Property

Mrs. Delaney hired a contractor to build a deck on the back of her house. She purchased the necessary lumber and it's piled in her backyard. Under what coverage part of her homeowners policy is the lumber insured? a. Coverage A - Dwelling b. Coverage B - Other Structures c. Coverage D - Loss of Use d. The lumber isn't insured by her policy.

a. Coverage A - Dwelling (Materials and supplies located on the residence premises that are to be used in the construction, alteration, or repair of the insured dwelling are insured under Coverage A - Dwelling.)

Under the NFIP, which of the following properties would most likely be covered under the general property form for residential buildings? a. Metropole Apartments b. Neon Nights Motel c. The Germania House, a bed-and-breakfast inn d. Shady Grove nursing home

a. Metropole Apartments (The general property form is used for both residential and nonresidential properties. When applied to residential buildings, it can cover apartment buildings, assisted-living facilities (distinct from nursing homes), and hotels and motels with more than four units where the normal guest occupancy is at least six months.)

Which of the following statements correctly describes coverage for mold damage under the businessowners policy (BOP)? a. Only damage from mold resulting from water used to extinguish a fire is covered. b. All damage from mold resulting from water is always covered. c. All damage from mold is always excluded. d. Damage from mold is excluded unless it is the result of rainfall.

a. Only damage from mold resulting from water used to extinguish a fire is covered. (Damage caused by fungi, such as mold, is excluded under the BOP. However, an exception is made when mold grows in conditions caused by water used to extinguish a fire. Fungi, wet rot, or dry rot resulting from the water used to extinguish a fire, including mold, are covered by the BOP.)

Heat and electricity were out for four days at Tanner's home due to a city power outage. The lack of heat, combined with freezing weather conditions, caused the pipes in Tanner's home to burst. Will his DP 3 Special Dwelling policy cover this loss? a. The freezing loss is covered by the DP 3 only. b. Freezing loss is not covered by any dwelling policy form. c. Fifty percent of the freezing loss will be covered by the DP 3. d. Seventy-five percent of the freezing loss will be covered by the DP 3.

a. The freezing loss is covered by the DP 3 only. (The power failure exclusion refers to the failure of power or any other utility service if this failure occurs off the residence premises. However, if a covered loss ensues as a result of this failure, the ensuing loss itself is covered.)

The farm policy defines a dwelling as all of the following EXCEPT: a. a barn used to store farm equipment b. a farm house in which the family lives c. a tool shed attached to a farm house d. materials intended for use in building or renovating the dwelling

a. a barn used to store farm equipment (A covered dwelling is a building owned by and used primarily by the insured for residential purposes. Coverage on the dwelling includes not only a house or mobile home, but also attached structures and materials used to build or renovate the dwelling or attached structures.)

All of the following losses are subject to limits under a businessowners policy (BOP) EXCEPT: a. damage caused by lightning b. loss to steam boilers caused by internal conditions c. missing property, unless there is evidence to show what happened to it d. breakage of fragile articles

a. damage caused by lightning (Lightning damage is covered with no limitation other than the limit of liability on the property.)

Which one of the following Other Coverages are provided in all three unendorsed dwelling policy forms? a. reasonable repairs b. trees, shrubs, and other plants c. collapse d. glass or safety glazing material

a. reasonable repairs (Of those listed in this question, only reasonable repairs coverage is provided in all three unendorsed forms.)

A rare gun worth $30,000 was stolen from it Samuel's home. How much, if anything, will Samuel's homeowners policy pay for this loss? a. nothing, because firearms are not covered under a homeowners policy b. 2,500 c. $6,000 d. $30,000

b. 2,500 (The sublimit in the 2011 edition of ISO's homeowners policy is $2,500. Exact dollar limits vary among the different ISO policy form editions and among non-ISO policies.)

Which of the dwelling policy coverages, if any, would cover wall-to-wall carpeting that is damaged by a burst water pipe? a. Coverage C - Personal Property b. Coverage A - Dwelling c. Coverage B - Other Structures d. not covered

b. Coverage A - Dwelling (Coverage A - Dwelling covers the dwelling that is listed in the declarations and structures attached to the dwelling, including wall-to-wall carpeting installed over an unfinished floor.)

Under what section of a homeowners policy is an in-ground pool insured, if at all? a. Coverage A - Dwelling b. Coverage B - Other Structures c. Coverage D - Loss of Use d. The pool isn't insured by her policy.

b. Coverage B - Other Structures (The swimming pool is insured under Coverage B - Other Structures on the homeowner policy because it is not attached to the dwelling.)

Stefania buys a new car on credit from a dealer. The dealer requires her to buy credit insurance and tells her that she can choose the agent and insurer from which to buy the insurance. However, it requires her to obtain its approval before she buys the insurance. Which of the following statements is correct? a. As the creditor, the dealer has the right to approve the credit insurance. b. The dealer is probably committing an illegal act. c. The dealer is entitled to refuse any credit insurance that the buyer chooses. As the creditor, the dealer should recommend suitable credit insurance to the buyer.

b. The dealer is probably committing an illegal act. (A creditor or lender cannot interfere with the right of the buyer to choose the agent and insurer for credit insurance, and it cannot refuse any reasonably adequate credit insurance that the buyer selects.)

All of the following are included on the declarations page of a commercial property insurance policy EXCEPT: a. name of the insured b. causes of loss c. addresses of covered premises d. limits of insurance

b. causes of loss (The declarations page contains information that pertains to that particular policy, such as the name of the insured, the addresses of covered premises, the limits of insurance, the deductible amount, and so forth. Causes of loss are addressed in a separate form.)

In ocean marine insurance, the term "freight" refers to which of the following? a. the vessel b. charges assessed for carrying cargo c. the hull d. the cargo

b. charges assessed for carrying cargo (In the context of ocean marine insurance, freight is the charge for carrying goods.)

With the dwelling policy, the DP 2 Broad Form covers the dwelling on what valuation basis? a. actual cash value basis b. replacement cost basis c. agreed value basis d. depreciated value basis

b. replacement cost basis (The DP 2 covers the dwelling and other structures on a replacement cost basis. However, it covers personal property (and awnings, carpeting, household appliances, outdoor equipment and antennas, and nonbuilding structures) on an actual cash value basis.)

