Learn As You Go
Surplus lines brokers are required to post a surety bond with the Commissioner of insurance in an amount of at least a) $10,000. b) $15,000. c) $20,000. d) $5,000.
a) $10,000
All of the following are special personal property limits under a homeowners policy EXCEPT a) $500 for business personal property on the insured premises. b) $1,500 for securities, accounts, deeds, and evidences of debt. c) $1,500 for trailers not used with watercraft. d) $2,500 for theft of firearms.
a) $500 for business personal property on the insured premises
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? a) 3 days b) 5 days c) 10 days d) 14 days
a) 3 days
An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this? a) Consequential b) Direct c) Special d) Additional
a) Consequential
An additional loss that results from a direct loss of property is called a/an a) Indirect loss. b) Proximate loss. c) Liability loss. d) Punitive loss.
a) Indirect loss
Which of the following would be covered under the crime coverage inside the premises - theft of money and securities? a) Loss or damage to a locked safe, vault, or cash register b) Loss resulting from the surrendering of property in any exchange or purchase c) Dishonest acts of employees, directors, trustees or representatives d) Accounting or arithmetic errors or omissions
a) Loss or damage to a locked safe, vault, or cash register
Several insureds have become liable because of a single loss. How will the policy's limit of liability be affected? a) No more than the per occurrence limit applies, no matter how many insureds are involved. b) Pro rata liability applies. c) A homeowners policy can have no more than one insured. d) The full limit applies to each insured individually.
a) No more than the per occurrence limit applies, no matter how many insureds are involved
Who might receive dividends from a mutual insurer? a) Policyholders b) Subscribers c) Stockholders d) Agents
a) Policyholders
While an insured was towing a utility trailer with his auto, the trailer came loose and ran into a store front. What part of the insured's auto policy would pay for the damage to the store? a) Property damage liability b) Collision coverage c) Other-than-collision coverage d) This loss would not be covered.
a) Property damage liability
The Federal Fair Credit Reporting Act a) Regulates consumer reports. b) Protects customer privacy. c) Regulates telemarketing. d) Prevents money laundering.
a) Regulates consumer reports
Who is covered by an HO-4 policy? a) Tenants b) Owners of a vehicle c) Owners of a condominium d) Owners of a home
a) Tenants
When a regular bill of lading is issued, who will be responsible for the invoice cost of any damaged property? a) The carrier b) The person to whom the goods are being shipped c) The shipper d) The driver of the truck
a) The carrier
All of the following are true regarding physical damage coverage EXCEPT a) The limit of liability is the greater of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle. b) Losses to nonowned autos will be covered the same as the broadest coverage available for any covered auto, except nonowned trailers are limited to $1,500. c) The policy will pay up to $20 per day up to a maximum of $600 for rental transportation. d) The insurer will pay for direct and accidental loss to a covered auto minus any applicable deductible.
a) The limit of liability is the greater of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle
Which of the following statements is true concerning a bonded contractor who defaults on a construction performance contract? a) The obligee may engage another contractor and then seek reimbursement from the surety. b) The surety may cancel the bond and avoid paying any losses or expenses. c) The contractor will lose his license to operate in the state. d) The principal has no obligation to complete any remaining work or to pay for the expenses.
a) The obligee may engage another contractor and then seek reimbursement from the surety
In the event of a producer's license being terminated, which of the following would be true? a) The producer's appointments must also be terminated. b) The producer must wait 3 years before applying for a new license. c) The producer must automatically retake the licensing exam. d) The producer is barred from selling insurance in this state indefinitely.
a) The producer's appointments must also be terminated
Which of the following would NOT be considered part of the insured location under the liability section of a homeowners policy? a) Vacant farmland owned by the insured b) A residence where an insured is temporarily residing c) A family cemetery plot d) A lakeside cabin rented by the insured for vacation
a) Vacant farmland owned by the insured
A business hosted an annual holiday party for employees and customers, after which a customer who had too much to drink was involved in an automobile accident. Occupants of the other car involved in the accident sued the business for serving the customer too much alcohol. Will the businessowners policy provide coverage? a) Yes, none of the exclusions will apply. b) Yes, employer liability obligates the company to pay. c) No, accidents outside the company premises are not covered. d) No, liquor liability is excluded.
a) Yes, none of the exclusions will apply
All of the following statements concerning coinsurance are true EXCEPT a)The coinsurance formula will also be applied to total losses. b)It is used to help adequacy and equity in rates. c)The insured agrees to maintain insurance equal to some specified percentage of the value of the property. d)If the insurance carried is less than required, the insurance may not cover the whole loss.
a)The coinsurance formula will also be applied to total losses.
