INSURANCE - Property & Casualty

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A notice of cancellation must be issued ____ days before effective date of cancellation for NON PAYMENT OF PREMIUM & ____ days for all other reasons

10 days for nonpayment; 20 days for all other reasons

The commissioner must hold a hearing within ___ days after receipt of demand from an aggrieved person.

30 days

What is the time frame to report change of address, administrative actions, or criminal charges to the Commissioner?

30 days

Upon written demand by a person aggrieved, the Commissioner must hold a hearing within:

30 days after receipt of the demand

When does flood insurance take effect?

30 days after the date of application and payment of premium.

Under the commercial articles coverage form additional acquired property is automatically covered for up to

30 days if it is a type of property already covered by the form

Under the commercial articles coverage form additional acquired property is automatically covered for up to:

30 days if it is a type of property already covered by the form

Licensees must inform the Commissioner of a change in legal name or address within:

30 days of the change

Under temporary partial disability, benefits are paid during the period of disability, but not beyond ____ weeks.

300

Workers' Compensation benefits for temporary partial disability will be paid for a maximum of:

300 weeks

The basic extended reporting period included in the commercial general liability form covers claims made up to 5 years after the end of the policy period, as long as an occurrence is reported within how long after the end of the policy period?

60 Days

The continuing education requirements do not apply to a producer who has been licensed in Alabama for 15 years and who is at least how many years old?

Insurance companies that are nonadmitted insurers fall into 2 categories. They are either an authorized nonadmitted carrier or an unauthorized nonadmitted insurer. What type of license would a person need to sell for an authorized nonadmitted insurer?

A surplus lines license

When a small restaurant is damaged by a tornado, the owners are forced to close for 1 month while the property is repaired. The building suffers damages of $20,000. The owners estimate they will lose $50,000 in business receipts. In order to keep their staff, the owners must continue to pay salaries totaling $5,000. Ignoring any deductible, how much of the direct loss will the business owners policy pay? A) 20,000 B) 50,000 C) 75,000 D) 55,000

A) 20,000 direct loss to property is physical damage to property requiring repair/replacement

What is twisting?

Making misleading statements or comparisons to induce a policyholder to take out an insurance policy or lapse, surrender or forfeit an existing policy and purchase a new policy FROM A DIFFERENT INSURER.

Mary and Sue are customers in Paul's bicycle shop. Mary and Sue are both injured when a stack of bicycles fall on them because they were trying to get a bike off the top shelf. How would Paul's standard businessowners policy provide coverage in regards to Mary and Sue's injuries?

Mary and Sue would receive payments for up to the policy limits under the medical expenses coverage, whether or not Paul is found to be legally liable.

Aviation physical damage coverage, also known as aircraft hull insurance, covers all of the following EXCEPT A) personal effects B) engines C) controls D) electronic navigation

Personal Effects

What is coverage E under the homeowners policy?

Personal Liability

Sandy and Stewart had a fire loss, and the insurance company reimbursed them for their damaged personal property. They believed that they did not get enough for this property because the settlement was based on actual cash value. Which endorsement would have provided a better loss settlement?

Personal Property replacement cost endorsement

Which commercial auto coverage covers automobiles in the insured's care?

Garagekeepers

Which one of the following commercial auto coverages covers automobiles in the insured's care?

Garagekeepers

Who would use a HO-6 homeowners form?

Owner of a condominium

An insured has a $60,000 Special Form (DP-3). When a covered loss in the amount of $10,000 damages the attached garage, how much of that amount is paid under the Coverage B- Other Structures?

$0 The attached garage is considered part of the dwelling, so the $10,000 is paid under Coverage A-dwelling.

An insured's claims-made CGL policy just expired after having been in effect for 1 year. The policy included a supplemental extended reporting period endorsement to cover claims filed after the end of the 60-day basic extended reporting period. When a $5,000 claim is filed 3 years late for a loss that occurred during the 60-day basic extended reporting period, how much will the policy pay?

$0 this loss did not occur during the policy's coverage period

An insured has a $70,000 dwelling policy (DP-1 Basic) with a $500 deductible. While the insured is on vacation, burglars enter the house and steal several items. The total loss is estimated to be $5,000. How much of that loss will be paid under the policy?

$0. DP-1 does not cover burglary

An insured has a $70,000 dwelling policy (DP-1 basic) with a $500 deductible. While the insured is on vacation, burglars enter the house and steal several items. The total loss is estimated to be $5,000. How much of that loss will be paid under the policy?

$0. The DP-1 provides coverage only if a loss is caused by one of the perils specifically named or identified in the policy. The DP-1 basic covers only fire, lightning, and internal explosion.

An insured has a $40,000 Dwelling Special Form (DP-3) policy. After hosting an afternoon party, the insured discovers that the family's credit cards and ATM cards are missing. If the cards are used, what coverage is provided under Coverage C - Personal Property, and why?

$0. Coverage C excludes coverage for credit cards.

The minimum capital required to form and organize a new domestic stock life insurance company in Alabama is:

$1 million

What are the limits of payment for an outdoor sign attached to a building?