Anna discovered that a clerk in her leather goods shop accepted twelve $100 counterfeit bills. Will any of this $1,200 loss be covered by Anna's businessowners policy (BOP)? a. There is no coverage for accepting counterfeit money. b. Fifty percent of the loss will be covered. c. $1,000 of the loss will be covered. d. The entire $1,200 loss will be covered.

c. $1,000 of the loss will be covered. (Coverage of $1,000 is provided for loss due to the insured having accepted counterfeit money or money orders.)

In the liability section of a homeowners policy, "business" refers to a full-time, part-time, or occasional trade, profession, or occupation a person engages in for money or other compensation of at least: a. $100 per year b. $500 per year c. $2,000 per year d. $10,000 per year

c. $2,000 per year ("Business" refers to a full-time, part-time, or occasional trade, profession, or occupation as well as other activities a person engages in for money or other compensation of at least $2,000 per year.)

Bryan's homeowners insurance company responds to a claim for bodily injury filed by his neighbor. If the insurance company makes payment without regard to Bryan's legal liability, under what coverage is it paying? a. Coverage E - Personal Liability b. Coverage C - Personal Property c. Coverage F - Medical Payments to Others d. Coverage D - Loss of Use

c. Coverage F - Medical Payments to Others (Medical Payments to Others pays for reasonable and necessary medical expenses under certain circumstances without regard to the legal liability of the insured.)

The land immediately behind Amy's home was being excavated to install underground wiring to her garage. The earth movement resulted in a gas line break and explosion that damaged her home. Which statement is true about coverage for losses due to earth movement under Amy's DP 3 form? a. Earth movement losses are generally covered. b. Earth movement losses are covered only if they result from an act of God. c. Only damage resulting from the explosion is covered. d. Damage resulting from the explosion is excluded.

c. Only damage resulting from the explosion is covered. (Earth movement losses, which include perils such as earthquake, land shock waves, and landslide, are excluded under the DP 3 form. However, coverage is provided if a direct loss by fire or explosion ensues, but only for the damage resulting from the fire or explosion.)

David, an electrician, is installing electrical wiring in a building under construction. While working on an electrical control panel, he negligently starts a fire that burns down most of the building. Is there coverage for the damage under the liability section of David's businessowners policy? a. No. This is excluded among the property damage exclusions. b. No. He needs an umbrella policy to cover the damages. c. The damage to the control panel is excluded, but the fire damage is covered. d. The fire damage is excluded, but damage to the control panel is covered.

c. The damage to the control panel is excluded, but the fire damage is covered. (The liability section of the businessowners policy will not cover damage to the part of the property on which the insured is working. It will cover damage to other property that results from the insured's work.)

Mr. Uhlman's dwelling policy is written on a DP 1. He wants to add the peril of windstorm to the basic perils of fire, lightning, and internal explosion. What instructions do you give him with respect to processing his request? a. The peril of windstorm is not available on the DP 1. b. The peril of windstorm must be purchased with the peril of vandalism. c. The peril of windstorm can be purchased with extended coverages (EC). d. The peril of windstorm can only be added at renewal.

c. The peril of windstorm can be purchased with extended coverages (EC). (The peril of windstorm cannot be added by itself to the DP 1. It is included in the extended coverages and may be purchased with the extended coverages.)

Action Auto Mart sells a used truck to Jones. Jones decides to pay the purchase price over time and intends to finance the purchase through Action Auto. The salesperson tells him that to do so, Jones is required to obtain credit insurance through Action Auto Mart's Active Buyer Program. With respect to the salesperson's statement, which of the following is correct? a. Jones is required to obtain credit insurance through the Active Buyer Program. b. Though the salesperson's conduct is aggressive, it is lawful. c. The statement is incorrect. d. Action Auto Mart can require this if its premium rate is lower than comparable insurance from another insurer.

c. The statement is incorrect. (No one who finances the purchase of real or personal property is allowed to require, as a condition of financing the purchase, that the buyer obtain credit insurance through a particular insurer, agent, or type of insurer.)

Fire is a named peril that may be designated as "friendly" or "hostile." All of the following would be considered a friendly fire EXCEPT: a. a fire in a wood-burning fireplace b. a fire in a barbecue pit c. a fire in a forest d. a fire in an incinerator

c. a fire in a forest (A friendly fire is one that burns where it was intended to burn. Coverage is provided only for hostile fires.)

Beatrice works from her home, on a part-time basis, as a hairdresser. What definition in the homeowners policy describes Beatrice's activities as a hairdresser? a. residence premises b. insured location c. business d. compensable

c. business ("Business" on the homeowners policy means a trade, profession, or occupation conducted on a full-time, part-time, or occasional basis.)

All of the following are covered perils under the basic dwelling form (DP 1) EXCEPT: a. fire b. lightning c. falling objects d. internal explosion

c. falling objects (Limited property insurance coverage is available with the Basic Form (DP 1). Fire, lightning, and internal explosion are the only standard perils under this form.)

Someone broke into Mr. Johnson's house and stole $5,000 worth of firearms. What Coverage C special limit of liability applies to the loss? a. No special limit applies to firearms. b. $500 c. $1,000 d. $2,500

d. $2,500 (The Coverage C special limit of liability applying to loss by theft of firearms and related items is $2,500.)

Ace Real Estate is considering a businessowners policy for an office building that has eight stories and is less than 100,000 square feet. Its agent will advise Ace that: a. Ace is eligible if the building has an approved fire protection system. b. Ace is eligible if every floor is occupied. c. Ace is ineligible because the building must exceed 100,000 square feet of space. d. Ace is ineligible because the building is taller than six stories.

d. Ace is ineligible because the building is taller than six stories. (Office buildings are eligible for the businessowners policy if they do not exceed six stories in height or 100,000 total square feet.)

