Comprehensive Exam Study Guide
In order to be licensed as a surplus lines broker, an applicant must have a valid resident property or casualty producer's license that has been in effect for how many years? A 3 B 1 C 4 D 2
A 3 Among other qualifications, anyone licensed as a resident property or casualty insurance producer may be licensed as a surplus lines broker if they have held a license, in Arkansas or any other state, for 3 years prior to application for a surplus lines broker's license.
On a Personal Auto policy, which of the following is covered under Part C - Uninsured Motorists Coverage? A An accident caused by an unidentified hit-and-run driver B A family member struck by a vehicle owned by the named insured, but covered only on a different policy C Punitive damages awarded against the insured D An insured who is covered by Workers' Compensation and driving a vehicle during the course of their employment
A An accident caused by an unidentified hit-and-run driver When a hit-and-run vehicle's operator or owner cannot be identified, it is considered an uninsured motor vehicle. Part C pays compensatory damages to the insured, but not any punitive or exemplary damages.
Which of the following is not one of the limits of liability provided by Commercial General Liability policies? A Bodily injury limit B General aggregate limit C Medical expense limit D Personal and advertising injury limit
A Bodily injury limit There is no unique limit for bodily injury losses, though payment for such losses would be subject to other policy limits, such as the per occurrence limit, the general aggregate limit, the products-completed operations aggregate limit, or the medical expenses limit.
General damages are those that: A Compensate an injured party for suffering, loss of consortium, and similar types of losses B Are awarded to the negligent party to punish wrongdoing C Can be documented by objective dollar amounts D Are awarded to the general public rather than to a specific party
A Compensate an injured party for suffering, loss of consortium, and similar types of losses General damages are damages for noneconomic losses that are likely to continue into the future, where it is difficult to put a final figure on the losses.
When Applicant P fails to disclose all motor vehicle violations in an application for automobile insurance, P may be guilty of: A Concealment B Breach of warranty C Estoppel D Avoidance
A Concealment Concealment is the failure to disclose material facts.
When underwriters select risks, their goal is to: A Estimate a normal range of losses for the risk classification, and select risks that will meet those expectations B Charge higher rates to increase company profits C Select only risks that have a higher probability of loss D Select only low-risk clients
A Estimate a normal range of losses for the risk classification, and select risks that will meet those expectations Underwriters want the risks they select to accurately reflect their estimated losses. This accuracy helps the insurer to better prepare for claims while maintaining their financial health. Financial ratios are tools that can determine the insurer's profitability and, by extension, the success of the underwriters. Underwriters must also protect the insurer against adverse selection and make sure that rates are not inadequate, excessive, or unfairly discriminatory.
In which section of the BOP would coverage for equipment breakdown be found? A Optional Coverages B Endorsements C Additional Coverages D Coverage Extensions
A Optional Coverages The BOP offers equipment breakdown coverage under the Equipment Breakdown Protection Optional Coverage. Other Optional Coverages include Outdoor Signs, Money and Securities, and Employee Dishonesty. Optional Coverages must be selected by the insured and indicated on the Declarations page, and they are not automatically provided by the BOP.
A company manufactures and packages household cleaners. Defective packaging makes it difficult for a customer to open the cleaner. After the customer forced it open, the cleaner gets into their eyes, causing blindness. This is an example of which legal liability exposure faced by the company? A Products liability B Completed operations liability C Operations liability D Premises liability
A Products liability After its sale to the customer, the cleaner is considered the insured's product. Under the definition of product provided by Commercial General Liability policies, products include containers and other equipment furnished with the product. Because this is a matter of defective product design that occurred after the cleaner left the company's premises and control, this exemplifies the products liability exposure.
Liability for use of which of the following vehicles is not covered by a Homeowners policy? A Recreational dune buggy that is owned by the insured and used on a public beach B Riding lawn mower C Custom motorized wheelchair for a resident family member D Motorized golf cart used at the local golf course
A Recreational dune buggy that is owned by the insured and used on a public beach An owned vehicle designed for recreational use off public roads must be used on the insured premises for coverage to apply.
The following are all found on the Declarations page, except: A The policy exclusions B Location of the insured property C Expiration date of the policy D Amount of the deductible
A The policy exclusions The Declarations page contains the information necessary to tailor the policy to the individual and property insured. The exclusions, common to all policies, are found in the Exclusions section of the policy and coverage forms.
Q has a Personal Auto policy that insures a pickup truck for liability, medical payments, and uninsured motorists coverages, as well as collision coverage under Part D. Q buys a new auto and wants the same coverages to apply to the new auto. A week after the purchase, Q's auto is damaged by a covered collision, and Q remembers that the insurer had not been informed of the newly acquired auto. What coverage from Q's PAP would apply to this accident? A The same coverages provided to the pickup truck already on the policy would apply to the newly acquired auto for this accident B The insurer would provide the same coverages already provided to the pickup truck, but payments for physical damage to the newly acquired auto would have a $500 deductible C No coverage would apply because no notice was provided to the insurer before the accident D Only liability coverages under Parts A, B, and C would apply, but property damage coverages under Part D would not apply
A The same coverages provided to the pickup truck already on the policy would apply to the newly acquired auto for this accident Reporting the accident to the insurer would count as notice, meaning coverage under Parts A, B, and C would apply from the date of ownership and Q could request Part D coverage to apply from the date of ownership as well. Because collision coverage already applies to an auto on the policy, this notice would meet the 14-day notice requirement to have coverage apply from the date of ownership. The $500 deductible would only apply if the pickup truck did not have collision coverage and the loss occurred before the insured could meet the 4-day notice requirement.
Homeowners policies cover all of the following losses to trees, shrubs, and plants, except: A Loss due to lightning B Loss due to vehicles not owned or operated by a resident C Loss due to theft D A loss resulting from a windstorm
A loss resulting from a windstorm Damage to plants by windstorm, hail, or the weight of ice, snow, or sleet is considered so common as to be an uninsurable peril. The Trees, Shrubs, and Other Plants Additional Coverages names the perils insured against: fire, lightning, explosion, riot or civil commotion, aircraft, vehicles not owned or operated by a resident, vandalism or malicious mischief, and theft.
