Insurance

Alexander has covered a home he has inherited under a DP-1 form with the EC perils included. The home is situated on property that has been passed down in Alexander's family for generations and there is a fairly large family cemetery on the property. How much coverage would Alexander have under Coverage B of his policy, to cover the grave markers and mausoleums in his family cemetery?

$0

The NAIC Model Unfair Claim Settlement Practice Act provides for a financial penalty of what for each violation of the Act.

$1,000

Jewell has filed a lawsuit because she was injured by a negligent party. During the court proceeding, it is determined that Jewell was 15% negligent in her own injuries, however, the award for damages was set at $22,000. Jewell's state uses the pure comparative negligence standard to compute damage awards therefore, the amount Jewell will receive in damages is:

$18,700

Hamish has covered his antique automobile with a loss settlement amount that is stated in the policy of $55,000. The ACV of the vehicle is $32,000, but Hamish insured it for more because of his emotional attachment to the car. The policy deductible is $1,000. Hamish is driving his beloved automobile to an antiques car show one afternoon, when he is distracted by another antique vehicle and crashes into a brick retaining wall. Hamish's antique car is a total loss. Which of the following is the amount he should receive for his claim?

$31,000

Rush is covered under a Standard Fire policy and suffers a loss to his home and personal property. The limit of liability listed on the policy itself is $120,000. The ACV of his loss is $55,000. To repair or replace the property with materials of like kind and quality would cost $72,000. Rush's insurable interest in the property is $42,000 as he has a mortgage and some liens on personal property. What is the amount of the claim settlement Rush will receive?

$42,000

An insured owns a set of six drawing pens designed and used by Benjamin Franklin. Each pen is worth $1,000 alone, but the set is worth $12,000. One pen is destroyed by a covered peril. Under the pair or set clause the insurance company will pay a maximum of which of the following amounts?

$7,000

Drag the statement on the right, to its corresponding statement on the left to create a correct sentence.

1.) The Commissioner is empowered to create rules necessary to implement the insurance laws of Texas. - and to meet the minimum requirements of federal law, including regulations. 2.) At a minimum, the Texas Department of Insurance must examine insurance carriers - not less frequently than every five years 3.) When the Texas Commissioner decides to revoke an insurer's certificate of authority - the Commissioner must provide notice not later than the 10th day before the date the revocation is to occur. 4.) The Texas Commissioner will require the electronic transfer, - of any amount held or owed that exceeds $500,000.

The NAIC Model Unfair Claim Settlement Practices Act specifies that the insurance company must provide the proper claim forms with a reasonable explanation of how to use them to the claimant within:

15 calendar days of the request.

Indemnify Insurance, Inc. is a Texas insurer has violated the regulations with regard to the timely payment of claims. Indemnify will now be required to pay interest on the amount of the claim at a rate of:

18% per year.

Under the 1943 New York Standard Fire policy, the appraisal clause indicates that each party in a dispute must select an impartial appraiser within:

20 days

Leland has two insurance policies covering his home. Indemnify Insurance carries a $120,000 limit of liability on the home, while Binders Keepers, Inc. carries a limit of $80,000. A fire breaks out in Leland's kitchen and causes $40,000 in damage. Remember, when there are two or more policies covering the same risk, the "other insurance clause" determines the method used to calculate each company's share of the claim. Leland's policy states that the prorata share method will be used. Which of the following is the correct amount that will be paid by Indemnify Insurance?

24,000

An insured carries property insurance with a limit of $25,000 and an 80% coinsurance requirement. The covered building, however, is worth $40,000. How much would the insured collect in the event of a total loss?

25,000

When a Texas insurer has reason to believe that a loss resulted from arson, the time limit the insurer has to notify the claimant of acceptance or denial of the claim is after the date the insurer receives all items, statements, and forms required by the insurer to process the claim.

30 days

Samantha, who is covered under a Standard Fire policy, has suffered a loss and submitted a claim. After the claim was paid, Samantha's insurance company has decided to take possession of the damaged property to sell it for its salvage value. The insurance company must provide Samantha with what notice?

30 days' notice

Surplus Lines companies in Texas have what to acknowledge the receipt of a

30 days.

To be eligible for coverage under a standardized Dwelling form, the insured must not allow more than how many boarders to live on the premises?

5

Under the 1943 New York Standard Fire Policy, how many days of coverage applies to the removal coverage when the insured property is endangered by the perils insured against?

5 days

Under the Standard Fire Policy, how many days advance notice does the insurer have to give before cancelling a policy?