$1,000/occurrence or $2,500 max

Under Coverage C- Personal Property, the homeowners policy (HO-3) covers property owned or used by an insured. When jewelry valued at $5,000 is stolen from the residence, the policy will pay

$1,500 that is the limit of liability

The insured has an auto policy with liability limits of 30/60/10. He negligently runs off the road and causes $70,000 damage to an apartment building. How much will the policy pay for damage to the building?

$10,000

The federal government is not obligated under the TRIA to make payments for any portion of losses that exceed how much annually?

$100 billion

What is the minimum deductible for a single-family dwelling insured as a preferred risk in the regular flood program?

$1000 each for building and contents

A house has a replacement cost of $150,000. To make sure that the replacement cost provision of a homeowners policy applies, the minimum policy amount for the dwelling should be:

$120,000 at least 80%

The Insurance Guaranty Association is obligated to pay any covered claim that is more than $100 and less than:

$150,000

Abby's beauty parlor suffers a loss caused by lightning. Her parlor sustains $10,000 of building damage and $5,000 personal property loss. Her fire department also charged her $1,000. To meet current building codes, her cost to repair her building was an additional $2,000. What will her BOP pay, assuming that her limits are adequate?

$18,000

The insured is a tenant in a shopping mall. A fire starts in the insured's store, resulting in the following damages: business personal property, $15,000; damage to fixtures installed by the insured, $2,000; damage to property belonging to customers, $1,000; and smoke damage to the ceiling and walls, $8,000. How much will the insured's Building and Personal Property Coverage Form pay for this loss?

$18,000 The tenant's policy will pay for all of the loss except for the damage to the ceiling and walls, which are part of the building owned by the landlord.

$20,000

For a monthly industrial fire policy, the maximum face amount covering contents is:

$20,000 For a monthly industrial fire policy, the maximum face amount covering a building or dwelling is $40,000 and for contents $20,000

If policy limits of building and personal property have been exhausted, how much additional coverage is available for debris removal?

$25,000

If the policy limits of the building and personal property form have been exhausted, how much additional coverage is available for debris removal?

$25,000

Uninsured/underinsured motorist minimum bodily injury limits are ____ per person and ____ per accident.

$25,000 per person; $50,000 per accident

An insured has an $80,000 dwelling policy with a $500 deductible. In addition to the house, the property includes a detached garage, storage shed, and an artist's studio. During a thunderstorm, the garage and storage shed, and an artist's studio. During a thunderstorm, the garage and storage shed are damaged by lightning. The loss is $3,000 to the garage and $1,000 to the shed. What amount is covered by the policy?

$3,500 Coverage B- other structures provides coverage for real property located on the described location and separated from the dwelling by clear space. Up to 10% of Coverage A (in this case, $8,000) is included for other structures. Lightning is a covered peril, so the policy would pay $3,500 (the $4,000 loss less the $500 deductible).

An insured has an $80,000 dwelling policy with a $500 deductible. In addition to the house, the property includes a detached garage, storage shed, and an artist's studio. During a thunderstorm, the garage and storage shed are damaged by lightning. The loss is $3,000 to the garage and $1,000 to the shed. What amount is covered by the policy?

$3,500 Coverage B-Other structures provides coverage for real property located on the described location and separated from the dwelling by clear space. Up to 10% of Coverage A (in this case, $8,000) is included for other structures. Lightning is a covered peril, so the policy would pay $3,500 (the $4,000 loss less the $500 deductible).

An insured buys a business income policy with a maximum policy limit of $100,000 and a 25% monthly limit of indemnity. How much can the insured collect if the lost income is $40,000 in the first month and $10,000 in the second month? A) $50,000.00 B) $65,000.00 C) $35,000.00 D) $25,000.00

$35,000 The monthly limit of indemnity restricts how much the insured can collect in a single month to a specified percentage of the policy limit. The insured will collect $25,000 for the 1st month and $10,000 for the 2nd month

An insured has a value reporting form that requires monthly reporting. A standard penalty applies for late or underreporting. On June 30, the insured reports that the values as of May 31 were $300,000. When the insured files a claim for a loss that occurred on May 20 in the amount of $60,000, the insurance company checks the actual inventory as of May 31 and finds that it was $500,000. What amount will the insurance company pay?

$36,000 300,000/500,000=0.60*60,000= 36,000 The insured suffers a $24,000 penalty

Adam's Appliances sustains a fire loss and has the following losses: damage to the building is $15,000, damage to contents is $7,000, debris removal is $5,000, and damage to valuable papers and records is $15,000. What will his businessowners policy pay, assuming his limits are adequate?

$37,000 - All losses covered in full except for valuable papers and records.

An insured has a homeowners policy for $60,000 on the dwelling. Lightning completely destroys the home, which has a replacement cost of $40,000. How much will the insured receive? A) 40,000 B) 20,000 C) 6,000 D) 60,000

$40,000

Bryce owns a $50,000 lake cabin that he has insured for $40,000. He sustains a $5,000 covered loss. According to the principle of indemnity, how much will his insurer pay?

$5,000

A surplus lines broker must file a bond in the amount of:

$50,000

An insured has a commercial property policy with a Causes of Loss-Broad Form with a $250 deductible. During a snowstorm, a $750 rooftop sign is destroyed. How much will the policy pay for the sign?

