Property Insurance Exam

A business using its own trucks to move its own cargo would insure the cargo using

Motor truck cargo - owners form. A business using its own trucks to move its own cargo would insure the cargo using the owners form.

Which of the following covers a carrier for liability for loss to cargo while it is being transported in a truck?

Motor truck cargo policy - truckers form The motor trucker cargo truckers is liability insurance and the owners form is property coverage.

The extension of coverage under the Commercial Fine Arts Floater includes coverage for newly acquired property for a maximum of

$10,000. An extension of coverage is included for newly acquired property for 30 days for up to 25% of the total limit of insurance, for a maximum of $10,000.

The insured purchased a $200,000 extra expense policy. If the percentages applying to the limit of insurance are 40%, 80%, and 100%, what would be the maximum payable for a 47-day loss?

$160,000 Extra expense coverage is written with a minimum of 3 applicable percentages that apply to the limit of insurance in the declarations. When the period of restoration is 30 days or less, the first percentage applies; when it is more than 30 days and not more than 60 days, the second percentage applies; when more than 60 days, the third percentage applies. In this case, the calculation should be 80% of $200,000, so $160,000.

An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor, who was sitting on the porch, is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have?

Combined single Combined single is a single dollar limit of liability applying to the total of damages for bodily injury and property damage combined resulting from one accident or occurrence.

Expenses that an organization would not have incurred if business interruption had not existed are known as

Extra expenses. Extra expenses are expenses that an organization would not have incurred if the business interruption had not occurred. Examples include additional overtime labor costs or renting a similar building to continue operations, as opposed to waiting until the existing building is rebuilt.

All of the following are conditions commonly found in the insurance policy EXCEPT

Insuring agreement. The insuring agreement provides information on the policy's coverages. Conditions state the legal obligations and duties of the parties to the contract.

Which of the following is true regarding the fire department service charge under the builders risk form?

It is an additional coverage. The fire department service charge is considered an additional amount of insurance. Up to $1,000 coverage is included.

All of the following statements describe the concept of strict liability EXCEPT

It is imposed on defendants engaged in hazardous activities. Strict liability is commonly applied in product liability cases. The business is then liable for defective products, regardless of fault or negligence.

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of

Misrepresentation. Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.

An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have?

Specific Specific insurance provides a specific amount of coverage for each property. A blanket insurance policy provides coverage for more than one property with a single limit of coverage.

When a regular bill of lading is issued, who will be responsible for the invoice cost of any damaged property?

The carrier When a regular bill of lading is issued, the carrier will be responsible for the invoice cost of any damaged property, and the shipper does not have to specifically declare a value.

In insurance, an offer is usually made when

The completed application is submitted. In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

What consequences will occur if a producer acts without a bond that is required?

The producer's license may be revoked. The producer's license may be revoked if the producer acts without a bond that is required.

A group insurance policy was solicited by a limited insurance representative. Which of the following is true according to the disclosure regulation?

The representative's name and signature must appear on the master policy. Any policy solicitation which involves an insurance producer, limited insurance representative, or temporary insurance producer must identify the name of the producer, representative, or firm on the policy.

All of the following are correct regarding misrepresentation EXCEPT

The fines for misrepresentation range from $50 to $1,000. Misrepresentations include guaranteeing dividends and creating misleading advertisements. Penalties for misrepresentation include fines of $200 up to $10,000.

Which of the following IS covered under the theatrical property floater of an Inland Marine policy?

Vehicles used on stage Covered property includes the following: scenery; costumes; theatrical property; and similar property of others. Vehicles are also covered if they are actually used on stage.

When an insurer receives a written complaint from a policyholder, the insurer must respond to the complaint, in writing, within

21 days. Companies must provide a written response to written inquiries and complaints within 21 days of receipt.

Prior to requesting renewal of an insurance producer's license, how many hours of continuing education must a producer complete?

24 hours Once licensed, producers must complete at least 24 hours of study in approved CE courses before every license renewal. Failure to do so will result in automatic termination of the license.

