Study Aid

Twenty years ago, Eldon paid a contractor $100,000 to build a house on land worth $50,000. Today the land is worth $75,000 and it would cost $250,000 to build the same kind of house. What is the current replacement cost value of Eldon's house?

$250,000

Gregorio's new dwelling policy has an automatic increase in insurance endorsement, which gives him 4 percent more coverage at the end of the one-year policy term. The policy limit is $300,000. How much pro-rated coverage will Gregorio have after the policy has been in force for three months?

$303,000

Lara's businessowners policy has a $500,000 limit on her office building. It includes the 8 percent per year inflation guard. Six months after the policy takes effect, the building is destroyed by fire. What is the most that Lara can recover?

$520,000

Allison's businessowners policy has a $500,000 limit on covered business personal property at her arts and crafts shop. This limit is based on her average inventory values. Her inventory is at its peak when water from a winter storm ruins it. With the policy's seasonal increase provision, what is the most that she can recover for the loss?

$625,000

How many hours of continuing education must an all-line insurance adjuster licensed in Florida complete every two years?

24

Jeff is a licensed insurance agent in both New York and Florida. He is was charged with embezzlement in New York, and pleaded guilty to the charge on March 1. He must notify the Florida Department of Financial Services of the charge within how many days?

30

After reading his homeowners insurance policy, Elijah realizes that he is paying for coverage that he does not need. Why might a dwelling policy be more suitable?

A dwelling policy provides only basic property insurance but permits the insured to add other coverages by endorsement.

Dairy products in Bette's ice cream shop would be destroyed if her freezers failed for more than a few hours. So Bette added the utility services-direct damage endorsement, scheduling overhead transmission lines, to her businessowners policy. When the shop loses electrical power due to a mechanical breakdown of the utility company's equipment:

Bette's loss will not be covered because mechanical breakdown is not a covered peril

Joe was restocking the merchandise in Discount Store at 1 a.m. when an alarm went off. He rushed to the back room and discovered that the normally locked exit door was broken open, and a carton of valuable merchandise was missing. Which of the following correctly describes the cause of loss?

Burglary

Butch's Meat Market loses electrical power during a flood. The business closes for several days, during which time there is no refrigeration and a large quantity of meat spoils. The loss of the meat is what type of loss?

Consequential

Which form(s) value dwelling buildings on the basis of actual cash value?

DP 1

Jamie rents a two-bedroom apartment in a 12-unit apartment building where she lives with her two-year-old son. She wants to insure the property in their apartment. Which homeowners policy form, if any, is appropriate for her situation?

HO 4

Arturo's business has been burglarized. Which of the following is NOT a duty that is required of Aurelio by his insurance policy?

Hire a private detective to investigate the burglary.

The BOP's personal and advertising injury liability coverage does NOT apply to certain offenses committed by:

Internet service providers

Which statement is correct about the businessowners policy coverage for personal and advertising injury?

It covers a claim for tort liability.

Josephine's novelty store has a businessowners policy that covers the building and business personal property. When will the personal and advertising injury liability coverage address a claim?

Josephine detains a suspected shoplifter who turns out to be innocent.

Cathy's business does not own or lease any autos. When necessary, she and her employees use their own cars on business errands. Why should Cathy's businessowners policy include the hired auto and nonowned auto liability endorsement?

Nonowned auto coverage will protect the business if an employee has an accident while using a personal car on company business.

Which person would NOT be insured by a company's BOP liability coverage?

Pat, domestic servant for the named insured

What does an insurance company require from an insured before it will determine whether the policy covers a loss?

Proof of Loss statement

In what way does a public adjuster differ from a staff or independent adjuster?

Public adjusters represent insureds; other adjusters represent insurers.

Rocco bought his home before he married Crystal. The declarations page of his homeowners insurance policy refers to him as the named insured. The "you" throughout the policy will refer to:

Rocco and his wife, Crystal

Which one of the following incidents is an example of vicarious liability?

Rudy is held responsible for an accident caused by his employee.

Aimee thought she was correctly following the cooking instructions when she put a frozen turkey into the turkey fryer, but the resulting fire destroyed her neighbor's wooden deck. After paying for the deck, the neighbor's insurer attempts to recover from Aimee by exercising its right of:

Subrogation

Gretchen's travel agency invites recent customers to a presentation to promote sales of times-share vacation homes. She serves cocktails and snacks to the guests. A guest has an auto accident on the way home and sues Gretchen for his intoxication. How will the liability coverage of Gretchen's BOP respond?