$500

Credit card fraud is covered under a homeowners policy to a maximum of what amount?

$500

Dwelling policies and homeowners policies provide how much additional coverage for a fire department service charge?

$500

The standard deductible for property losses on a BOP is

$500

Two insurance policies apply to Monica's home. The limit for Policy A is $100,000, and the limit for Policy B is $50,000. Both policies have a pro rata other insurance clause. If she suffers a $9,000 covered loss to her home, how much will Policy A pay?

$6,000 Under the pro rata method, each company prorates its payment for the loss. Each company's share is the proportion that its limits of liability bears to the total of all applicable limits, whether collectible or not. Formula: $100,000/$100,000+$50,000= 0.6666 * $9,000 = $6,000

Bill and Marge suffer the following losses as the result of a severe storm: $3,900 wind damage to their roof; $1,000 loss of income because a boarder in their house had to move; $1,250 in repair costs to prevent further loss to covered property; and $500 in medical expenses when Marge was hit by part of the falling roof. How much will their HO-3 policy pay for these losses? Assume all losses are within the applicable policy limit and ignore any deductible that may apply.

$6,150

Bill and Marge suffer the following losses as the result of a severe storm: $2,000 wind damage to their roof; $1,500 loss of income because a boarder in their house had to move; $5,000 loss to a grand piano destroyed by flood where it was temporarily stored; and $500 in medical expenses when Marge was hit by part of the falling roof. How much will their HO-3 policy pay for these losses? Assume all losses are within the applicable policy limit and ignore any deductible that may apply.

$6,150. All losses are covered except for medical expenses

If an employee dies from work-related events, employer must pay burial expenses of up to:

$6,500

The face amount of insurance provided by an industrial fire policy covering buildings under the same ownership may not exceed what amount for a weekly policy?

$7,500

Bill and Marge have a HO-2 policy insuring their main residence for $150,000. How much coverage do they have for personal property kept at their summer cottage?

$7,500 only 10% of the personal property limit can be applied to property not located at the insured's primary residence

Ted's TV shop employees are installing a TV at Mandy's home. While doing so, they drop the TV, causing damage to the TV in the amount of $250. They also damage the floor and wall in the amount of $700. What will Ted's BOP policy pay, assuming his limits are adequate?

$700

Jennifer owns a house valued at $500,000. She purchases a policy insuring it for $300,000 with an 80% coinsurance clause and a $1,000 deductible. Faulty wiring causes a fire that results in a loss of $100,000. How much will the policy pay?

$74,000 amount of insurance carried ($300,000) / amount of insurance required ($400,000) * amount of loss ($100,000) - any deductible ($1,000) = $74,000

Frank's house has a replacement cost of $250,000. His HO-3 policy has a Coverage A limit of $180,000 and a $500 deductible. A fire causes a loss of $10,000 replacement cost and $8,000 actual cash value. What is the most Frank can collect for his loss?

$8,500 180,000/200,000*10,000=9,000-500=8,500

Brenda's Bakery, which is covered by a businessowners policy, sustains a fire loss of $50,000 to the building, and $25,000 in content damages is incurred. In addition, a customer and an employee are injured in the fire. Medical payments for their injuries amount to $2,000 for the injured customer and $3,000 for the injured worker. Brenda's business income is $5,000 per month, but she is unable to conduct any business for 60 days as a result of the fire. Assuming Brenda has adequate limits to cover this loss, how much will her policy pay?

$87,000 $50,000 (building) + $25,000 (contents) + $10,000 (business income) + $2,000 (injured customer's injuries) = $87,000

The insured has a homeowners policy (HO-3) with a $100,000 liability limit and a $1 million personal umbrella policy with a self-insured retention of $1,000. When a child is seriously injured on the insured's property, a jury awards the plaintiff $2 million. Given only these facts, for what amount is the insured personally responsible?

$900,000 The amounts for a loss recovery under both property and liability policies are restricted by policy limits. In this case, the underlying homeowners policy pays the first $100,000 and the umbrella would pay $1 mill (which exhausts both policy limits). The insured pays the balance of the $900,000 settlement.

What are the cancellation conditions for commercial package policy?

- if first-name insured cancels it must be in writing and any premium refund due will be sent to the first-name insured. - if the insurance company cancels, it must mail a written notice to the first-name insured. The premium is refunded to the first-name insured on a pro rata basis.

What are the commercial casualty forms?

- auto umbrella, medical, and uninsured motorists - general liability - crime - farm liability - inland marine

What are the commercial property coverage forms?

- building & personal property - builder's risk - condominium association - condominium commercial unit owners - business income - extra expense - commercial inland marine

The Commissioner may hold hearings when necessary and for what reasons?

- commissioner received a written request from a person who is the victim of a violation of insurance code - insurance law requires a hearing

What are the commissioner's powers and duties?

