Insurance Practice Test

Medical malpractice is coverage available for professionals in the medical field such as doctors, surgeons, physicians, etc., to protect against claims of negligence by persons while in the professionals care. What statute of limitations is placed on medical malpractice claims?

Depends on the individual state the claim is filed in.

Dwelling policies and homeowners policies are often confused as being the same coverage. Name one difference between the two types of policies?

Dwelling policies do not have to be for owner occupied residences

Earthquake coverage is usually excluded on all property policies except for what exposure associated with earthquakes?

Ensuing Fire

Which government-funded program was established to help protect against the losses caused by flooding and aid in the recovery from natural disasters such as hurricanes?

Federal Emergency Management Agency(FEMA)

What makes a fidelity bond different from a regular bond?

Fidelity bonds cannot be traded

What type of coverage extends the liability coverage available under the garagekeepers coverage policy?

Garagekeepers extra legal liability

Following a Court ruling on a claim what damages may be awarded to the plaintiff for pain and suffering?

General damages

Directors & officers liability insurance is a form of professional lines insurance which provides coverage for directors & officers working for all the following entities EXCEPT?

Government Entities

Jason owned a home in the city that he rented out to a full-time tenant. As part of the lease for this home, Jason required his tenant to obtain an insurance policy to cover the tenant's own personal property in the home. What type of homeowner's policy should Jason's tenant obtain?

HO-4

Which form of homeowners policy is designed to cover the tenants of the insured dwelling on a named perils basis?

HO-4

Which type of homeowner's policy provides coverage for the dwelling, personal property, and other structures on an all risks basis?

HO-5

Punitive damages are monetary awards given to a plaintiff to punish a defendant for negligent or intentional actions. The majority of umbrella policies exclude coverage for punitive damages, but what two types of insurance policies usually do not exclude punitive damages?

Commercial general liability and business auto policies

Insurance applications require the potential policyholders to be completely accurate and honest with their answers. When a potential insured holds back information that could be considered relevant to the type of insurance being provided, this is known as what act?

Concealment

Brenton needed to obtain an insurance policy in order to rent an apartment. Brenton has a terrible credit score but knew he needed to lie about his credit in order to get this apartment. He lied on his insurance application about his credit history in hopes that the company would not check his credit report. What type of hazard did Brenton participate in?

Moral Hazard

What type of hazard exists when the insured's attitude is poor towards the care or maintenance of the property because the insured knows insurance will cover any losses that may occur?

Morale Hazard

Financial institutions have what requirement for an insurance policy prior to offering large loans?

Mortgagee Clause

Errors and omissions insurance is an insurance product that provides protection for claims made against professionals for what type of actions?

Negligent acts

Amber was in the process of applying for a new job as a computer specialist. The company Amber was applying to ran a credit report without first gaining Amber's written consent. Was it legal for this company to run her credit report without written consent?

No, a company is required to obtain written consent prior to running a credit report

Ryan has an insurance policy through ABC insurance for September 1st, 2008, through September 1st, 2009. His policy contains a runoff provision for a five-year term. If a claim was submitted against Ryan on September 2nd, 2015, for a loss occurring on June 1st, 2009, would Ryan's insurance policy cover the loss?

No, because the claim was reported after the runoff period.

Martha is interested in obtaining business income coverage to cover her business in the event of a loss that occurs in the business is shut down for some time. Martha has some questions for her agent, including whether or not coverage would end as soon as the repairs from a Loss are made?

No, coverage will extend a specific number of days.

Is tail coverage automatically attached to all policies at no extra cost to the insured?

No, it is added to claims-made policies at an additional cost.

The wind and hail deductible is often added to policies written for locations where there is a higher chance of loss due to wind and hail. Is this deductible always a specific dollar amount?

No, it may be a specific dollar amount or a percentage of the property value.

The federal government has Insurance programs available for crop insurance. Does the federal government's crop program cover damage by hail?

No, this is purchased through licensed insurance agents

Under a commercial auto policy, what coverage is afforded to vehicles the named insured does not own but that employees are using during the course of business?

Non-owned automobile

Maria had her auto insurance policy through ABC Insurance Company. Maria asked to renew coverage but her company first needed to run a motor vehicle Report to see if Maria had any violations or accidents over the past year. Her MVR came back showing 3 new accidents over the past year and ABC would not be able to write a policy with that many accidents. What formal notice would ABC send Maria to notify her it would not be able to offer her renewal terms?

Non-renewal notice

Edmond purchased a new home that included 120 Acres of farmland and a barn. Edmonds plan was to start growing crops on his farm and sell to the public as his main source of income. Which dwelling policy should Edmund obtain to cover his needs?

