insurance exam
Mrs. Lombardi's dwelling policy denied her claim for the collapse of her deck. On what form is her dwelling policy written?
DP-1 Basic Form
If a homeowner operates a certain type of business at the location insured in his or her homeowners insurance policy, that policy may not be canceled principally because the insured does so. That business is a
Day care facility
Insurers may consider which of the following when determining whether to deny personal insurance coverage?
Total amount of outstanding debt in relation to the total available line of credit
Sheila lives in New Mexico in a home constructed of adobe. What basic type of construction is her home?
masonry
What is the maximum amount that the Washington Insurance Guaranty Association will pay on a covered claim?
$300,000
Donaldson Insurance Company had earned premiums of $100 million last year and incurred losses of $75 million in that same time period. What is this insurer's loss ratio?
75%
What is the major cause of loss, or peril, on a crop insurance policy?
hail
Which of the following causes of loss would typically be covered under a standard property insurance policy?
tornado
Upon receipt of an insurance applicant's signed application and first premium payment, the insurer has all the following options EXCEPT:
transfer the offer to a different insurance company
Jonas received a cease and desist order from the Commissioner for an unfair practice he committed while transacting insurance business. He is subject to a fine if he does not discontinue the practice within how many days after receiving the order?
10 days
Mortgage lenders require flood insurance on property that is located within a community's floodplain, which is an area that is at risk of flooding on average once every how many years?
100 years
What is the maximum time for which the Commissioner can order the suspension of a producer's license?
12 months
A temporary producer's license issued in Washington is valid for up to
180 days
Coverage F - Unscheduled Farm Personal Property has a coinsurance provision that requires the insured maintain coverage equal to what percent of the unscheduled property's actual cash value?
80 percent
Janice inherited her mother's diamond earrings, which are valued at $25,000. Why would her agent recommend that Janice insure the earrings on a personal articles floater rather than under Coverage C - Personal Property on her homeowners policy?
A limit of $1,500 applies to loss by theft of jewelry on the homeowners policy.
Bill, who owns a businessowners policy, operates a small grocery shop in a rented building which has a large plate glass window in front. A windstorm damages the window. Will Bill's BOP cover the damage?
Bill's business personal property coverage under the BOP will cover the damage.
What penalty may not be imposed upon an insurance producer who represents an unauthorized insurer?
Cancellation of unauthorized policies and refund of all premiums
Which of the following is not a condition for licensure as an insurance producer in Washington?
College degree
Samantha causes an auto accident. An injured party makes a claim against her for $30,000. She discovers that she has two concurrent policies that provide coverage. The limit of liability for Company A's policy is $50,000 while the limit of liability for Company B's policy is $100,000. How will the companies pay the claim?
Company A pays $10,000 and Company B pays $20,000.
A single-unit home owned by Karen and rented to a tenant is damaged by fire and becomes uninhabitable while it is repaired, resulting in lost rental income during the repairs. Which of the following dwelling policy coverages will help Karen cover some of the lost rent?
Coverage D - Fair Rental Value
Rebecca tells a potential customer that an insurer she is considering disputes all claims from its policyholders, though she knows this is not true. What do her actions constitute?
Defamation
When meeting with a prospect to discuss insurance, Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Tyler committed?
Defamation
Davis Insurance Company was formed under the laws of Washington. In Washington, it would be considered a(n)
Domestic insurer
How often must insurance producers licensed in Washington fulfill continuing education requirements to maintain their licenses?
Every 24 months
The Washington Essential Property Insurance Inspection and Placement Program created a plan to make essential property insurance available when it cannot be obtained through the normal insurance market. This plan is commonly known as the
FAIR Plan
Which of the following is not an unfair claims settlement practice if committed by an insurance company in Washington?
Failing to promptly settle a claim for which liability is uncertain
Assurance Insurance Co. is an Oregon corporation that wants to do business in Washington. In Washington, Assurance would be considered what type of insurer?
