Insurance Exam
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
An insured's building has an actual cash value of $200,000 and he has the property insured for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. how much will the policy pay?
$30,000
In the event of a member insurer's insolvency, the Association's obligation to pay a covered claim is the lesser amount of the loss, the limits of the insurance coverage, or
$300,000 (maximum obligation for insolvent insurer per accident)
An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today's prices. If the roof has been depreciating at $200 per year and his policy is ACV, how much will it pay toward the insured's new roof?
$5,000 (replacement cost - depreciation= ACV)
What is the correct formula for computing a loss ratio?
(incurred losses + loss adjusting expense)/earned premium
Within how many years of a loss may an insured bring lawsuit against an insurer, according to the dwelling policy?
2 years
Insurers are required to pay the amount of any claim within
30 days of receiving a satisfactory proof of loss
If an insurer is nonrenewing a Homeowners policy, it must mail or deliver to the insured written notice of its intention at least
30 days prior to the expiration date
An insurer has just cancelled an insured's policy. How long does the insurer have to explain this cancellation?
6 months
Which of the following would be covered by the broad theft endorsement on a dwelling policy?
A camera the insured has with him on vacation
The property condition that precludes the insured from simply turning over damaged property to the insurer and claiming a total loss is called
Abandonment
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
Adhesion (insured can only accept or deny)
An insured pays $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?
Aleatory
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
Aleatory
In insurance, an offer is usually made when
An applicant submits an application to the insurer
In insurance, in offer is usually made when
An applicant submits an application to the insurer
Funding for the operation and administration of the Louisiana Insurance Guaranty Association comes from
Annual Assessments paid by member insurers
Should 2 or more insurers issue a combined Standard Fire Policy insuring a single risk, in the event of a loss, the insured must notify
Any of the insurers providing coverage
An insurance contract must contain all of the following to be considered legally binding EXCEPT
Beneficiary's consent
A policy which insures all property at multiple locations for a single amount is referred to as
Blanket
Which of the following other coverages is NOT included in the basic form dwelling policy?
Breakage of glass
The part of the policy that sets forth the rules of conduct, duties, obligations of the parties is called the
Conditions
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration (binding force of any contract)
What property coverages would provide protection to contents damaged by fire?
Coverage C
Which of the following is the Fair Rental Value coverage in the dwelling policy?
Coverage D
Which of the following dwelling policy forms primarily insures a structure on an actual cash value basis?
DP-1
The part of a property policy that shows the amount of insurance, premium, and policy term is the
Declarations
The part of a policy that clarifies terms in the policy is the
Definitions
A beauty parlor burns to the ground. What type of loss is this to the owner?
Direct (damage caused by a peril that is insured is classified as direct loss)
All of the following are other coverages under the dwelling policy except
Earth movement
What is the purpose of the coinsurance clause found in property insurance policies?
Encourage the insured to insure the property closer to its full value
The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the
Exclusions
Which of the following are the authorities that and agent can hold?
Express and Implied
The authority granted to an agent through the agent's contract is referred to as
Express authority
Which of the following would be named on the declarations page of a property or liability policy?
First named insured
When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?
Foreign
What type of compensatory damages will pay for pain and suffering and disfigurement?
General (intangible elements)
Faulty wiring in a home is an example of a
Hazard
When would a misrepresentation on an insurance application be considered fraud?
If it is intentional or material
Under which of the following conditions can broad theft coverage be added to a dwelling policy?
If the insured is owner-occupant of the dwelling
If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?
Indemity
To purchase insurance, the policyowner must have financial interest in the property being insured. This is known as
Insurable interest
Which of the following would be covered under the Broad Form (DP-2) policy's falling object peril?
Interior building damage if the exterior was damaged first
Which of the following would be covered under the Broad Form (DP-2) policy's falling object perl?
Interior building damage if the exterior was damaged first
All of the following statements describe the concept of strict liability except
It is imposed on defendants engaged in hazardous activities (on company, not workers)
Dwelling coverage does not include
Land on which the dwelling is located
What provision in a property policy applies when the insurer broadens coverage but does not increase the premium?