5 days

Willie's Widgets is covered by a policy that includes a franchise deductible of $50,000 and a policy limit of $400,000. A fire rips through Willie's warehouse, and he sustains $342,000 in damage. How much of the claim will Willie's Widgets be responsible for paying?

50,000

Payment for a covered loss under the Standard Fire policy must be made within how many days after a satisfactory proof of loss has been received by the insurer?

60

In Texas, if an insurer delays the payment of a claim beyond the period specified by law for more than what? they must pay damages to the insured/claimant.

60 days

Texas issues emergency adjuster licenses in case of an emergency arising out of a disaster. The application must be certified not later than the fifth day after the date on which the person begins works as an adjuster. An emergency license is valid for days.

90

Insurance policies are most often serviced by:

A CSR.

A document that temporarily obligates an insurance company to provide coverage while the issuance of a policy is pending is known as:

A binder

In order to lawfully write insurance business in a state, an insurance company must hold?

A certificate of authority

Which of the following terms would describe a situation where a building is not a total loss, but the cost to repair the building is greater than the value of the building

A constructive total loss.

The standard Dwelling forms may be used to cover all of the following, EXCEPT:

A farm house

Which of the following is NOT a hazard?

A fire started in a waste basket.

Which of the following losses would be covered under the 1943 New York Standard Fire Policy?

A fire that is a result of a riot that causes property damage to the insured's property

A warranty in insurance is best described as which of the following?

A guarantee that the statements made by the applicant are completely true and untrue statements can void the coverage

Which of the following buildings is considered to be vacant?

A house with no furnishings or occupants for over 60 days

Which of the following represents an indirect loss?

A kitchen fire made a house untenable, causing the occupants to incur hotel charges.

Any intentional misinformation provided by an applicant for an insurance policy that would have kept the insurance company from issuing the policy had that information been known is:

A material misrepresentation.

Sam the shopkeeper mops the floor of his store and forgets to set the "Caution Wet Floor" sign in the area to warn his customers. Sarah walks through the store a few moments later, slips on the floor and injures her arm and leg. This is an example of:

A negligent tort.

Which of the following would NOT have the capacity to enter into an insurance contract?

A person who is under the influence of drugs at the time the agreement was made

A slippery floor is an example of what?

A physical hazard

What demonstrates a moral hazard

A recent purchase of auto insurance drives less carefully, knowing that the insure will cover any losses that occur

Which of these statements best describes the law of agency?"

A relationship in which someone is authorized by contract to represent another party.

Vanessa states on an application for personal automobile insurance, that she has had no car accidents within the past three years. She later remembers an accident and corrects this statement to include an accident that occurred two years ago. Vanessa's original statement can be described as:

A representation

Which of the following statements best describes a "representation" made in an insurance application?

A representation is a statement made by the applicant that he believes to be true whes made, but which might prove to be false

Which of the following losses would be covered by the EC peril of "Windstorm and Hail" under a Dwelling policy?

A roof that suffered damage in a tornado.

Indemnify Insurance has been using a specific ISO Homeowners form for several years in all states where they are an admitted insurer. Indemnify Insurance has recently been admitted to an additional state, but the laws of that state contradict a few of the provisions in the ISO form. How is this situation likely to be handled?

A statutory form will be drawn up and attached to each Homeowners policy Indemnify Insurance writes in the state.

An incorporated insurance company with its capital divided into shares and owned by its shareholders is known as:

A stock company

Which of the following types of insurance companies is known as a "nonparticipating company" because they do not pay their policyholders a dividend?

A stock insurance company

An "admitted insurer" in any given state could include all of the following, EXCEPT:

A surplus lines insurer

Which of the following is a statement that is guaranteed to be the truth throughout the duration of the policy?

A warranty

Which of the following is not a covered peril under the Standard Fire policy?

Actions of war.

The amount it would cost to repair or replace property minus depreciation, is the definition of:

Actual cash value.

When the property covered under an insurance policy is destroyed beyond repair and nothing of value remains, this is known as:

Actual total loss.

Which of the following people is committing "hard fraud"?

Ally wants her insurer to buy her a new truck, so she pushes her current truck off a cliff and file an auto accident claim.

The Guaranty Association in Texas has requested that their claims-handling deadlines be extended due to a weather-related catastrophe. The Commissioner will grant this extension for:

An additional 15 days beyond the current deadlines.

Failure of a Texas licensee to obtain the required number of continuing education credit hours during the required biennium will result in:

An automatic fine of $50 per credit hour not completed

Economic loss that is the consequence of a direct loss is known as:

An indirect loss.

