Property Exam Questions
55. A businessowner has a building and personal property policy that covers a shed in which he stores extra parts. If he buys a second shed for the same purposes, this will be automatically covered for how long
a) 15 days b) 20 days c) 30 days d) 45 days Coverage is for 30 days for newly acquired buildings and personal property that are similar in use to the property insured.
68. What is the maximum number of roomers or boarders for properties insured under the dwelling policy
a) 2 b) 3 c) 5 d) 6 Dwelling policies may insure a property that allows up to 5 roomers or boarders.
21. If a licensee does not earn 24 hours of Continuing Education by the license review date, the license will be suspended for up to how many days
a) 30 days b) 60 days c) 90 days d) 120 days If a licensee fails to earn 24 hours of CE by the required review date, the license will be suspended for up to 90 days.
74. If an insurer wishes to appoint a producer, it must file a notice of appointment within how many days of the date that the contract is executed
a) 45 days b) 7 days c) 15 days d) 30 days The insurer has 15 days to file a notice of producer appointment.
45. Johanna purchased a National Flood Insurance policy 10 days after her community entered an emergency program. When would her coverage be effective
a) 5 days after the application and premium payment are mailed b) 12:01 am the day after the application and premium payment are mailed c) 30 days after the application has been accepted d) 12:01 pm on the 5th day after the endorsement request has been mailed During the first 30 days after a community enters the emergency or normal programs, coverage on a flood policy begins at 12:01 a.m. the day after application and premium payment have been mailed.
98. An insured has a personal property replacement cost endorsement under her homeowners policy. If an expensive painting and an antique chair are stolen from the insured's home, what will the insured receive on the claim under that endorsement
a) 70% of the replacement cost b) 80% of the replacement cost c) 100% of the actual cash value d) Nothing The personal property replacement cost endorsement excludes property such as art and antiques.
77. Which of the following losses would NOT be covered by a homeowners policy
a) A $800 outboard motor destroyed by hail b) A coin collection valued at $500 lost in a fire c) A $550 utility trailer blown away by a tornado d) A stolen silver tea set worth $2,000 An HO policy will pay up to $2,500 for silverware by theft, $1,500 for boats, motors, trailers, $1,500 for loss of trailers not used with boats, but no more than $200 for coins.
90. The insured owns an older home with lath and plaster walls. Following a kitchen fire, the insurance company pays to have the wall replaced with drywall that is just as functional, but costs less than lath and plaster. Which loss valuation allows the insurance company to have plaster replaced with drywall
a) Actual cash value b) Functional replacement cost c) Replacement cost d) Market value This loss valuation method allows the insurer, at the time of a loss, to adjust the loss on the basis of functional replacement cost, which is the cost to replace damaged property with less expensive and more modern construction or equipment. A building with lath and plaster walls may be replaced with drywall that is just a functional, but at a lower cost to repair.
97. 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
a) Actual cash value b) Replacement cost c) Reproduction cost d) Stated amount A stated amount is an amount of insurance scheduled in a property policy which is not subject to any coinsurance requirements in the event of a covered loss.
38. 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
a) Adhesion b) Subrogation c) Warranty d) Aleatory An insurance contract is an aleatory contract in that it requires a relatively small amount of premium for a large risk.
39. Which of the following would be required to be licensed as an insurance producer
a) An insurance company director who performs executive, administrative and managerial duties b) A salaried employee who advertises and solicits insurance c) A person whose activities are limited to producing insurance advertisements d) A salaried full-time employee who furnishes information for group insurance A person does not require an insurance producer license if he or she only advertises without intent to solicit insurance. However, once there is solicitation, a license is required.
57. Following a property loss that is covered under a businessowners policy, if the insurer and insured cannot agree on the amount of the loss, what method is used to resolve the issue
a) Arbitration b) Adjudication c) No-fault procedure d) Appraisal The appraisal clause provision allows an insured and insurer that cannot reach an agreement on the amount of a loss settlement to each select its own appraiser. The appraisers then select a disinterested umpire. Disagreements between the appraisers are settled by the umpire. The umpire's decisions are usually binding on both parties.