- conduct investigations & examinations - make reasonable rules & regulations - issue orders & notices - issue insurance license & authority certificates - impose penalties (fines, suspensions, & revocations) - approve policy forms & rates

An auto policy in force 60 or more days may only be cancelled for specific reasons, such as:

- nonpayment of premium - material misrepresentation - violations of policy terms and conditions - failing to disclose accidents and violations for the proceeding 36 months if asked - making a false claim - the name insured or a resident operator driver's license suspended or revoked within 36 months prior to cancellation notice - conviction during the preceding 36 months for any felony, criminal negligence arising out of operation of vehicle, and operating a vehicle while under the influence

The commissioner can place on probation, suspend, revoke, or refuse to issue or renew the license of a producer who:

- provides incorrect or misleading info in the application - violated any law, rule, order, etc. - obtained a license by fraud or misrepresentation - cheated on exam - failed to pay child support - failed to pay state income tax - misappropriated nay money/property received - intentionally misrepresented the terms of an insurance contract or application - was convicted of a felony - admitted to or found guilty of any unfair trade practice - used fraud, coercion or demonstrated incompetence, untrustworthiness - had license denied/revoked/suspended in another state - forged a name on a transaction - accepted insurance business from an unlicensed individual

The commercial package policy cannot include:

- workers compensation - life insurance - health & disability insurance - certain types of professional liability

Covered PROPERTY under Equipment Breakdown (property that the insured owns/is in their care):

-equipment built to operate under internal pressure or vacuum other than the weight of contents -electrical or mechanical equipment that is used in the generation, transmission, or utilization of energy -communication equipment and computer equipment -any equipment that is owned by a public or private utility and used solely to supple utility services to the insured's premises

Equipment Breakdown is designed to cover:

-mechanical breakdown -electrical arcing -artificially generated electrical currents -centrifugal force -boiler overheating, cracking, bulging, sagging -bulging, cracking, or collapse of pressure vessels, such as water heaters, compressed air tanks, steam cookers and kettles, expansion tanks, and condensate return tanks

Types of professional liability insurance:

-medical malpractice -errors and omissions -directors and officers -fiduciary liability -consent to settle cause

An insured may select from among what coverages under equipment breakdown:

-property damage -expediting expenses -business income and/or extra expense -spoilage damage -utility interruption -brands and labels

What three situations does a commercial umbrella policy provide coverage for?

-the policy limits applying to a loss under an underlying policy have been exhausted -a loss is excluded under an underlying contract but not excluded under the umbrella -previous losses reimbursed under an underlying policy have reduced its aggregate limit so that a subsequent loss is not fully covered

Adjuster must keep usual and customary records pertaining to transactions under the license for at least __ year(s).

Coverage C of Commercial General Liability will cover reasonable medical expenses within how many years of an accident?

The businessowners policy will pay reasonable expenses for

1 year from date of accident

What are the six coverage parts to a worker's compensation policy?

1. Bodily Injury 2. Liability 3. Other state's insurance 4. Duties of insured 5. Premiums 6. Conditions

For hearings held to investigate instances of unfair trade practices, the Commissioner must give ____ days' notice.

10 days

Only ____% of Personal Property Limit can be applied to property NOT located at the primary residence.

Premiums may not be collected for more than __ months in advance.

Julia purchases a new car for her daughter. How many days does she have to add it to her policy?

An insurer must file a notice of appointment within ___ days of the agency contract date or first insurance application.

15 days

Who is responsible for making the premium payments due under a commercial package liability?

1st name insured

Legal action against us gives the insured ____ years to bring an action against the insurer.

2 years

Under an HO-2 policy with a coverage limit of $50,000 on the dwelling, what is the amount of personal property coverage that would be available? A) $25,000.00 B) $20,000.00 C) $30,000.00 D) $50,000.00

25,000 amount of coverage for personal property is 50% of coverage

The required coverage limits under Alabama's mandatory automobile liability insurance law are:

25/50/25

Under the medical payments coverage of a personal auto policy, the insurer pays for medical expenses and funeral services incurred within how many years from the date of an accident?

When the insurer and the insured cannot agree on the value of a loss, the matter is submitted to disinterested parties for resolution. Under a standard appraisal clause, how many parties are involved in determining the value of the loss?

3 - 2 appraisers, 1 umpire

Stacking of limits is allowed on up to __ vehicles, if multiple cars are insured ON THE SAME POLICY.

3 vehicles

A producer must keep complete records pertaining to transactions under the producer's license for at least:

3 years

Producer insurance transactions must be retained for at least ___ years.

3 years

A licensee must inform the Commissioner of a change in legal name or address within how many days of the change?

If the Commissioner denies a request for an extension to comply with the continuing education requirements, the licensee must complete the continuing education requirements within how many days of being notified of the denial?

An insurer that terminates an appointment must notify the Commissioner within __ days.

30 days

If an insured has a claims-made commercial general liability policy with the basic extended reporting period, the insurer will pay for losses after the policy has been canceled as long as the occurrence is reported within 60 days of cancellation and the claim is filed within how many years?

The workers' compensation laws are mandatory for employers who employ at least how many covered employees in any one business?

An injured employee must give the employer written notice of an accident within __ days after the accident occurs.

5 days

Workers' compensation laws are mandatory for employers with ___ or more covered employees.

5 employees

Workers' compensation laws are mandatory for employers who employ:

5 or more covered workers

The commissioner will conduct an examination of every domestic insurer at least once every __ years.