An insured has $5,000 of medical coverage on a personal auto policy at the time of a covered accident. The insured and two passengers are injured. Medical treatment costs $7,000 for the insured, $4,000 for the first passenger, and $8,000 for the second passenger. How much will the policy pay under medical payments coverage? a) $5,000 minus the policy deductible b) $14,000 c) $15,000 d) $5,000 maximum for the accident
b) $14,000 The limit is not more than $5,000 per person, per accident.
Which of the following is the correct formula for computing a loss ratio? a) Loss adjusting expenses - incurred expenses b) (Incurred losses + loss adjusting expense)/earned premium c) (Incurred expenses + loss adjusting expenses)/earned premium d) (Incurred losses - loss adjusting expense)/earned premium
b) (Incurred losses + loss adjusting expense)/ earned premium
A broker requests a hearing with the Commissioner. Within how many days of the request must the hearing be held? a) 10 b) 30 c) 60 d) 90
b) 30
Under the dwelling policy, if an insurer chooses to repair or replace damaged or lost property, it must inform the insured within how many days of receiving proof of loss? a) 10 days b) 30 days c) 45 days d) 60 days
b) 30 days
Vandalism and malicious mischief would be covered if the insured's premises have been vacant for no more than how many days? a) 30 b) 60 c) 100 d) 365
b) 60
Which of the following would be a legal reason for a named driver exclusion in an auto liability policy? a) A driver's relationship to the vehicle owner b) A driver's claim experience c) A driver's age d) Driving record of all individuals covered under the policy
b) A driver's claim experience
Which of the following statements is true regarding the premium computation for workers compensation insurance? a) The premium is set at the beginning of the policy period and will not change. b) A premium auditor has the right to examine the insured's compensation records at the end of the policy period to determine the actual premium basis. c) The premium basis for workers compensation insurance varies by the type of industry in which the insured is involved. d) The insured pays a guaranteed premium based on an estimated value of the annual income received.
b) A premium auditor has the right to examine the insured's compensation records at the end of the policy to determine the actual premium basis
In dwelling policies, automatic increase in insurance is a) Coverage for newly acquired property. b) Coverage by endorsement. c) Automatic coverage. d) Coverage without additional premium.
b) Coverage by endorsement
The major portion of the premium for a boiler and machinery policy pays a) Coverage for BI & PD of others. b) For replacement parts. c) For inspections and examinations. d) Repair to prevent.
b) For replacement parts
Which of the following limits, shown in the declarations of a policy, applies to medical expenses? a) Per incident b) Per person c) Per occurrence d) Per injury
b) Per person
All of the following are additional liability coverages automatically provided in a homeowners policy EXCEPT a) Loss assessment coverage. b) Personal injury. c) Claims expenses. d) Damage to the property of others.
b) Personal injury.
Which services are associated with Standard & Poor's and AM Best? a) Storing medical information collected by insurance companies b) Rating the financial strength of insurance companies c) Investigating violations of The Fair Credit Reporting Act d) Providing employment histories for investigative consumer reports
b) Rating the financial strength of insurance companies
All of the following are additional causes of loss included in the broad form of a commercial property policy EXCEPT a) Water damage. b) Replacement cost. c) Falling objects. d) Weight of ice, snow, or sleet.
b) Replacement cost
When an umbrella policy is broader than underlying insurance and it pays a loss that is not covered by the underlying policy, it usually only pays a) A percentage of the loss as described on the declarations. b) The excess over the self-insured retention. c) The amount specified in the policy under the additional coverage provisions. d) The amount in excess of the underlying policy deductible.
b) The excess over the self-insured retention
Which of the following losses would be covered under the property damage liability coverage of a personal auto policy? a) A passenger in the insured's vehicle is injured following an accident caused by the insured. b) The insured damages a rented garage when he failed to stop in time. c) A temporary substitute vehicle is damaged while the insured is driving it. d) The insured's vehicle is damaged when it collides with a deer.
b) The insured damages a rented garage when he failed to stop in time
In insurance policies, contract ambiguities are automatically ruled in the favor of the insured. What privilege does the insurer have in order to balance this? a) The right to revoke the policy b) The right to raise premiums as a result of court rulings c) The right to determine the wording of a policy d) The right to refute the rulings
c) The right to determine the wording of a policy
Which of the following statements would be correct if an insured failed to maintain the underlying limits as required by a personal umbrella policy? a) The insured would have to pay the self-insured retention limit. b) The insured would be responsible for the amount required as underlying limits in the event of a claim. c) It would have no effect on the umbrella policy. d) The policy will be cancelled.
b) The insured would be responsible for the amount required as underlying limits in the event of a claim
Which of the following statements would be correct if an insured failed to maintain the underlying limits as required by a personal umbrella policy? a) The insured would have to pay the self-insured retention limit. b) The insured would be responsible for the amount required as underlying limits in the event of a claim. c) It would have no effect on the umbrella policy. d) The policy will be cancelled.
b) The insured would be responsible for the amount required as underlying limits in the event of a claim.
