KY Property & Casualty Insurance Exam

All of the following are examples of hazards EXCEPT: a) a fire in the kitchen of a home b) trash or debris in the basement of a home c) faulty wiring in a home d) broken step or hand railing on the porch

A fire in the kitchen of a home

Which of the following would NOT be classified as personal property for insurance purposes? a) furniture b) a house c) a vehicle d) equipment

A house

An insurer has made all of the decisions regarding provisions included in the insured's policy. The insured finds and objectionable provision and wants to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe? a) personal b) adhesion c) unilateral d) conditional

Adhesion

In property and casualty insurance, insurable interest must exist: a) at the time a change is made to a policy b) at the time of policy application c) at the time of loss d) at the time of policy solicitation

At the time of loss

What must an insurance company receive before it will be allowed to transact insurance in this state? a) Guaranty Association clearance b) Executive Director's inspection certificate c) Writ of compliance d) Certificate of Authority

Certificate of Authority

What is the legal defense that can be used in most states in which proportionate damages may be awarded when both the plaintiff and defendant were negligent? a) proximate cause b) comparative negligence c) relative degree of damage statute d) contributory negligence

Comparative negligence

Which of the following is a statutory defense? a) intervening cause b) contributory negligence c) comparative negligence d) assumption of risk

Comparative negligence

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? a) aleatory b) unilateral c) conditional d) contingent

Conditional

The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the: a) exclusions b) declarations c) insuring clause d) conditions

Conditions

Something of value exchanged between the insurer and the insured is considered an: a) acceptance b) legal capacity c) consideration d) offer

Consideration

Reporting forms help the insurer to: a) determine workers compensation benefits b) report complaints against it to the Executive Director c) report their financial status to the Executive Director d) determine premiums to be charged

Determine premiums to be charged

Which of the following best describes the aleatory nature of an insurance contract? a) only one of the parties being legally bound by the contract b) ambiguities are interpreted in favor of the insured c) policies are submitted to the insurer on a take-it-or-leave-it basis d) exchange of unequal values

Exchange of unequal values

The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as: a) declarations b) endorsements c) conditions d) exclusions

Exclusions

Faulty wiring in a home is an example of a: a) loss b) peril c) risk d) hazard

Hazard

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost? a) reasonable expectations b) indemnity c) stop-loss d) consideration

Indemnity

What do individuals use to transfer their risk of loss to a larger group? a) insurable interest b) exposure c) indemnity d) insurance

Insurance

All of the following are conditions commonly found in the insurance policy EXCEPT: a) subrogation b) appraisal c) insuring agreement d) cancellation and nonrenewal

Insuring agreement

After a storm dumps several inches of snow, an insured spends several hours clearing his sidewalk and driveway. Later that night it begins to sleet. Before the insured can clear his walks again, his neighbor slips and falls while walking past the insured's house, breaking his arm. Which defense will reduce recovery for the neighbor's injury? a) comparative negligence b) statute of limitations c) intervening cause d) contributory negligence

Intervening cause

All of the following actions by a person could be described as a risk avoidance EXCEPT: a) investing in the stock market b) refusing to scuba dive c) never flying in an airplane d) taking a flu shot each year

Investing in the stock market

Using an air-cooled engine, a proposed insured has developed a new, experimental aircraft. If the inventor applies for liability insurance, what rating type will the insurer most likely use? a) judgement b) class c) schedule d) merit

Judgement

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become: a) more active b) larger c) smaller d) older

Larger

Which of the following is NOT an element of negligence? a) libel b) duty c) breach d) unbroken chain

Libel

Rates that are established based on the similarities of the risk with other risks are known as: a) experience rates b) "A" rates c) merit rates d) manual rates

Manual Rates

Illegal use of narcotics would be an example of: a) pure hazard b) morale hazard c) moral hazard d) physical hazard

Moral hazard

According to the standard mortgage clause, who has the right to bring a suit in their own name to recover damages, pay policy premiums, and submit a proof of loss? a) insurance company b) governor c) policyholder d) mortgagee

Mortgagee

What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? a) binder policy b) named peril policy c) open peril policy d) specified peril policy

Open peril policy

What hazard would you be concerned about if you lived next to an explosive contractor? a) morale b) dangerous c) physical d) moral

Physical

Which of the following insurance options would be considered a risk-sharing arrangement ? a) stock b) mutual c) surplus lines d) reciprocal

Reciprocal

Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? a) transfer b) avoidance c) retention d) reduction

Reduction

Insurance is the transfer of: a) peril b) risk c) loss d) hazard

Risk

Which one of the following is NOT an element of insurability? a) loss must be expected b) risk of loss is speculative c) loss is calculable d) risk of loss must represent a financial hardship

Risk of loss is speculative

In which of the following examples would a contract between an insurer and a prospective insured be legal? a) The applicant is under the influence of medication at the time of application. b) The applicant has a prior felony conviction. c) The applicant is intoxicated at the time of application. d) The applicant is a 12-year-old student.

The applicant has a prior felony conviction

In insurance terms, what are components? a) the factors that determine rates b) the amounts paid out in benefits c) the penalties paid for unfair trade practices d) the prices charged for policies

The factors that determine rates

Negligence is defined as: a) Conduct that is so hazardous that the individual engaging in it will be held fully responsible for any resulting injury or damage b) An intentional act that results in bodily injury or property damage to another person c) The failure to do what a reasonable prudent person would do under given circumstances d) An unbroken chain of events that results in bodily injury or property damage to another person

The failure to do what a reasonable prudent person would do under given circumstances

Negligence may be defined as: a) a situation that creates a probability of loss b) a latent defect or fault in property c) the inability to meet the burden of proof d) the failure to use reasonable and prudent care

The failure to use reasonable and prudent care

What will happen if a house covered by a standard mortgage clause is a total loss? a) the insurer pays the mortgagee according to the mortgagee's interest in the property b) the mortgagee retains no rights to any contracts involving the policy c) the insured receives the full benefit and passes the mortgagee's share to the mortgagee d) the mortgagee receives the full benefit and passes the insured's share to the insured

The insurer pays the mortgagee according to the mortgagee's interest in the property

What is the purpose of reporting forms? a) to report a violation of the Insurance Code of the Executive Director b) to report a loss to the insurer c) to organize information required for the Executive Director's inspections d) to determine the amount of premium to be charged

To determine the amount of premium to be charged

When a homeowner purchases insurance on his home, what risk management technique is he or she practicing? a) retention b) transfer c) avoidance d) sharing

Transfer

When a person buys insurance what method of handling risk has been undertaken? a) transfer b) reduction c) avoidance d) retention

Transfer

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? a) representation b) warranty c) concealment d) indemnity

Warranty

What term best describes the act of withholding material information that would be crucial to an underwriting decision? a) concealment b) withholding c) utmost good faith d) breach of warranty

concealment

Which of the following terms describes the concept of disrupting the chain of events? a) pro rata cause b) proximate case c) intervening cause d) last clear cause

intervening cause

Which of the following does the term proximate cause refer to? a) reason for filing a lawsuit b) negligence that leads to an injury c) injury that leads to monetary compensation d) duty of the defendant to act

negligence that leads to injury