5 years

If shrubs in front of a house burn when the house catches fire, how much is the insured entitled to recover for the shrubs under their HO-3?

5% of limit on Coverage A with a max of $500 for any one shrub

If the shrubs in front of a house burn when the house catches fire, how much is the insured entitled to recover for the shrubs under his HO-3?

5% of the limit on Coverage A with a maximum of $500 for any 1 shrub

Ace Insurance Company and Acme Insurance Company each insure the same building for the same amount. Both policies contain a pro rata other insurance clause. In the event of a partial loss, how much of the loss will Acme pay?

50%-each insurer will pay half the amount of the loss

The insured has a building with a replacement cost of $200,000 but has insured it for only $100,000. An 80% coinsurance provision is present in the policy. When a $80,000 loss occurs, the policy will pay:

50,000 100,000/160,000*80,000

How many coverage parts are there to a workers' compensation policy?

A temporary license may be issued for up to:

6 months

The basic extended reporting period included in the commercial general liability form covers claims made up to 5 years after the end of the policy period, as long as occurrence is reported within how long after the end of the policy period?

60 days

The insured must send a signed statement of loss to the insurance company within how many days?

60 days

For an injury producing temporary total disability, the workers' compensation benefit is what percentage of the employee's average weekly earnings at the time of the injury?

66 and 2/3%

Under temporary and permanent total disability, compensation is ___% of the employee's average weekly earnings subject to a maximum and minimum weekly compensation.

66&2/3%

For an injury producing temporary total disability under workers' comp, the comp is what percentage of the employee's average weekly earnings at the time of the injury, subject to a maximum and minimum weekly compensation specified in the law?

66-2/3%

How long does coverage apply for the civil authority additional coverage?

72 hours after the action and for 4 consecutive weeks

Under the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) the federal government's share of compensation that exceeds the insurer's TRIPRA deductible is

80%

Losses to the dwelling and other structures are paid at replacement cost as long as the insured carries an amount of insurance equal to or greater than

80% of the building's replacement cost

Losses to the dwelling and other structures are paid at replacement cost as long as the insured carries an amount of insurance equal to or greater than:

80% of the building's replacement cost

A binder is not valid beyond the issuance of the policy for which it was given or beyond how many days?

Binders are valid up to ___ days or until the policy is issued, whichever is shorter.

90 days

An insured lives in a house covered by an $80,000 special form (DP-3) policy. While the insured is on vacation, someone breaks into the house and steals $5,000 in electronic equipment. The damage to the door is estimated at $800. What coverage is provided by the DP-3 policy? A) $800.00 B) $0.00 C) $5,000.00 D) $5,800.00

A - $800 Theft coverage is not automatically included in dwelling policies; however, damage by burglars is included under the peril on vandalism and malicious mischief

A - 5

Under an auto policy, Other than Collision coverage would apply to which of the following situations? A) All of the car's tires are stolen. B) An insured has her car parked at an airport, and a suitcase is stolen from the car. C) The car rolls over after hitting a patch of ice. D) An insured breaks a window to gain access because the keys were left inside.

A - all of the car's tires are stolen

The insured has an accounts receivable coverage form added to the commercial inland marine coverage form. When a fire destroys the insured's records, coverage is provided for all of the following EXCEPT A) bad debts B) reconstruction of records C) uncollectable sums D) extra collection fees

A - bad debts

A tavern owner has a CGL policy. A patron who claims he was injured when the bartender forcibly removed him from the premises sues both the tavern owner and the bartender. Under the CGL's duty to defend provision, the policy would: A) have no duty to defend because the damages are not covered. B) defend the insured in the lawsuit, even if it is groundless. C) defend the insured in the lawsuit only if it has merit. D) have no duty to defend the bartender because he is not an insured.

A - have no duty to defend because the damages are not covered

Which of the following is an example of control (reduction) as a method of handling risk? A)installing a burglar alarm B)increasing a deductible C)buying insurance to reduce the risk D)reducing coverage

A - installing a burglar alarm

What type of endorsement would be used to insure a recreational vehicle under the personal auto policy? A) Miscellaneous type vehicle endorsement. B) Motor home endorsement. C) Extended vehicle endorsement. D) Joint ownership coverage.

A - miscellaneous type vehicle endorsement

Comprehensive coverage pays for all of the following damages EXCEPT A) overturning of the auto B) glass breakage C) hitting a deer D) explosion

A - overturning of the auto

Which one of the following risks is insurable? A) Pure B) Partial C) Whole D) Speculative

A - pure

Premium credits for all of the following will lower the insurance premiums for the owner of a mobile home EXCEPT: A) reducing Coverage C limit to 40% of Coverage A. B) installing insurer-approved alarm system, fire system, or both. C) installing an automatic sprinkler system. D) tie-down credit.

A - reducing Coverage C limit to 40% of Coverage A

What is one of the major differences between the application of commercial blanket bond's policy limit versus a blanket position bond's policy limit?

A commercial blanket bond's policy limit applies separately to each loss. A blanket position bond's policy limit applies separately to each employee involved in a loss.

What is an exposure?