Subrogation may follow which of the following events

An insured collects from his insurance company for damage caused by third party

An insurance broker is a person who represents:

An insured or prospective insured

Estoppel is best exemplified by which of the following

An insurer is prohibited from denying a claim because its appointed producer advised the insured the claim covered

In most states, which of the following most accurately describes an "admitted insurer

An insurer that can transact insurance in the state under a certificate of authority.

To prove negligence, the "proximate or legal cause" of the injury or loss, includes what important feature

An unbroken chain of events must lead to the bodily injury or property damage.

Risk is defined as

An uncertainty of loss.

A "complaint" as specified in the Texas insurance code is any written communication to an insurer, not solicited by the insurer, primarily expressing a grievance relating to:

An unfair claim settlement practice.

The Texas insurance code specifies that "misrepresentation" includes all of the following, EXCEPT:

Any false statement.

The authority the general public believes an insurance professional possesses based on their actions is known as:

Apparent authority

Adverse selection occurs when

Applicants are accepted by the insurer with little or no attention given to underwriting. EX: When insurers accept all applicants, ultimately the applicants choose their insurer, which is against normal industry practice. Typically insurers carefully choose applicants, not the other way around.

The provision in an insurance contract that outlines the process of bringing a contract dispute before an objective third party for resolution is known as:

Arbitration

A structure made of modified fire resistive materials has a fire resistive rating of

At least 1 hour.

To obtain an insurance agent, producer, or adjuster license, an applicant must be:

At least 18 years of age.

In which of the following cases of alleged negligence would the defendant not be legally liable?

Bill was restoring an antique auto at his auto store's garage when Jeff drove by the garage. Jeff slowed his car and looked over his shoulder to admire the antique car. Suddenly his car struck a telephone pole. Jeff sues Bill for damages

The NAIC Unfair Claim Settlement Practices Act is intended to cover all of the following types of insurance claims, EXCEPT:

Boiler & Machinery (Equipment Breakdown) insurance claims.

Which of the following is a TRUE statement regarding how bullion and manuscripts are covered under the 1943 New York Standard Fire policy?

Bullion or manuscripts may be covered, but only if they are specifically named in the policy

Someone breaks down the door to a store and steals merchandise. This loss is known as what?

Burglary

The ACV settlement under a property insurance policy may be determined using the "broad evidence rule", which means that the loss is valued:

By establishing the value of the property using any evidence a court finds relevant

Which of the following is a general summary of a policy?

Certificate of Insurance

Chris is insured through Binders Keepers Insurance Company and his policy period ends in 12 months. However, Chris has decided that he wants to cancel his policy in order to purchase another one from a company that advertises with cute commercials on television. Chris calls his agent to cancel the policy and is informed that the unearned premium on the cancelled policy will be returned to him by mail in a couple of weeks. When Chris receives the check, he is surprised to find that it's made out for less than the amount of unearned premium he should have received. What is the most likely reason for this?

Chris' policy had a provision stating that UEP must be returned on a short-rate basis

On December 31st of each year, the Texas Department of Insurance computes the reinsurance reserves for all unexpired risks of domestic, foreign and alien insurers doing business in Texas. All of the following types of insurance are EXEMPT from these calculations, EXCEPT

Commercial property insurance

A person becomes legally liable by:

Committing a tort

All of the following are a "cause of loss" form, EXCEPT:

Comprehensive

An applicant fails to disclose known facts when completing an application for insurance. This act is known as:

Concealment

The amount of insurance countersigned, issued, or sold by an agent or producer to cover immediate family members, an employer, or employees is known as:

Controlled business

All of the following are property policy additions and/or extensions of coverage that are likely to be amended by state statutory forms, EXCEPT:

Coverage for property removed.

A liability policy written on an "occurrence" form:

Covers a liability claim when the occurrence took place during the policy period, regardless of when the claim is filed. Correct That's right! You answered

what are the four main sections of a Standard Fire Policy?

Declarations, Insuring Agreement, Conditions, and Exclusions

Where in the insurance contract can an insured find the terms used throughout the policy and an explanation as to what they mean in the context of the policy?

Definitions

An insurance contract must comply with the "Principle of Indemnity". Jarron's friend Nick accidentally destroys Jarron's laptop computer. Nick pays Jarron for the damage, but Jarron also submits a claim to his insurance company for the laptop. The claim will be:

Denied because Jarron has already been paid for the damage

Binders Keepers, Inc. is selling their insurance products via telephone calls. Which of the following insurance marketing and distribution systems is being utilized by Binders Keepers?