Foreign
Which legislation prevents a financial institution from disclosing a consumer's nonpublic personal information to an unaffiliated third party unless it provides notice to the consumer and allows the consumer an opportunity to opt out?
Gramm-Leach-Bliley Act (GLBA)
Marilyn and Dan rent in an apartment. They want to buy insurance to cover their personal property and protect them against liability claims from third parties. Which homeowners insurance form is appropriate for Marilyn and Dan?
HO 4 Contents Broad Form
Tom and Ann have just bought a condominium as a secondary residence. Which of the following homeowners coverage form is best designed for them?
HO 6 Unit-Owners Form
Fred and Sharon live in an older home whose replacement cost far exceeds its market value. What homeowners form would be most appropriate for their insurance needs?
HO 8 Modified Coverage Form
All of the following are rating organizations that review an insurance company's financial strength in some way, EXCEPT:
Insurance Services Office (ISO)
Spike received a cancellation notice from his insurer stating that his homeowners insurance policy would be cancelled in 45 days, but no reason was given for this action. Spike's insurance producer told him that the insurer is required by law to provide the reason. This notice is
Invalid
The air conditioning unit at Iggy's Ice Cream Shop failed, causing its frozen inventory to melt. How did Iggy's unendorsed commercial property policy respond to the loss of frozen inventory?
It denied coverage under the Mechanical Breakdown exclusion.
Which of the following statements correctly describes the earthquake coverage in a standard property insurance policy?
It is generally excluded but may be covered by endorsement.
Hart Food Supply was forced to shut down when the electrical service to its building was disrupted due to a motor vehicle accident that took place on the other side of town. How will the Special Causes of Loss Form on Hart's commercial property policy respond to its claim for spoiled inventory?
It will deny the claim under the Off-Premises Utility Service Interruption exclusion.
Which of the following does not constitute the transaction of insurance?
Mailing an insurance contract
Which of the following is not covered by essential property insurance?
Manufacturing risks
Each of the following producers is unable to fulfill the continuing education requirements within the time allowed. Who will probably not be granted a waiver by the Commissioner?
Melanie, who is travelling abroad
Making a false statement in an insurance policy application to obtain a benefit from the insurer is known as
Misrepresentation
An agent sold a homeowners policy to Mrs. Tannenbaum, who suffers from Alzheimer's disease. When Mrs. Tannenbaum's son learned of the insurance sale, he claimed the policy was not a legal contract, requested cancellation of the policy, and obtained a full refund for which of the following reasons?
Mrs. Tannenbaum was not a competent party.
How many insurance rejections must an insurance applicant show to the industry placement facility before qualifying to participate in a FAIR plan?
None
Which of the following persons would not qualify for a temporary producer's license in Washington?
Part-time producer of a licensed agency
Which of the following correctly explains the difference between the stated amount loss valuation method and the agreed value method?
Policyowner may recover less than the listed amount under the stated amount method, and would recover the listed amount under the agreed value method.
Zelda, a producer selling property and casualty insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the Washington Insurance Guaranty Association. This kind of assurance is
Prohibited at all times
To boost her sales at the end of the year, Trudy started offering potential clients a $250 cash gift card in exchange for buying an insurance policy from her. What unfair trade practice has Trudy committed?
Rebating
Sam purchased a fire insurance policy on an old building with the intention of setting fire to the building and collecting the insurance. For what reason did the insurance company decline to pay Sam's claim, citing the policy was not a legal contract?
Sam entered into the contract for an illegal purpose.
In Washington, which of the following persons is not considered an insurance producer?
Sven, who brokers surplus lines contracts
Which of the following statements correctly describes the difference between an HO 2 Broad Form homeowners policy and an HO 3 Special Form policy?
The HO 2 insures all property on a named perils basis while the HO 3 insures real property on an open perils basis and personal property on a named perils basis.