J has a Personal Auto policy with liability limits of 50/100/25, a medical payments limit of $5,000, and comprehensive and collision deductibles of $500. J's vehicle slides on ice and hits a guardrail, causing $9,500 in damage to the vehicle and $11,000 damage to the guardrail. J also sustains $1,000 in injuries. How much will the policy pay for all damages? A $21,000 B $11,000 C $21,500 D $9,500
A) $21,000 The policy will pay $11,000 in property damage liability under Part A - Liability Coverage, $1,000 for J's bodily injuries under Part B - Medical Payments Coverage, and $9,000 for physical damage to the insured's auto after the deductible is met under Part D - Coverage for Damage to Your Auto, totaling $21,000.
L owns a home covered under an HO-3 for $200,000. Under Coverage D, how much coverage does L have for lost rental income if the basement apartment becomes uninhabitable due to a fire loss? A $60,000 B $30,000 C $200,000 D $100,000
A) $60,000 For a covered loss, the standard Coverage D limit for additional living expense, fair rental value, and civil authority prohibits use is 30% of the Coverage A limit. 30% of $200,000 is $60,000.
On the DP-2, a loss to which of the following could be valued at its replacement cost? A A detached garage B A swimming pool C Interior carpeting D Household appliances
A) A detached garage The Broad Form provides replacement cost coverage for the dwelling and other structures that are buildings, like a detached garage. Carpeting, appliances, nonbuilding structures (like a swimming pool), outdoor antennas and equipment, awnings, and personal property are all valued at their actual cash value.
Which of the following would be covered by a Commercial General Liability policy as an instance of the insured's product liability? A A restaurant customer contracts food poisoning B A customer's hand is injured by a vending machine C A cell phone the insured is selling is damaged after its defective battery explodes D A customer is injured by a product that was sold to them after it had been recalled
A) A restaurant customer contracts food poisoning A customer who contracts food poisoning is an example of the insured's product liability that would be covered by the CGL. Coverage is excluded for bodily injury or property damage resulting after a product is recalled. Because the CGL offers third-party liability coverage, coverage is not provided for physical damage to the property itself. The definition of Your Product provided by the CGL excludes vending machines.
A standard Personal Auto policy considers all of the following to be uninsured motor vehicles, except: A A vehicle that is being used as a residence B A vehicle with insurance from an insurer that becomes insolvent C A vehicle with no liability insurance coverage D A hit-and-run vehicle whose owner or operator cannot be identified
A) A vehicle that is being used as a residence Vehicles used as a residence are excluded from the definition of an uninsured motor vehicle.
Losses to unscheduled farm personal property covered under Coverage F of a Farm Property policy are settled on a(n): A Actual cash value basis B Market value basis C Replacement cost basis D Salvage value basis
A) Actual cash value basis Farm personal property, whether scheduled under Coverage E or unscheduled under Coverage F, has an actual cash value loss settlement basis. For unscheduled farm personal property, the Coverage F limit is subject to an 80% coinsurance requirement.
All of the following statements regarding liability losses are correct, except: A Bodily injury includes personal injury, sickness, and disease B Advertising injury includes defamation and copyright infringement C Property damage includes physical damage to tangible property, including loss of use of that property D Loss of consortium means the loss of companionship of a spouse
A) Bodily injury includes personal injury, sickness, and disease Bodily injury does not include personal injury, which are injuries that affect a person's reputation or emotional well-being.
Business liability coverage provided by the BOP excludes coverage for all of the following, except: A Bodily injury to a customer as a result of the use of reasonable force to protect them B Liability arising out of product recall C Employers liability D Bodily injury to an employee injured in the course of employment
A) Bodily injury to a customer as a result of the use of reasonable force to protect them Though expected or intended injuries are excluded from coverage, this exclusion does not apply to injuries resulting from the use of reasonable force to protect people or property.
Which of the following is not an example of personal and advertising injury, as understood by the CGL? A A broken leg B Misappropriation of a title or slogan C Infringement of copyright D False imprisonment
A) Broken leg A broken leg is an example of bodily injury, not personal injury.
D has a fine arts collection insured by a Fine Arts Floater. Which of the following statements regarding the Fine Arts Floater is correct? A If any covered art piece is transported, it must be done by competent packers B It settles losses on an ACV basis C Automatic coverage for newly acquired fine art pieces is provided for up to 30 days D A loss occurring while scheduled art is exhibited at a national exposition is covered
A) If any covered art piece is transported, it must be done by competent packers The Fine Arts Floater requires art pieces to be handled by competent packers if they are being transported, or else coverage will not apply. Coverage is also excluded for losses while being exhibited and losses caused by the repairing or restoration process. Covered losses are settled on an agreed value basis, and newly acquired art is automatically covered for 90 days.
Goods being transported would be covered by which of the following types of insurance? A Inland Marine B Surety C Automobile D Casualty
A) Inland Marine Inland Marine insurance protects goods in transit over land.
Special damages would be awarded for all of the following types of loss, except: A Pain B Repair costs C Medical expenses D Loss of income
A) Pain Special damages are an award to an injured party for actual and known expenses such as bills, loss of earnings, and the costs of repairing or replacing damaged property. General damages are paid to compensate for losses that cannot be calculated objectively, like pain and suffering.
A worker suffers a spinal injury that leaves the worker unable to work, with no possibility of improvement. This type of disability is called: Permanent total B Permanent partial C Temporary partial D Temporary total
A) Permanent Total A permanent total disability is a disability where no improvement is possible and that leaves the injured employee unable to do any work.
What is the primary objective of Workers' Compensation? A To provide a payment of benefits to employees for injuries that arise out of their employment, regardless of negligence B To provide accident coverage for employees both on and off the job C To improve employer and employee relations D To improve the employee's working conditions
A) To provide a payment of benefits to employees for injuries that arise out of their employment, regardless of negligence The primary objective of Workers' Compensation is to provide benefits to workers who are injured on the job, without regard to fault. As a result of providing these benefits to employees and requiring employers to accept absolute liability for workplace injuries, this incentivizes the employer to ensure better and safer working conditions.