A condition that presents a possibility of a loss

A) 36,000 300,000/500,000=.6*60,000= 36,000

Which one of the following is NOT an additional coverage found in homeowners policies? A)Market Valuation B)Debris Removal C)Fire department service charge D)loss assessment

A) Market Valuation

Which of the following is not part of the purpose of the Insurance Guaranty Association? A) Provide advertising support for individual insurers B) Avoid excessive delay in payments and avoid financial loss to claimants or policyholders because of the insolvency of an insurer C) Provide a mechanism for the payment of covered claims under certain insurance policies D) Assist in the detection and prevention of insurer insolvencies

A) Provide advertising support for individual insurers

Which of the following statements about commercial umbrella liability is NOT true? A)They exclude catastrophic liability coverage for business risks B)They provide catastrophic liability coverage for business risks C)They require another policy to be in place before they can be issued D)The policy will only pay once the policy limits on an underlying policy have been met

A) They exclude catastrophic liability coverage for business risks

All of the following are covered as business personal property EXCEPT A) accounts receivable B) wall-to-wall carpeting C) exterior building glass D) leased computers

A) accounts receivable

When an ordinance or law coverage endorsement is added to a property policy, all the following consequential losses are covered EXCEPT: A) direct damage caused by an interruption of utility services. B) increased cost of construction because of stricter building codes. C) demolition costs for the undamaged portions of the building. D) cost to remove the building debris.

A) direct damage caused by an interruption of utility services

Which one of the following forms would be most appropriate to protect against a suspension of business operations for an insured that cannot afford to have its operations interrupted? A) extra expense insurance B) business income with a monthly limit of indemnity C) extended business income insurance D) business income with the agreed value option

A) extra expense insurance

All of the following vehicles can be insured under a unendorsed personal auto policy EXCEPT: A)motorcycles B)newly acquired vehicles C)rental cars D)trailers hitched to the insured vehicle

A) motorcycles

Section II of the homeowners policy provides liability coverage for all of the following EXCEPT: A) renting the garage to a jewelry maker B) actions of a residence employee C) actions of a domestic animal in the care of the insured D) use of a 17-foot sailboat

A) renting the garage to a jewelry maker

While driving down the street, an insured swerves to avoid a pedestrian, goes over a curb, and damages a neighbor's fence. Which of the following will pay for the repairs to the fence? A) the drivers automobile policy under the property damage liability provisions B) the drivers automobile policy under the collision provisions C) the drivers general liability policy D) the insureds homeowners policy

A) the drivers automobile policy under the property damage liability provisions

Recently the local utility company's main power supply depot was damaged by high winds. Mike, who owns a TV store, wants to make sure he has coverage for damage to all the TV components demonstrated in his store if the power goes out. What does Mike need to purchase? A) utility services - direct damage coverage B) utility service - time element coverage C) nothing, these utility services are covered in all businessowners policies D) utility services coverage

A) utility services - direct damage coverage

A person may provide evidence of compliance with the state's financial responsibility law in any of the following ways EXCEPT: A) with a bond in favor of the state in the amount of $25,000 B) with a policy of automobile liability insurance C) by making a cash deposit with the state treasurer D) by becoming a qualified self-insurer

A) with a bond in favor of the state in the amount of $25,000

A commercial property policy with the Causes of Loss-Basic Form covers all of the following perils EXCEPT: A)earthquake B)sinkhole C)sprinkler leakage D)volcanic action

A)earthquake

Barney's Breads and Bakery store needs workers' compensation coverage for his 7 employees. He could purchase coverage from all of the following sources EXCEPT A) an assigned risk plan B) self-insurance or group insurance if available C) a private insurance carrier D) the state fund

A- an assigned risk plan

Name the coverage's A, B, C, & D under the Homeowner's policy:

A-dwelling B-other structures C-Personal Property D-Loss of Use

Insurer may terminate a producer's appointment at:

ANY TIME

Physical damage losses under the personal auto policy are reimbursed on what basis?

Actual Cash Value or cost to repair or replace, whichever is less

Failure to carry insurance of at least 80% of Replacement Cost Value results in either _____________ or _____________.

Actual cost value or a proportional share of loss.

Jim and his family are considering a move to the West Coast but are very concerned about earthquakes. Jim called an insurance agent for advice. What is the best advice the agent could give Jim about adequately covering his new home for possible earthquake damage?

Adding the earthquake endorsement will provide the coverage needed

Joe's Plumbing has leased a fleet of vans to be used by his plumbers while going from job to job. Which endorsement is especially important in this situation?

Additional insured - lessor

Coverage E of the dwelling policy forms applies to:

Additional living expenses

What nonprofit association in Alabama protects owners of policies issued by insolvent insurers?

Alabama Insurance Guaranty Association

Who represents the insurance company and is a direct link between the company and the insureds?

An insurance agent

An agent in the XYZ Insurance Company, equipped with business cards, sample XYZ policies, and an XYZ rate book, informs a prospect that XYZ has given him unlimited binding authority. The prospect assumes this is true. Given the prospect's assumption, which of the following terms correctly defines the agent's authority in this case?