On a DP-3 Dwelling Property Special Form policy, the coverage provided for personal property is a) The same as provided on the DP-1 Basic Form. b) The same as provided on the DP-2 Broad Form. c) All risk. d) Open peril.
b) The same as provided on the DP-2 Broad Form
All of the following are other coverages included in both the broad and special form dwelling policy EXCEPT a) Lawns, trees, shrubs, and plants. b) Theft of personal property. c) Collapse. d) Breakage of glass.
b) Theft of personal property.
Which of the following types of property will NOT be covered by business liability insurance? a) Nonowned watercraft 50 feet long used for transporting personal property of the insured b) Owned watercraft 30 feet long used for carrying passengers for a fee c) An auto parked at the insured's premises d) Watercraft while on shore at a premises owned by the insured
b) owned watercraft 30 feet long used for carrying passengers for a fee
Which of the following homeowners forms is designed for individuals that own and reside in a condominium? a)HO-3 b)HO-4 c)HO-6 d)HO-2
c HO-6
Bob's home is insured for $100,000 under a dwelling policy. Yesterday his home suffered $20,000 damage from a fire. Today the home was struck by lightning, starting another fire that completely destroyed the structure. Bob's policy will pay a) $20,000. b) $120,000. c) $100,000. d) $80,000.
c) $100,000
A commercial property special form covers property in transit up to a) $500. b) Full replacement cost. c) $5,000. d) ACV.
c) $5,000
How long must producers maintain records of continuing education completion? a) 2 years b) 3 years c) 4 years d) Indefinitely
c) 4 years
What is the maximum number of roomers or boarders for properties insured under the dwelling policy? a) 2 b) 3 c) 5 d) 6
c) 5
Which of the following is NOT considered an insured contract under the commercial general liability policy? a) An obligation as required by ordinance to indemnify a municipality, except for work for a municipality b) A written lease agreement on the insured premises c) A written agreement which indemnifies a person for fire damage to the premises rented to the insured d) An elevator maintenance agreement
c) A written agreement which indemnifies a person for fire damage to the premises rented to the insured
Which of the following statements is true concerning the special form dwelling policy? a) Both Coverage A and Coverage C are provided for the broad form perils. b) Coverage A is for all-risk perils, and Coverage C is for basic perils only. c) Coverage A is for all-risk perils, and Coverage C is for the broad form perils. d) Both Coverage A and Coverage C are provided on an all-risk basis.
c) Coverage A is for all-risk perils, and Coverage C is for the broad form perils
An insured has four separate but identical policies written by different insurers to cover her $100,000 building. Each policy is written for $100,000, and each has the pro rata liability other insurance clause. In the event of a total loss to the building, what would each insurer pay? a) The first policy written will pay $75,000, and the other three policies will contribute proportionately to pay for the remaining $25,000. b) The policy with the earliest effective date will pay the entire loss, and the other policies will pay nothing. c) Each policy will pay $25,000 of the loss. d) Each policy will pay the total policy limits of $100,000.
c) Each policy will pay $25,000 of the loss
Events or conditions that increase the chances of an insured loss occurring are referred to as a) Risks. b) Perils. c) Hazards. d) Exposures.
c) Hazards
All of the following are conditions commonly found in the insurance policy EXCEPT a) Subrogation. b) Appraisal. c) Insuring agreement. d) Cancellation and nonrenewal
c) Insuring agreement
Which of the following types of property would be covered in homeowners coverage forms? a) Structures rented to others who are not tenants of the dwelling b) Animals, birds, or fish c) Landlord furnishings in an on-premises apartment d) Structures used for business purposes
c) Landlord furnishings in an on-premises apartment
Which of the following is included under the physical damage coverage of a personal auto policy? a) A cellular phone located in a locked vehicle b) Custom furnishings or equipment in a pickup or van c) Sound reproduction equipment permanently installed in the covered auto d) A covered auto that is seized and destroyed by a government authority
c) Sound reproduction equipment permanently installed in the covered auto
All of the following are EXCLUDED by PIP coverage EXCEPT a) An insured is injured while in a car that he knows is stolen. b) The insured is injured while fleeing from the scene during commission of a felony. c) The insured is injured after being rear ended while sitting at a red light. d) An insured deliberately crashes into a tree.
c) The insured is injured after being rear ended while sitting at a red light
When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be a) Strict liability. b) An intervening cause. c) The proximate cause. d) The direct cause.
c) The proximate cause
All of the following are perils covered under the broad form dwelling policy EXCEPT a) Lightning. b) Collapse. c) Theft. d) Fire.
c) Theft.