When L's company initiated a plan refusing to insure buildings over 50 years old on the basis that all the buildings were by definition high risk, dissatisfied consumers brought a complaint accusing them of: A Unfair discrimination B Geographical redlining C Defamation D Boycott and coercion
A) Unfair discrimination Refusing to insure buildings simply based on their age is considered unfair discrimination in Arkansas. It is not geographical redlining, because the scenario is based on the age of the structure, not its location. Defamation is an unfair trade practice against a person, not a building. As for boycott or coercion, it reflects an insurer's attempt not to exclude market segments, but to monopolize market segments, often by coercing the purchase of one product that is less desirable, in order to obtain coverage that is more desirable.
Personal Umbrella Liability policies may provide coverage for losses occurring within what policy territory? A Worldwide B The United States and other locations, only if they are scheduled C The United States, its territories and possessions, Puerto Rico, and Canada D The policy territory applicable to underlying insurance policies
A) Worldwide Umbrella Liability policies provide worldwide coverage, even for auto losses.
All of the following are types of Professional Liability insurance, except: A Commercial Umbrella Liability insurance B Medical Malpractice insurance C Errors and Omissions insurance D Fiduciary Liability insurance
A)Commercial Umbrella Liability insurance A Commercial Umbrella Liability policy is a form of excess liability coverage, not professional liability coverage. These policies typically exclude professional liability exposures.
Which of the following most accurately describes the Abandonment condition? A The insured cannot abandon damaged property to the insurer B The insured must make reasonable and necessary repairs to protect the property C The insured must cooperate with the company in the investigation of a claim D Abandoned property must be protected from further damage
A)The insured cannot abandon damaged property to the insurer The Abandonment condition provides that the insurer will not accept property abandoned by an insured, such as the insured surrendering property to the insurer for disposal.
Which statement regarding liability insurance coverage is incorrect? A The per occurrence limit is the maximum amount recoverable during the policy period B If the policy is written as primary coverage, it pays first with respect to other policies C Casualty policies must defend the insured against liability claims made against them, but only if the claim is relevant to the policy's coverage D Pro rata liability is the proportionate distribution of liability among insurers that have policies on the same risk
A)The per occurrence limit is the maximum amount recoverable during the policy period The occurrence limit is the most that will be paid for any one occurrence. The aggregate limit is the most that will be paid within the policy period. Pro rata liability refers to the policy's Other Insurance clause and indicates that when two policies both cover a loss, they coordinate coverage by paying proportionate amounts compared to the total amount of insurance available for the loss.
J is looking to buy a second home to use as a rental property and is exploring insurance options. The producer offers J a property policy that provides coverage on an open perils basis. This means that: A The policy covers all direct physical loss to covered property, unless caused by an excluded peril B The policy Insuring Agreement will name all perils covered by the policy C The policy contains no exclusions D If J chooses the policy, J may select which perils are covered from a list provided by the insurer
A)The policy covers all direct physical loss to covered property, unless caused by an excluded peril When coverage is provided on an open perils basis, the Insuring Agreement provides for insurance against all causes of loss except those specifically excluded. These exclusions will be found as stipulations in the Insuring Agreement and in the distinct Exclusions section found elsewhere in the policy.
Under a Dwelling Policy, an insured tenant may use up to what percentage of the Coverage C limit of insurance for a covered loss to improvements, alterations, and additions made at the insured's expense to that part of the described location occupied by the named insured? A 0% B 10% C 5% D 20%
B 10% An insured tenant may use up to 10% of the Coverage C limit for a covered loss to improvements, alterations, and additions made at the insured's expense to that part of the described location occupied by the named insured.
Section I of a Businessowners policy does not cover which of the following? A Lawn mowers used to service the premises B Computers permanently installed in a motor vehicle subject to registration C Signs attached to the building D Permanently installed machinery and equipment
B Computers permanently installed in a motor vehicle subject to registration Motor vehicles and computers permanently installed in them are not covered by the Businessowners policy, as a Commercial Auto policy would provide better coverage. The same is true for aircraft, watercraft, and any computer installed in them.
J is hosting a dinner party with family friends. After dinner, one of the guests trips while running in the yard and breaks their arm, incurring $2,500 in medical bills. Under Section II of J's Homeowners policy, coverage for these expenses is subject to which of the following policy terms? A Coverage is denied because J's policy is intended for automobile liability exposures B Medical payments made to the guest are not subject to the policy deductible C Medical payments provided by J's policy are an admission of fault D Coverage is denied because medical payments are only provided to J and J's resident family members
B Medical payments made to the guest are not subject to the policy deductible Deductibles only apply to property insurance coverages, and do not apply to payments made under Section II - Liability Coverages of a Homeowners policy. Payments under Coverage F - Medical Payments to Others are goodwill coverages, and are not an admission of J's fault.
Under the Discovery Form available for Commercial Crime coverage, the latest a covered loss can be discovered and be covered by the policy is: A The policy expiration date B One year after policy expiration C Two years after policy expiration D The retroactive date
B One year after policy expiration For both the Loss Sustained Form and the Discovery Form, the latest time the insured may discover a covered loss is 1 year after policy termination. However, for the Discovery Form, this one-year period only applies to losses related to an employee benefit plan shown in the Declarations. All other losses covered by the Discovery Form are subject to a 60-day extended discovery period.
All of the following are Commercial Property Conditions of a CPP, except: A Control of Property B Premiums C No Benefit to Bailee D Liberalization
B Premiums The Premiums condition is a Common Policy Condition. Commercial Property Conditions, standardized across commercial property policies, include Concealment or Fraud, Control of Property, Insurance Under Two or More Coverages, Legal Action Against Us, Liberalization, and No Benefit to Bailee.
An insured owns a commercial building worth $400,000 and insures it for $350,000 on a commercial property policy written on the Building and Personal Property Coverage Form. If the insured plans to construct a new building on the premises, coverage for the newly constructed property is: A Provided by an Additional Coverage for up to $100,000 B Provided by a Coverage Extension for up to $250,000 C Not provided by the policy D Provided under the limit of insurance applying to the policy's building coverage
B Provided by a Coverage Extension for up to $250,000 If the insured meets the 80% coinsurance requirement, they may extend coverage to apply to newly acquired or constructed properties for up to $250,000 for the building itself and up to $100,000 for newly acquired business personal property. This is provided by the Newly Acquired or Constructed Property Coverage Extension. If the insured failed to maintain insurance to value, this extension would not be available to them.