Apparent

The garage coverage form is used to insure

Auto businesses, such as auto dealers, service stations, rental car services, and auto repair shops

Which of the following is an optional coverage under the businessowners policy? A) personal effects B) Employee dishonesty C) valuable papers D) Business income

B - Employee dishonesty

Which one of the following forms would be most appropriate to protect against a suspension of business operations for an insured that cannot afford to have its operations interrupted? A) Extended business income insurance B) Extra expense insurance C) Business income with a monthly limit of indemnity D) Business income with the agreed value option

B - Extra expense insurance

Extensions of coverage are available under the business and personal property form if the: A) insured carries both building and personal property insurance. B) policy indicates that 80% or higher coinsurance applies or the insured has purchased a reporting form. C) insured has declared an amount of insurance applicable to each extension. D) amount of building insurance is $100,000 or greater.

B - Policy indicates that 80% or higher coinsurance applies or the insured has purchased a reporting form

Trees, shrubs, and other plants are covered as additional coverages for Coverages A- The coverage is limited to certain perils, however. All of the following perils are covered when causing damage to a tree or shrub EXCEPT: A) THEFT B) WIND C) RIOT D) EXPLOSION

B - Wind

Which of the following describes a personal contract? A- the contract is a promise made by only one party B- the contract protects the individual who owns the property C- the persons involved may void the contract D- the contract insures a property

B - the contract protects the individual who owns the property

All of the following coverages can be found in the businessowners policy EXCEPT A) extra expense B) workers' comp C) business income D) liability

B - workers comp

An insured owns 4 stores. As inventory is sold, the insured transfers new inventory from the other locations to the store making the sales. Which type of policy would best fit this insured's needs?

Blanket Policy

Coverage for workers' compensation may be obtained from all of the following EXCEPT: A) self-insurance. B) a commercial general liability policy. C) assigned risk plans. D) the Federal Employers Liability Act.

B) A commercial general liability policy

Bob's Auto Repair stores its customers' autos inside its building overnight. A fire destroys the building and everything in it. Bob's commercial general liability policy will pay for which of the following? A) Value of Bob's work on the autos but not the damage to the customers' autos. B) Neither the damage to the customers' autos nor the value of Bob's work. C) Damage to the customers' autos and for the value of Bob's work already performed on them. D) Damage to the customers' autos but not the value of Bob's work.

B) Neither the damage to the customers' autos nor the value of Bob's work. 2 exclusions: 1) applies to property of others in Bob's care, custody, or control 2) applies to damage to the insured's product

Which of the following is covered by the jewelers block coverage form? A) Property in transit by mail B) Property that is sold but not delivered C) Property being worn by the insured D) Property exhibited in a showcase away from the premises

B) Property that is sold but not delivered

Which one of the following statements pertaining to risk is NOT correct? A) only pure risks are insurable B) a stock market venture is an example of a pure risk C) pure risk involves only the chance of loss; there is never a possibility of gain or profit D) uncertainty regarding financial loss is the definition of risk; therefore, it is characteristic of both pure and speculative risks

B) a stock market venture is an example of a pure risk pure risk = only chance of loss

Under the CGL form, insured contracts include all of the following EXCEPT: A) contracts for the lease of the premises. B) assumption of an architect's liability for any injury or damage arising out of the insured's rendering or failure to render professional services. C) obligations required by local ordinance to indemnify a municipality (except in connection with actual work done for that municipality). D) elevator maintenance agreements.

B) assumption of an architect's liability for any injury or damage arising out of the insured's rendering or failure to render professional services

What is the most coverage available for a single-family dwelling covered under the regular flood program? A) building - $300,000, and contents - $100,000 B) building - $250,000, and contents - $100,000 C) building - $35,000 and contents - $10,000 D) building - $250,000 and contents - $150,000

B) building - $250,000, and contents - $100,000

Adding the personal injury endorsement to the homeowners policy protects the insured against all of the following EXCEPT: A) invasion of privacy. B) contractual liability. C) libel. D) slander.

B) contractual liability

The purpose of the extended reporting period in a commercial general liability policy is to provide A) coverage for events that happen up to 5 years after a claims-made policy has expired B) coverage for claims made after the policy expires C) coverage for events that have happened before the policy became effective D) additional time for the insured to make monthly reports of information for rating purposes

B) coverage for claims made after the policy expires

Which of the following statements regarding employee theft is NOT true? A) coverage is automatically canceled for employees causing the loss B) coverage is not canceled for employees causing the loss C) the insurer pays only the amount of the loss that exceeds the deductible D) the insured must notify the insurer as soon as possible of any loss insured against

B) coverage is not canceled for employees causing the loss

Which one of the following exposures to loss is NOT covered by the equipment breakdown protection coverage form? A) business income B) fire or combustion explosion C) spoilage damage D) utility interruption

B) fire or combustion explosion

All of the following are excluded under collision or Other than Collision coverages EXCEPT A) damage to awnings, cabanas, or other equipment B) flood damage C) damage due to wear and tear D) road damage to tires

B) flood damage

After business hours, someone breaks into the insured's lot behind his car dealership and steals a customer's auto. Which of the following coverages would apply to this loss? A) liability coverage in the garage coverage form B) garagekeepers coverage in the garage coverage form C) liability coverage in the Business Auto Coverage Form D) Premises-operations coverage in the commercial general liability coverage form