None of the dwelling policies can provide coverage for farming exposures.

All of the following are types of hazards which cause concern for insurance companies as they assume different risks EXCEPT

age hazard

Why are farmowners insurance policies a combination of homeowners, commercial property, and Commercial liability policies?

Because farms have commercial as well as residential characteristics

Why, when strict liability is applied, does negligence not need to be proven?

Because the insured was involved in an act which was inherently dangerous.

Like premises-operations, products-completed operations provides coverage for liability caused by the insured's business operations. However, for products-completed operations, where does the loss have to take place?

Away from the insured's premises

Inventory storage, unauthorized instructions, and employee dishonesty are some examples of theft exclusions under policies containing what type of cause of loss form?

Special form

Scott purchased stocks as a means of investing his money in hopes of a great return. What type of risk is Scott taking by purchasing stocks?

Speculative Risk

First aid expenses, pre-judgment interest, and require travel expenses are all expenses an insured may incur after a claim. These bills may be reimbursed to the insured by the insurance company through what type of payments?

Supplemental payments

Which act was designed around the need for insurance companies and banking companies to consolidate for the better good of the economy?

The Gramm Leach Bliley Act

A surety bond is a contract between three parties. Which of the three parties guarantees the contract will be fulfilled in its entirety?

The Guarantor

In cases of a multi-family dwelling, how many of the units must be occupied by the named insured to be eligible for homeowners policy?

1

After winning a dispute from the credit bureau over and accurate information, how long does the credit bureau have to correct the information on the credit report?

30 days

Beth was excited to purchase her first home, which was a historic Victorian home in the city. Because of the nature of her house, Beth's insurance agent suggested she purchase an HO-8 modified homeowners policy to meet her needs. The HO-8 policy covers against exposures through what cause of loss form?

Basic Form

Determining an automobiles fair market value is often used to determine what other value placed?

Actual cash value

What value is determined by subtracting the depreciation from the replacement cost value of a specific piece of property?

Actual cash value

ABC Insurance learned of a large tornado heading in the direction of a local Town. Calls started coming into ABC asking for new property policies and an increase in property limits to existing policies. ABC Insurance issued a statement that it would not write new policies or increase policy limits for a limited period of time. This attempt was to stop the public from purchasing property policies only because there was the risk of an excessive loss to their property. What situation was ABC faced with due to the threat of the tornado?

Adverse Selection

Catherine is wishing to obtain coverage for her manufactured home. Does Catherine need to get an endorsed homeowners policy, regular homeowners policy, or Stand-alone mobile home policy?

An endorsed homeowners or stand-alone mobile home policy

Terrence went to his local insurance agent to obtain a homeowners policy for his newly purchased home. Terrance met all the insurance company's guidelines to be eligible for a policy except that he had an unfenced pool. The agent offered Terrance a policy but attached a document that specifically excluded the pool exposure. What is the name of the document Terrence's agent added to make Terrance's home acceptable for coverage.

An endorsement

In order for a person to purchase an insurance policy, what is the potential insured required to have in relation to the exposure being insured?

An insurable interest in the exposure

A garagekeepers coverage is designed for insureds who are in what business?

Auto and Trailer dealers

Margaret owned a home in a neighborhood that had sidewalks to connect each house. All the homeowners were required to maintain the sidewalk outside of their individual homes. A significant ice storm hit and after the storm was over, Margaret left her house to drive to work without shoveling her driveway. A neighbor was walking his dog and slipped on the ice on Margaret's driveway causing him to break his arm. Margaret is guilty of what when it comes to maintaining her property?

Being negligent

Directors & officers liability insurance coverage excludes coverage for property damage and what other possible exposure?

Bodily injury

Errors and omissions insurance covers which costs when the insured is faced with a covered claim?

Both court costs and settlement amount up to the policy limit

Trevor obtained an HO-2 form of homeowners insurance for his newly acquired house. What cause of loss form is attached to Trevor's HO-2 policy?

Broad form

An example of crime coverage that is provided by some insurance policies is coverage for when a person unlawfully enters a property and steals from this property. What is this unlawful entry and theft known as?

Burglary

In an office building, furniture, fixtures, & computers are all the different forms of what type of property?

Business personal property

Bob is the owner of a large company that is in need of some repairs to its office building. Bob was interviewing contractors in the area and one of his requirements was proof they had sufficient insurance coverage in place. What form may these contractor's present to Bob to provide proof of their insurance policies?