36. Installing deadbolt locks on the doors of a home is an example of which method of handling risk
a) Avoidance b) Transfer c) Self-insurance d) Reduction Steps taken to prevent losses from occurring are called risk reduction.
61. Which of the following risks is eligible for coverage under a businessowners policy
a) Bars or taverns b) Condominiums c) Banks d) Automobile dealers Insurance Services Office, Inc. (ISO) maintains a list of risks not eligible for consideration for a BOP. Financial institutions, auto dealers, and bars and grills are specifically excluded from coverage.
28. An individual's construction company leaves mobile equipment and construction machinery on the job site until the project is completed. What could this individual use to insure it
a) Builders risk form b) General property form c) Contractors equipment floater d) Bailee's customers form The contractors equipment floater covers equipment left unattended on a job site until the project is finished.
58. If an application for home insurance, made in writing, is declined, how must the insurer or insurance producer provide the explanation for the reason or reasons for the declination
a) By any means acceptable to the insurer and the Commissioner b) By a means consistent with the companies underwriting standard c) In writing d) By direct oral communication made by the insurance producer If the application or request for coverage was made in writing, the insurer or producer must provide an explanation of reasons in writing.
86. A policy that agrees to reimburse the insured for the difference between the value of the insured property at the time of loss and the amount the insured actually spends to repair or replace the damage with new materials of like quality, has which endorsement attached
a) Coinsurance b) Actual cash value c) Replacement cost d) Repair cost Under the replacement cost endorsement, repairs are covered for the amount necessary to repair, rebuild, or replace damaged property with new property with no deduction for depreciation.
72. The ABC Corporation has $100,000 of coverage on its building through insurance Company A, and $50,000 of identical coverage on the same building through insurance Company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs and the pro rata method is used, how much will each insurer pay
a) Company A will pay $24,000; Company B will pay $0. b) Company A will pay $16,000; Company B will pay $8,000. c) Company A will pay $20,000; Company B will pay $4,000. d) Company A will pay $12,000; Company B will pay $12,000. Each policy pays its pro rata share of the loss based upon each policy's share of the total amount of coverage.
96. 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. HO-5 provides open peril coverage for contents; HO-3 is named peril coverage for contents. Replacement cost coverage is available only by endorsement to either form.
79. A farmer is remodeling his 100-year-old farmhouse. He is in the process of painting the porch and hanging shutters. He keeps his ladder, paint, and other materials used to remodel his home under the porch. Which of the following provides coverage for his remodeling materials
a) Coverage C b) Coverage D c) Coverage A d) Coverage B Coverage A covers materials and supplies used to construct, alter, or repair the dwelling. These materials used to service the dwelling are located on or next to the insured dwelling.
20. A specific coverage part is listed on the commercial package policy declarations page, but there is no premium shown. What does that mean
a) Coverage is automatic. b) There is no coverage. c) Coverage applies without premium. d) This must be a misprint on the form. If no premium amount is shown, there is no coverage for that coverage part.
33. Under which of the following conditions can broad theft coverage be added to a dwelling policy
a) If permission is granted by the department of insurance b) Broad theft coverage cannot be added to a dwelling policy. c) If the policy has been in effect for 60 days d) If the insured is owner-occupant of the dwelling Broad theft coverage can be added as an endorsement to a dwelling policy if the insured is owner-occupant of the dwelling.
78. What do individuals use to transfer their risk of loss to a larger group
a) Insurable interest b) Exposure c) Indemnity d) Insurance Insurance is the mechanism whereby an insured is protected against loss by a specified future contingency or peril in return for the present payment of premium. Because many other individuals with the same or similar risk of loss are paying premiums, funds are available to indemnify those who actually suffer that loss.