The BOP will cover the claim.

Corinne purchased her home with a 10 percent down payment and a 90 percent mortgage from Sidney Bank. Why does Sidney Bank have an insurable interest in Corinne's house?

The bank faces the possibility of a loss if Corinne's house is damaged or destroyed.

Isaac insured his convenience store with a businessowners policy, which will protect him from which property loss?

The cigarette display goes up in smoke when its neon sign starts a fire.

Why should a photographer schedule valuable camera equipment under a scheduled personal property endorsement to an HO 3 policy?

The endorsement covers some causes of loss that are not covered under a homeowners insurance policy.

Adrian leaves his workbench to help a customer. When he returns, he discovers that his soldering iron has fallen into a wastebasket and started a fire. Adrian rents his shop and has a businessowners policy with only business personal property and liability coverage. Why will his BOP cover the landlord's claim for damage to the building?

The fire damage was caused by Adrian's negligence.

Some property in the storeroom of Corey's firm is rusted. It is not clear whether a water leak caused the rust. Corey's special causes of loss form might cover damage from a water leak, but not from wear and tear or normal aging. What will happen if Corey makes a claim on his property insurance policy?

The loss is covered unless the insurer shows that it is excluded.

An employee accidentally damaged a sprinkler head that is part of Jumbo Store's automatic sprinkler system. The manager shuts off the system's main valve and notifies the sprinkler company, which schedules the repair for that evening. Shortly before the store closes that night, a fire breaks out in the storeroom. How will the protective safeguards endorsement to Jumbo's businessowners policy respond to the claim for fire damage?

The policy will cover the loss because the protective system was shut off for less than 48 hours.

If the insurer and the insured cannot agree on the value of damaged property in settling a property loss claim, all the following statements are correct EXCEPT:

The umpire appraiser's valuation must be accepted by all parties.

While a homeowner is out of town, a group of teenagers break into her house, throw a beer party, and damage the interior without stealing anything. Connie's resulting property insurance claim will be covered if her policy covers what peril(s)?

Vandalism

When the utility services-time element endorsement is attached to a businessowners policy, it covers the loss of business income or additional expenses that the insured suffers due to:

a covered peril that damages the utility service property noted in the endorsement

Nigel and Collette form N&C Company, a partnership that is the named insured in a businessowners policy. For purposes of liability coverage, who is NOT an insured?

a customer who sues N&C

Glenn was painting trim over the entry to the apartment building he owns when his scaffold collapsed. Several people were injured. Who can recover medical expenses under Glenn's businessowners policy?

a guest who was entering the building

Therese signs many contracts in her business. Which is an insured contract as defined by her businessowners policy?

a lease on the space for her business

When completing an insurance application, Dusty intentionally lied about his age in order to obtain a lower rate. What is Dusty's lie technically considered?

a misrepresentation

An enforceable contract must involve consideration by both parties. When an insurance company enters into a contract, what is the insurance company's consideration?

a promise to pay for losses as stipulated in the insurance contract

Which one of the following legally qualifies as an attractive nuisance?

a swimming pool in a homeowner's backyard that neighborhood children use, without the owner's permission, while the owner is at work

Nola's hardware store is insured by a businessowners policy that covers her building and business personal property. Her liability coverage will NOT cover a claim that arises when:

a window display falls and breaks the plate-glass window

Corinne's house does not qualify for a homeowners insurance policy, so she buys a DP 1 policy. She realizes that it does not include personal liability coverage. What can she do to get this coverage?

add the personal liability endorsement

Upon learning that his HO 3 policy covers personal property for only its actual cash value, Jamal wants to get replacement cost coverage instead. How can he do this?

add the personal property replacement cost loss settlement endorsement to his current policy

A homeowner who owns a vicious dog may be more inclined to purchase liability insurance than one who doesn't own such an animal. What is this an example of?

adverse selection

Luke pays a $300 premium for a personal umbrella policy in which the insurance company promises to pay up to $1 million dollars for a liability claim against Luke. This mismatch between the size of the premium and the potential size of the insurer's obligations results because insurance policies are:

aleatory contracts

In the context of a property or casualty insurance policy, which of the following is personal property?