Direct response system.

The NAIC Model Unfair Claim Settlement Practice Act DOES NOT apply to any of the following types of coverage, EXCEPT:

Dwelling insurance

what would be an example of a moral hazard?

Embezzlement

One of the purposes of the coinsurance clause is to:

Encourage insureds to insure property for most if not all of its value

A written modification of an insurance policy is known as a(n):

Endorsement form.

If an insurance company covered an excluded claim it may have to continue paying other such claims because of:

Estoppel

Ally's insurance agency has contracted with Indemnify Insurance to sell only those insurance products offered by Indemnify. Ally's is utilizing which of the following types of insurance marketing and distribution systems?

Exclusive agency system

Which of the following is NOT an example of an unfair claim settlement practice

Failing to examine a claimant under oath.

Bill may be negligent if he:

Fails to do what a reasonably prudent person would do in the same circumstance

All of the following are exclusions under the Standard Fire policy, EXCEPT:

Fire damage that is the result of a riot

Coverage provided by the basic Dwelling form (DP-1) automatically includes (without additional premium) which of the following perils?

Fire, Lightning and Internal Explosion.

Which of the following basic coverages are provided under a Standard Fire policy?

Fire, lightning and removal

Indemnify Insurance, Inc. was formed under the laws of California but is an admitted insurer in Oregon. When Indemnify Insurance is accused of violating the Oregon insurance code, they will be treated as what? by the Oregon Division of Financial Regulation.

Foreign insurer

Monique's house is covered in brick veneer. Monique's house is which of the following types of construction that insurers use to set insurance premiums

Frame

Any corporation organized with a representative form of government operated solely for the mutual benefit of its members is known as a

Fraternal benefit society

An agent, insured, or claimant has intentionally deceived an insurer for financial gain. Such an act is known as

Fraud

Which of the following is an example of the "assumption of risk" defense against negligence?

Fred, in a hurry to get to work, takes a shortcut over a bridge marked "condemned", that subsequently collapses under the weight of his car

A method of replacing damaged property with something not exactly like the damaged item, but performs in a similar fashion is known as:

Functional replacement cost.

Which of the following is a type of "voluntary loss" taken to save the property from further loss?

General Average Loss

All of the following is a function of the standard mortgage clause in a property insurance policy, EXCEPT

Guarantees that the mortgage payments will be made by an insurance policy, if the insured does not make the payments.

A church has had the woodwork in the building refinished and new stain and varnish has been applied. The workers placed the rags and brushes that were used to apply the varnish in a small closet and closed the door, creating the possibility of spontaneous combustion. Which of the following terms best describes this condition?

Hazard

All of the following statements are true regarding the chief administrative officer of a state insurance department, EXCEPT:

He/She sets insurance rates within their state

Helena has not paid her insurance premium for a significant amount of time. Which of the following is likely to happen in this scenario?

Her policy will be cancelled

All of the following statements are TRUE regarding the cancellation clause of the New York Standard Fire policy, EXCEPT

If the insured cancels the policy, there is no financial penalty assessed on the unearned premium

All of the following statements are true regarding the Standard Fire policy, EXCEPT:

If there is an endorsement attached to the SFP and it contains a deductible, the amount will only be deducted from the coverage provided by the endorsement and not from the coverage provided by the SFP form itself

Agent Rice informs an applicant for auto insurance that he needs to obtain motor vehicle records on all of the drivers in the household before the policy will be issued. This is an example of Agent Rice's:

Implied authority

The attempt to restore an insured to his or her financial condition before a loss occurred is BEST described as:

Indemnification

Which of the following situations would not be considered an unfair claim settlement practice according to the NAIC Model Act?

Indemnify Insurance pays thousands of claims per year, but on two of those claims they failed to accept or deny the claim within the time frame required by state law.

Standard and Poor's, A.M. Best and Moody's are examples of what?

Independent rating services

When a state requires that all property policies within the state provide coverage equivalent or greater to the SFP with the EC perils attached, what policies are exempt from this requirement?

Inland marine policies

The insured has several business locations and would like to insure both the structures, and the inventory (contents). His agent advises him to complete a statement of values form and issues a policy with one limit to cover all locations. This is an example of:

Insuring on a blanket basis.

A separate limit scheduled "per type of property' on a cause of loss form, is known as:

Insuring on a specific basis.