When a commercial property insurance policy, in effect for more than 60 days is canceled for an allowable reason, other than non-payment of premium, the insurer must give written notice to the first named insured of at least

60 days. A provision established by the Insurance Code.

Producers are allowed, by law, to hold client premiums for no more than how many days?

90 days If an insurance company allows their producer to collect premiums on its behalf, the producer may hold the funds for no more than 90 days.

No person may act as a premium finance company or hold himself out to be engaged in the business of financing premium, without obtaining a license. Which of the following would be deemed to be a premium financing activity?

A producer who allows partial payments and schedules the balance for payments that are paid throughout the policy term. Premiums are due at the inception of a policy. A producer is deemed to be financing premiums when 10% or more of the producer's premium accounts receivable are more than 90 days past due.

Which coverage form would provide coverage for all incoming and outgoing shipments?

Annual transit Annual transit policies provide coverage for a shipper's or receiver's incoming and outgoing shipments during the year.

Homeowners policies provide coverage for

Business property while on the residence premises. Your contents coverage will cover up to a $2,500 for loss of business property on premises.

Which of the following is NOT true about earthquake coverage?

Coverage is commonly provided through a federally-funded program. It is a peril excluded by most standard property forms. Coverage for the peril of earthquake may be added by endorsement to most property policies, or coverage may be written in a Difference in Conditions policy.

Which of the following is NOT covered under the Utility Services - Time Element endorsement?

Damage to the insured's property caused by utility service disruption Utility services - time element covers business income or additional expense losses arising from disruption of service caused by a covered peril.

If a licensee charges any fee separate from a commission off of the insured's premium, what must the licensee obtain if the fee exceeds 10% of the premium's value?

Insured's signature If the combined compensation or fee exceeds 10% of the premium amount, the disclosure must also include the signature of the consumer.

All of the following are conditions commonly found in the insurance policy EXCEPT

Insuring agreement. Insuring agreement provides information on the policy's coverages. Conditions state the legal obligations and duties of the parties to the contract.

Which of the following is NOT an element of negligence?

Libel There are four essential elements of negligence: duty, breach, injury, and unbroken chain. Libel is a type of intentional tort.

Which of the following coverages in dwelling and homeowners policies is for indirect losses?

Loss of use Loss of use coverage applies only after a direct loss caused by a covered peril has occurred.

ABC Trucking hauls products for Acme, Inc. as a contract carrier. On one shipment, the driver stopped at a truck stop for lunch. Leaving the truck in the parking lot, he made certain that the truck was locked before leaving it. Upon returning to the truck, he discovered that someone had broken into the truck and stolen the cargo. Is ABC legally liable for this loss?

No, the driver had taken reasonable measures to protect the property by locking the truck. ABC, as a contract carrier, would not be legally liable for this loss. If ABC were operating as a common carrier rather than a contract carrier, it would have been legally liable.

In Illinois, after an auto policy or person property policy has been in force for 5 years, all of the following are allowable reasons for nonrenewal, except

Nonpayment of premium. After 5 years, nonpayment of premium is no longer grounds for nonrenewal. Otherwise, reasons for nonrenewal after 5 years are limited to the same allowable reasons for cancellation.

A building insured with commercial property insurance has been vacant 90 days. Which of the following is NOT true?

Payment for unnamed perils is reduced by 25%. If the building has been vacant for more than 60 consecutive days before the loss, the insurer will not pay for damage caused by vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft. If the loss is caused by any other peril, the insurer will reduce the amount they would have otherwise paid by 15%.

An insured has a liability policy that sets the amount for all claims that arise from a single incident at $50,000. Which type of limit of liability does this insured's policy have?

Per occurrence Per occurrence sets the amount for all claims that arise from a single incident at a certain number.

Who would participate in a Write Your Own (WYO) flood insurance program?