an automobile

Sharron had a large saltwater aquarium in her living room. Vandals entered her house and broke the aquarium. This led to the death of her fish and the warping of the hardwood floor beneath the aquarium. Coverage C-Personal Property of her homeowners insurance policy will cover the loss or damage to the:

aquarium

Storm damage to utility wires caused a power surge that ruined Delmer's 60-inch flat panel TV. Delmer submitted a homeowners insurance claim that was denied because his policy, like almost all policies on buildings and their contents, excludes coverage for:

artificially generated electrical current

Where do the definitions appear in an ISO businessowners policy?

at the end of the property section and at the end of the liability section

For an insurer to pay a property or casualty claim, when must the policyholder have an insurable interest in the insured risk?

at the time of the loss

Evangeline bought her home with a 20 percent down payment and a mortgage from Trevor Bank. She had not yet paid off the mortgage when the home was badly damaged in an explosion. Who had an insurable interest in the home at the time of the loss?

both Evangeline and Trevor Bank

Which pollution-related liability claim would an ISO businessowners policy cover?

carbon-monoxide fumes from a defective furnace that make motel guests ill

Sally was seriously injured when she collided with Frank at an intersection. A court determined that the accident was 20 percent Sally's fault, so she was entitled to recover 80 percent of her damages from Frank. The defense was based on the doctrine of:

comparative negligence

Morgan sends a newsletter to his clients that includes photos from a recent business event that many of them attended. One of the clients sues him for invasion of privacy. Morgan's ISO businessowners policy will:

cover the claim because it is for a personal injury

Which is NOT one of the businessowners policy's three categories of liability coverage?

damage to the property of others

Where in a property and casualty insurance policy would the insured expect to see his or her name?

declarations

Merrill's insurance agency has an ISO businessowners policy. A customer claims that Merrill failed to recommend the necessary insurance policies for his firm. What will Merrill's insurer do?

deny coverage

Water-based paint in Vincent's hardware store would be destroyed if he loses electrical power during freezing weather. He adds the utility services-direct damage endorsement to his businessowners policy and schedules overhead transmission lines. If Vincent's store loses power because a windstorm downs power lines, what, if anything, will the policy cover?

direct damage alone

Which forms are attached to a commercial property policy to broaden or narrow coverage?

endorsements

An interruption of electrical power could ruin the meat stored at Tyrone's Steak House. The business personal property coverage of his businessowners policy provides open perils coverage that:

excludes loss of electrical power that originates away from the insured premises

Jordan converts her home's attached garage into an apartment that students rent year-round for $300 each month. A tenant accidentally starts a fire in the apartment, making it uninhabitable for three months while the damage is repaired. Which coverage in Jordan's homeowners insurance policy covers her rental income loss?

fair rental value

Valerie buys a DP 1 policy to cover her small house. If she buys extended coverage, her policy will cover:

fire; lightning; internal explosion; vandalism and malicious mischief

For how many years after completing an insurance transaction must an insurer keep a record of it?

five

Which of the following is a peril?

flood

While driving, Terri ran a red light and broadsided Victor's pickup. Victor was hospitalized for a week and spent another month recovering from injuries he suffered from the accident. In addition to paying his medical bills and reimbursing his lost wages, Terri's insurer was required to pay additional damages for Victor's pain and suffering, which are considered:

general damages

A claims adjuster is NOT required to keep a complete and accurate claim file to

help the insurer deny the claim

Ivy's personal auto policy provides primary liability coverage with a $100,000 limit, while her personal umbrella policy provides excess coverage with a $1 million limit. If Ivy must pay $55,000 in damages because she is responsible for an auto accident:

her personal auto policy will pay $55,000

Which of the following is not among the recognized approaches to handling risk?

ignoring it

A fire severely damages Carl's home, making it uninhabitable. He moves his family to a hotel while the house is repaired. The additional expenses incurs in housing the family are considered what type of loss?

indirect

It cost Hollis a few thousand dollars to rent a motel room because he could not stay in his home while fire damage was being repaired. These additional living expenses are called a(n):

indirect loss

Martha's home has an insurable value of $500,000, which she has insured for $300,000 under a property insurance policy with an 80 percent coinsurance clause. Ignoring any deductible that might apply, if the building sustains $20,000 in damage due to a covered peril, how much will the insurer pay?

less than $20,000

Most of Leo's business building is destroyed by a tornado. Local ordinances require him to tear down the remainder of the building. If he builds a new one it must comply with current codes. The ordinance or law coverage endorsement of Leo's commercial property coverage form will NOT cover the:

loss of income or increased expense resulting from compliance with the ordinance

Which factor does an adjuster NOT consider when accounting for depreciation in the adjustment of a claim?

