Guarantee Exam Practice

Business auto coverages apply only to those autos that are identified as covered autos in the declarations by entry of the appropriate numerical symbols. Which symbol affords the broadest coverage? a) 1 b) 2 c) 7 d) 9

1 -symbol 1 provides coverage for the insured's exposure on any auto

An executive is accused of sexual harassment. What type of coverage would respond? a) Hiring practices liability b) commercial general liability (CGL) c) Employment practices liability d) workers compensation

Employment practices liability -Personal liability,CGL, and workers compensation exclude this type of liability

All of the following statements about mutual insurance companies are correct EXCEPT a) Dividends allow policy holders to share in a mutual company's divisible surplus b) Dividends are a return of unused premiums c) Mutual companies issue policies referred to as a participating d) Policy dividends issued by mutual companies are guaranteed and not taxable

Policy dividends issued by mutual companies are guaranteed and not taxable -Insurance policy dividends are not guaranteed and are not taxable

All authorized property and casualty insurers must be members of all of these organizations EXCEPT a) Texas automobile insurnce plan association b) Property and casualty insurance guaranty association c) Fair Plan Assocition d) Teas Department of Insurance

Texas Department of Insurance -Insurers are not members of the Department of Insurance. All the other answers are professional associations in which authorized insurers must maintain membership as a condition for their certificate of authority

An insurer wants to cancel a personal auto policy for nonpayment of premium. The insurer must send the insured a notice of at least a) 10 days b) 15 days c) 30 days d) 60 days

10 days -Cancellation of a policy nonpayment of premium requires a 10 day notice to the insured

Which of the following exclusions would specifically fall under Coverage E? a) Contractual liability b) bodily injury to a residence employee c) falling objects d) land

Contractual liability -Coverage E is a personal liability form. The following are the exclusions that apply to it: damage to property owned by or in the care of the insured; liability for any assessment charged against the insured as a member of an association; contractual liability; bodily injury to any person eligible for workers comp; and bodily injury to the named insured, relative, or minor residing int he household

Medical benefits under workers compensation statues 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 worker's annual income

Without Limit -There is no maximum set for necessary medical expense

An insurance company that is owned by the policy holders is called a a) Mutual insurer b) Fraternal insurer c) stock insurer d) reciprocal insurer

Mutual insurer -Mutual companies are own by the policy owners and issue participating policies

In contrasting stock insurers with mutual insurers, which statement is true? a) Stock insurers are owned by the shareholders and issue noparticipating policies b) Stock dividens are tax free while policy dividens arae taxable c) nonparticipating policies can pay out dividesn to the policyholders d) mutual interest are owned by the shareholders and issue participatin policies

Stock insurers ar eowned by the shareholder sand issue nonparticipating policies -Stock insurers are owned by their shareholdres/stockholders. Their policies ar elabeled nonparticipating since the insureds do not share i nthe divisible surplus (dividends)

Which of the following statements regarding surety bonds is true? a) The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled b) A surety bond is also known as third-party guarantee insurance because it always involves three parties c) The principal is the designated beneficiary of the holder of the surety bond d) The person who promises to fulfill the obligation of the bond is known s the obligee

The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled. -The principal is the person who promises to fulfill the obligation of the bond. Surety bonds are not insurance, so therefore they are not known as third-party insurance. The obligee is the person to whom the promise has been made and to whom the bond is payable

Homeowners policies consider all of the following insured locations EXCEPT a) a strawberry patch owned by the insured b) Land owned by the insured on which his new home is under construction c) An individual cemetery plot d) the hotel ballroom rented by the insured for a family reunion

A strawberry patch owned by the insured - Insured location cannot include farmland or any premises used for business purposes

The supplementary payment section of the commercial general liability policy would cover A) loss of the insured earnings, up to $300 a day b) up to $500 for the cost of required bail bonds c) up tot he policy limit for bodily injury or property damage d) court costs assessed against he insured Ina suit

Court costs assessed against the insured in a suit. -Supplementary payments are amounts the insurer will pay in addition to the stated policy limits. They include any expenses the insurer incurs, up to $250 for the cost of required bail bonds, up to $250 a day for loss of income, cost taxed against the insured, prejudgment interest and interest that accrues on any judgment.

