Simulate Your Exam
Supplementary payments under the personal auto policy include all of the following except
Cost of defense
All of the following are supplemental payments found in liability policies except?
Costs the insured incurred in hiring an attorney.
In a farm policy, which of the following coverages would reimburse the insured for loss of rental income following damage to the insured dwelling by an insured peril?
Coverage D
In dwelling policies, automatic increase in insurance is
Coverage by endorsement
Which of the following authorities monitors the financial strength of insurers
Department of Insurance
States with monopolistic state workers compensation funds
Do not allow private insurers to be licensed to write workers compensation coverage
What method of premium computation relates an employer's losses, payroll, and premiums to the rating bureau's classifications of operations?
Experience modification factor
All of the following are excluded in the equipment breakdown basic policy EXCEPT
Explosion of steam boilers.
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?
Fair Credit Reporting Act
Which of the following is the federal body that regulates truckers who travel across state lines?
Federal Motor Carrier Safety Administration
An insurance company assures it's new policyholders that their premiums costs will not increase for a period of 5 years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act?
Fraud
An insured decides to store some heavy boxes in the attic. While moving them around, he accidentally drops a heavy box that crashes through the ceiling, causing $1,000 of damage. The insured's HO-3 policy form will pay
$1,000 minus the deductible.
What is the maximum amount an insurer will pay under the equipment dealers pollution cleanup and removal extension of an inland marine policy?
$10,000 for all expenses incurred during a 12-month period
Bob's home is insured for $100,000 under a dwelling policy. Yesterday his home suffered $20,000 damage from a fire. Today the home was struck by lightning, starting another fire that completely destroyed the structure. Bob's policy will pay
$100,000
Tom's truck Service's vehicle is stolen. The policyholder May obtain coverage for transportation expenses subject to which of the following limits?
$20 per day $600 maximum
Transportation expenses are covered under a personal auto policy for
$20 per day, for a maximum of $600.
A covered watercraft was damaged in an accident. The actual cash value of the damaged property was assessed at $10,000. The cost of repairs for the watercraft was assessed at $5,000. The insured's watercraft policy is written with a $25,000 limit. How much will the insurer pay for coverage to damage to the watercraft?
$5,000
Under additional coverages for homeowners policies, what is the maximum amount that can be charged to the insured for fire department services?
$500
Under businessowners policy Section I, if an insurer wants to nonrenew a policy, how many days before the expiration date must the insurer notify the mortgageholder?
10 days
Coverage J under farm coverage agrees to pay reasonable medical expenses, regardless of fault, caused by an accident if the expenses are incurred and reported to the insurer within how many years of the accident date?
3 years
How long is the waiting period after the application has been accepted before flood coverage goes into effect?
30 days
Under the dwelling policy, if an insurer chooses to repair or replace damaged or lost property, it must inform the insured within how many days of receiving proof of loss?
30 days
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?
5 days
If an insured has an umbrella liability policy in addition to his personal auto policy, which would be considered the underlying policy?
Auto policy
Which of the following would not be considered an exception to the National do not call list
Calls based from outside of the United States
The difference in the contents coverage on an HO-3 and HO-5 is which of the following?
Contents are covered open peril on HO-5 and named peril on HO-3
Which of the following coverages will respond if a claim is made or a suit is brought against an insured for damages due to bodily injury or property damage caused by an occurrence to which the coverage applies?
Coverage E- Personal Liability
The extra expense coverage form provides
Coverage that will permit the insured to continue in business without interruption following a property damage loss.
The designation symbols used in commercial auto policies can be found in which policy section?
Covered Auto
Which of the following examples of losses paid under an HO-3 also would be paid under an HO-2 homeowners policy?
Damage to the dwelling caused by lava or dust from a volcanic eruption
If an insurer appoints a producer, which authority must be notified
Department of insurance
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT
Dividends from a mutual insurer.
Another person has alleged that you are responsible for damage to their property. You notify your homeowners insurer. The insurer will
Either pay or defend as it decides
The subsequent injury fund was established to
Encourage employers to hire workers who had suffered prior compensable injuries
Which of the following will be covered by aviation hull insurance
Fuselage and wings
What type of compensatory damages will pay for pain and suffering and disfigurement?
General (General compensatory damages are for intangible elements that cannot be specifically measured in terms of dollars.)
In farm insurance, Coverage I - Personal and Advertising injury liability for suits alleging personal injury is most similar to the coverage found in which coverage form?
General Liability
State laws specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT
Inviting prospective clients to the grand opening of the company's new office
A policy condition that states if a policy is broadened with no additional premium, then the expanded coverage will be automatically applied to all policies of the same type is known as
Liberalization clause
Coverage A - Bodily Injury and Property Damage in the commercial general liability policy will cover
Losses due to the insured's negligence.
An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?