Torts that can be covered by insurance policies include all of the following, EXCEPT:

Intentional torts purposely committed to cause harm to another.

All license application and state licensing exam fees in Texas are deposited:

Into the Texas Department of Insurance operating account.

Which of the following BEST describes a tort?

Is an act causing harm to an innocent party for which a civil remedy is provided through the payment of monetary damages

Under the Standard Fire policy, theft

Is covered by the "removal" coverage if the property is stolen while the insured is attempting to remove the property to protect it

It has been reported to the insurance department in a given state that Callie, a licensee in that state, has violated an insurance law. The Commissioner/Director/Superintendent will hold a hearing to determine the nature of Callie's behavior. After the hearing, the Commissioner is convinced that Callie has engaged in behavior that violates insurance law. Which of the following is the next step that will be taken by the Department?

Issuing a cease and desist order.

Recovery under the Standard Fire policy may be limited by the "pro rata" liability clause. All of the following statements are true about this clause, EXCEPT:

It allows the insured to collect the full limit of liability under all policies covering the damaged property, in case of a loss.

Under a liability policy, the insurance company will pay damages on behalf of an insured when:

It is established that the insured is legally liable.

Which statement is FALSE regarding an appointment contract with an insurance company

It is generally an oral agreement between the parties

Which of the following is true regarding "open peril" coverage?

It provides coverage for all perils, unless that peril is specifically excluded

Mike purchased a policy several years ago to cover him for liability. Last year, Mike determined that the limits of his liability policy were not high enough to cover him adequately should a loss occur, so he purchases an excess liability policy to provide more coverage. Mike experiences a loss, and discovers that his underlying liability policy had expired before the loss, but his excess liability policy is still in effect. How will this loss be paid?

It will be denied, due to nonconcurrency

Milton agrees to steal and wreck Albert's car for $4,000, so that Albert can collect $8,000 under his auto insurance policy. Which of the elements of a valid contract are missing in this agreement?

Legal purpose

In order for a contract to be binding in a court of law, it must be designed for:

Legal purposes

Tort Law applies to all of the following, EXCEPT:

Liability arising from breach of contract.

All of the following are extended coverage (EC) perils that can be added to the Standard Fire policy by endorsement, EXCEPT

Lightning

Third-party provisions allow for an entity that lends money to an insured to purchase property, to be named on the insurance for that property. In property insurance, this is known as a "standard mortgage clause." In auto insurance, it is known as

Loss payable clause.

Which of the following would be considered "compensatory" or "special damages" paid to an injured party when the insured is negligent and causes the injury?

Lost wages.

All of the following are examples of unfair claim practices, EXCEPT:

Making claim payments and stating the coverage under which payment is made.

A legal term describing an intentional act that is illegal or morally wrong, and contributes to the injury of another person is:

Malfeasance

The 1943 New York Standard Fire policy specifically excludes all of the following, EXCEPT: :

Manuscripts

Which of the following would be considered "economic losses" that could result in compensatory damages being awarded in a negligence case?

Medical expense and lost wages.

A Texas adjuster has adjusted a claim under a policy type for which he is not licensed. This is considered a:

Misdemeanor and is punishable by a fine of not more than $500, confinement in the county jail for not more than six months, or both.

All of the following statements are true regarding the coverage of mobile or trailer homes under a standardized Dwelling policy, EXCEPT:

Mobile or trailer homes can be owner or tenant occupied

An insured gas fabricated a claim so that it would be legitimate. what would this be?

Moral hazard

What is a common risk management technique?

Multiple the risk by engaging hazardous activity

For a liability policy to pay a claim, the person who is legally liable:

Must be an "insured" under the policy.

Dana lives in a state that has passed a valued policy law (VPL). This means that insurers issuing property policies in the state:

Must pay the full limit of the policy (the face amount), stated on the Declarations page, in the event of a total loss.

Using the modified comparative negligence standard, a plaintiff in a lawsuit who is 60% at fault for her injuries will receive:

No award

Katherine lives in Texas. A third-party claim has been filed against her insurance policy by Joe, for an accident in which Katherine was liable. Joe's attorney contacts Katherine's insurance company and makes an initial offer to settle the claim. The insurance company must notify Katherine of the offer, in writing:

Not later than the 10th day after the date the initial offer was made

When a licensee in Texas receives an inquiry from the Insurance Department regarding their insurance transactions, he or she must respond in writing:

Not later than the 15th day after the date the inquiry is received

The NAIC Model Unfair Claim Settlement Practices Act specifies that when a violation of the Act is suspected, a hearing must be held:

Not less than 30 days after notice has been provided to those involved.