Andrew wants to buy a property insurance policy to protect himself and his business from the risk of loss due to fire. All of the following would qualify as risks that can be insured under a property insurance policy EXCEPT: a. An antique auto b. A field of corn c. A horse d. An employee

d. An employee (For purposes of regulating property insurance transactions in Kentucky, property insurance is defined as insurance on real or personal property of any kind to protect the insured owner against its loss or damage to it.)

Tom and Ann have just bought a condominium as a secondary residence. Which of the following homeowners coverage form is best designed for them? a. HO 3 Special Form b. HO 8 Modified Coverage Form c. HO 7 Miscellaneous Coverage Form d. HO 6 Unit-Owners Form

d. HO 6 Unit-Owners Form (Whether full- or part-time, a condominium residence is best covered under a HO 6 Unit-Owners form, which is designed for owners of condominiums and cooperative apartments.)

What homeowners form was designed to provide coverage for older homes because their replacement values exceed their market values by a significant amount? a. HO-4 Contents Broad Form b. HO-5 Comprehensive Form c. HO-6 Unit-Owners Form d. HO-8 Modified Coverage Form

d. HO-8 Modified Coverage Form (The HO-8 Modified Coverage Form was designed to insure older homes when their replacement values far exceed their market values.)

All the following statements regarding the commercial inland marine policy commercial articles floater are correct, EXCEPT: a. Theft is covered under a commercial articles floater. b. The commercial articles floater is designed specifically to insure camera equipment and musical instruments. c. The commercial articles floater insures equipment used commercially or by nonprofit organizations. d. Open perils coverage applies only if the insured property is stored at the insured's premises.

d. Open perils coverage applies only if the insured property is stored at the insured's premises. (A commercial articles floater is designed to insure either camera equipment or musical instruments used commercially or by nonprofit organizations. Open perils coverage, which includes theft, applies wherever the property is located; there are no limitations on the coverage territory.)

Which of the following would be covered under the property section of a homeowners policy? a. personal property of a person who is unrelated to the insured and is renting a room in the insured's house b. a small private airplane c. a collection of exotic fish in an aquarium d. a motorized wheelchair

d. a motorized wheelchair (While no coverage applies to most motor vehicles, including their equipment and parts, vehicles are covered when they do not need to be registered for use on public roads or when they are used only to service an insured's residence (such as a riding lawnmower) or designed to assist the handicapped (such as a motorized wheel chair).)

Since flood is the only peril covered in a flood insurance policy, how a flood is defined is important in determining whether coverage applies. Which of the following is NOT considered a flood for purposes of the NFIP standard flood insurance policy? a. mudflow b. unusual and rapid accumulation of surface water c. overflow of inland or tidal waters d. accidental water damage from a burst plumbing pipe

d. accidental water damage from a burst plumbing pipe (The NFIP standard fire insurance policy defines a flood as 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 (at least one of which is the insured property) from these causes, except an accidental leak from a burst plumbing pipe, which is covered under most homeowners and property insurance policies.)

Which of the following correctly describes a principal difference between a dwelling policy and a homeowners policy? a. A dwelling policy only covers the dwelling, other structures, personal property, fair rental value, and additional living expenses. It does not cover liability. b. Both policies are almost identical, except that the homeowners policy focuses on the more expensive homes. c. A dwelling policy requires that the owner occupy the dwelling. d. Although any one- to four-family dwelling is eligible for a homeowners policy, only a one-family dwelling is eligible for a dwelling policy.

a. A dwelling policy only covers the dwelling, other structures, personal property, fair rental value, and additional living expenses. It does not cover liability. (Unlike a homeowners policy, standard dwelling policies provide only property coverage. Theft and liability coverage is not included but is often available as an optional supplement.)

In addition to paying up to the limit of liability, how else will the Coverage E - Personal Liability section of a homeowners policy respond to a lawsuit brought against the insured? a. It will provide a defense. b. It will pay punitive damages. c. It will file a countersuit. d. It will subrogate against the plaintiff.

a. It will provide a defense. (Coverage E pays up to the limit of liability shown on the Declarations and provides a defense, at the insurer's expense, even if a lawsuit is groundless or fraudulent. Defense costs are paid in addition to the limit of liability.)

Although the liability section of the homeowners policy excludes motor vehicle liability, some exceptions do permit coverage for the use of certain motor vehicles. Which of the following types of vehicles will be covered in the event they cause a liability claim? a. a motorized wheelchair used by the insured's spouse at the insured residence b. an automobile that is registered for use on public roads c. a van used to carry cargo for a fee d. a race car that is used exclusively on race tracks

a. a motorized wheelchair used by the insured's spouse at the insured residence (Motor vehicles used solely to service the insured's residence, such as a motorized lawnmower or wheelchair, are not subject to the homeowners policy exclusion for motor vehicle liability.)

Bridget reported the theft of her Rolex watch to her insurance company. The insurance company says it will replace the watch instead of making a loss payment. An insurer has this option: a. because Bridget's homeowners policy has a repair or replace option b. if the insurance company gives the insured oral or written notice of its intent to do so c. if the insurance company gives the insured written notice within 60 days after receipt of the proof of loss d. if the insurance company gives the insured written notice within 30 days after it makes the decision to select the replacement option

a. because Bridget's homeowners policy has a repair or replace option (The repair or replace option allows the insurer to repair or replace any damaged or stolen property instead of making a loss payment directly to the insured, so long as the insurer provides the insured written notice within 30 days after receipt of the insured's signed, sworn proof of loss.)

Under the businessowners policy (BOP), coverage for losses from vandalism, sprinkler leakage, and building glass breakage is voided if the building remains vacant for how long? a. more than 60 consecutive days b. more than 30 consecutive days c. any 60 days within a six-month period d. any 30 days within a six-month period

a. more than 60 consecutive days (Vacancy for more than 60 consecutive days voids coverage for losses from vandalism, sprinkler leakage (unless the system has been protected against freezing), building glass breakage, theft, and attempted theft.)

The Permitted Incidental Occupancies endorsement provides coverage for what types of businesses on the homeowners policy? a. offices and studios b. car dealerships c. manufacturing plants d. banks

a. offices and studios (The Permitted Incidental Occupancies endorsement is used for incidental business exposures such as those of office, school, and studio exposures.)