Material misrepresentation
ABC trucking company recently purchased XYZ manufacturing company ABC wants to transport the new company's freight with their trucking division. The company also wants to continue to haul freight for the clients it has served for many years. In regard to coverage which of the following is true?
Motor carrier coverage is needed
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are
Not taxable since the IRS treats them as a return of a portion of the premium paid
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 the insured's policy have?
Per occurrence
If an insured bakery is sued because its marketing states that the products of another bakery may not be safe, which coverage of a commercial general liability policy will defend the suit?
Personal and advertising injury liability
When ABC Appliance's marketing stated that its mowing machine was the only safe mower available for purchase in town, ABC was sued by XYZ Lawn and Garden. ABC's coverage would come from which part of its general liability coverage?
Personal and advertising injury liability
What is the term for the entity that an agreement represents regarding contractual agreements with third parties
Principal
All of the following are true regarding rebates EXCEPT
Rebates are allowed if it's in the best interest of the client.
In order to be covered by the U.S. Longshore and Harbor Workers Compensation Act, a worker must meet the requirements of the
Situs and status test
Events in which a person has both the chance of winning or losing are classified as
Speculative risk
Replacement cost coverage is provided in both the broad and special form dwelling policies when
The amount of insurance on the dwelling is at least 80% of its replacement cost at the time of loss
Which of the following is NOT the consideration in a policy
The application given to a prospective insured
If a licensee wants to transact insurance under a different name than that listed on his or her producer's license, which of the following must occur?
The change must be reported to the Commissioner.
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?
The customer's associates, friends, and neighbors provide the report's data.
Personal property coverage under a homeowners policy would cover
The insured's camera if it is stolen while the insured is on vacation.
Who is NOT an insured for liability on a BAP?
The owner of a car the insured borrows
A policy that insures all property at multiple locations for a single amount is referred to as
a) Blanket. **** b) Reporting. c) Special. d) Specific. Blanket coverage provides one limit of insurance for multiple locations or classes of property with the entire limit of insurance available to respond to any loss. No single item is assigned a specific amount of insurance. However, different amounts of insurance may be shown for buildings in general and contents in general
The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the
a) Insuring agreement. **** b) Conditions. c) Exclusions. d) Declarations. The insuring agreement is the part of the policy structure that describes the insured perils and the method of indemnification.
Which of the following is the closest term to an authorized insurer?
admitted
Under farm liability, Coverage H includes
bodily injury
Which of the following are the authorities that an agent can hold?
express and implied
What type of coverage does a homeowners policy include that a dwelling policy does not?
liability
A common exclusion found under physical damage to your auto includes
mechanical breakdown
If a person is using an auto with the belief that he is entitled to do so, subrogation rights under a personal auto policy would apply to all coverages EXCEPT
physical damage
All of the following are considered parts of the policy structure except
provisions
Which method of loss valuation is contrary to the principle of indemnity?
replacement cost
Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?
twisting
A building is insured, but no one has lived or worked in it for 10 years. The building is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered
vacant
What is the basic limit for costs incurred at the place a vehicle is disabled provided by the towing and labor costs endorsement
$25
What is the highest level of protection available under a Federal Crop insurance policy
75%
What is the required limit of insurance in the coinsurance clause for Coverage F - Unscheduled Farm personal property
80%
The employee theft crime policy includes a coverage extension that applies to employees temporarily outside the coverage territory for up to
90 days
Which of the following would be considered an unfair claims settlement practice?
A claims adjuster advises the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered
Loss Valuation
A factor in determining the premium charged and the amount of insurance required.
For there to be a negligent liability, all of the following must exist except?
A reasonable expectation that the act may cause injury or damage
According to the common policy conditions for a commercial package policy, if the insured dies, the policy rights and duties
Automatically transfer to a legal representative
Business personal property coverage form covers all of the following EXCEPT?
Automobiles held for sale.
The pro rata liability clause is designed to protect the principle of
Indemnity. If more than one policy is in force on the same property at the same time covering the same perils, this is concurrent coverage. The intent of insurance is that after a loss, the insured is restored to the condition he or she was in before the loss (indemnified). Each policy pays a percentage of a loss directly related to the amount of insurance it provides compared to the total amount of coverage.
Which of the following is true regarding the fire department service charge under the builders risk form?
It is an additional coveragee
If an employer in a state with elective workers compensation laws chooses not to be subject to those laws, what does the employer lose?
Its common law defenses against liability suits
Crews of Ships are covered by the
Jones Act
A municipality can protect itself against the construction or repair of properties that do not conform to the building codes established by ordinance by requiring the contractors to obtain
License and permit bonds
Which of the following is not correct regarding false statements by a person engaged in the business of insurance?
Only written statements can be considered fraud
Which of the following watercraft will NOT be covered by business liability insurance?
Owned watercraft 53 feet long
Limited Fungi, Wet or Dry Rot, or Bacteria endorsement in HO policies applies to
Property and liability losses
Which of the following persons may be covered under farm Coverage J?