62. What provision in a property policy applies when the insurer broadens coverage but does not increase the premium
a) Insuring clause b) Appraisal clause c) Subrogation clause d) Liberalization clause The liberalization clause extends broader coverages to current policies if they do not affect the premium. A modifying endorsement is not required to add such coverage.
35. Which services are associated with Standard & Poor's and AM Best
a) Investigating violations of The Fair Credit Reporting Act b) Providing employment histories for investigative consumer reports c) Storing medical information collected by insurance companies d) Rating the financial strength of insurance companies Reports generated by Standard & Poor's and AM Best help prospective consumers to judge the financial security of various insurance companies.
42. An out-of-state producer wants to start selling insurance in this state. What type of license should the producer obtain
a) Limited lines b) Surplus lines c) Temporary d) Nonresident A nonresident producer is a producer who is domiciled and licensed as a resident producer in another state.
49. 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 Loss ratio equals (incurred losses + loss adjusting expense)/earned premium
26. Which method of loss valuation is contrary to the basic concept of indemnity
a) Market value b) Agreed value c) Replacement cost d) Functional replacement cost The replacement cost method of loss valuation is contrary to the basic concept of indemnity because following a loss it may provide the insured with a settlement in excess of the property's actual cash value.
80. A small restaurant was forced to close for 10 days in August when the power company's transformer was destroyed by lightning, and the restaurant was without electricity. Which of the following endorsements could be added to the businessowners policy that would provide protection against loss of income from such events
a) Named peril endorsement b) Protective safeguards endorsement c) Utility services - time element endorsement d) Utility services-direct damage endorsement The utility services - time element endorsement would cover business income and extra expense arising from utility service disruption that is caused by a covered peril.
87. When can a Standard Fire Policy be cancelled by the insured
a) Never, coverage continues until the expiration of the policy b) Within 10 days of receipt of the policy c) At any time d) At the policy renewal date An insured can cancel a Standard Fire Policy at any time.
51. An insured works outside the home. The insured's sister lives with him and cares for his four children. When the insured's home is severely damaged by fire, the family moves into an apartment while repairs are being made. The largest apartment available in the area has two bedrooms, so the insured's sister has to stay at a motel. How much will the HO-3 form pay for these additional living expense
a) Nothing b) All of the expense up to the Coverage D limit c) The cost of renting an apartment, but not the cost of the motel room d) The cost of renting an apartment, and 50% of the cost of the motel Coverage D will pay the expenses incurred to maintain the same lifestyle as before the loss.
31. An applicant is purchasing a homeowners policy. A producer comes to her home, fills out the paperwork, and tells the applicant that her home will be covered as soon she signs all of the paperwork, and that she will receive a new policy in the mail in 5 business days. Even though the policy is not issued, the applicant's home is temporarily covered until then. Which of the following makes that possible
a) Notice of claim b) Binder c) Loss settlement provision d) Mortgagee clause A binder is a temporary agreement issued, usually in writing, but may be oral, by a producer or insurer providing temporary coverage until a policy can be issued.
56. What type of insurance can be obtained through a surplus lines insurer
a) Out-of-state coverage b) Commercial coverage c) Coverage that provides dividends d) Coverage that is unavailable through authorized insurers The permitted types of transactions are usually limited to insurance that is difficult to place, or insurance that is not readily available through an authorized insurer in the state. These unauthorized insurers are called excess or surplus lines insurers.
89. Which of the following would be considered causes for flood conditions covered by the National Flood Insurance Program
a) Overflow of inland or tidal waters b) Unusual and rapid accumulation or runoff of surface waters from any source c) A mudflow d) All of the above could be considered flood sources A flood, as defined by the National Flood Insurance Program, is a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties from overflow of inland or tidal waters, unusual and rapid accumulation or runoff of surface waters from any source, or mudflow.