Which of the following items owned by the insured would NOT be covered under a HO-3 Special Form homeowners policy? a. a family cemetery plot b. a greenhouse that is rented to a local farm for business purposes c. vacant land on the insured property d. land on which a residence is being built for the insured

b. a greenhouse that is rented to a local farm for business purposes (An "insured location" on a homeowners policy does NOT include structures rented to others for business purposes.)

Which of the following perils is included on the commercial property Broad Causes of Loss Form but NOT on the Basic Causes of Loss Form? a. fire b. collapse c. smoke d. vandalism

b. collapse (The four perils included on the Broad Causes of Loss Form that are not included on the Basic Causes of Loss Form are falling objects, water damage, collapse, and weight of ice, snow, or sleet.)

Which of the following are additional coverages under a businessowners policy? a. pollutant clean-up and removal, debris removal, and earthquake b. debris removal, fire department service charges, and preservation of property c. debris removal, preservation of property, and flood d. debris removal, pollutant clean-up and removal, and nuclear hazard

b. debris removal, fire department service charges, and preservation of property (Debris removal, fire department service charges, and preservation of property are among the additional coverages of a businessowners policy. Earthquake, flood, and nuclear hazard are not.)

Monroe Fabricating Co. has equipment breakdown insurance. A boiler explodes and, in addition to damaging property, forces Monroe to make temporary repairs to speed up the permanent repair work. Which coverage in its equipment breakdown policy will cover the costs of making these temporary repairs? a. spoilage coverage b. expediting expenses c. property damage d. incidental expenses

b. expediting expenses (Expediting expense coverage includes reasonable costs to make temporary repairs and to speed up permanent repairs or replacements.)

In an HO 3 policy, the definition of "motor vehicle" includes automobiles and all of the following EXCEPT: a. motorcycles b. helicopters c. self-propelled lawn mowers d. motorized wheelchairs

b. helicopters ("Motor vehicle" is defined as a self-propelled vehicle or any trailer connected with it. This definition is broad enough to include not only autos but also motorcycles, self-propelled lawn mowers, and motorized wheelchairs. It does not include aircraft of any type.)

Becky is asked to give examples of tangible property. She provides four examples, but only three are correct. Which example is incorrect? a. her bicycle b. her brother's generous nature c. the apartment building she lives in d. an ice cream cone

b. her brother's generous nature ("Property damage" is defined as physical injury to, destruction of, or loss of use of tangible property. "Tangible property" is property that has physical form and can be seen, felt, touched, or handled. Generosity is intangible.)

In which of the following situations would liability coverage be provided under a businessowners policy (BOP)? a. when the insured is a tavern that sells alcoholic beverages to members b. when the insured is a real estate company that hosts a cocktail reception for its employees to celebrate a new office c. when the insured is a distillery that does not serve cocktails to the public d. when the insured is a beer distribution company

b. when the insured is a real estate company that hosts a cocktail reception for its employees to celebrate a new office (The liquor liability exclusion in the BOP applies when the named insured is in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. However, host liquor liability coverage is provided for insureds who host events at which liquor is provided.)

Frank's Grocery owns a 4,000-square-foot building you insure on a Building and Personal Property Coverage Form. Frank wants to know how he can insure fixtures that he plans to attach permanently to the building. What do you tell him? a. He can't insure permanently installed fixtures on the BPPC form. b. He must buy a separate policy. c. Coverage is provided under Building Property coverage. d. Coverage is provided under Personal Property of Others coverage.

c. Coverage is provided under Building Property coverage. (Building Property coverage on the BPPC form includes coverage for permanently attached fixtures and equipment.)

Maria intends to buy a dwelling policy on some rental property she owns. She tells her agent she wants the broadest coverage possible. Which policy form should the agent recommend? a. DP 1 b. DP 2 c. DP 3 d. Broad Form HO policy

c. DP 3 (Rental property is not eligible under a homeowners policy because the dwelling is not owner-occupied. Since the DP 3 provides coverage on the dwelling on an open perils basis and coverage on personal property on a named perils basis, it is the broadest of the three DP forms.)

Mrs. Hancock is driving from the Post Office, where she picked up the mail for her employer, to her place of employment when she's involved in an accident. What endorsement on her employer's BOP will extend liability coverage for the accident? a. Personal and Advertising Injury Liability b. Utility Services-Direct Damage c. Hired and Non-owned Auto Liability d. Protective Safeguards

c. Hired and Non-owned Auto Liability (The Hired and Non-owned Auto Liability endorsements extend liability coverage on the BOP to vehicles not owned by the insured that are used in the business of the insured.)

Which of the following types of business would be eligible for a businessowners policy? a. a bank b. an amusement arcade c. a grocery store that sells gasoline d. a self-storage business

c. a grocery store that sells gasoline (Banks, self-storage facilities and places of amusement are among the types of businesses that are not eligible for a BOP. A grocery store that sells gasoline is eligible.)

Which of the standard homeowners policies includes malicious mischief as a named peril? a. only HO 3 b. all forms except HO 5 and HO 8 c. all forms except HO 5 d. all forms

c. all forms except HO 5 (The perils covered by the homeowners policy vary by form. Vandalism and malicious mischief is a named peril in all of the standard homeowners policies except HO 5 (Comprehensive Form) because it is the only homeowners policy that provides open perils coverage for all types of covered property.)

A storm at sea forces Davy Jones Freight Company to jettison some cargo to lighten the ship and keep it from sinking and losing the entire cargo. In ocean marine insurance, what provision determines how the loss to the cargo owners is treated? a. deductible average clause b. running down clause c. general average clause d. sue and labor clause

c. general average clause (In ocean marine insurance, general average is a loss incurred for the common good that is shared by all parties to the venture.)

Which of the following terms is used in a homeowners policy to refer to the insured location? a. house b. apartment c. residence premises d. abode

c. residence premises (On a homeowners policy, the definition "residence premises" includes the two, three, or four-family dwelling in which the named insured lives.)

