Practice Test #9

The insured carries an unendorsed DP-3 dwelling policy on his home and personal contents. While traveling abroad, someone broke into the home and stole $200 in cash, a shotgun valued at $1000. and other household items valued at $2,000. Damage caused by the burglars is $1,500. Assuming no deductible applies to their coverage, how much would be paid?

$1,500. Explanation: The DP-3 only provides damage to the covered property caused by the burglars. Theft is excluded under the DP-3 unless endorsed with the theft endorsement.

Under the new 2000 Homeowner Forms, how much will be paid under claims' expense for loss of earnings by the insured to assist the insurer in the investigation or defense of a claim?

$250 per day.

Under Homeowner Insurance, medical payments to others coverage will cover necessary medical expenses incurred within:

3 yrs. of the accident causing the injury.

Texas issues emergency licenses in cse of an emergency arising out of a disaster. An emergency license is valid for ________ days?

90 days.

Hired car liability under the business auto policy will cover all of the following for liability EXCEPT:

A new SUV owned by an employee, that is using until the insured company can make a purchase of an SUV to be used in the dept. of the employee. Explanation: Hired car coverage does not apply to employees using their own vehicles on company business. This will be an employers non-owned auto coverage and would only protect the employer in case the employee had an at-fault accident while using the vehicle for company business.

An insurance broker is a person who represents:

An insured or prospective insured.

Which of the following statements is correct: 1. Unendorsed DP-2 and DP-3 settle all losses to personal property at actual cash value; 2. Unendorse DP-2 and DP-3 settle all partial losses to dwellings at replacement cost. A. 1 only; B. 2 only; C. Both 1 and 2

Answer: C. Both 1 & 2. Explanation: Both DP-2 and DP-3 settle all personal property losses on an ACV basis. They settle partial dwelling losses at replacement value ONLY if adequate limits are carried. That is, the dwelling limit must be at least 80% of a dwelling's replacement value in order to receive a replacement cost settlement for a partial dwelling loss.

A major difference between surety bonds and insurance contracts is:

Bond underwriters expect few, if any, losses.

What does the Leasehold Interest Endorsement provide?

Covers a building tenant, when a favorable lease is cancelled because of loss or damage. Explanation: Leasehold interest insurance protects against the financial loss suffered by a building tenant, when a favorable lease is cancelled before expiration because of loss or damage to the building by an insured cause of loss.

The Building and Personal Property Coverage Form includes which of the following coverage extensions?

Newly Acquired Property. Explanation: There are five coverage extensions under this form. They are Newly acquired or constructed property; personal effects and property of others; valuable papers and records; property off-premises, and outdoor property. Note that these are very limited in scope of coverage.

When may an insured sue their Insurance Company?

Not until the insured has complied with all policy provisions.

The insured is moving to a new location. Coverage for contents provided under a Homeowner Policy would be:

On a pro-rata basis between the two locations. Coverage would apply for 30 days.

Which of the following statements concerning the Insurance Guaranty Association is not correct?

The Commissioner of Insurance supervises the Association. Explanation: Although the Commissioner has regulatory authority over all insurance matters in the state, the Association is governed and supervised by a nine-member board of directors.

Who determines legal liability?

The court/jury/judge.

The burden of proof is normally a duty of:

The insured.

On the basic dwelling (02) policy, all of the following perils are EXCLUDED EXCEPT:

Volcano. Explanation: The (02) is the edition date and is not relevant. The question is about the DP-1 Basic Form. War, earthquake and landslide are not named perils and are therefore excluded.

Two customers are injured when a fire sweeps through the hardware store. Medical expenses cost $8,000 for one customer and $3,000 for another. A suit against the hardware store results in an award of $40,000 damages to one customer and $25,000 to the other. The hardware store's CGL policy has a per occurrence limit of $50,000, medical payments of $5,000 each person and a general aggregate of $100,000. How must will the insurer pay?

$50,000. Explanation: The per occurrence is only $50,000. This is all the insurer can pay. The amount will then be subtracted from the aggregate limit of $100,000 and leave the insured only $50,000 left to pay future claims during the policy period.

In property and casualty insurance, when must a person absolutely have an insurable interest?

At the time of loss.

Commercial Building and Personal Property coverage forms apply to all of the following EXCEPT:

Dwellings. Explanation: Dwelling forms are available for dwellings.

Which of the following coverages are NOT automatically included in the BOP?

Employee Dishonesty.

Under the Personal Auto Policy, the Supplementary Payments coverage is:

IN addition to the limit of liability.

CGL policies are often referred to as "third party" contracts. Which company would be considered the "third party" in General Construction Company's policy?

Inferno Heating Company who is a claimant. Explanation: The claimant is always the third party in a liability claim.

Strict Liability is best described as:

Liability WITHOUT FAULT. Explanation: Strict liability is liability without fault. Strict liability is found in cases involving ultra-hazardous undertakings wherein the entity undertaking the ultra-hazardous activity or enterprise is, without the necessity of showing negligence, liable for any injuries resulting there from.

The original Nation-Wide Definition for inland marine exposures outlined in specific detail:

The coverage that marine insurers could write.

The declarations section of an insurance policy provides which of the following?

The name, address of the insured and the time duration of the policy--also limits of coverage, endorsements, deductibles, etc.

All of the following are true about workers compensation benefits EXCEPT:

The waiting period applies to medical and disability benefits. Explanation: Workers compensation programs have no waiting periods for medical expenses. Many states do have waiting periods for disabiltiy income benefits.

All of the following are exclusions under a DP-2 dwelling form, EXCEPT:

Tornado. Explanation: Flood, earthquake, and mudslides are excluded perils. Coverage for flood and mudslides can be covered by purchasing a separate flood policy. Earthquake coverage can be purchased separately. Tornado is covered by the wind peril.

Which of the following losses may not be determined by an adjuster?

Use of a rental car from a rental company. Explanation: The adjuster usually advised the claimant to rent a vehicle similar to that which was damged and submit the bills at a later date after the claim has been negotiated.

Which of the following statements concerning the Limited Fungi, Wet or Dry Rot, or Bacteria Coverage Endorsement is correct?

Used to add coverage to the Property and/or Liability sections of the policy. Explanation: It may be used to add coverage to the Property and/or Liability sections of a Homeowners policy under forms HO-3 and the HO-5.