Under the employee theft coverage, when a covered employee is found to have participated in a dishonest act, the coverage for that employee will terminate a) in 30 days b) on the anniversary of the bond c) upon employee's conviction d) immediately

Immediately -coverage for an individual employee automatically terminate was as soon as the employer becomes aware that the employee has participated in a dishonest act that is or could be the basis of a claim

Lost Treasures has a guard dog in a fenced lot to protect the salvage yard. The dog scared a passerby, who now claims that it was a traumatic experience and that he suffers from recurring nightmares. A claim for personal injury of $5,000 is filled against Lost Treasures. Why will the personal and advertising injury liability section (Coverage B) of the CGL policy cover this claim? a.) Mental anguish is a covered injury b) Animals are excluded from coverage c) the injury was expected or intended d) The occurence was off premises

Mental anguish is a covered injury -Mental anguish is a covered injury under personal and advertising injury liability. Of course, documentation from a licensed practitioner that mental trauma has indeed resulted from this incident will be required prior to coverage

An applicant for property insurance owns a building in which combustible materials are stored in the furnace room. From an underwriting standpoint, this risk would likely be considered a a) Morale Hazard b) speculative risk c) Moral Hazard d) Physical hazard

Morale -the insured's lack of caution in storing combustible materials increases the likelihood of fire or explosion. This careless attitude is an example of a morale hazard

A small appliance manufacturer in this state provides products around the globe. A customer in Switzerland is injured using one of its products. If the appliance manufacturer is found liable for the damages, why would its commercial general liability policy cover the customer's claim for bodily injury? a) The appliance manufacturer is negligent b) The appliance was manufactured in the United States c) The commercial general liability policy extends rights to Switzerland d) The appliance manufacturer did not have a permit to sell globally

The appliance was manufactured in the United States -Coverage territory means anywhere in the world if injury or damage results from goods or products manufactured or sold in a coverage territory

An insured and his spouse were traveling down an icy road and hit a sign, accumulating $1350 damage to their car. They have a $250 deductible. They already collected on a $1500 claim earlier this year. How much will they collect on this claim? a) $0 b) $250 c) $1100 d) $1350

$1,100 -they will collect the difference between this claim and the amount of their deductible, which equals $1100. Collision deductibles apply to every collision.

In order to receive transportation expenses under the personal auto policy following damage to your auto caused by collision, you must have a) uninsured motorist property damage b) supplementary payments c) other-than-collision coverage d) Collision coverage

Collision coverage -the policy will pay $20 a day for a maximum of $600 for autos that cannot be used for more than 24 hours due to damage caused by collision only if the declarations page fo the policy indicates that collision coverage is provided for that auto

Guaranteeing future dividends is considered to be an unfair or deceptive act known as a) misrepresentation b) Churning c) False financial statements d) Rebating

Misrepresentation -It is considered to be misrepresentation to make any false or misleading statements regarding the dividends to be received on any insurance policy

An insurance agent visits a potential client and explains vicarious types of policies. The customers displays a lack of interest, so the agent guarantees higher divides than he knows would be possible. Which term describes what the agent has done? a) Rebating b) Twisting c) Defamation d) Misrepresentation

Misrepresentation -Misrepresentation is the act of portraying sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends etc. This refers to all forms of communication

Among people in the same class and life expectancy, which of the following factors can be used to influence premium rates? a) Race b) occupation c) ancestry d) Marital status

Occupation -Discrimination in rates, premiums, policy benefits, etc. for persons within the same class or with the same life expectancy is illegal. No discrimination may be made on the basis of marital status of an individual race color national origin, creed or ancestry unless the distinction is made for a business purpose or required by law

All of the following are additional coverages under a homeowners policy EXCEPT a) coverage for trees, shrubs, and other plants b)payment for reasonable repais and debris removal following a covered loss c) outbuildings d) fire department service charge

Outbuildings -outbuildings are covered under Coverage B- other structures

In reference to insurable interest, which of the following is NOT an element of insurable risk? a) Business b) Personal c) Blood D) Financial

Personal -For any person or property covered under an insurance policy, insurable interest must exist. Insurable interest is broken into three categories which include financial (a monetary interest), blood (a relative) and business (a business partner)

Policy limits are the maximum amount an insured may collect, or for which an insured is protected under the terms of the a) Insuring agreement b) conditional receipt c) application d) policy

Policy -Policy limits are the maximum amount an insured may collect, or for which an insured is protected under the terms of the policy

Which of the following statements is true regarding personal injury protection (PIP) coverage in auto liability policies issued in this state? a) The maximum allowed amount of coverage is $1,000 b) PIP does not cover funeral expenses c) Insurers may offer the coverage upon the insured's request d) The inured may reject this coverage in writing

The insured may reject this coverage in writing -All automobile liability insurance policies issued or delivered In Texas must provide personal injury protection (PIP) unless the insured rejects such coverage in writing. A minimum amount of coverage is $2500. PIP covers medical, rehabilitation, and funeral expense, among others

If the premium collected by an insurer participating in the WYO flood program are insufficient to cover losses, which of the following would be true? a) The insurer must apply for disaster relief funds b) federal insurance administration will remove the insurer from the NFIP c) the insurer will be reimbursed for the excess costs by the NFIP d) the insurer will be reimbursed for the excess costs by the NFIP