Certificate of insurance

Hunter had an insurance policy through ABC Insurance that just ended last month. Hunter forgot to report a claim to his insurance carrier and was wondering if he was still able to report the claim. What type of policy must Hunter have had to be able to report his claim?

Claims-made

Trevor recently purchased his first home. Trevor is searching for an insurance policy to protect his home, which is valued at $250,000. One carrier is requiring Trevor to purchase limits of at least 80% of what his home is worth. What requirement does this insurance carrier have which requires 80% of the value to be insured?

Coinsurance clause

What type of automobile insurance will provide coverage when the auto is in an accident with another vehicle or collides with an object, such as a road sign or guard rail?

Collision coverage

The limit on an insurance policy can be presented in multiple forms. Which form indicates that a single dollar limit applies to the policy?

Combined single limit

Under the Terrorism Risk Insurance Act (TRIA) of 2002, which party is responsible for providing coverage against covered terrorist acts?

Commercial Insurance carriers

Reagan owns and operates a food truck that she drives to different events each weekend. Because Reagan's truck does not operate out of a fixed location, what floater should she purchase to insure her food vendor business?

Commercial Property Floater

Aircraft provide a unique and uncommon risk to homeowners. Which dwelling policy provides automatic coverage from damage that may occur from an object falling off of an aircraft?

DP-2

The dwelling policy is currently written in three different forms: DP1 DP2 and DP3. Which of the three dwelling forms is written on an open perils basis?

DP-3

Kendall's house was located right on the beach in a popular shore town. Kendall's town sustained significant wind damage and flooding following a tropical storm. Which of the following is a direct loss Kendall suffered from the tropical storm?

Damage to her roof requiring repair

Brent was the beneficiary named on his parents life insurance policy. His parents passed away suddenly from an accident, and Brent received a lump sum of money from the life insurance carrier. What is the amount of money Brent received a known as?

Death Benefit

Grace was in an automobile accident for which she was deemed at fault. She took her vehicle to the auto mechanic to be fixed following the accident. The mechanic sent Grace a $2500 bill for the repair work completed. Grace contacted her local insurance agent to see if the company would be paying the repair bill. Her agent informed her that after Grace pays $500 to the mechanic, the insurance company would then pay the remaining $2000 left on the bill. The $500 portion Grace is responsible for is known as what?

Deductible

Directors & officers liability insurance, like other insurance products, states a limit that the policy will pay up to in the event of a claim. Shrinking limits is a term used in the insurance industry to describe which costs that reduce the amount of limits available to pay the settlement?

Defense costs

Farmowners insurance is a specialized form of insurance that provides what type(s) of coverage?

Homeowners, commercial property, and commercial liability coverage

Insurance carriers use different means of collecting data in order to determine the rates for their products. What is one concept insurance carriers use that believes that as the sample size in question grows, the average of results obtained from this sample will be closer to the expected value?

Law of large number

A commercial package policy (CPP) is an insurance policy for businesses which combines coverage for property and what other coverage into one policy?

Liability

Broad cause of loss form is available on some commercial property insurance policies. Broad cause of loss adds additional causes of loss to those already covered under basic form. All of the following are additional perils broad form will cover in addition to those covered under basic form EXCEPT

Lightning

Frankie was involved in a car accident and deemed at fault. He hit an elderly woman who needed to seek medical care over a long-term basis from injuries caused by the accident. If Frankie's auto policy was written with a split limit approach, which limit would respond to pay towards the woman's extensive Medical Care?

Limit One

If an insured has an auto policy that uses the split limits approach, which limit will indicate the maximum policy limit allowed for property damage?

Limit Three

Employment practices liability policies can be written as stand-alone or as a combined policy with a D&O policy. What is one disadvantage to having an Employment Practices ability policy added by endorsement to a D&O policy?

Limits may be exhausted on the combined policy due to non-D&O claims.

Builder's risk insurance is often a requirement of which party the contractor has a contract with?

Local city government

Martin was the owner of a large media corporation that operated out of a single building downtown. Martin's building was badly damaged from a hurricane and had to close for several weeks for repair. Which of the following was an indirect loss of the hurricane?

Lost wages from employees not being able to work

Underinsured motorist coverage is coverage available at-fault party to an accident has insurance but not sufficient limits to cover possible claims. Underinsured motorist coverage will apply, when written with limits trigger, if a liability limits carried by the at-fault party are lower or higher than the underinsured limits the insured has?

Lower

A car with four passengers was involved in a car accident that resulted in all four individuals needing care at the hospital. Which part of the insurance policy would cover the care provided at the hospital?