A policy contains a provision stating that after the insurer pays for a covered claim, the insurer will reinstate the policy limit to its initial value. This is provided by which policy condition? A Loss Payment B Restoration of Limits C Limit of Liability D Loss Settlement
B Restoration of Limits The Restoration of Limits condition specifies the circumstances under which the insurer will restore the limit of liability to its initial value after the insurer pays a covered claim.
An insured has coverage under the NFIP, with $500 deductibles for the dwelling and contents. The insured sustains flood damage to both their home and personal property. What is the maximum the insured will have to pay for damages, assuming the loss is under the policy limits? A $1,500 B $1,000 C Nothing D $500
B) $1,000 he deductible applies separately for the dwelling and the contents, so the insured is responsible for $1,000 in deductibles.
A producer tells an applicant for insurance that a competitor insurer in Arkansas is struggling financially, and may not be able to honor their claim obligations. Which unfair trade practice has the insurer committed? A Churning of business B Defamation C Boycott, coercion and intimidation D Unfair discrimination
B) Defamation Defamation is the making of any false or maliciously critical statement regarding the financial condition of any person, with the intent to injure such person. In this case, the producer made a maliciously critical statement about the competitor insurer in hopes that the applicant would decline the coverage being offered from the competitor insurer. Boycott, coercion and intimidation involves entering into action resulting in an unreasonable restraint of, or monopoly in, the business of insurance.
Which of the following is true regarding business personal property under a BOP? A It is covered while in transit B It is covered when located in or on the building at the described premises, or in the open within 100 feet of the premises C It is covered only while within the building or an enclosed structure on the premises D Coverage extends to property in vehicles within 500 feet of the premises
B) It is covered when located in or on the building at the described premises, or in the open within 100 feet of the premises Business personal property is covered while in or on the building at the described premises, or in the open or in a vehicle within 100 feet of the premises.
The person specifically designated in the policy as the person with whom the contract of insurance has been made is considered to be the: A Contingent insured B Named insured C Additional insured D Contract insured
B) Named insured The named insured is the entity with whom the insurance contract is made. When there is more than one entity designated as named insured in the policy, then contractual obligations are transacted with the first one designated, known as the first named insured.
Medical payments coverage under the Commercial General Liability coverage part includes reasonable medical expenses incurred and reported within: A Three years of the accident B One year of the accident C Ninety days of the accident D Nine months of the accident
B) One year of the accident Expenses that have been incurred and reported within 1 year of the date of the accident are eligible for payments under Coverage C.
The Business Auto Coverage Form would cover which of the following losses? A Injuries resulting from the operation of mobile equipment B Property damage caused by the insured's completed operations C Expenses incurred to respond to damage caused by the escape of lubricant from a covered auto after a covered accident D Expected or intended injuries
B) Property damage caused by the insured's completed operations The BAP typically excludes costs associated with the insured's pollution liability, but the exclusion makes an exception to provide coverage for expenses incurred to respond to the escape of fuel or lubricants (pollutants needed for the normal functioning of covered autos) after an accident that causes bodily injury or property damage.
The Personal Articles Floater is similar to which of the following Homeowners endorsements? A Permitted Incidental Occupancies Endorsement B Scheduled Personal Property Endorsement C Personal Property Replacement Cost Endorsement D Special Personal Property Endorsement
B) Scheduled Personal Property Endorsement The Personal Articles Floater and the Scheduled Personal Property Endorsement available to Homeowners policies provide similar coverages.
An insured has a business Auto policy with the Auto Medical Payments Coverage Endorsement. Necessary medical and funeral expenses incurred by an insured who sustained bodily injury in an accident are covered by the endorsement for expenses incurred within: A Two years B Three years C Five years D One year
B) Three years The endorsement allows a 3-year period for the injured insured to report covered expenses incurred as a result of an accident. Coverage is provided up to the limit of insurance.
In case of a total loss by fire or natural disaster of the property insured, a property insurance policy, other than for flood and earthquake, will be held and considered to be a liquidated demand against the company taking the risk for the full amount stated in the policy defines which of the following terms? A Automobile insurance plan B Valued policy law C Comparative fault D Commercial liability
B) Valued policy law Comparative fault deals with determining the liability or fault of a claimant and comparing it with the fault of the party from whom the claimant seeks to recover damages. Commercial liability states that any policy providing an aggregate limit of liability within the schedule of limits must include a notice specifying that the policy limit is an aggregate. The Arkansas Automobile Insurance Plan is available for individuals who were unable to obtain auto insurance through normal markets.
Liberalization, Subrogation, and Other Insurance are all found in which section of a property or casualty insurance policy? A Declarations B Conditions C Exclusions D Insuring Agreement
B)Conditions Liberalization, Subrogation, and Other Insurance are all policy conditions, found in the Conditions section, that specify certain terms of the policy.
Under the Duties in the Event of Occurrence, Claim, or Suit condition of a Commercial General Liability policies, which of the following is NOT correct? A If the insured receives a claim made against them, it must be reported to the insurer as soon as practicable B If the insured voluntarily assumes an obligation related to a claim without the insurer's consent, the insurer is still liable for the cost C If the insured receives a claim made against them, the details must be immediately recorded D If an occurrence that may result in a claim takes place, the insured must notify the insurer as soon as practicable
B)If the insured voluntarily assumes an obligation related to a claim without the insurer's consent, the insurer is still liable for the cost Other than first-aid expenses, if the insured voluntarily makes a payment, assumes an obligation, or incurs an expense without the insurer's consent, the insurer is not liable for the cost.
All of the following are defined as insured locations under a Homeowners policy, except: A Cemetery plots B A non-owned premises where the insured is temporarily residing C Farmland owned by the insured D Boat slip
C Farmland owned by the insured Farmland owned by the insured is not considered an insured location. The definition of insured location includes premises used in connection with the residence premises, like a boat slip.