Mr. Pelletier is upset with his agent because his policy doesn't provide the coverage he asked for and was told the agent would apply for. Which of the following statements correctly describes the agent's responsibility in this case?
The agent is responsible in this case because one of an agent's primary duties is to obtain insurance as agreed upon.
Mary's new refrigerator was delivered a few days ago. It catches fire due to an electrical short in the refrigerator. The fire causes extensive damage to the appliance as well as to her kitchen. The adjuster investigates the claim and tells Mary that subrogation is appropriate in this case. What will occur if the claim is subrogated?
The insurer can recover its claim payment from the responsible party.
All of the following are true statements about an insurer's cancellation of a medical malpractice insurance policy EXCEPT:
The insurer must provide the named insured with at least 30 days' notice of cancellation if the reason for cancellation is nonpayment of premium.
What additional training is required if a Washington state licensed insurance producer wants to sell flood insurance policies?
The producer must complete a one-time 3-hour course on flood insurance.
A producer who deals directly with the insured and receives compensation from the insured is required to disclose all of the following information EXCEPT:
The producer's annual income from fees paid by clients
If the building Hannah's business owns is destroyed because floodwaters sweep it away during a hurricane, how will her business property policy respond?
Water damage will be excluded from coverage.
James is a licensed producer who lives in Washington. He moves to a new town in the state. When must he notify the Washington Department of Insurance of his move?
Within 30 days
Joan and Chris live in an apartment with four units. Would their living situation comply with the definition of "residence premises" and be eligible for a homeowners policy?
Yes. A one-, two-, three-, or four-family dwelling where the insured resides is eligible, if the insured lives in at least one of the units.
Incent is a building carpenter. One of his customers has requested a document that shows evidence Vincent has liability insurance coverage in place. What type of document does Vincent need?
a certificate of insurance
Although the liability section of the homeowners policy excludes motor vehicle liability, some exceptions do permit coverage for the use of certain motor vehicles. Which of the following types of vehicles will be covered in the event they cause a liability claim?
a motorized wheelchair used by the insured's spouse at the insured residence
Nick lives with his parents and works part time at a grocery store. He earns about $1,800 a year because for several months a year he plays basketball on his high school team. How might he be defined for purposes of the liability section in his parents' homeowners policy?
a named insured because he is a member of the household
When Mr. and Mrs. Unger lived in New Hampshire, they didn't buy earthquake insurance because they believed they were unlikely to suffer an earthquake loss. When they moved to California, however, they bought earthquake coverage immediately because of their high exposure to earthquakes in that state. What underwriting principle do their actions characterize?
adverse selection
Which of the following is an example of adverse selection?
an applicant whose business was recently burglarized deciding he had better buy some commercial crime insurance coverage
Which of the following persons would be considered legally competent to apply for an insurance policy?
an individual who is physically disabled
What term involves physical harm to, or impairment of, the body?
bodily injury
Judy owns a small beauty salon located on the first floor of her apartment building. A customer trips over a hair dryer cord in the salon and is injured. Judy is held legally liable for the customer's injury. What coverage under her businessowners policy (BOP) will pay for this customer's injury claim?
business liability coverage
Madeline's three-family dwelling was damaged in a fire. Several claims were submitted to the insurer that issued her dwelling policy by people who live in the dwelling. A claim for which of the following items of personal property was NOT paid by Madeline's insurer?
clothing of Madeline's second floor tenant
In an auto insurance policy, the insurance company's promise to pay benefits in the event of a covered loss is legally known as:
consideration
Which of the following terms refers to the things given by both parties to a contract that make for a legal contract?
consideration
Total Manufacturing, Inc. gets its materials from Material Supply Company. Material Supply suffers a boiler explosion that halts its mechanical equipment. As a result, Total must cease operations until Material Supply restores its equipment and resumes operations. Which coverage, if any, under Total's equipment breakdown policy will cover its loss of income?
