage for diseases that occur as a result of working in the employer's working environment. Which of the following is an example of a disease that would NOT be covered by such provisions?

An employee of a medical facility who suffers from a common cold- Although a cold could have been caught as a result of the working environment, it is not specific enough to that environment for it to be considered causal.

With respect to the business of insurance, a hazard is

Any condition or exposure that increases the possibility of loss. A hazard is any condition or exposure that increases the possibility of loss occurring. Hazards are generally classified as either physical, moral, or morale.

If an insurer makes a change to broaden coverage in a dwelling policy while it is in effect, the changes will apply

Automatically. Changes made to broaden coverage in a dwelling policy, if made while the policy is in effect or 60 days before it goes into effect, will apply automatically and will not need to be endorsed to the policy.

Connor, an employee for Marble Tile, Inc., is injured outside of his home state. How will the workers compensation benefits be determined?

Benefits will be provided if the state was listed on the policy information page. Employers must list all states in which they do business on the policy information page for coverage to apply in those states.

In life insurance, agents are permitted to share or split commissions, provided that

Both are properly licensed for the line of insurance. For an agent to receive commissions from the sale of insurance, they must be properly licensed for that line of insurance.

Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as

Cancellation..- Cancellation is the termination of an in-force insurance policy by either the insured or the insurer prior to the expiration date shown in the policy. Termination may be voluntary, involuntary, or in mutual accordance with provisions contained in the policy.

Which of the following is issued by the state Department of Insurance to show that the insurer has power to write insurance contracts in that state?

Certificate of Authority A Certificate of Authority is issued by the state Department of Insurance and shows that the insurer has power to write insurance contracts in that state.

Which of the following is NOT an example of an uninsured motor vehicle?

Consuming one alcoholic beverage before driving home Consuming an alcoholic beverage does not determine the insurability of a motor vehicle.

Under the examinations of books and records condition, the insurance company has the right to examine and audit the insured's books and records related to the policy

During the policy period and for up to 3 years after the termination of the policy. Any time during the policy period and for up to 3 years after the termination of the policy, the insurer may examine the books and records.

Tina has four separate but identical policies written by different insurers to cover her $100,000 building. Each policy is written for $100,000, and each has the pro rata liability other insurance clause. In the event of a total loss to the building, what would each insurer pay?

Each policy will pay $25 thousand of the loss Each policy will pay its pro rata share of the loss, but not more than the amount of loss in total.

For purpose of determining its financial condition, fulfillment of its contractual obligations and compliance with Nevada law, the Commissioner will examine the affairs of each insurer as often as deemed necessary. Each domestic insurer must be examined at least

Every five years. The purpose and time parameters for insurance company examinations is established by the Insurance Code.

When an agent is handling premium funds while conducting business, the insurance agent acts in a(n)

Fiduciary capacity. Money designated as premium belongs to the insurance company. An agent is handling this money in a position of trust. Fiduciary is the term that refers to the handling of money.

Which of the following criminal activities would be sufficient violation to warrant rejection, revocation, or suspension of an insurance producer's license?

Forgery Upon conviction of a felony, a producer's license will be revoked by the Commissioner.

Rates that are clearly insufficient to sustain projected losses and expenses in the class of business to which they apply are considered

Inadequate. Rates are inadequate if they are clearly insufficient, together with the income from investments attributable to them, to sustain projected losses and expenses in the class of business to which they apply.

Property insurance does not

Include title insurance. Property insurance does not include title insurance.

Which of the following best describes a misrepresentation?

Issuing sales material with false statements about policy benefits Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.

Sally is given a certificate of insurance as proof of financial responsibility. The minimum limit amount is $15,000. Which of the following policies most likely applies to Sally's situation?

It is for bodily injury or death to 1 person in an accident.

If during a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant, the producer has committed

Misrepresentation. Making false or misleading statements with the intent to defraud another is misrepresentation.

In a personal umbrella, the amount paid by the insured for certain losses not covered under the primary coverage is called Self-insured retention. In casualty insurance, the portion of a claim not paid by insurance is called a retention. In property insurance, it is called a deductible.

One advantage of claims-made liability forms from the insurer's point of view is that It prevents stacking of limits. Because of the occurrence trigger, if an occurrence happened in more than one policy period, claims could be filed on all policies. Because of the claims-made trigger, only the policy in force would be in play.

When a certificate of insurance is given as proof of financial responsibility, the insurance policy must be written with the following minimum limits: $15 thousand for bodily injury or death to 1 person in one accident; $30thousand for bodily injury or death to 2 or more persons in any one accident; and $10thousand for injury or destruction of property of others in any one accident. The proof of ability to cover any liability on account of accidents arising out of the ownership, maintenance, or use of a motor vehicle within the United States or Canada is the definition of

Proof of financial responsibility. Every owner of a motor vehicle registered in Nevada must continuously provide proof of financial responsibility, which is the proof of ability to cover any liability on account of accidents arising out of the ownership, maintenance, or use of a motor vehicle within United State or Canada.