When a Homeowners policy provides coverage for medical payments, payments are provided: A For therapy following personal injuries B To cover an insured's injuries C For funeral expenses D Up to the Coverage E limit
C For funeral expenses Medical payments coverage, provided by Coverage F, provides a limited amount of coverage for medical expenses incurred by an injured third party, including surgical, dental, hospital, professional nursing, and funeral expenses. Personal injury damages are not covered by Section II, except by endorsement. Coverage E - Personal Liability provides coverage for damages awarded against the insured for bodily injury or property damage to others.
A dental lab protected by an unendorsed Businessowners policy is damaged by a fire. Hoping to minimize the suspension of business, the lab incurs extra expenses to move to a temporary location and resume business. These extra expenses are covered during the period of restoration, which begins: A 48 hours after the fire loss B 24 hours after the fire loss C Immediately after the fire loss D 72 hours after the fire loss
C Immediately after the fire loss The period of restoration applying to coverage provided by the Extra Expense Additional Coverage begins immediately after the loss and ends on either the date the property should be repaired or the date business is resumed at a new permanent location. This period of restoration differs from the one that applies to business income coverage, which begins 72 hours after the direct physical loss.
In which section of the Workers' Compensation and Employers Liability policy would the policy conditions be found? A Part Two B Part Four C Part Six D Part Eight
C Part Six Part Six of the Workers' Compensation and Employers Liability policy contains the policy's conditions. Part Two outlines Employers Liability coverage, and Part Four outlines the insured's duties in the event of an injury. Part Eight does not exist.
The Ordinance or Law Additional Coverage on a Homeowners policy will cover an increase in costs that results from the enforcement of an ordinance or law regulating all of the following, except: A Construction or demolition of an insured building B Remodeling or renovation of an insured building C Pollutant testing and removal from an insured premises D Repair of an insured building
C Pollutant testing and removal from an insured premises The Ordinance or Law Additional Coverage applies when increased expenses result from enforcement of an ordinance or law regulating the construction, demolition, remodeling, renovation, or repair of a covered building. It does not cover increased costs resulting from responding to pollutants.
Insurers are subject to all of the following liability policy terms, except: A When this policy and another liability policy through a different insurer cover the same risk on a pro rata liability basis, each insurer must pay its proportion of a covered loss B If the insurer broadens coverage without an increase in premium, that broadened coverage must automatically apply to the insured's policy C The insurer is relieved of its obligations if the insured is bankrupt D The insurer is not required to provide a defense if the insured's policy limits have been exhausted
C The insurer is relieved of its obligations if the insured is bankrupt Bankruptcy or insolvency of the insured does not relieve the insurer of its obligations under the policy, according to the Bankruptcy condition.
Under a Broad Form Dwelling policy (DP-2), which peril is not included for coverage without an endorsement? A Falling objects B Damage to appliances by artificially generated electricity C Theft D Volcanic eruption
C Theft Theft coverage for the DP-2 is available only through attachment of the Limited Theft Endorsement or the Broad Theft Endorsement.
All of the following are powers of the Insurance Commissioner, except: A Regulating premium rates B Conduct insurer and agency audits C Writing the insurance laws D Issuing licenses
C Writing the insurance laws Insurance laws are created by the state legislature and enforced by the Commissioner. The Commissioner is responsible for regulating premium rates, but not setting them.
Driver D slid into another car, causing an accident in which three people in the other car were injured. Two injured parties claimed $15,000 in medical expenses, and the third person claimed $25,000. How much will D's insurance company pay if D's policy has 25/50 limits for bodily injury? A $75,000 B $55,000 C $50,000 D $45,000
C) $50,000 The policy pays up to $25,000 for each person injured, but no more than $50,000 per occurrence, regardless of the number of persons injured. Therefore, the limit for this accident is $50,000.
An insurance company is organized under the laws of the United Kingdom, and is authorized to do business in New York. In New York, what kind of insurer is this? A Non-admitted foreign insurer B Admitted domestic insurer C Admitted alien insurer D Admitted foreign insurer
C) Admitted alien insurer The insurer is incorporated in a different country, so it is considered an alien insurer. Because it is authorized to do business in a state, it is considered an admitted insurer.
Under the Spoilage Coverage Endorsement of a commercial property policy, the insured may protect their perishable stock from loss due to: A Any of the perils included on the attached Causes of Loss form B Breakdown or contamination and earth movement C Breakdown or contamination and power outage D Power outage and water damage
C) Breakdown or contamination and power outage The endorsement offers two covered perils: breakdown or contamination and power outage. The insured must select the peril or perils they want coverage for in order for coverage to apply.
The part of an insurance contract that varies with each individual policy, but is still a mandatory part of the policy, is the: A Insuring Agreement B Conditions C Declarations D Exclusions
C) Declarations The Declarations section of the policy contains specific information about the insured, and thus will vary by policy, even when the type of coverage provided is the same. The other policy sections will not change for each individual policy. For example, although there are multiple policy form options for Homeowners insurance, all forms through the same insurer will likely have the same Conditions and Exclusions sections. Insureds with policies based on the same policy form used by an insurer will have the same Insuring Agreement.
Who is responsible for paying premiums, and will receive any premiums that have to be returned? A Any named insured B An additional insured C First named insured D Any insured
C) First named insured The first named insured is granted certain rights and responsibilities under the policy. This includes being responsible for premium payments and being the recipient if the insurer has to remit premiums, such as if the policy is cancelled.
Which of the following is true regarding the Personal Liability Supplement? A It covers professional services rendered by the insured B The limit of liability is the same as the Coverage A amount C It provides coverage for claim expenses, first aid expenses, and damage to property of others D It covers the insured's personal autos
C) It provides coverage for claim expenses, first aid expenses, and damage to property of others Claim Expenses, First Aid Expenses, and Damage to Property of Others are Additional Coverages that extend coverage under Coverage L - Personal Liability and Coverage M - Medical Payments.