Teri is a Texas adjuster who has had her license suspended by the Commissioner. What is the maximum length of time Teri's license can be suspended according to the Texas insurance code?

One year

Under the provisions of the 1943 New York Standard Fire Policy, an insured may file a suit to recover for a loss, only if all of the required duties have been met and the period of limitation tolled is what from the date of the loss.

One year.

Which of the following statements correctly applies to a "named perils" policy?

Only the perils listed by name in the policy are covered

When can an insured assign his or her insurance policy over to another party?

Only with the written consent of the insurer

Many states amend property insurance coverage additions and extensions by statute due to insufficient coverage amounts or time limits. All of the following are property insurance additions or extensions that are frequently amended by state statute, EXCEPT:

Other Structures

All of the following are factors in establishing negligence, EXCEPT:

Others involved

An "other insurance" clause is included in insurance policies to deal with the problem of:

Overinsurance

Mutual Insurance Company is what?

Owned by its policyholders

An insured is covered under a Standard Fire Policy. The insured returned home to find smoke rising from the windows and roof of her dwelling. After calling the fire department, she immediately started carrying personal belongings out of the house. In the process, the insured dropped a very expensive computer and completely destroyed it. The adjuster will:

Pay the loss for the computer because of the removal clause in the policy, CONTINUE

Risk retention and purchasing groups are used to provide which of the following types of coverage?

Products Liability insurance

Which type of damages is not intended to indemnify the plaintiff?

Punitive damages

Private, unincorporated mutual insurers that consist of associations that agree to equally share risks among its members are known as:

Reciprocal exchanges.

Aiden is reimbursed by his insurance company for the cost of a new sofa, after a 10-year-old sofa is destroyed by fire. Which of the following best describes the loss settlement method used in this situation?

Replacement cost

Which of the following is considered an Unfair Claim Settlement Practice?

Requiring a claimant to submit a preliminary claim report before moving forward on the claim.

What type of insurance is usually provided or subsidized by the state or federal government because it is not ordinarily available from private insurers?

Residual market insurance

The principle of indemnity is illustrated by which of the following?

Restores an insured to the same condition enjoyed before a loss

Horatio is a business owner who is part of a business owners group that is buying old commercial buildings in their small city and refurbishing them. Horatio has bought a beautiful historical building made mostly of wood. He knows that he should install a sprinkler system right away to prevent a fire. What risk management strategy is Horatio using?

Risk reduction.

Meg has been in very good health in the past 3 years. she has been exercising her blood pressure is at a perfect level and her cholesterol is the envy of all her friends because Meg is feeling so healthy, she decides to cancel her health care policy. This is an example of which risk management methods?

Risk retention

Mikela is walking from her car, across a dark parking lot, to her apartment one evening after work. Suddenly, a masked man jumps out from between two cars and holds a gun to Mikela's head. The man tells Mikela that he will kill her if she does not give him her purse. Mikela has just experienced a:

Robbery

An element of a valid contract must involve an offer and an acceptance. Sebastian completes an application for auto insurance and submits it to Indemnify Insurance Company. Who made the offer?

Sebastian

Which section of the modern property insurance policies such as a homeowners policy, will the language and the cover of 1943 New York Standard fire policy be found?

Section |

Which of the following is NOT a responsibility of the Insurance Commissioner in any given state?

Setting insurance rates.

The purpose of the appraisal clause in a property policy is to:

Settle disputes concerning the amount of a loss.

Which of the following best demonstrates the meaning of "contract of adhesion"?

Since the insurance company formulates the policy language, the courts usually will resolve any ambiguities in the insured's favor

Which of the following best describes an "insurance producer"?

Someone who represents an insurance company in the soliciting and negotiation of insurance.

Which of the following statements defines a "bailee"?

Someone, other than the insured, to whom the insured property is entrusted temporarily

A risk where both profit and loss are possible is known as:

Speculative

Regulation of the insurance industry in the United States is primarily left to:?

State governments

A 100-year flood is an example of which of the following types of risk?

Static risk

Steve and his insurance company are embroiled in a dispute regarding the amount of the property loss that Steve has incurred. Both Steve and his insurance company have selected an appraiser, but they cannot agree on the amount. The appraisers attempt to select an umpire, but cannot agree on one. What is the next course of action that must be taken?

Steve and/or his insurance company can request that the umpire be selected by a court of law.