Insurance on real or personal property is called what?

Property insurance Property insurance is insurance on real or personal property of every kind.

What type of damages may be awarded by the court to create disincentives that discourage behavior that is deemed highly undesirable by society?

Punitive.- Punitive damages are a form of punishment, intended to serve as an example to others to discourage undesirable behavior.

An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of

Rebating. When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.

In case of a loss, the indemnity provision in insurance policies dose what

Restores an insured person to the same financial state as before the loss.Indemnity (sometimes referred to as reimbursement) is a provision in an insurance policy that states that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the existence of an insurance contract.

The Commissioner of Insurance is responsible for all of the following actions EXCEPT

Setting premium rates. The Commissioner organizes, manages, and supervises

The effective period of a binder may be extended 30 days at a time with written approval of

The Commissioner. The effective period of a binder may be extended 30 days at a time with written approval of the Commissioner.

Which of the following would be considered a competent party to a contract between an insurer and prospective insured?

The applicant who has been convicted of a felony When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, and a 12-year-old student is considered in most states to be underage.

A homeowner sells his house to a friend. The friend wants to keep the homeowner's current policy in effect. Under the assignment provision, which of the following is most likely?

The homeowner will need to get written consent from the insurer before the policy can be reassigned. In property and casualty insurance, assignments of policies are usually valid only with the prior written consent of the insurer.

The inspections and surveys condition in a businessowners policy

The inspections and surveys condition gives the insurance company the right to inspect the insured's premises and operations at any reasonable time during the policy period. Inspections and surveys are not required. This condition does not make safety inspection, nor does it guarantee that the conditions are safe, healthful, or meet safety regulations.

Under a businessowners policy, the inspections and surveys condition specifies all of the following EXCEPT

The insurer does not have the right to inspect the insured's property and operations.- The inspection and survey condition DOES allow the insurer the right to inspect the property and operations. These inspections are important in determining the insurability of the insured's property and operations, in setting proper insurance rates, and in making loss control recommendations.

What is the primary objective of workers compensation?

The payment of benefits to employees for injuries arising out of their employment Workers compensation is a type of liability insurance purchased by employers to pay for employment-related injuries to employees.

If an individual insures his dwelling and contents under a DP-3, he would be protected against loss by all of the following perils EXCEPT

Theft of personal property located in the dwelling. Coverage C (Contents) is written on a named peril basis. Theft is not named as an insured peril.

Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?

Twisting "Twisting" is a misrepresentation that persuades an insured/owner, to his or her detriment, to cancel, lapse, or switch policies from one to another.

If one rate, when compared with another in the same class, clearly fails to reflect equitably the differences in expected losses and expenses, it is considered

Unfairly discriminatory. One rate is unfairly discriminatory in relation to another in the same class if it clearly fails to reflect equitably the differences in expected losses and expenses.

Supplementary payments on a CGL provide all the following EXCEPT..

Up to $500 a day for lost earnings and $2,000 for the cost of bail bonds. Supplementary payments will cover only $250 for these.

An insured's 9-year-old son threw a ball, accidentally breaking a neighbor's plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of

Vicarious liability. Under vicarious liability, an insured may be held responsible for the acts of other family members or independent contracts engaged by the insured to perform work.

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty.- A warranty in insurance is a statement guaranteed to be true. When an applicant is applying for an insurance contract, the statements he or she makes are generally not warranties, but representations. Representations are statements that are true to the best of the applicant's knowledge.

for obtaining surplus lines coverage?

What is the maximum amount a surplus lines broker can charge 20% of the premium A surplus lines broker may charge a maximum fee of 20% of the premium for obtaining surplus lines coverage.

When would uninsured motorists coverage apply?

When the other party is legally liable but has no insurance Uninsured motorist coverage would not apply if the insured was at fault; it applies only if the other driver is at fault but has no coverage.

When are copies of a written binder delivered to the insured and insurer?

Within 24 hours after the binder becomes effective Copies must be delivered to the insured and the insurer providing coverage under the binder within 24 hours after a written binder becomes effective.

How soon after receiving a statement of charges for completed repairs must an insurer issue a check payable to the garage or jointly to the insured and the garage?

Within 30 days A delay is the failure to issue a check payable to the garage or jointly to the insured and the garage within 30 days after the insurer's receipt of the statement of charges for repairs which have been satisfactorily completed.

What is continuous care coverage in this state?

Workers compensation coverage. Continuous care insurance is also known as workers compensation insurance. All persons who sell that type of coverage must be licensed as an accident and health insurance producer, as well as a casualty insurance producer.

true or false? Motor vehicle physical damage appraisers do not have to be employed by an insurance company

false.. Motor vehicle physical damage appraisers must be employed by an insurance company and licensed by the Commissioner.