Liberalization clause
Which rating method provides an insurer with that portion of a rate that does not include provisions of expenses (other than adjusting expense) or profit and is based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time?
Loss costs rating
Which of the following is NOT true concerning the fair rental value coverage provided in a dwelling policy?
Loss or expense caused by the cancellation of a lease is covered
An insurer may cancel or renew a Homeowners policy based on any of the following, except
Loss resulting from an Act of God
According to the standard mortgage clause, who has the right to bring a suit i their own name to recover damages, pay policy premiums, and submit a proof of loss?
Mortgagee
According to the standard mortgage clause, who has the right to bring a suit in their own name to recover damages, pay policy premiums, an submit a proof of loss?
Mortgagees
Which of the following terms refers to other insurance that is written on the same risk, but not on the same coverage basis?
Nonconcurrency
What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?
Open peril (special policies except what they say they don't)
What hazard would you be concerned about if you lived next to an explosives contactor?
Physical
The value placed on property insured under a fire insurance policy is used to determine the policy's
Premium
The policy that pays first in the event of a covered loss is known as the
Primary policy
The Association is obligated to pay up to $10,000 for claims seeking return of unearned premium on
Property insurance policies, Casualty insurance policies, and Workers Compensation
All of the following are considered parts of the policy structure except
Provisions (essential parts of the policy are declarations, insuring clause, conditions and exclusions)
A Standard Fire Policy may be written to cover all of the following except
Reinsurance
What type of information would be found in a policy's insuring agreement?
Renewal dates
Which of the following is used in the formula for calculating the actual cash value of a property?
Replacement cost and depreciation
When the insured's car was totaled in a recent accident, the ownership of the car was transferred to the insurer. The insurer then sold off the wrecked car to recover some of the loss it paid to the insured. What is the term for this action?
Salvage
A property insurance policy that is not subject to any coinsurance requirements but has a set amount of insurance scheduled for the property would use what loss valuation method?
Stated amount
When the amount of insurance written in a property policy is not subject to any coinsurance provision and hat amount is paid in the event of a covered loss, the coverage is said to be written as
Stated amount
The penalty to an insurance producer who issues a binder for an insurer for whom he or she does not hold an appointment is
Suspension or revocation of license
Under a dwelling policy, which of the following is NOT a factor in determining a loss?
The amount negotiated by the insured
Replacement cost coverage is provided in both the broad and special form dwelling policies when
The amount of insurance on the dwelling is at least 80% of its replacement cost at the time of loss.
Peril is most easily defined as
The cause of loss occurring
In insurance terms, what are components?
The factors that determine rates
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?
The insured will need a written consent of the insurer
Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT
The loss ma be intentional
What will happen if a house covered by a standard mortgage clause is a total loss?
The standard mortgage clause ensures that benefits will go to the insured and the mortgagee as their interest appears in the event of a loss to a real property
All of the following are other coverages included in both the broad and special form dwelling policy except
Theft of personal property
Which of the following is not included in both the bora and special form dwelling policy?
Theft of personal property
Which of the following best expresses the purpose of a stated value contract?
To pre-establish the amount of coverage available for property items that are difficult to value
The process an insurer uses to evaluate applications and determine if a policy should be issued and on what terms, conditions and rates is known as
Underwriting
A building is insured, but no one has lived or worked in it for 10 years. The building is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered
Vacant
An insured's 9 year old son threw a ball accidentally breaking the neighbor's window. The insured was found legally liable for the cost of replacing the window. This is an example of
Vicarious liability (acts of family members/hired help)
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
Warranty
The Association's obligation for the payments of claims is $300,000 per occurrence under all of the following policies, except
Works Compensation
Persons covered under an insurance policy, whether named or not, are known as the
insureds
All of the following are conditions commonly found in the insurance policy except
insuring agreement (policy's coverages)