A homeowners policy extends liability coverage to an insured who rents a ballroom for all the following events EXCEPT: a. to host a wedding anniversary party b. to host a friend's retirement party c. to host a business conference d. to host a relative's 100th birthday

c. to host a business conference (A premises the insured rents on an occasional basis is only an "insured location" if rented for other than business purposes.)

Which of the dwelling policy coverages, if any, would cover a permanent swing set that is built in the backyard? a. Coverage A - Dwelling b. Coverage C - Personal Property c. not covered d. Coverage B - Other Structures

d. Coverage B - Other Structures (Coverage B - Other Structures applies to structures on the residence premises that are separate and distinct from the dwelling by a clear space, or connected to the dwelling by only a fence, wall, wire, or related connection. A swing set permanently located on the premises would qualify as other structures.)

A fire in a commercial building forces the owner to store office furniture and files away from the office. Will the owner's commercial property policy cover this personal property? a. Coverage only applies during the move. b. Coverage applies for up to 10 days at the new location. c. Coverage applies for up to 15 days at the new location. d. Coverage applies for up to 30 days at the new location.

d. Coverage applies for up to 30 days at the new location. (There is additional coverage for preservation of property. Coverage to property that must be moved to another location to protect it from damage by a covered cause of loss applies during the move and for up to 30 days at the new location.)

Jack and Jill are vacationing at a golf resort when a thief enters their room and steals a laptop computer, golf clubs, cash, and clothing. Jack and Jill contact their homeowners insurer and ask the claim representative whether they are covered for this loss. What does the representative tell them? a. Coverage does not apply to a theft away from the residence premises. b. Coverage applies but is limited to $1,000. c. Coverage applies but the claim will be adjusted on a pro rata basis with the resort. d. Coverage applies just as it would if were stored at the insured's home.

d. Coverage applies just as it would if were stored at the insured's home. (Coverage for an insured's personal property applies anywhere in the world, subject to a restriction that limits coverage to property usually located at another residence to $1,000. The limitation on property usually located at other residences does not apply to temporary locations like hotel rooms.)

Under an unendorsed businessowners policy (BOP), business personal property coverage covers all he following EXCEPT: a. inventory owned and used by the insured in the business b. business equipment rented by the insured for use in the business c. tenant's improvements and betterments d. money and securities kept in the business owner's office

d. money and securities kept in the business owner's office (Business personal property coverage applies to property located on or within 100 feet of the premises, including owned personal property used in the business; personal property of others in the insured's care, custody, or control; and leased personal property that the insured is contractually responsible to insure. The BOP does not cover money and securities.)

Which of the following is a "hired auto" under the Hired and Non-owned Liability endorsement that may be added to Gateway Motel's BOP? a. the company car owned by Gateway and used by an employee b. the car owned by the owner of Gateway Motel c. the car owned by an employee of Gateway Motel d. the car rented by Gateway Motel

d. the car rented by Gateway Motel (A "hired auto" is one rented, leased, hired, or borrowed by the named insured.)

As an open perils policy, the HO 3 Special Form covers all the following causes of loss EXCEPT: a. fire b. vandalism c. theft d. water damage

d. water damage (The HO 3 form has nine standard exclusions, including water damage. Except for the named perils that are excluded from coverage, all other perils are covered.)

The building owned by Greta's Dog Grooming is damaged when a driver crashes through the front of the building, forcing it to shut down while the building is repaired. What commercial property coverage form pays for the income Greta's Dog Grooming loses while it's shut down? a. Business Income and Extra Expense Coverage Form b. Building and Personal Property Coverage Form c. Builder's Risk Coverage Form d. Condominium Association Coverage Form

a. Business Income and Extra Expense Coverage Form (The Business Income and Extra Expense Coverage Form provides coverage for the loss of business income that results from the necessary suspension of operations because of a covered loss.)

Naples Pizza is a successful 10,000 square foot restaurant that generates close to $8 million in gross sales annually. Is this business eligible for a businessowners policy (BOP), and why or why not? a. No, because its gross sales are too high. b. No, because restaurants are generally ineligible for a BOP. c. Yes, because it is a successful business. d. Yes, because it is less than 35,000 square feet in area.

a. No, because its gross sales are too high. (While restaurants are generally eligible for a BOP and this one is within the 35,000-square-foot limit, eligibility is restricted to businesses that generate no more than $6 million in annual gross sales.)

What section of a commercial property policy identifies the insured's name, address, and limits of insurance? a. declarations page b. conditions c. exclusions d. coverage form

a. declarations page (The declarations page of a commercial property policy contains the name of the insured, the address of the covered premises, and the policy period.)

Which of the following would be covered under the Farm Property-Barns, Outbuildings and Other Farm Structures coverage form? a. pasture fences b. portable buildings c. land d. docks

b. portable buildings (Coverage G-Barns, Outbuildings and Other Farm Structures provides coverage for seven types of structures, including portable buildings and fences other than field and pasture fences.)

An earthquake ruptures a natural gas line, which starts a fire that damages Mary's home. Is the damage covered under her dwelling policy? a. Damage caused by the earthquake is excluded. Damage from the ensuing fire is covered. b. No. The proximate cause of the loss was earthquake, which the policy excludes. c. Loss caused by the earthquake and the resulting fire is covered. d. Damage from the earthquake is covered, but the loss due to fire is excluded.

a. Damage caused by the earthquake is excluded. Damage from the ensuing fire is covered. (The dwelling policy excludes losses from earth movement. However, coverage is provided if a direct loss by fire or explosion ensues.)

The manager at Don's Diner shut off the fire and burglar alarm after arriving at work because it developed a short and kept beeping. When the manager left for the night, he forgot to put the alarm back on. How did the Protective Safeguards endorsement on Don's Diner's BOP respond when the building was destroyed by a fire that night? a. It excluded coverage for the fire loss. b. It required a loss penalty when the claim was paid. c. It limited coverage to $50,000. d. It doesn't apply to fire losses.

a. It excluded coverage for the fire loss. (The Protective Safeguards endorsement precludes loss by fire if the insured knew of an impairment to the system and failed to notify the insurer or failed to maintain the system.)