Wyatt is a basting contractor who set off a blasting charge, damaging several buildings in the area and causing severe bodily injury to several people. Which of the following types of liability apply in this scenario?

Strict liability

What type of liability is imposed by law without regard to fault on those participating in certain activities or owning certain things that are considered especially hazardous?

Strict/Absolute

After paying a claim submitted by an insured, an insurance company may have the right to pursue legal action against the negligent party that caused the insured's loss. This is known as:

Subrogation

Gena purchased a policy to cover her home. Recently, she has been conducting business from the home and has hired several employees. She also has several clients per day coming to the home for business purposes. When Gena's insurer finds out about the additional exposures she has introduced into her home, they decide to take action. Which of the following actions is Gena's insurer most likely to take?

Suspend her policy until she moves the business out of her home

Insurance companies often outsource a significant percentage of their duties to Third Party Administrators (TPAs). All of the following statements about TPAs are true, EXCEPT:

TPAs assume the risk on the policies they handle

Which of the following policy provisions or clauses is designed to prevent the violation of the principle of indemnity?

The "Other Insurance" provision

Which of the following is NOT a reason to purchase a Dwelling policy instead of a Homeowners policy?

The Dwelling policy provides higher limits of liability than the Homeowners policy

Which of the following organizations creates and maintains model laws that establish standards for how insurance is offered and delivered in the United States?

The NAIC

Which of the following statements is true about the Standard Fire Policy?

The Standard Fire policy is no longer used in its original format

The maximum amount a liability policy will pay for all occurrences taking place during the policy period, is known as:

The aggregate limit.

What is the primary source of information used by insurance companies during the underwriting process?

The application of insurance

Which of the following best describes a licensed insurance professional's "implied authority"

The authority given by a principal to an agent that is not formally expressed or communicated.

Which of the following cause of loss forms provides named peril coverage?

The basic and broad forms only.

The Standard Fire policy (SFP) contains an assignment clause. Which of the following statements is true regarding the assignment clause?

The clause states that assignment is permitted with the written consent of the insurer.

In which part of an insurance contract would you expect to find a description of the duties and obligations of the insured?

The conditions

The 165 numbered lines on page 2 of the Standard Fire policy covers:

The conditions and exclusions of the policy

An insurance contract is considered to be an aleatory contract. All of the following are characteristics of an aleatory contract, EXCEPT

The contract allows the insured to receive a return in claims payments that is nearly equal to the amount paid in premium.

An agent with a surplus/excess lines license, will place insurance business with an unauthorized insurer when

The coverage cannot be obtained from insurers authorized within the state.

Which of the following statements is NOT TRUE with regard to the "Defamation of an Insurer" as it is explained in the Texas insurance code?

The defamatory statement must be made in written form.

All of the following describe one of the four elements of a negligent act, EXCEPT:

The defendant entered into a legal contract with the plaintiff

Which of the following insurance marketing or distribution systems includes agents that are hired as actual employees of the insurance company?

The direct writer system

The DP-1 basic form peril of "internal explosion" will cover which of the following losses?

The explosion of a furnace that the insured owns, inside the covered dwelling.

Which of the following losses would be covered by the EC peril of "volcanic eruption" under a standard Dwelling form?

The exterior siding of the dwelling that was ruined by the ash that settled on it from the erupting volcano

All of the following statements are true regarding state Guaranty Associations, EXCEPT:

The fund assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association.

Which of the following losses would be covered under the standardized Dwelling policy optional coverage Vandalism & Malicious Mischief (V&MM)?

The graffiti painted on the siding caused by a gang in the neighborhood while the insured was out for the evening.

Linda has received an inquiry from the Texas Commissioner. She realizes that she is required by law to respond to the inquiry, however her response contains information that is confidential and privileged. Which of the following is true of Linda's response to the Commissioner's inquiry?

The information will remain confidential and privileged until it is introduced as evidence in an administrative hearing or in a court of law

An insurance agent/producer represents the interests of:

The insurance company.

A Standard Fire policy frequently insures both a mortgagee and an insured under the same policy. All of the following statements are true regarding how a property loss will be paid under an SFP when there is a mortgage on the property, EXCEPT:

The insured receives payment from the insurance company for the entire loss and the insured is responsible for paying the mortgagee their portion of the payment. CONTINUE

When loss settlement under a policy is the "agreed value", which of the following is true?

The insurer will pay the value that was agreed upon and scheduled in the policy.

Which of the following parts of the insurance contract contains the "contractual agreement between the insurance company and the insured?