All of the following statements about the National Flood Insurance Program are correct, except: A It is administered by the Federal Emergency Management Agency (FEMA) B Property in nonparticipating communities are ineligible for flood insurance coverage C It provides unlimited coverage for properties in participating communities that are part of the Regular Program D The federal government subsidizes all flood losses
C) It provides unlimited coverage for properties in participating communities that are part of the Regular Program The NFIP does not provide unlimited coverage. Maximum limits apply to policies written for communities in both the Emergency Program and the Regular Program.
Under Part Three - Other States Insurance of a Workers' Compensation and Employers Liability policy, if a state is not listed on the Information page but the insured begins work in that state, the insured: A Cannot be insured for benefits owed to workers injured in that state B Must notify the insurer immediately upon beginning work in that state in order for coverage to apply C Must notify the insurer within 30 days of beginning work in that state in order for coverage to apply D Must notify the insurer within 60 days of beginning work in that state in order for coverage to apply
C) Must notify the insurer within 30 days of beginning work in that state in order for coverage to apply Typically, other states must be listed on the Information page of a Workers' Compensation and Employers Liability policy in order for coverage to apply. However, if a state is not listed and the insured provides notice within 30 days of beginning work in that state, the policy's coverage can be extended to cover benefits owed to workers injured in that state.
The Business Auto Coverage Form provides coverage for the insured's liability arising out of the ownership, maintenance, or use of: A Hovercraft B Aircraft C Semitrailers D Watercraft
C) Semitrailers A Business Auto policy is used to provide liability and property coverages for autos, including private passenger autos, trucks, trailers, and semitrailers. Aircraft, watercraft, and hovercraft are not insured on the BAP.
Which of the following is an example of risk reduction? A Eliminating exposure to a specific risk B Insuring only those risks that threaten the financial stability of the insured C Taking action to minimize the severity of a potential loss D Transferring risk to an insurance company
C) Taking action to minimize severity of a potential loss Risk reduction is one method of managing risk that involves reducing the severity or frequency of potential loss, without eliminating the risk exposure entirely. Risk transfer and risk avoidance, which is the elimination of risk by not participating in activities that involve a chance of loss, are separate methods.
Which of the following statements regarding producer appointments in Arkansas is correct? A A licensee may only act as an agent for an insurer without an appointment if they are working under the terms of a temporary license B An appointing insurer must file a notice of appointment at least 20 days before the first application can be submitted C The Commissioner must verify that an individual is eligible to be appointed within 30 days of receiving an application D Producers must reapply for appointments in conjunction with their license renewal process every 2 years
C) The Commissioner must verify that an individual is eligible to be appointed within 30 days of receiving an application An insurance producer may not act as an agent of an insurer unless the producer becomes an appointed agent of that insurer. The notice of appointment must be filed within 15 days, not 20, after the first application submitted by a new agent, not before, and the appointment is always necessary in order to act as an agent. Appointments last until one's license is terminated or a notice of termination is filed with the Commissioner.
An insured has a Commercial General Liability policy written on the Claims-Made Form. Which of the following is correct regarding the supplemental extended reporting period? A The SERP increases the policy's limits of insurance B The SERP covers occurrences that take place after the policy term during the supplemental extended reporting period C The SERP's premium is a one-time charge D Cancellation of the insured's SERP by the insurer requires 90 days' advance written
C) The SERP's premium is a one-time charge The SERP, purchased as an endorsement, has a premium that is a one-time charge, up to 200% of the policy's annual premium. Like any extended reporting period, it allows an extended time frame in which the insured may report legal claims made against them for occurrences that took place during the policy period. Occurrences taking place during the extended reporting period are not covered. The SERP cannot be cancelled. Extended reporting periods on the CGL do not change the coverage provided, the applicable limits of insurance, or the length of the policy period.
P is an agent for ABC Insurer, which has just issued an insurance policy to M. In this transaction, who is known as the principal? A P, the agent B M, the insured C ABC Insurer D M's beneficiary
C)ABC Insurer This is referring to the Law of Agency, which is about the relationship between two parties: the principal and the agent. The agent, also referred to as the producer, represents and acts on behalf of the principal, which is the insurance company. The insured is not part of the Law of Agency.
Coverage for catastrophic exposures commercial businesses may face is provided by which kind of policy? A Commercial General Liability policy B Employers Liability policy C Commercial Umbrella Liability policy D Businessowners policy
C)Commercial Umbrella Liability policy Commercial Umbrella Liability insurance provides coverage for catastrophic losses and coverage that is more comprehensive than that which is contained in underlying insurance.
D has a DP-1 policy with Extended Coverage to insure a tenant-occupied dwelling. All of the following losses are covered by the policy, except: A Roof damage caused by high winds B Damage to the dwelling caused by lava flow from a nearby volcanic eruption C Damage to a corner of the dwelling after a tree fell onto the dwelling D Damage to D's dining room after a neighbor accidentally drives into D's dwelling
C)Damage to a corner of the dwelling after a tree fell onto the dwelling The Falling Objects peril, which would cover damage caused by falling trees or falling space debris, is not included as a basic peril or an EC peril. The Vehicle peril is included as an EC peril, and applies to damage caused by a vehicle that the insured or a resident does not own or operate. Windstorm and Hail and Volcanic Eruption are other EC perils.
Under Commercial Auto policies, for which of the following persons is the Drive Other Car Endorsement intended? A The officers and directors of a corporation B Owners of school buses C Individuals of a corporation who do not own an auto D Truckers and motor carriers
C)Individuals of a corporation who do not own an auto The Drive Other Car - Broadened Coverage for Named Individuals Endorsement may be added to any of the Commercial Auto coverage forms and is designed for individuals, such as employees, who do not personally own and insure an auto.
Which of the following statements about Employers Liability insurance is correct? A It is excess coverage over Workers' Compensation benefits B It covers only executive officers C It covers actions brought against the insured in a capacity other than as an employer D It covers employees only if working in a state not listed on the Information page
C)It covers actions brought against the insured in a capacity other than as an employer Employers Liability covers actions brought against the insured in a capacity other than as an employer. This might include an employee bringing action against the business as a manufacturer, rather than as an employer, or loss of consortium suits brought by an employee's spouse. Employers Liability damages are separate from Workers' Compensation damages, meaning Employers Liability coverage does not operate as excess insurance.