Medical Payments coverage

Howard was at his son's baseball game when a foul ball was hit into the parking lot. The ball crashed through Howard's windshield and shattered the entire window. Howard had his car towed to his mechanic and submitted a claim under his auto insurance policy. What coverage would Howard need to have in order for coverage to apply?

Other-than-collision coverage

Jewelry, silverware, fine arts, and stamps are all pieces of personal property requiring more coverage than the unendorsed homeowner's policy can provide. What is the name of the floater, either attached to the homeowner's policy through endorsement or a stand-alone policy that provides specific protection for these types of personal property?

Personal articles Floater

Peter was cleaning up his yard after a heavy storm hit his area the previous night. The storm brought damage such as broken tree limbs, branches, and leaves scattered across Peter's yard. Peter raked up all the debris but left it on his sidewalk without properly putting it in trash bags for removal. Peter leaving the debris on his sidewalk where the public walks through represents what type of hazard?

Physical hazard

The insurance contract contains multiple sections to address what the policy covers, who is covered and when coverage will end. What section of the insurance contract or policy states how the policy will handle changes in coverage during the policy period?

Policy conditions

Terrance was reading over his insurance policy to see if he had the proper coverage he felt his exposures required. Terrance read that his vehicle was covered except if he was driving the vehicle for a reason other than personal use. Which section is Terrance reading which would say this vehicle did not have coverage during specific times?

Policy exclusions

The declarations page, or dec page, of an insurance policy contains all the following information EXCEPT?

Policy exclusions

Which category of hazards results from damage by the insured's business operations while the operations are occurring on the Insured's premises?

Premises-operation

Zander recently had his third accident within the past year. His insurance company was notified of the additional accident and decided to cancel Zander's Policy. What method of cancellation will Zander's insurance carrier use to cancel his policy?

Pro rata method

With regard to supplemental payments, how do professional liability policies differ from commercial general liability (CGL) policies?

Professional Policy limits are often reduced by the supplemental payments.

Before an insurance company can determine if it will cover a loss, what must the insured provide?

Proof of loss

A commercial crime policy covers against losses due to employee dishonesty. Employee dishonesty protects against theft of securities, money, and which other exposure?

Property

The HO-3 and HO-6 homeowner's forms are similar in that they provide coverage for owner occupants. These two forms however are different in that the HO-6 policy form?

Provides less property coverage than the HO-3

Simon purchased a car with his savings from the past three years. What type of risk is Simon taking by purchasing his new car?

Pure risk

Reid was involved in a car accident but was not at fault. The damage to his vehicle required extensive work and he would be without his car for a couple of weeks. Reid obtained a rental car during the time his own car was being fixed. What endorsement does Reid need to have on his automobile policy to be reimbursed for the rental car?

Rental Reimbursement coverage endorsement

If an insured's policy calls for the insurance company to replace property with the same or equal value in the event of a loss, this is known as what type of loss valuation?

Replacement cost

Insurance policies provide coverage against several forms of employee crime. What is the type of crime in which theft of property occurs with the use of force or weapon?

Robbery

Marty's vehicle was involved in a three-car accident. The accident left Marty's vehicle no longer usable, and the insurance company declared the vehicle a total loss. Even though the vehicle is inoperable, parts of the vehicle could be used by a scrap yard or mechanic shop. What value is given to the parts of Marty's vehicle that are still usable?

Salvage value

Beverly had an insurance policy written through ABC Insurance. Beverly decided about three months into the policy that she no longer wished to have coverage through ABC and found another carrier. Beverly asked ABC Insurance to cancel her policy and return the unearned premium to her attention. ABC did cancel but returned less premium than Beverly expected to get. What method did ABC use in determining how much premium to return to Beverly?

Short rate method

Bodily injury is a coverage afforded by many insurance policies. Bodily injury includes all the following EXCEPT?

Slander

Matt worked as an insurance agent for ABC Insurance. He was in the process of trying to place coverage for a potential policyholder. Matt ask the potential client to provide a completed application and consent to pull motor vehicle reports and a credit report. What information was Matt collecting?

Sources of underwriting information

What damages awarded by a court are to compensate the injured person for expenses such as loss wages and medical expenses?

Special damages

A surety bond is a type of insurance contract that involves at least three parties. Which party is responsible for actually performing the work being insured?

The Principal

Potential insureds go to their local insurance agents to obtain coverage to best suit their needs. Agents have their insureds fill out all the necessary paperwork, such as applications, in order to secure coverage. The agent may issue a temporary notice of coverage until the policy can be fully written and issued. What is the temporary notice of coverage called?