34. Which of the following endorsements is used to insure Coverage C (personal property) for values beyond the limitations of the homeowners policy
a) Personal property replacement cost endorsement b) Blue skies endorsement c) Personal property injury endorsement d) Scheduled personal property endorsement Items that are scheduled and insured under a scheduled personal property endorsement are covered on a valued basis.
93. What type of information would be found in a policy's insuring agreement
a) Policy limits b) Insurer's address c) Renewal dates d) Location of premises An Insuring Agreement establishes the obligation of the insurance company to provide the insurance coverages as stated in the policy. The insuring agreement lists the parties to the contract, effective and renewal dates, the description of coverage provided, and perils (among other things). Location of premises, policy limits, supplemental representations, and insurer's name and address can all be found in the Declarations.
66. Which commercial crime form would provide coverage for a loss that did not necessarily happen during the policy period but was revealed during the policy period
a) Retro form b) Reporting form c) Loss sustained form d) Discovery form The discovery form is used for losses that are discovered during the policy period but may not have happened during the policy period. The discovery form is one of the conditions contained in the crime general provisions forms, which contain conditions and exclusions applying to all crime forms. The discovery period is normally 1 year.
10. Under a dwelling policy, which of the following clauses applies if an insured has lost one of two matching silver candlesticks
a) Sets coverage b) Fractional loss c) Portion loss d) Pair or set Pair or set is a clause stating that if only one item of a set has been lost, the insurer is not obligated to pay the total value of the set.
99. Which of the following types of valuation works best for property whose value does not fluctuate much
a) Stated amount b) Inflation guard c) Agreed value d) Market value Agreed value works best for items whose value does not fluctuate much. When a loss occurs, the policy pays the agreed value as specified on the policy schedule, regardless of the insured item's appreciation or depreciation.
53. Which common policy condition prohibits the insured from changing the rights or duties as defined under the policy to any other person or entity without the written consent of the insurance company
a) Subrogation b) Reassignment and modification c) Changes d) Transfer of rights and duties under the policy Under the transfer of rights and duties under the policy condition, the insured cannot transfer any rights or duties under the policy to any other person or organization without the written consent of the insurance company.
60. Which of the following would require an individual to stop participating in a specific activity if the Commissioner believes to be violating the Insurance Code
a) Suspension of authority b) Cease and desist order c) Stop action order d) Restriction of authority A cease and desist order requires an individual to stop doing a specific activity that the Commissioner believes to be violating the Insurance Code.
41. In property insurance, actual cash value is defined as which of the following
a) The actual amount of a loss payable, less the policy deductible b) Replacement cost at the time of the loss, less depreciation c) Market value of the property at the time of the loss d) Stated value of the property as shown on the declaration A loss valuation method used in many property forms is determined by today's replacement cost minus depreciation for age and obsolescence.
2. Which of the following best describes liberalization clause in a policy
a) The insurer is relieved of its contractual obligations to the insured. b) The insured may assign the policy to any person without their written consent. c) The policy cannot be cancelled. d) Changes adopted by the insurer that broaden coverage automatically apply to the policy at no additional premium. Liberalization clause states that if the insurer adopts any changes that broaden coverage in the policy, those changes will automatically apply to the policy at no additional premium as of the date the insurer implements the change in the insured's state, provided that this implementation date falls within 60 days prior to or during the policy period stated in the declarations.
5. What will happen if a house covered by a standard mortgage clause is a total loss
a) The mortgagee receives the full benefit and passes the insured's share to the insured. b) The insurer pays the mortgagee according to the mortgagee's interest in the property. c) The mortgagee retains no rights to any contracts involving the policy. d) The insured receives the full benefit and passes the mortgagee's share to the mortgagee. 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 real property.
1. In a commercial package policy, who may cancel the policy in writing and make changes to the policy with the consent of the insurer
c) First named insured Some commercial policies may have more than one named insured. Complications and confusion over contractual duties are reduced by making the insurer and the first named insured the primary parties for carrying out responsibilities.