All of the following provisions are included on the Personal Jewelry Floater, except: A A Pair and Sets clause applies in the event of a partial loss to a pair or set B The insurer may require appraisal to determine the value of scheduled jewelry C Newly acquired items are automatically covered for 60 days D Coverage can be written on a valued basis
C)Newly acquired items are automatically covered for 60 days Automatic coverage for newly acquired items under the Personal Jewelry Floater applies for 30 days, and coverage may continue if the insured reports the item and pays any additional premium required by the insurer. Personal Inland Marine floaters can settle losses based on the property's actual cash value or based on an agreed value. Policies written on an agreed value basis are also known as valued policies.
Under the Property Removed Other Coverage of a Dwelling policy, which of the following is incorrect? A Removed property is covered against direct loss from any peril B The coverage does not change the limit of liability that applies to the property C The policy will not provide any coverage while insured property is being removed when endangered by a covered peril D Under the DP-1, coverage is provided for up to 5 days
C)The policy will not provide any coverage while insured property is being removed when endangered by a covered peril The Property Removed Other Coverage provides coverage when covered property is removed from the premises to protect it from being damaged by a covered peril. While the property is removed, coverage for the removed property is expanded to protect against direct loss from any cause. Under the DP-1, this coverage is provided for up to 5 days. Under the DP-2 and DP-3, this coverage is provided for up to 30 days.
Which of the following statements regarding UM/UIM coverage in Arkansas is correct? A UM/UIM coverage is required for all insured drivers B A policy's liability limits and UM/UIM limits must always be equal C UM/UIM limits must be between the state minimum and the liability limits of the policy D UM/UIM coverage limits cannot exceed the state minimums
C)UM/UIM limits must be between the state minimum and the liability limits of the policy UM/UIM coverage must be offered, but is not required coverage. Its limits must at least equal the state minimum liability limits, but can be up to the policy's liability limits.
Coverage C on the HO-3 would cover which of the following losses? A Fire loss to the personal property of a boarder who is not related to the insured B Lightning damage to a structure held for rental to tenants as a private garage C Vandalism loss to property the insured borrows from a neighbor D Damage to furniture caused by wild animals
C)Vandalism loss to property the insured borrows from a neighbor Coverage C covers personal property (contents) owned or used by the insured. Coverage C can apply to the personal property of others while it is on the residence premises, as long as coverage is requested by the insured after a loss by a covered peril. Property of a boarder, roomer, or tenant who is not related to an insured is not covered, as they would need their own insurance. Coverage C on the HO-3 protects against the Broad Form named perils, which does not include wild animals. Damage to a structure rented or held for rental to tenants as a private garage is covered under Coverage B.
Which of the following statements about Coverage C under the Homeowners policy is incorrect? A)Limited coverage is provided for personal property located in a student insured's dorm B)Coverage C provides property coverage for machinery used to service the premises C)Coverage for business personal property on the premises is provided, up to a special limit D)Coverage C provides coverage for the property of roomers and boarders at the insured's request
Coverage C provides coverage for the property of roomers and boarders at the insured's request The property of roomers and boarders is considered property not covered by Coverage C. The property of guests and residence employees, however, may be provided upon request. Business personal property associated with a home-based business that is on the residence premises is protected up to a $2,500 special limit.
Under Coverage H - Bodily Injury and Property Damage Liability of the Farm Liability Coverage Form, liability arising out of the insured's custom farming operations is covered if the insured's custom farming receipts for the year are: A $10,000 or less B More than $10,000 C More than $5,000 D $5,000 or less
D $5,000 or less Liability arising out of custom farming operations is typically not covered by the policy, but this exclusion only applies when the insured's custom farming receipts exceed $5,000 for the 12 months immediately preceding the occurrence. If receipts total $5,000 or less, the exclusion does not apply and coverage is provided.
Coverage C of the Homeowners policy would cover which of the following? A Property of the tenant of an apartment located in the insured's garage B The insured's registered pet dog C Business data stored on the insured's laptop computer D A camera stolen while the insured is on vacation
D A camera stolen while the insured is on vacation Animals, property of tenants, and business data are all considered property not covered under Coverage C.
Under a Commercial General Liability policy, the earned premium used in a premium audit to compute the final premium is determined at what point in time? A At the beginning of the policy period B Monthly C At the time the premium deposit is made D At the end of the policy period
D At the end of the policy period The earned premium is based on an audit at the end of the policy period. An additional premium is required if the earned premium is greater than the premium deposit. A premium credit (refund) will apply if the premium deposit was greater than the premium determined by the audit.
In the event a Personal Auto policy is to be terminated, which of the following provisions applies? A If the insurer chooses to nonrenew the policy, an oral notice is required B Insurers may only cancel a policy within the first 60 days of the policy's effective date C Any insured may cancel the policy anytime D Proof of mailing a notice is considered sufficient proof that the insurer provided a termination notice
D Proof of mailing a notice is considered sufficient proof that the insurer provided a termination notice Proof of mailing is considered sufficient proof of notice. The named insured shown on the Declarations has the right to cancel the policy at any time. The insurer may also cancel the policy at any time, but if the policy has been in effect for at least 60 days, it can only do so for certain reasons. Advance written notice is required for all termination notices, and oral notice alone would not be sufficient.
When a limit of insurance is indicated on the Declarations page of the Equipment Breakdown Protection Coverage Form, expediting expenses coverage pays for which of the following? A Lost income resulting from any one breakdown B The cost of newly acquired property necessary to replace damaged property C Damage caused by hazardous substances used to hasten the repair of the damaged equipment D Temporary expenses to expedite permanent repairs of damaged property essential for the operation of the business
D Temporary expenses to expedite permanent repairs of damaged property essential for the operation of the business Expediting expenses coverage pays for the necessary extra costs the insured incurs to make temporary repairs and to expedite the permanent repairs or replacements.