Unusual Enterprise cannot obtain property and liability insurance through standard markets because it is considered a high-risk business whose products are untested and unproven. Which of the following represents the best option for Unusual Enterprise to obtain insurance? a. surplus lines broker b. state insurance department c. admitted insurer d. foreign insurer

a. surplus lines broker (Some risks are unacceptable to standard insurers. In these cases, the surplus and excess insurance market is available to insure these risks. A wholesale surplus lines broker or managing general agent (MGA) works with the retail agent and excess and surplus lines insurers to obtain insurance for the risk.)

Daniela's Deli loses its electricity for two weeks after a severe storm. During that time, Daniela cannot conduct business and loses income. What endorsement does she need that will cover her loss of income? a. utility services - time element coverage b. perishable food endorsement c. power outage endorsement d. protective safeguards endorsement

a. utility services - time element coverage (The utility services - time element endorsement covers income or expense loss suffered by the insured as a result of an interruption in utility service. For coverage to apply, the interruption must be caused by damage from a covered cause of loss to the types of utility service property identified in the endorsement schedule.)

Jeremy files a claim for a loss covered by a commercial inland marine policy. However, his insurer does not agree on the amount of the loss. Jeremy and the insurer have each selected an appraiser and the appraisers have selected an umpire to resolve this difference. One of the appraisers and the umpire agree on the value of the loss. What does this mean? a. The insurer must cover the agreed-upon amount of loss. b. Agreement by any two of the three parties establishes the value of the loss. c. All three parties must agree on the value of the loss. d. If all three parties are unable to agree on the loss amount, they must reach a compromise.

b. Agreement by any two of the three parties establishes the value of the loss. (During the appraisal, agreement by any two of the three parties establishes the value of the loss. Nevertheless, the insurer still has the right to deny coverage.)

While a guest in Tanya's home, Mary contracts an infectious disease from Tanya's daughter. Mary files a claim against Tanya for medical expenses and medications. Will Tanya's homeowners policy cover the claim? a. Yes, because the guest contracted the disease in the insured's home b. No, due to the communicable disease exclusion in the homeowners policy c. No, because the guest should have expected to become exposed to the disease d. Possibly, if the guest can prove she was unaware that she had become exposed to the disease

b. No, due to the communicable disease exclusion in the homeowners policy (The homeowners policy excludes any type of bodily injury or property damage that arises out of the transmission of a communicable disease by an insured.)

Which of the following is most appropriate for a home that is under construction and not yet inhabited? a. homeowners policy b. dwelling policy c. umbrella policy d. personal liability policy

b. dwelling policy (Homes that are under construction are not eligible for homeowners insurance, though they can be covered by a dwelling policy with the Dwelling Under Construction (DP 11 43) endorsement which adjusts the policy to accommodate the structure's increasing value.)

When would wall-to-wall carpeting be considered part of the dwelling and included under Coverage A of a dwelling policy? a. if installed over an unfinished floor and easily removable b. if permanently affixed over an unfinished floor c. if attached to flooring by tacks and removable without incurring damage to the floor d. if the carpeting extends wall to wall over an unfinished floor, but is not attached to the floor

b. if permanently affixed over an unfinished floor (Coverage A - Dwelling considers items permanently attached to the dwelling, such as wall-to-wall carpeting installed over an unfinished floor, as part of the dwelling.)

An accident that happens during the policy period and results in bodily injury or property damage, and losses arising from continuous or repeated exposure to the same harmful conditions, are defined as what in a homeowners policy? a. bodily injury b. occurrence c. damage d. comprehensive personal liability

b. occurrence

Which commercial property insurance policy endorsement is designed to cover high inventory values at certain times of year? a. value reporting form b. peak season limit of insurance c. spoilage coverage d. ordinance or law coverage

b. peak season limit of insurance (Some businesses experience especially high sales during a certain time of the year, and therefore increase their inventories to meet the demand. The peak season endorsement can be used to avoid overinsurance during the insured's slow season (and underinsurance during the peak season) by establishing a higher limit for only the period of time specified in the endorsement.)

The identity fraud expense coverage endorsement under a businessowners policy (BOP) is subject to a single deductible of: a. $1,000 b. $2,500 c. $250 d. $500

c. $250 (The identity fraud expense coverage endorsement under a businessowners policy (BOP) is subject to a single deductible of $250.)

Any bodily injury or property damage due to the use, sale, manufacture, delivery, transfer, or possession by any person of cocaine, marijuana, or a narcotic is excluded in a homeowners policy by the: a. professional services exclusion b. physical or mental abuse exclusion c. loss assessment exclusion d. controlled substance exclusion

d. controlled substance exclusion (Any bodily injury or property damage due to the use, sale, manufacture, delivery, transfer, or possession by any person of a controlled substance is excluded. The homeowners policy does not cover illegal activities.)

The motor vehicle liability exclusion under the liability coverage section of a homeowners policy applies to all of the following motor vehicles EXCEPT: A. motorized wheelchair B. car with a license plate C. all-terrain vehicle required by federal regulation to have a special sticker D. snowmobile required by state law to have a special sticker

A. motorized wheelchair (The motor vehicle liability exclusion specifies that personal liability and medical payments coverage do not apply to any motor vehicle liability if the vehicle is required to be registered for operation on public roads. There is coverage for motor vehicles designed to assist the handicapped under certain circumstances)

The ordinance or law coverage endorsement covers all of the following losses EXCEPT: a. loss to an undamaged part of a building b. income lost during reconstruction or repairs c. demolition of an undamaged part of a building d. increased cost of reconstruction or repairs

b. income lost during reconstruction or repairs (The endorsement addresses only the direct damage portion of the ordinance or law loss exposure. Another endorsement is needed to add coverage for income loss.)

Ivy fails to comply with a number of the Duties after an Occurrence listed in the conditions section of her homeowners insurance policy. If Ivy's failure impedes the insurer's processing of a claim, what may the insurer do? a. have Ivy arrested b. cancel Ivy's policy c. deny Ivy's claim d. charge Ivy a failure to comply fee

c. deny Ivy's claim (If the insured fails to comply with the Duties after an Occurrence in a homeowners policy, and that failure prejudices the insurer's settlement of a claim, the insurer may deny coverage.)