contingent business income and extra expense
All of the following are elements of a legal contract EXCEPT:
counteroffer
If the Davis brothers are farming for others at a farm that is NOT an insured location, and the farming operations are directed by the owner of the outside farm, they are engaged in:
custom farming
Patrick has a commercial property insurance policy that does not cover damage caused by an earthquake. He is interested in obtaining earthquake coverage. He read that it is possible to obtain a separate policy insuring against this specific peril and it was referred to as a(n):
difference-in-conditions policy
In a liability policy, the insurer typically has two essential duties with regard to protecting the insured. These duties are the:
duty to pay damages and defend the insured
While the liability section of a businessowners policy (BOP) generally does not cover liability that the insured assumes through a contract, coverage is provided for insured contracts, which include al the following EXCEPT:
equipment rental agreement
If an insurer repeatedly fails to exercise its right to cancel a policy due to a policyowner's chronically late payment of a premium, what legal principle would prevent the insurer from exercising that right later on?
estoppel
A building tenant who owns a businessowners policy (BOP) would be protected with which of the following losses?
fire damage to leased office equipment
Sara's insurance application was declined because of information provided in a consumer report. She is entitled to receive all the following information about the coverage denial EXCEPT:
identification of the investigator who collected the information
Mr. Ursini's home is located in an area that has a 1 percent chance of being flooded in any given year. Where does Mr. Ursini live?
in a special flood hazard area (SFHA)
Malcolm Enterprises sustains a serious fire loss to its factory. Operations are suspended for several weeks while repairs are made. During this time, Malcolm Enterprises cannot produce the goods they sell and will lose considerable income. How would you describe the loss of income?
indirect loss
Most insurance regulation in the United States is conducted by the:
individual states
With respect to the liability coverages provided through a homeowners policy, all the following are considered insured locations EXCEPT:
land purchased by the insured on which a business office is going to be built
Underwriters know that as the number of units of exposure increases, loss prediction becomes more accurate. This basic insurance principle is known as:
law of large numbers
A personal articles floater will cover all the following golf equipment EXCEPT:
lost golf balls
Helen submitted an insurance application and premium deposit to TLS Insurance Company. In doing so, she has:
made an offer to the insurer
The purpose of the abandonment provision in a property insurance policy is to:
make it clear that the insured cannot simply walk away from damaged property
Alcoholism and drug abuse are examples of what type of hazard?
moral
Though she lives in a high crime area, Hilda rarely locks the door to her apartment when she goes out, figuring that whatever she owns of value is insured and can be easily replaced if stolen. What type of hazard does this represent?
morale hazard
A typical homeowners policy does NOT cover:
motor vehicles
Allie was shopping at the mall on a busy Saturday afternoon. She wore a bracelet with expensive charms attached to it, which she set down on a store counter as she was examining new charms. When she looked up, the bracelet was gone. Which of the following types of crime perils applies to this loss?
mysterious disappearance
Which of the following would NOT be included in the meaning of "insured" in a homeowners policy?
neighbor who voluntarily mows the insured's lawn
An accident that happens during the policy period and results in bodily injury or property damage, and losses arising from continuous or repeated exposure to the same harmful conditions, are defined as what in a homeowners policy?
occurrence
Essential property insurance is issued for a term of
one year
To identify what perils they cover, property insurance policies use either the named perils approach or the:
open perils approach
A cause of loss is called a(n):
peril
What term is used to describe the cause of a loss, such as a fire or explosion?
peril
What type of property are buildings, land, and structures attached to land?
real property
Brad purchased an auto insurance policy to insure his new car. An insurer might consider Brad, his car, or both to be a:
risk
Which of the following terms is sometimes used by insurers to refer to the insured person or property?
risk
The Health Insurance Portability and Accountability Act (HIPAA) affects property and casualty insurers because medical information may be used in each of the following situations EXCEPT:
settle a claim for stolen property
As an open perils policy, the HO 3 Special Form covers all the following causes of loss EXCEPT:
water damage