The binder

Claims-made and occurrence are known as what with regard to an insurance policy?

The coverage triggers

When reviewing personal insurance policy, which section should you close the review to see any and all potential exposures you would not be insured against?

The exclusions

The declarations page is often the first page of the insurance contract. On the declaration page, there is a section that names the person or group of people the contract is providing coverage for. What is the name given to the person of the group of people being afforded this coverage?

The insured

Susanna was reviewing her credit report as she was sitting in her mortgage lenders office. She noticed a discrepancy on her report for being charged late fees for a credit card she did not even own. Is Suzanna allowed to dispute this error on her credit report?

Yes, you can dispute information that is inaccurate

Which section of the insurance policy will indicate what hazards the insured is protected against through the policy?

The insuring agreement

Which section of the insurance policy will specify that the insurance company will make payment on approved claims?

The insuring agreement

Proximate cause is the means to determine the cause of loss. Proximate cause says that which peril is the one responsible for the loss that occurred?

The peril that is most directly associated with the loss.

Builder's risk insurance policies typically exclude all the following exposures EXCEPT.

Theft

An insurance policy can have its policy limits represented by a single limit or by split limits. A policy that uses split limits to indicate the amount of coverage available typically shows how many split limits?

Three limits

After a loss, the insured has the duty to notify the insurance company in a timely manner for coverage to apply. All of the following are other duties the insured has when a loss occurs EXCEPT?

To fix the loss independently

Subrogation is the insurance process of one party, the insurer, stepping in for the responsible party to indemnify the insured for their loss. The insurer then tries to recoup, or subrogate, from the responsible party. Why would subrogation ever be waived?

To prevent or lessen the likelihood of lawsuits.

Automobile insurance is a requirement in every state. While it is a requirement by law, often individuals do not obtain Insurance due to its cost or because they do not think they need insurance. For those who do have proper Insurance, what coverage is important to protect yourself in case you are involved in an accident where the at-fault party does not carry Insurance?

Uninsured motorist coverage

The HO-3 homeowners policy is a unique policy in that it covers the dwelling and scheduled personal property on an all risks and perils basis, but what exposures does it cover on a broad-named basis?

Unscheduled Personal Property

Mary and Bruce have a five-year-old son named Henry. Henry was playing baseball outside one day with his friends and threw a ball into their neighbor's window. The window shattered and glass went into the house causing additional damage. Because of Henry's age, Mary and Bruce were held responsible for paying for the damages to the neighbor's house. What type of liability is imposed on Mary and Bruce with regard to Henry's actions.

Vicarious Liability

Which other perils can be added to crop-hail Insurance?

Wind and Fire

Caroline owned a building in town that housed multiple businesses. A severe winter storm hit the town where Caroline's building was and left large amounts of snow and sleet on the roof. Part of Caroline's roof collapsed due to the weight of the snow and sleet left from this storm. Would Caroline be covered for the damaged roof by her Insurance policy if the cause of loss was broad form?

Yes, broad form does include coverage due to weight causing the rood to collapse.

Robert was in the process of obtaining a pre-approval for a mortgage on a home he was planning to purchase. Robert wanted to know his credit score but was too impatient to wait for the loan company to return his phone calls. Can Robert request his credit score on his own?

Yes, but he will have to pay for it.

Property insurance policies often contain mortgagee clauses. If the insured commits an act which causes the policy to be voided, will the mortgagee still be provided coverage for the location on the policy?

Yes, but the mortgagee in turn will take on all the responsibilities the insured previously held as owner of the policy.

Bill was planning a road trip for his family's annual vacation. Bill did not want to drive his own vehicle as it was older and in need of some repairs. Bill decided to rent a vehicle to make the trip and called his insurance agent to see if this rented vehicle would have coverage under his automobile policy. Will the vehicle Bill is renting have coverage under his automobile insurance policy?

Yes, his rental vehicle would be considered a "hired auto" and will have coverage as a temporary auto.

If an employer fails to obtain proper insurance for its company and employees, would the employees be allowed to file a tort claim in the event of an injury?

Yes, if there was willful negligence on the part of the employer as well.

Norman recently purchased an additional automobile to be used by his sixteen-year-old son. Does Norman need to tell his insurance company about the newly purchased vehicle?

Yes, insurance companies specify the time frame in which a newly acquired auto needs to be added to the policy for adequate coverage to exist for the auto.

Under any circumstances is an insured allowed to transfer an insurance contract to another party?

Yes, with the insurer's consent