loss of value for accounting purposes

Frances converts the garage behind her house into an office where she operates a seasonal tax preparation service. She must walk several feet outside to get from her house to the garage. Does Frances's standard, unendorsed homeowners insurance policy cover damage to the office?

no

Although it addresses common terms that apply to all commercial policy forms, the commercial policy conditions form does NOT include:

no benefit to bailee conditions

Dora hires Shaun to clean the terra-cotta tiles in her home's foyer. Shaun's work is poor, so Dora sues him to recover the cost of the tiles he ruined. Shaun's businessowners policy will:

not cover the damage to the ruined tiles

Gabriela learns that her wholesale firm sells a toy that contains lead. She asks all retailers who bought the toy to return the unsold units from their inventory. She offers a refund on all returns. Gabriela's businessowners policy will:

not cover the expenses of the product recall

Arnulfo takes his computer to Patti's shop for repairs. Patti accidentally erases the hard drive, so Amulfo sues her for the loss of the data. Patti's ISO businessowners policy will:

not cover the loss of the electronic data

For BOP business liability coverage to apply to a loss, the loss need NOT

occur within a single policy period.

Although the policyholder must pay premiums to keep an insurance policy in force, the policy is considered a unilateral policy because:

only the insurer makes an enforceable promise

Alex's Diner is insured by an unendorsed businessowners policy. The policy's declarations page specifies limits for the building coverage and for the business personal property coverage. What kind of perils coverage does Alex have?

open perils coverage on both the building and personal property

Two matching gas lampposts stand at the end of Hiram's driveway. A car damages one of the lampposts. The Loss to a Pair or Set condition in Hiram's HO 3 policy will not permit his insurer to:

pay the difference between the pre-loss and post-loss actual cash value of the pair of matching lampposts

Laurie applies for a businessowners policy to cover her small enterprise. What kind of business would make her ineligible for a BOP policy?

pinball and video game arcade

The liability section of the ISO businessowners policy has an aggregate limit for:

products and completed operations

Section III of a businessowners policy contains common policy conditions. What do Sections I and II provide?

property and liability coverage

Which provision is NOT found in the common policy conditions section of a businessowners policy?

property loss settlement

The businessowners policy is a package policy that combines coverage for

property, liability, crime, and inland marine risks.

Agreements between municipalities to share major losses through a process called pooling is based on what type of risk management technique?

risk sharing

BOP eligibility is based on a business's:

size and type

Whose insurance needs are businessowners policies specifically designed to meet?

small to medium-sized businesses with typical exposures

After being attacked by a neighbor's dog, Rose was hospitalized and spent a month at home recovering from her injuries. In addition to paying for her pain and suffering, the neighbor's insurer was required to pay for her medical expenses and lost wages, which are considered:

special damages

A dump truck collided with a tall oak tree in Marian's front yard. The tree fell onto her house, breaking a glass picture window and knocking a lamp off the table inside it. Sparks from the lamp started a fire that destroyed half the house. What is the proximate cause of the damage to Marian's house?

the collision

Randolph has bought grain and packaged it for sale in pet stores for the past four years. In the third year, customers claimed that the grain sickened their pets. He then discovered that he was using grain treated with a pesticide. Randolph had BOPs for each of these four years. Which BOP will cover his liability?

the first three BOPs, which were in effect from the time the damage began until the time he discovered it

Why do insurance policies use quotation marks with certain words and phrases?

to identify words and phrases that are defined in the policy

Liability insurance basically involves:

tort law

It is not a violation of the Florida insurance code to

truthfully tell clients that an agent holds a chartered financial consultant (ChFC) designation.

John let his 17-year-old daughter Ashley use his motorboat, knowing she was normally a responsible operator. On this evening, while fooling around, she collided with another boat causing injuries and property damage. Though John was not in the boat, he was found to be responsible for damages based on the doctrine of:

vicarious liability

The gradually expanding brown spot on the ceiling of his barbershop suggests that Edmond might have a plumbing leak, but he ignores it because any drips from the ceiling fall into a sink. When the ceiling collapses because of water damage, Edmond finally submits an insurance claim that the insurer denies because his policy has an exclusion for:

water leakage or seepage

When is an owner of a property or casualty insurance policy required to have an insurable interest in the insured risk?

when the loss occurs

While a businessowners policy combines coverages that might otherwise be written on several forms, it does NOT include coverage for:

workers compensation