Which of the following property is not covered under Coverage A of a Dwelling Policy? A Materials for repairing the dwelling, located on the described location B Outdoor equipment on the location used to service the dwelling C Fire damage to outdoor television antennas attached to the dwelling D The land on which the dwelling is located
D The land on which the dwelling is located Land is exlcuded
Statements in the application that are guaranteed true, but later found to be false at the time of application, may result in which of the following? A Establishment of a monetary penalty B Nullification of the warranty C A waiver of the provisions of the warranty D Voidance of the contract
D Voidance of the contract A breach of warranty is a determination that a warranty has proven to be untrue, whether intended as a falsehood or not, and may void the contract.
J's Personal Auto policy includes Other Than Collision coverage, but no collision coverage, with a $200 deductible. J's parked car rolls downhill and hits a tree, incurring $500 in damage to the car, $150 of which is from glass breakage. How much will J's insurer pay for the loss? A $500 B $350 C $150 D Zero
D Zero Without collision coverage, the accident is not covered under the policy. Hitting a tree is considered a collision, so the $350 loss caused only by the collision is not covered. Losses resulting from glass breakage can be covered by collision or OTC coverage, at the insured's option, but in this case, that $150 glass breakage loss is less than the deductible, so the insurer would not provide coverage.
An unendorsed Businessowners policy will pay no more than what amount for the theft of jewelry? A $7,500 B $3,500 C $5,000 D $2,500
D) $2,500 The theft of jewelry, watches, pearls, precious and semi-precious stones, bullion, gold, silver, platinum, and other precious alloys or metals is limited to $2,500 for any one loss.
All of the following are examples of a blanket limit of insurance, except: A A single limit applies to building and contents coverage for multiple buildings at multiple locations B A single limit applies to building coverage for multiple buildings at multiple locations C A single limit applies to building and contents coverage for one building at a single location D A single limit applies to building coverage for one building at a single location
D) A single limit applies to building coverage for one building at a single location A blanket limit can insure more than one property for a single amount of coverage. The multiple properties could refer to multiple types of property (such as a single limit applying to both building coverage and contents coverage at a single location), multiple locations (such as coverage for two buildings at two different locations), or both (such as building and personal property coverage for two buildings at two different locations). A limit for a single item of property would be a specific limit.
The definition of an uninsured motor vehicle under a standard Personal Auto policy does not include: A A vehicle that has no applicable liability insurance policy B A pickup insured by an insolvent company C A hit-and-run vehicle that cannot be identified D A vehicle newly acquired by the named insured that has not been reported to the insurer
D) A vehicle newly acquired by the named insured that has not been reported to the insurer A vehicle owned by the insured would not fit the definition of an uninsured vehicle.
Which of the following statements about Commercial Umbrella Liability policies is NOT correct? A Specific minimum limits for underlying coverage are required B Commercial Umbrella Liability policies are excess policies C If the Umbrella Liability policy provides broader coverage than the underlying policy, the Umbrella will cover the loss, less a retention D Commercial Umbrella Liability policies generally cover first-party claims
D) Commercial Umbrella Liability policies generally cover first-party claims Umbrella Liability policies are liability policies and therefore cover third-party claims.
Under a Commercial General Liability policy, all of the following are considered a type of personal and advertising injury, except: A Violation of copyright B Misappropriation of advertising ideas C Infringement of copyright D Extortion
D) Extortion Damages resulting from criminal acts, such as damages owed to others resulting from the insured extorting another party, are excluded from coverage under Coverage B.
An insured protects a small fishing boat under a Boatowners policy. Which of the following coverages is not provided? A Physical damage coverage for the hull, motor, and trailer B Bodily injury liability coverage C Medical payments coverage for passengers D Personal injury liability coverage
D) Personal injury liability coverage Personal injury liability coverage is not provided by Boatowners policies. Coverage is provided for the insured's bodily injury and property damage liability, medical payments coverage for passengers, and physical damage coverage for the hull, motor, trailer, equipment, and accessories.
The Personal Liability Supplement provides all of the following coverages, except: A Damage to the property of others coverage B Medical payments coverage C Bodily injury liability coverage D Personal injury liability coverage
D) Personal injury liability coverage The Personal Liability Supplement attached to a Dwelling policy provides Coverage L - Personal Liability coverage, which includes bodily injury and property damage liability coverages, and Coverage M - Medical Payments to Others. Personal injury coverage is not included in this endorsement.
All of the following statements regarding property insurance are correct, except: A The insurer may cancel a policy, after providing proper notice B A binder is a temporary proof of insurance C A property that contains neither occupants nor personal property is deemed vacant D The owner of clothing left in the care of a dry cleaner is called a bailee
D) The owner of clothing left in the care of a dry cleaner is called a bailee The owner of clothing taken in for cleaning would be a bailor. The dry cleaner in custody of the clothes is the bailee.
Insured locations under a Homeowners policy include all of the following, except: A Individual and family cemetery plots B A hotel room used by the insured while on vacation C A banquet hall the insured rented for the insured's daughter's wedding D Vacant farm land
D) Vacant farm land The definition of insured location includes locations where the insured temporarily resides, locations that are rented to the insured, and cemetery plots. Vacant land is also included in the definition, but farm land is not eligible for coverage.
Under the Hired Auto and Non-owned Auto Liability Endorsement on a Businessowners policy, which of the following would not be considered a hired auto? A An auto the insured rents B An auto the insured leases C An auto the insured borrows D An auto owned by the insured's employee
D)An auto owned by the insured's employee Hired autos do not include any auto owned by the insured's employees, partners, executive officers, or members of their household. This definition also applies to Commercial Auto policies.
Under Coverage C - Household Personal Property on a Farm Property policy, coverage is provided for: A The insured's personal autos B Animals, including pets and livestock C Farm personal property D Furniture in the dwelling
D)Furniture in the dwelling Coverage C applies to personal property in the residential dwelling, not farm personal property. Like Coverage C on Dwelling and Homeowners forms, property not covered by Coverage C includes animals and autos.
Losses to most business personal property insured by a Businessowners policy are settled on what basis? A Market value B Agreed value C Actual cash value D Replacement cost
D)Replacement cost As a baseline, the BOP offers replacement cost coverage for buildings and business personal property. However, specific items of property are only valued on an actual cash value basis, such as the property of others, secondhand merchandise held in storage, and works of art.