Private insurers that wish to write and service National Flood Insurance policies on a no risk-bearing basis A WYO program is made up of private insurers that write and service National Flood Insurance policies on a no risk-bearing basis through a special arrangement with the Federal Insurance Administration. WYO programs retain part of the flood insurance premium to pay for commissions and administrative costs. The remaining premiums, plus investment, are used to cover losses.

All of the following are considered parts of the policy structure EXCEPT

Provisions Provisions is a broad term used to refer to the sections or clauses of an insurance policy that communicate the policy's benefits, conditions, etc. The essential parts of the policy are declarations, insuring clause, conditions and exclusions.

All of the following are true regarding rebates EXCEPT

Rebates are allowed if it's in the best interest of the client. A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.

Which of the following is INCORRECT concerning the purpose of the Insurance Fraud Prevention Act?

The Act will help insurers not sell policies to those who are high risks. The Insurance Frauds Prevention Act is intended to permit the Director and the department to utilize their expertise to investigate and discover insurance frauds, halt fraudulent activities more effectively and receive assistance from federal and state law enforcement agencies.

Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?

The Fair Credit Reporting Act The purpose of the Fair Credit Reporting Act is to protect consumers against the circulation of inaccurate or obsolete information and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers.

An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

$30,000 This insured only carried 75% of the amount of insurance he had agreed to carry ($120,000 of the agreed $160,000), so the insurer will pay only 75% of the loss, or $30,000. If the insured had carried the required amount of insurance, partial losses would be paid in full. In the event of a total loss, the face of the policy would be paid. If the full amount is not carried, divide the actual amount carried by the amount that should be carried (the coinsurance amount), and multiply it by the loss.

If a property is covered by Company A for $20,000 and Company B covers the same property for $40,000, how much will Company A pay on a $24,000 loss?

$8,000 Pro rata liability applies. Each policy pays a percentage of the loss based on the percentage of coverage that policy provides. Company A carries 1/3 of the total coverage ($20,000 + $40,000 = $60,000). Therefore, it is responsible for 1/3 of the $24,000 loss, or $8,000.

What term best describes the act of withholding material information that would be crucial to an underwriting decision?

Concealment Concealment occurs when a person withholds a material fact that is crucial to making a decision. In insurance, this involves withholding information that would be important for making underwriting decisions.

An insured's accounts receivable records have been damaged. The loss may be covered with

The accounts receivable coverage form. The accounts receivable coverage form reimburses the insured for amounts that can't be collected from customers due to damage to the company's records.

The Director may refuse to issue a license if a licensee's aggregate amount of premiums on controlled business exceeded the aggregate amount of premiums on all other insurance business during

2 calendar years immediately preceding the extension date of the license. An insurance license is not intended to be used to earn commissions on personal insurance needs, or those of family members, or business associates only. An insurance producer license may be refused if the Director has reasonable cause to believe that the aggregate amount of premiums on controlled business exceeded the aggregate amount of premiums on all other insurance business during either 2 calendar years immediately preceding the extension date of the license, or the 12-month period immediately following the issuance or extension of the license.

Which of the following other coverages is NOT included in the basic form dwelling policy?

Breakage of glass Breakage of glass is included in the DP-2 and DP-3 only.

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

Consideration The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.

Which of the following defines the term "controlled business"?

Insurance written on the interests of the producer or his/her spouse In this state, controlled business is defined as the insurance written on the interests of the licensee him/herself and his/her property or risks; the licensee's spouse and his/her property or risks; or the licensee's employer's or own business' life, property or risks.

When does the coverage begin under the builders risk form?

On the date construction starts Coverage begins on the date construction starts.

In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation?

Agreed value Agreed value is a property policy with a provision agreed upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the property at the time the insurance is written. When a loss occurs, the policy pays the agreed value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation.

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT

Dividends from a mutual insurer. Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.

The purpose of the FAIR plan is

To make basic Property insurance more available to Illinois residents. The Fair Access to Insurance Requirements plan attempts to make basic Property insurance more available to Illinois residents.

The type of insurance used to cover goods for one specific trip is called

Trip transit. Trip transit policies cover a single shipment of goods for a specific trip.