The insurer will be reimbursed for the excess costs by the NFIP -The federal government will not let a WYO flood insurer lose money on flood policies. If the premium is insufficient to cover losses , the insurers will be reimbursed for the excess costs by the NFIP

All of the following are considerations in determining which state's law applies when a worker is required to travel into another state and is injured while working in the other state EXCEPT a) Place where the accident occurred b) the normal location where the employee works C) the state where the employee was hired D) the insurer's chartered location or domicile

The insurer's chartered location or domicile -The insurer's locations is irrelevant to the processing of workers compensation claims. The critical components relate to the employer and employee and their location

An insured's diner suffered a fire loss. In addition to the damged cuased by the fire, the floor covering had to be replaced because fo the water damage. It took 4 weeks for the repairs to be completed. The insured was without income for that period of time. The insured's policy include both direct and indirect loss coverage. What part of the loss would be paid as indirect loss? a) both the loss of income and the cost of the floor covering b) the entire loss would be paid as direct loss by fire c) The loss of income for the time the diner was closed d) the cost of replacing the floor covering due to the water damage

The loss of income for the time the diner was closed -Loss of income would be paid as indirect loss

The obligation to compensate injured workers without regard to fault or negligence is known as a) Employers liability b) Elective liability c) Compulsory liability d) Absolute liability

Absolute liability -Absolute liability is the obligation to compensate injured workers without regard to fault or negligence

The amount of loss the insured is willing to absorb without insurance protection is known as a) maximum deductible b) stop loss c) limit of liability d) self-insured retention

Self-insured retention -The SIR includes the amount of loss the insured is willing to absorb without insurance protection

An insured has a personal umbrella with a $2000 self insured retention (SIR). assuming no other policy is involved, how much would the umbrella pay after a $12,000 personal injury liability claim? a) $2,000 b) $1,000 c) $10,000 d) $12,000

$10,000 -If no other policy pays, the insured must pay a SIR

The businessowners liability coverage form would respond to a claim arising from which of the following events? a) an injury arising out of the sale of alcoholic beverages b) an injury arising out of a customer falling because of a wet floor c) an injury to an employee while performing his or her job d) damages sought by a third party as a result of an accounting error

An injury arising out of a customer falling because of a wet floor -Medical payments and bodily injury liability coverage is available to settle a claim airising from a customer's injury

John had a disagreement with his insurer on the value of his damage property. After making a written demand, both John and the insrer each selected an appraiser. The appraisers then agreed on a fiar value without having to select an umpire. what condition did John use ? a) Notice of Claim b) Fair Value c) Appraisal d) Arbitration

Appraisal -If there is a disagreement between the insured and the insurer on the value of any property loss, either party can make a written demand for an appraisal. Each party will select a competent appraiser who will then select an umpire if they are unable unable to agree on a fair value. A similar condition found in the Personal Auto policy for Uninsured Motorists coverage is called arbitration

Which of the following entities is eligible for a business owners policy? a) manufacturing operations B) convenience stores c) places of amusement d) automobile sales and servicing operations

Convenience stores -Convenience stores are eligible for coverage

An insured was having a new home built. While digging the footings for the foundation, the contractor struck a solid rock formation and found that was necessary to blast the formation in order to remove the rocks. The force of the blast broke several windows and some chinaware in a neighbor's home several blocks away. Who pays for this damage? a) The insured's insurer, regardless of negligence b) The contractor c) The neighbor's insurer d) The insured's insurer, if the neighbor proves that the insured was negligent

The contractor -Most states impose absolute liability when a person's actions are determined to be against public policy. Damage caused by the use of explosives or damage caused by harboring poisonous snakes or wild animals are examples. The neighbor would not need to prove negligence; he would only need to prove that the damage occurred

If an insurance policy has the additional coverage provision, how does it affect the policy a premium? a) there is no additional premium b) premium will be recalculated when a specific los covered but this provision occurs c) additional premium will be assessed d) premium will be calculated on a pro rated basis based on the amount of additional coverage

There is no additional premium -additional coverage is a provision in an insurance policy that provides amount of coverage for specific loss expenses, at no additional premium.

Claims from which of the following types of insurance will be covered by the Texas Property and causality insurance guaranty association a) fidelity or Surety bonds b) workers compensation c) Credit insurance d) Title insurance

Workers compensation -The texas property and casualty insurance guaranty association is made up of all authorized insurers writing any type of direct insurance except credit insurance, insurance of warranties or service contracts; title insurance; and fidelity or surety bonds. In the case of Workers compensation claims, the association pays the full amount of any covered claim.