Resident employees
Which of the following would not be considered a flood
Sewer backup
All of the following people would be considered insureds under the liability section of a homeowners policy EXCEPT
The 22 year old niece of the insured who is visiting
A tornado that destroys property would be an example of which of the following?
a) A loss b) A physical hazard c) A peril *** d) A pure risk A peril is the cause of loss insured against in an insurance policy.
Which situation would not be covered by the basic causes of loss form under a commercial property policy?
The Surf Side Club Waterfront Restaurant is damaged when flood waters rise and seep into the restaurant.
An insurance agency could purchase an errors & omission insurance policy which would provide protection in the event of any of the following events EXCEPT
The agency loses commission income from policies that were not issued by the insurer
Who is responsible for paying producer appointment fees
The appointing insurer
Losses that result from the freezing of a plumbing system while the dwelling is vacant would be EXCLUDED under a homeowners policy UNLESS
The insured had drained the plumbing system
What will Happen if a house covered by a standard mortgage clause is a total loss
The insurer pays the mortgagee according to the mortgagee's interest in the property.
If more than one person has an insurable interest in the property covered under a dwelling policy,
The insurer will be liable for only the insured's interest in the damaged property
On a DP-3 Dwelling Property Special Form policy, the coverage provided for personal property is
The same as provided on the DP-2 Broad Form.
A trucking business swaps trailers with other carriers. What coverage is necessary to cover loss to the other's trailer while in the borrower's possession?
Trailer Interchange Coverage
In the personal auto policy, owned trailers being towed by an insured auto are automatically covered for
Uninsured motorist coverage
All of the following are supplemental payments included in the liability section of a personal auto policy except
Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident.
An. Endorsement added to a businessowners policy that provides coverage for direct damage caused by utility service disruption stemming from a covered peril is called
Utility Services - Direct Damage
A claim is considered to have been made
When notice is received and recorded by any insured or the insurer, whichever comes first.
When would uninsured motorist coverage apply?
When the other party is legally liable but has no insurance
The bankruptcy provision found in the personal auto policy states that bankruptcy of the insured
Will not relieve the insurer of its policy obligations
Personal business property out in the open is covered under commercial property policy only while
Within 100 feet of the described premises
All of the following are other coverages included in both the broad and special form dwelling policy except
a) Collapse. b) Breakage of glass. c) Lawns, trees, shrubs, and plants. d) Theft of personal property.***** Theft of personal property only can be included by endorsement.
What term includes damage where the insured peril was the proximate cause of loss?
a) Indirect loss b) Consequential loss c) Negligent loss d) Direct loss***** Direct loss is direct, physical damage to buildings and/or personal property. Direct loss also includes other damage where the insured peril was the proximate cause of loss.
For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become
a) More active. b) Larger.***** c) Smaller. d) Older. According to the Law of Large Numbers, the larger a group becomes, the easier it is to predict losses. Insurers use this law in order to predict certain types of losses and set appropriate premiums.
All of the following are conditions commonly found in the insurance policy EXCEPT
a) Subrogation. b) Appraisal. c) Insuring agreement.***** d) Cancellation and nonrenewal. Insuring agreement provides information on the policy's coverages. Conditions state the legal obligations and duties of the parties to the contract.
Replacement cost is defined as
a) The market value of property of like kind and quality. b) Full replacement of property with like kind and quality, less an allowance for physical deterioration and depreciation. c) Payment of the full policy limits in the event of a total loss. d) Full replacement of property at its current cost, new and without reduction for depreciation. Replacement cost policies do not consider depreciation if the proper amount of insurance is maintained. Policies that provide replacement cost coverage require that the amount of insurance written be 80% or more of the replacement cost of the property at the time of loss.
Who acts on behalf of the principal?
agent
The crime of forced entry into the premises of another by a person or persons with felonious intent is defined as a
burglary
A lender who conditions approval of a loan on the condition that the borrower purchase insurance from that lended may be guilty of
coercion
The transfer of money from inside a banking premises to a person other than a messenger outside those premises or to a place outside those premises is covered under which commercial crime coverage?
computer fraud
An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this?
consequential
Which of the following would not be considered an unfair and deceptive practice?
controlled business
The authority granted to an agent through the agents contract is referred to as
express authority
Slippery floors, reckless driving, or providing false information are examples of..
hazards
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?
implied
The insured's house is located one mile from the county's new landfill and across the road from the entrance of a rock quarry. It would cost $150,000 to rebuild the house if something happened to it, but when the insured tried to sell it, the best offer he received was $80,000. The insurance company will insure the house for only $80,000. What method of valuation is used to insure this property?
market value
While an insured was towing a utility trailer with his auto, the trailer came loose and ran into a store front. What part of the insured's auto policy would pay for the damage to the store?
property damage liability
If the insured owns a watch valued at $10,000, full coverage can be provided on a homeowners policy by purchasing the
scheduled personal property endorsement
Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of
twisting