The insuring agreement

what is a true statement regarding the law of large numbers?

The law of large numbers states that as the number of insured units increase, the ability to predict losses increase

The record of complaints that all insurers in Texas must maintain must indicate all of the following, EXCEPT:

The license number of the person within the insurance company that generated the complaint from the client.

All of the following are characteristics of an insurable risk, EXCEPT:

The loss must be catastrophic in nature

An insured's property claim payment is reduced by depreciation. Why?

The loss was settled on an actual cash value basis.

The Declarations page of an insurance policy contains:

The name and address of the insured and the duration of the policy

Under a liability policy, "supplementary payments" include all of the following, EXCEPT:

The negotiated settlement

The time period after the policy inception and before the policy expiration is known as:

The policy period

If an insurer in Texas has received a large number of complaints of unfair claim settlement practices, the Department may subject the insurer to closer supervision. As part of this closer supervision, the Department can request that the insurer submit periodic reports containing claims information for:

The preceding 12 months or from the date of the insurer's last periodic report, whichever is shorter

In Texas it is considered to be an unfair or prohibited practice if an insurer does not keep a record of all complaints received for:

The preceding three years.

Patrice has received a reduced payment for her insurance claim and the explanation states that the reduction was due to the "obsolescence" of the damaged property. Which of the following best describes the reason for the reduction in the claims payment.

The property that was destroyed was obsolete

Which of the following is most likely to be uninsurable

The purchaser of a new home wants to protect herself from a possible drop in housing prices.

Which of the following statements is NOT true con oncerning the Law of Large numbers?

The size of the sample group is not relevant to the accuracy of the results.

One of the Unfair Claim Settlement Practices is failing to affirm or deny coverage of claims within a reasonable time after having completed its investigation related to such claim or claims". How is the length of time that is considered "reasonable" decided?

The state legislatures set the reasonable time period by statute

All of the following are excluded under the 1943 Standard Fire policy, EXCEPT

The theft of property after it had been removed from the insured premises to protect it from further loss.

Max lives in a large apartment complex where there is no guard station or gate. Several hundred people live in the complex so its very easy to determine the schedules of the neighbors living around him. One morning Max leaves for work at 6:30 AM as he usually does, but he forgets to lock the front door. Later that morning someone comes into the apartment and steals Max's computer. What was the peril in this situation?

The theft of the computer

During a tornado, Natalie's house is destroyed when a section of a wall is blown down, knocking over a heater, which sets the house on fire and creates smoke. The proximate cause of this loss is:

The tornado

The purpose of licensing surplus lines brokers in a given state is?

To allow them to place business with nonadmitted insurers

The appointment contract provides the agent with the authority to perform all of the following duties, EXCEPT:

To collect a commission from the applicant for insurance

What is the main purpose of government regulation of the insurance industry?

To protect the insurance consuming public.

A FAIR Plan is created in a state:

To provide coverage in the residual insurance market of any state that was created to provide insurance to insureds who are "high risk" and cannot obtain insurance in the usual markets

Which of the following best describes the purpose of the "insuring agreement" contained in an insurance policy?

To the insurer's promise to pay in case of a loss.

Which of the following would meet the definition of "concurrent causation"?

Two or more perils that cause a single loss

Under the A.M. Best insurance company rating system, a rating of "E" means that the company is:

Under state supervision.

All of the following statements are true regarding public law 15 (the McCarren Ferguson Act) Except what,

Under the law, the federal government retains the right to approve insurance forms.

Which of the following terms is used to describe a contract where the insurance company is the only party that is legally bound to perform its part of the agreement?

Unilateral

If a dwelling or commercial building has been without occupants for a significant period of time, but personal property still exists within the dwelling or building, it is considered:

Unoccupied

Property with no occupants or contents is considered to be whereas property with no occupants but containing contents is considered to be considered what?

Vacant/Unoccupied

Which of the following terms means "liability through another person"?

Vicarious/imputed liability

Which of the following most accurately describes reinsurance?

When an insurance company buys insurance for some of the risks for which it has issued coverage

define contract

an agreement between two or more parties that is enforceable by law

The attempt to restore an insured to his or her financial condition before a loss occurred is BEST described as...

indemnification

When a person purchases several insurance policies to provide more coverage on a risk than the value of the possible loss is known as what?

over insurance

An insurance binder is best described as:

temporary short-term evidence of coverage

The giving up of a known right is called:

waiver

what is true regarding pure and speculative risks?

with pure risks there is only the possibility of loss