Victor wants to purchase flood insurance, but you tell him he's not eligible based on his community. Why isn't Victor eligible for flood insurance? a. His community didn't pay the required fee. b. His community doesn't participate in the NFIP. c. His community had too many prior floods. d. His community has never flooded.

b. His community doesn't participate in the NFIP. (Flood insurance is only available to applicants whose property is located in a participating community, meaning a community that participates in the NFIP.)

The amount of Molly's outstanding mortgage was $100,000 at the time her house was destroyed in an explosion. Molly's claim for damages under Coverage A of her policy was $200,000 and her claim for damages under Coverage C was $150,000. How much did Molly's insurance company pay to the mortgagee? a. $100,000 b. $150,000 c. $200,000 d. $350,000

a. $100,000 (The company paid the mortgagee its insurable interest in the damaged building, which was the amount of the outstanding mortgage. The mortgagee had no insurable interest in Molly's personal property.)

Jason bought a sporting goods business "as is," which included the building, its contents, and some old mechanical equipment which required considerable maintenance to keep it operational. Jason purchased an equipment breakdown policy and tells you of his surprise after his claim for the extra maintenance expenses were denied. You tell Jason: a. Extra maintenance expenses to keep equipment running are excluded. b. He should resubmit the claim because the denial must have been a mistake. c. He should seek legal counsel and sue the insurer. d. He should file a claim to replace the old mechanical equipment.

a. Extra maintenance expenses to keep equipment running are excluded. (Equipment breakdown insurance is intended to pay for unexpected breakdowns of equipment. It is not a promise to pay expenses that might be necessary to keep the equipment running well and working properly.)

What businessowners policy (BOP) endorsement provides coverage for loss of business income and extra expenses incurred if the described location suffers an interruption of electrical service? a. Utility Services - Time Element b. Utility Services - Direct Damage c. Protective Safeguards d. Identity Fraud Expense Coverage

a. Utility Services - Time Element (The Utility Services - Time Element endorsement provides coverage under the BOP if an interruption in utility service originating away from the premises causes a business interruption loss. Coverage is provided for business income and extra expense.)

Jeremy owns and manages a small two-story motel on a main street in the city. After the local college football team wins a game, celebrating fans break the motel's front plate glass window and glass in the front door. The additional coverage for glass under Jeremy's businessowners policy (BOP) will cover all of the following expenses EXCEPT: a. loss of income to the motel while repair work is underway b. expense of putting up temporary plates c. expense of boarding up openings d. expense of replacing the glass in the door

a. loss of income to the motel while repair work is underway (Coverage applies to the expense of installing temporary plates or boarding up openings. The expenses of removing or replacing obstructions in order to repair or replace damaged glass that is part of a building, subject to the applicable limit of insurance, is also covered.)

Bill, who owns a businessowners policy, operates a small grocery shop in a rented building which has a large plate glass window in front. A windstorm damages the window. Will Bill's BOP cover the damage? a. There is no coverage because Bill is not the building owner. b. Bill's business personal property coverage under the BOP will cover the damage. c. There is no coverage because windstorm is not a covered peril. d. Bill's business income coverage will cover the damage.

b. Bill's business personal property coverage under the BOP will cover the damage. (A tenant can own a BOP, which will cover exterior building glass in the care, custody, or control of the insured tenant.)

Of the three dwelling policies, which would cover loss by falling objects; weight of ice, snow, or sleet; and accidental discharge from a plumbing system? a. DP 1 b. DP 2 and DP 3 c. DP 1 and DP 3 d. all three DP forms

b. DP 2 and DP 3 (Damage by falling objects; weight of ice, snow, or sleet; accidental discharge or overflow of water or steam from a plumbing, heating, air conditioning, or sprinkler system or a household appliance; and other similar perils is covered under the DP 2 and DP 3 policy forms, but not the DP 1.)

Sebastian insures his farm with your agency on a farm policy, which includes farm livestock coverage (FP 00 40). He submits a claim because three of his cattle were killed while being transported to auction by a contract carrier. How does Sebastian's farm policy respond to his claim? a. It pays the claim because livestock is covered for all causes of loss. b. It denies the claim because livestock is not covered when in the custody of a contract carrier. c. It denies the claim because livestock is only covered when located in a barn. d. It pays the claim because livestock is only excluded when being transported by the insured.

b. It denies the claim because livestock is not covered when in the custody of a contract carrier. (Livestock is not covered property when in the custody of a common or contract carrier, public stockyards and sales barns or yards, slaughterhouses, and packing plants.)

Joe is injured when he slips and falls on a wet floor in his delicatessen. He files a claim for medical expenses under his businessowners policy. Is coverage available, and why? a. Yes. The businessowners policy includes coverage for medical expenses. b. No. Medical expense coverage applies to third parties injured on the premises, not to the insured. c. Yes, but only if Joe bought the health insurance endorsement. d. No. Coverage is not provided for injuries incurred within the insured premises.

b. No. Medical expense coverage applies to third parties injured on the premises, not to the insured. (Coverage is provided for medical expenses incurred by third parties on the business premises. Medical expenses are payable without regard to fault. Coverage does not apply to bodily injury expenses of an insured, a tenant, an employee, or a tenant of the insured, those whose medical expenses are payable under workers compensation, nor to injuries related to physical exercises, games, or sports.)

Charles wants to know if his new dwelling policy includes coverage for theft. Which of the following is the correct answer? a. Theft is covered in all DP forms without an endorsement. b. Theft is not covered in an unendorsed policy, but may be covered in all DP forms through an endorsement. c. A DP 3 would cover theft without an endorsement, but DP 1 and DP 2 require an endorsement. d. Theft is not covered under any circumstances.

b. Theft is not covered in an unendorsed policy, but may be covered in all DP forms through an endorsement. (Although none of the DP forms covers loss by theft, it can be added by endorsement. The DP 2 and DP 3 forms cover burglary losses, but not theft losses. The broad theft coverage endorsement provides coverage for theft, attempted theft, and vandalism and malicious mischief that results from a theft.)

