Final Exam

the insured has a $1,000,000 personal umbrella policy with a retention limit of $1,000. the insured suffers a $15,000 loss that is excluded by the underlying policy, but not the umbrella. how much of this loss would be paid under the umbrella?

$14,000

carl's home sustains $50,000 damage in an electrical fire. the home is insured under a homeowners policy for $75,000 with an 80% coinsurance requirement. at the time of the loss, the home's replacement cost is $125,000. ignoring an deductible, how much will carl's homeowners policy pay for this loss?

$37,500

according to the cancellation condition in the common policy conditions form, if the insurance company is cancelling a commercial package policy for nonpayment of premium, the insured must be given how many days' notice of cancellation.

10

Open peril coverage for both the dwelling and personal property is provided by the:

HO-5

if a homeowner wants the maximum protection for home and contents, which form should be purchased?

HO-5

assume the following items were stolen from the insured's home. which one of these losses would be fully covered under the coverage c of the homeowners policy, assuming the loss was for the full value pf the property described?

a $2,000 laptop computer the insured uses for her in-home accounting business

the fair credit reporting act applies to applicant who are rejected for insurance coverage on the basis of:

a credit report

the insured, lefty's bar, wants coverage for liability arising out of selling and serving alcoholic beverages. such coverage can be provided by purchasing:

a liquor liability coverage form

which of the following is a correct definition of coinsurance?

a requirement that the insured carry insurance equal to a specified percentage of he property's value to qualify for replacement cost coverage under the policy.

a surety bond is:

a three-party contract

if a building insured under the building and personal property coverage form was vacant for three months:

a vandalism loss would not be covered; a fire loss would be covered, subject to a 15% penalty

the tendency for people with a greater-than average exposure to loss to purchase insurance is called:

adverse selection

the causes of loss-special form of the commercial property coverage part insures against:***

all risks of direct physical loss unless specifically excluded

which of the following accidents would NOT be covered under the uninsured motorist coverage of the personal auto policy?

an accident with a driver who carries the minimum liability limits required by law, but whose insurance is not adequate to cover the damages.

who of the following would have coverage for liquor liability losses under the commercial general liability policy

an advertising agency that serves liquor at a holiday party

the builders risk reporting form insures a building under construction for:

an amount that increases at the intervals to correspond with the increasing value of the building

all of the following are ways of functioning workers compensation benefits EXCEPT

an employee tax

an insurance agent who needs insurance for his or her professional liability exposure should purchase:

an errors and omissions policy

what is a hazard?

an increase in the possibility that a loss might occur

negligence is:

an unintentional tort

with the exception of rowboats and canoes and property belonging to guests or servants, the DP-1 form covers personal property off premises:

anywhere in the world for up to 10% of the coverage c amount.

the condition that provides a means to settle the amount of a loss when the insured and the insurance company cannot agree is the:

appraisal condition

in the commercial crime forms, new employees and additional premises obtained through a consolidation or merger:

are automatically covered for 90 days

under the business auto coverage form, the nonowned auto category represents:

autos owned by employees but driven in the insured's business

in ALL states, an UNENDORSED Personal auto policy's uninsured motorist coverage applies to what type of loss caused by an uninsured motorist?

bodily injury

a binder:

can be issued by the agent or the insurance company

coverage for which of the following is excluded by a dwelling policy?

coin collection

which of the following policies is specifically designed to cover business property?

commercial property coverage part

a commercial package policy must include:

common policy declarations, common policy conditions, two or more coverage forms

in most states, workers' compensation laws are:

compulsory

which of the elements of a legal contract does an insurance premium payment represent?

consideration

bid bonds, payment bonds and performance bonds are examples of:

contract bonds

what is the difference between the loss sustained and discovery versions of the commercial crime coverage forms?

coverage trigger

the personal auto policy's comprehensive physical damage coverage covers which of the following?***

damage caused by hitting an animal

which one of the following is NOT a possible defense against negligence?

doctrine of reasonable expectations

under the nationwide definition, imports and exports are:

eligible for ocean marine insurance

an agent who needs liability coverage for his or her professional liability exposure can obtain it by purchasing:

errors and omissions insurance

which one of the following is NOT a category of the nationwide definition?

excess liability

rhonda is an agent under contract with the big insurance company to represent and sell insurance only for big. this is an example of what type of agency system?***

exclusive/captive

what rating method involves modifying the premium based on the insured's loss experience over a specified period of time?

experience rating

the authority specifically given to an agent, either orally or in writing, by the principal is called:

express authority

which of the following can be covered as business personal property under the businessowners policy

exterior building glass

which of the following would be covered under the building coverage of the building and personal property coverage form?

fixtures

all of the following are parts of an insurance contract EXCEPT:

floater

which of the following describes an insurance company doing business in a state other than the one where it is incorporated

foreign

which commercial crime insuring agreement includes coverage for defense costs?

forgery or alteration

an individual who owns and lives in a condominium can obtain broad coverage for personal property in the condo under which homeowners form?

ho-6

what type of ocean marine insurance provides physical damage coverage for the ship while it is in transit?

hull

the principle that states that an insured should be restored to approximately the same financial position after a loss as before is known as:

idemnity

a hardware store is insured under a business income coverage form with the special causes of loss form. which of the following losses would be covered?