Which of the following statements is NOT true regarding mobile agricultural machinery and equipment coverage? a) It covers detached parts and accessories of mobile devices. b) It insures eligible equipment for open perils. c) This coverage must be written as part of farm coverage. d) It relates to devices used in the everyday farm operation.
c) This coverage must be written as part of farm coverage
Which loss listed below would be fully covered by a homeowners policy? a) $1,200 pedigreed golden retriever stolen b) $24,000 bass boat destroyed in a tornado c) $5,000 firearm collection stolen d) $2,000 silver tea set stolen
d) $2,000 silver tea set stolen
An insured hits a deer and crashes his car into a tree. The total damage to the vehicle is $6,000. How will this loss be covered? a) $3,000 would be paid under other-than-collision; $3,000 would be paid under collision coverage. b) $6,000 would be paid under collision coverage. c) This would not be a covered loss. d) $6,000 would be paid under other-than-collision coverage.
d) $6,000 would be paid under other-than-collision coverage
The Property and Casualty Guaranty Corporation is obligated to pay the full amount of any claim between $100 and $300,000 if the claim occurs within what period of time? a) 45 days after an insurer has been declared insolvent and after the insurance policy has expired b) 90 days before the policy has expired c) 180 days before the policy has expired d) 30 days after the insurer has been declared insolvent and before the insurance policy has expired
d) 30 days after the insurer has been declared insolvent and before the insurance policy has expired
The difference in the contents coverage on an HO-3 and HO-5 is which of the following? a) Contents are covered open peril on HO-3, and named peril on HO-5. b) Contents are covered for replacement cost on HO-5, and ACV on HO-3. c) Contents are covered for replacement cost on HO-3, and ACV on HO-5. d) Contents are covered open peril on HO-5, and named peril on HO-3.
d) Contents are covered open peril for HO-5, and named peril on HO-3
The designation symbols used in commercial auto policies can be found in which policy section? a) Liability Coverage b) Definitions c) Conditions d) Covered Auto
d) Covered Auto
What is the purpose of the coinsurance clause found in property insurance policies? a) Encourage higher standards of care by requiring the insured to pay a portion of every loss b) Ensure that insureds do not overinsure their property c) Prevent insureds from profiting from a loss d) Encourage the insured to insure the property closer to its full value
d) Encourage the insured to insure the property closer to its full value
Expenses that an organization would not have incurred if business interruption had not existed are known as a) Continuing expenses. b) Additional expenses. c) All-inclusive expenses. d) Extra expenses.
d) Extra expenses
Which of these methods of loss valuation replaces damaged property, even if this replacement is more expensive than the limit shown on the policy? a) Functional replacement cost b) Replacement cost c) Agreed value d) Guaranteed replacement cost
d) Guaranteed replacement cost
While cutting grass in your yard with your brother's borrowed lawnmower, the fuel line ruptures and the lawnmower is destroyed in the fire. How will your HO liability react? a) It will not cover the damage because you are not liable. b) It will pay your brother's property insurance deductible. c) Your HO liability and your brother's property coverage will share on a prorated basis. d) It will cover the damage.
d) It will cover the damage
Which of the following is defined as a covered cause of loss in businessowners property coverage? a) Rain b) Smoke from agricultural smudging c) Pollution d) Leakage from fire-extinguishing equipment
d) Leakage from fire-extinguishing equipment
How much is the premium for the dwelling under construction endorsement under the dwelling policy? a) 75% of the gross premium b) The full value of the house c) 50% of the actual value premium d) The average amount of insurance during construction
d) The average amount of insurance during construction
What will happen if a house covered by a standard mortgage clause is a total loss? a) The mortgagee retains no rights to any contracts involving the policy. b) The insured receives the full benefit and passes the mortgagee's share to the mortgagee. c) The mortgagee receives the full benefit and passes the insured's share to the insured. d) The insurer pays the mortgagee according to the mortgagee's interest in the property.
d) The insurer pays the mortgagee according to the mortgagee's interest in the property
An insured is driving her auto and strikes a large pothole, causing a flat tire. Which coverage of the insured's personal auto policy will pay for the repair? a) Comprehensive b) Collision c) Other than collision d) This loss is not covered
d) This loss is not covered