Your friend's dog that you are keeping while the friend is out of town bit a visitor in your home. does your homeowners liability coverage apply? a) No, because injury to others by animals is not covered b) Yes, the coverage would apply for any animal in your care c) Yes, if the visitor has no health coverage d) No, because the dog is not yours

Yes, the coverage would apply for any animal in your care -Personal liability coverage in Section II will respond to any claim made against an insured for damages due to bodily injury or property damage. You r liability coverage would apply to damage caused by your animals, as well as any other animals in you care

When an insured's gardener was spraying weed in his lawn, he failed to notice that the wind as drifting the spray into the neighbor's yard where he damaged their flower bed. The insured was found to be legally liable for this damage. This is an example of a) Vicarious liability b) intervening cause c) Comparative negligence d) gross negligence

vicarious Liability -vicarious liability may be imposed on one person as the result of the acts of another person who is acting on their behalf or under their control. Employers often are liable for the acts of employees acting within the scope of their employment. Parents are held liable for the acts of their children who are under the parents' control

an insured is the owner of a clothing boutique. She has a floor plan merchandise floater to cover the property that is financed until it is sold. At closing time a month ago, she noticed that 3 very expensive dresses had been stolen. However, she did not file a report to her insurance company until recently. How much will her insurer pay for this loss? A) 90%of the limit written B) 100% of the limit written c) nothing d) 50% of the limit written

90% of the limit written -if the insured has not filed. Report at the time of loss, the insurer will be liability only for 90% of the limit written

Which of the following exposures is NOT covered under a homeowners policy? a) medical payments to an insured b) unscheduled personal property damage c) bodily injury to others d) personal liability

Medical payments to an insured -Section II of the homeowners policy provides medical payments to others but excludes coverage fro the payment of medical expenses of an insured

which of the following is NOT available in a package policy? a) fire legal liability B) medical payments c) professional liability d) business auto liability

Professional liability -Business auto liability is optional. fire legal liability and medical payments are included, but professional liability is not included

The exact, direct, unterrupted cause of loss is the a) Proximate cause b) actual cause c)intervening cause d) absolute cause

Proximate cause -Proximate cause is an act or event that is the natural and reasonably foreseeable cause of damge or an event that occurs and damages property or caues bodily injury

When does the federal emergency flood insurance program go into effect? a) annually for the flood season b)when mandated by the president of the United States C) When a community applies for the program d) as soon as the flooding occurs

When a community applies for the program -The federal emergency flood insurance program goes into effect when a community applies for the program and ends when all NFIP criteria have been met and the regular program can begin.

Under the garment contractor floater of an inland marine policy, coverage while the property is in transit between the insured and the subcontractor is usually written on which basis? a) named peril b) unarmed perils C) all-risk D) unfiled

All-risk -Coverage is usually written on an all-risk basis while the property is in transit between the insured and the subcontractors and on a named peril basis while in the care, custody or control of the subcontractor

What part of the insurance contract describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured? a.) Insuring agreement B.) Exclusions C.) declarations D.) Conditions

Insuring agreement - The part of the contract that describe as the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the insuring agreement

Homeland housing Corp holds a mortgage on a property that John and Carol Thomas purchased. John and Carol have a Homeowners policy with Hoem protection Insruance which has a mortgagee clausenaming homeland as a loss payee. If John and Carol suffers. Fire to their home

The Thomases and homeland will be considered co-claimants and receive loss reimbursement from Home Protection Insurance -This is based on each claimant's pro-raga share of ownership in the property

An insurer may decline to renew a homeowners policy if the insured has filed how many claims under the policy in any 3-year period? a) one b) two or more c) Three or more d) Five or More

Three or more -An insurer may decline to renew a policy if the insured has filed three or more claims under the policy in any 3 year period

The broad cause of loss form in the commercial property policy contains three perils in addition to the basic form perils. Which of the following is NOT one of those three perils? a) Utility services b) Water damage c) Weight of snow, ice, or sleet d) falling objects

Utility services -falling objects, weight of snow, ice, or sleet, and water damage are the three perils added in the broad form. Utility services is specifically excluded

In a personal auto policy, underinsured motorist coverage applies when? a) you are involved in an auto accident with another motorist who is at fault and does not have any insurance b) you are injured in an auto accident with another motorist who i at fault but has limits of insurance that are not adequate to cover your medical expenses c) you are involved in an auto accident and then discover that your insurance company is insolvent d) you are at fault for an auto accident with another motorist, but your limits are not adequate to pay for all of the damage

You are injured in an auto accident with another motorist who is at fault but has limits of insurance hart are not adequate to cover your medical expenses -under insured motorist coverage in your policy acts as excess over another at-fault motorists limits hen his or her limits are lower Than those of your policy