income lost when the store closes for a week while damage from a burst water pipe is repaired

the dwelling basic form automatically provides coverage against fire, lighting and:

internal explosion

flood insurance:

is available from the federal government or private companies who are reimbursed for losses by the government

under a pure no-fault plan, each party to an auto accident:

is reimbursed by his or her own insurance company

which one of the following statements concerning the farm coverage part is NOT correct?

it covers the farmer's growing crops

which of the following coverages is included in the homeowners policy but is NOT included in an unendorsed dwelling policy?

liability

garagekeepers coverage provides coverage for:

liability for damage to autos of the others that are in the care, custody or control of the insured

the primary purpose of the business income coverage forms is to reimburse the insured for:

loss of income resulting form property damage at the insured's property.

the inside the premises-robbery or safe burglary insuring agreement in the commercial crime policy covers

loss of other property from robbery of a custodian

an assigned risk plan for auto insurance does which of the following?

makes insurance available to drivers who are unable to obtain it through normal channels

martha's home is insured by big insurance company. martha has recently made the final mortgage payment to large mortgage company. martha is contemplating selling her home to her best friend, bernice. which of the following has an insurable interest in the home?

martha

in PURE contributory negligence states, when an individual is found to have contributed to his or her own loss in any way, another party:

may not be held liable

which personal auto coverage reimburses the insured without regard to fault, regardless of whether or not the state is subject to no-fault laws?

medical payments coverage

Which commercial inland marine transportation form is used to insure a carrier's liability for damage to cargo it is transporting?***

motor truck cargo policy

when a policyholder is considered an owner with the right to vote and share in the profits, the type of insurance company is a:

mutual company

in the business auto coverage form, employers that want to cover employees' use of their own cars in the employer's business should opt to have liability coverage apply to which of the following groups pf autos?

nonowned

medical benefits under the workers compensation policy are:

not subject to time or dollar limits unless they are specified in the state law

in fidelity bonds, the party to whom the promise is made and for whose protection the bond is written is the:

obligee

which of the following lines of insurance CANNOT be included in the commercial package policy?

ocean marine

the dwelling special form provides:***

open peril coverage on the building and named peril coverage on personal property

what type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?

open peril policy

which one of the following types of benefits is generally not provided by a state's workers compensation law?

pain and suffering

which part of the workers compensation and employees liability policy pays all compensation and other benefits required by the state's workers compensation law?

part one-workers compensation

coverage for sums an employer becomes legally obligated to pay under common law as a work-related injury to an employee is provided by:***

part two- employers liability section of the workers comp policy.

what personal inland marine form is used to provide open peril coverage on a blanket basis for personal property

personal property form

each of the following is a primary coverage provided under the commercial general liability policy EXCEPT:

pollution liability

in surety bonding, which party seeks and pays for the bond?

principal

the party to a surety bond who promises to do or not do a specific thing is the:

principal

if in a particular state, an insurer is required to file policy forms and rates with the state insurance department, then wait for official approval before using the new forms and rates. this is an example of a/an:

prior approval state

which of the following can be insured under an unendorsed homeowners policy?

private residence in which the owner occupant also maintains an office for her accounting business

under the commercial general liability policy, a separate aggregate limit applies to the:

products-completed operations hazard

which one of the following is a coverage extension that is available in the building and personal property coverage form?***

property off-premises

the businessowners policy:

provides a prepackaged policy of property and liability coverages for certain types pf small businesses

under the claims-made CGL, the supplemental extended reporting period:

provides an unlimited extension for making claims for losses that occurred during the policy period, but the insured must pay an additional premium

the action which, in a natural and continuous sequence, produces a loss is known as the:

proximate cause

which of the following describes actual cash value?

replacement cost minus depreciation

which of the following businesses could be eligible for a businessowners policy?

rest easy motel

which one of the following is NOT an element of insurability?

risk of loss is a speculative risk

which of the following perils is covered by the HO-2 and HO-3?

sudden and accidental rupture of a heating system

a peril is:

the cause of loss

under the workers compensation system, who is responsible for the expenses resulting from work-related injuries and occupational diseases?

the employer, regardless of whether it was at fault for the injury or disease

in prior approval states, the rates and policy forms insurance companies use must be approved by

the insurance department of the state where they will be used

which of the following losses would NOT be recoverable under the liability coverage of the homeowners policy?

the named insured's son damages the family's garage with his car

under the commercial property coverage part, the causes of loss-broad form insures against:

the perils in the causes of loss-basic form and additional perils

when applying for homeowners insurance, john tells his agent that his home will be used as a residence only. in reality, he plans to manufacture wigets and sell them from his home. what will happen if the insurer discovers john's misrepresentation after policy issue

the policy will be voided since john misrepresented a material fact

in insurance, what is the primary purpose for the fair credit reporting act?***

to give the consumer recourse if insurance is denied on the basis of a credit report

the purpose of insurance is to:

transfer risk from a person, business or organization to an insurance company that agrees to pay for losses in exchange for a premium

trailer interchange coverage is part of the:

truckers coverage form and motor carrier coverage form

all of the following must be included in a commercial property policy written under the commercial package policy program EXCEPT

value reporting form

which of these losses would be covered under the personal auto policy's liability coverage?

will falls asleep at the wheel of his car and strikes and injures a pedestrian

which one of the following is NOT one of the required elements of a legal contract?

written instrument