Which of the following would be recognized as a residence employee under the liability section of a homeowners policy? a. the insured's CPA who is meeting at the insured's home to review business tax plans b. the insured's gardener who lives in a small cottage on the insured's land c. the insured who works out of her home d. an independent contractor hired by the insured to construct a new addition to the insured's home

b. the insured's gardener who lives in a small cottage on the insured's land (The homeowners policy defines a residence employee as one whose duties are related to the residence premises, such as a gardener, maid, butler, nanny, or cook.)

Sandra, Lynn, and Carole inherited their family home from Mrs. North. Mrs. North's will specified that her daughter, Carole, would be a 50 percent owner and her stepdaughters, Sandra and Lynn, would each own 25 percent of the home. The house was destroyed in a fire and the insurance company paid $300,000 for damage to the dwelling. How was this claim paid? a. $100,000 each to Sandra, Lynn, and Carole b. $300,00 to Carole and nothing to Sandra and Lynn c. $150,000 to Carole and $75,000 each to Sandra and Lynn d. $200,000 to Carole and $50,000 each to Sandra and Lynn

c. $150,000 to Carole and $75,000 each to Sandra and Lynn (No party can collect insurance benefits that exceed the amount of its insurable interest in the property at the time of the loss. Because Carole has a 50 percent ownership and insurable interest in the home, she will receive $150,000. Because Sandra and Lynn each have a 25 percent ownership and insurable interest in the home, they will receive $75,000 each.)

With respect to a commercial property policy, which of the following correctly describes the type(s) of property included in the term "building property"? a. any property used in the business b. the building and any business property in the building and on the grounds, including sidewalks and curbs c. buildings and structures, indoor and outdoor fixtures, including signs attached to the building, and personal property used to service the building d. fixtures within the building only

c. buildings and structures, indoor and outdoor fixtures, including signs attached to the building, and personal property used to service the building (The building property category includes the building(s) identified in the policy declarations, as well as indoor and outdoor fixtures and personal property used to service the building. Additions under construction, alterations, and repairs to the buildings and structures identified in the policy declarations also qualify as covered building property if they are not covered by other insurance.)

Property coverage under a dwelling policy is excluded for all the following causes of loss EXCEPT: a. failure to act in the face of an impending loss b. mudslides c. internal explosion d. neglect

c. internal explosion (Coverage is denied when the cause of loss is due to failure of a person, organization, or governmental entity to act or decide in the face of an impending loss; earth movements including mudslides; or neglect of the property.)

Which of the following would NOT be included in the meaning of "insured" in a homeowners policy? a. household residents b. children away from home at college c. neighbor who voluntarily mows the insured's lawn d. person who cares for the owner's dog in his absence

c. neighbor who voluntarily mows the insured's lawn (Family members residing at home, children away at college, and an individual who cares for a pet while the owner is away are all insureds under the policy. A neighbor who assists the insured out of generosity is not an insured under the policy.)

Which of the following coverages is NOT included in a dwelling policy? a. Fair Rental Value b. Other Structures c. Personal Property d. Business interruption

d. Business interruption (Business interruption is a commercial line of insurance. It is not available through a dwelling policy.)

United Farm Implements has a sale on tractors. Ralph wants to buy one on credit. United Farm offers him a credit insurance plan with a premium rate that he can easily afford. The dealer's salesperson tells Ralph that if he buys the tractor on credit, he must also buy the credit insurance plan or he cannot take advantage of the discounted sale price. Which of the following statements is correct? a. Because United Farm offers an affordable premium, it can require Ralph to buy its credit insurance. b. The discounted sale price on the tractor permits United Farm to require buyers to buy its credit insurance. c. Ralph must obtain credit insurance from another insurer. d. United Farm is prohibited from imposing this requirement on Ralph.

d. United Farm is prohibited from imposing this requirement on Ralph. (No one who finances the purchase of real or personal property is allowed to require, as a condition of financing the purchase, that the buyer obtain credit insurance through a particular insurer, agent, or type of insurer. However, this prohibition on the financier does not prevent the buyer from choosing to obtain credit insurance from a particular insurer, agent, or type of insurer selected by the financier.)

For the insured to recover the full replacement value of covered property, the businessowners policy (BOP) valuation provision requires the limit of insurance to be: a. 100 percent of its replacement value b. 100 percent of its actual cash value c. at least 80 percent of its actual cash value d. at least 80 percent of its replacement value

d. at least 80 percent of its replacement value (The BOP requires the limit of insurance to equal at least 80 percent of the replacement value of covered property.)

Which of the following businesses is generally NOT eligible for a businessowners policy (BOP)? a. office building b. restaurant c. motel d. auto body shop

d. auto body shop (Businesses that are not eligible for coverage on a BOP include auto repair or service stations, car dealerships, bars and pubs, manufacturers, amusement parks, and financial institutions.)

Total Manufacturing, Inc. gets its materials from Material Supply Company. Material Supply suffers a boiler explosion that halts its mechanical equipment. As a result, Total must cease operations until Material Supply restores its equipment and resumes operations. Which coverage, if any, under Total's equipment breakdown policy will cover its loss of income? a. property damage b. loss of income is not covered under any circumstances c. expediting expenses d. contingent business income and extra expense

d. contingent business income and extra expense (Contingent business income and extra expense coverage extends business income and extra expense coverage to an equipment breakdown at a location that the insured does not own or operate, when the breakdown results in lost sales or prevents delivery of services or materials. This coverage is recommended when an insured depends on another business for the materials it uses to produce its goods or services.)

Standard property insurance policies exclude coverage for property damage to electrical devices caused by all of the following EXCEPT: a. explosion of steam equipment b. mechanical breakdown c. electrical injury (other than damage from lightning) d. damage from lightning

d. damage from lightning (Exclusions in standard property insurance policies eliminate coverage for property damage caused by explosion of steam equipment, mechanical breakdown, and electrical injury (other than damage from lightning) to electrical devices.)