B) garagekeepers coverage in the garage coverage form

Which one of the following statements about occurrence liability policies is CORRECT? A) occurrence policies are only used for products-completed operations exposures B) occurrence policies cover events that happen after the policy is in effect, but before it expires C) occurrence policies do not have a coverage trigger D) occurrence policies cover losses that happen after a specified retroactive date

B) occurrence policies cover events that happen after the policy is in effect, but before it expires

Which of the following is NOT considered an unfair trade practice? A) inflating the dividend amount when discussing the policy's advantages with potential policyowners B) paying bonuses to life insurance policyowners out of surpluses C) circulating a statement that another insurer is in danger of going bankrupt D) rebating premiums

B) paying bonuses to life insurance policyowners out of surpluses

Which of the following statements about the businessowners policy (BOP) is NOT correct? A) land is not covered under a BOP B) tenants improvements are not covered under a BOP C) Aircraft is not covered under a BOP D) Motor vehicles are not covered under a BOP

B) tenants improvements are not covered under a BOP

The Insurance Guaranty Association is obligated to pay any covered claim that is more than $100 and less than: A) 250,000 B) 150,000 C) 500,000 D) 1 mil

B- 150,000

Jim borrows a company van to take his son to college. As the trip takes more than 10 hours, he would like to share the drive with Julia, his wife. What endorsement should Jim add to the company commercial auto policy to make sure he has the proper coverage? A) Employees as insureds. B) Individual named insured. C) Drive other car coverage. D) Additional insured.

B- Individual named insured

An insured rents a car while on vacation in Canada and causes an accident. What coverage is provided for this loss under the personal auto policy? A) The loss is covered if the insured has purchased a foreign country endorsement. B) The loss is covered under an unendorsed policy. C) The loss is not covered. D) The loss is covered if the insured has purchased a rental car endorsement.

B- the loss is covered under an unendorsed policy

What is the major difference between surety bonds and insurance?

Bonds guarantee something will happen. Insurance protects if something happens.

What does pro-rata mean?

Both insurers pay a portion.

What is the most coverage available for a single-family dwelling covered under the regular flood program?

Building 250,000 and contents 100,000

Which act involves visible signs of forced entry or exit?

Burglary

Differences between burglary, robbery, and theft:

Burglary - forcible entry into or exit from premises with the intent to carry off property belonging to the insured & VISIBLE SIGNS of entry/exit Robbery- forcible removal of an insured's property by use or threat of violence or injuring a messenger or custodian Theft- any act of stealing including burglary, robbery, and larceny

Ted's TV shop has a fire, and the shop must be closed for repairs for several months. Ted cannot generate an income while his shop is not open for business. Which additional coverage will pay for the revenue loss while the shop is closed?

Business Income

Which of the following transit policies protects the shipper or receiver of goods against loss of goods in transit incoming and outgoing all year long? A) Trip transit policy B) Bill of landing C) Annual transit policy D) Property in transit

C - Annual transit policy

John's dog bites a friend who is visiting John's house. Which part of John's homeowners policy, if any, would cover the visitor's ensuing medical expenses? A) Coverage F only. B) This loss is excluded because it was caused by an animal owned by the insured. C) Either Coverage E or Coverage F. D) Coverage E only.

C - Either Coverage E or Coverage F

Jane's sister, Maggie, who lives with Jane and just sold her car, drives Jane's sports car to a party. On the way home Maggie loses control of the car, hits a parked car, and rolls the car. Maggie dies as a result of her injuries. What coverage will reimburse Jane for Maggie's funeral expenses? A) Uninsured motorist coverage. B) No coverage is available for funeral expenses. C) Medical payments coverage. D) Liability coverage.

C - Medical Payments Coverage

Steve meets with his agent to apply for an automobile insurance policy on his 2 personal cars. In reviewing the policy, Steve finds he is not willing to accept the duties listed in the conditions section. He signs the application but adds a note deleting the duties to the insurer. Is this acceptable to the company? A) No, the agent has to make this request in writing. B) Yes, the insured has the ability to change the policy at the time of the application. C) No, a written endorsement by the insurer is the only way to change the policy. D) Yes, as long as the request is done in writing.

C - No, a written endorsement by the insurer is the only way to change the policy

Sue, an employee of Paul's Bicycle Shop, was on a service call repairing some bicycles at Bill's home. On her way back to the shop she was involved in an automobile accident and injured. Where would Sue find coverage? A) Paul's auto policy. B) Both Paul's auto policy and workers' compensation policy. C) Paul's workers' compensation policy. D) Her own auto policy.

C - Paul's workers' comp policy

Which of the following is NOT a peril covered under the personal property coverage in the HO-3 special form? A) malicious mischief B) hail C) water damage D) freezing

C - Water Damage

The unendorsed businessowners liability coverage exlcudes A) personal and advertising injury liability B) bodily injury liability C) auto liability D) products liability

C - auto liability

Which of the following is NOT an exclusion in the commercial auto policy liability section? A) completed operations B) care, custody, and control C) bail bonds D) contractual liability

C - bail bonds

Building coverage of the Building and Personal Property Coverage Form insures all of the following things EXCEPT: A) permanently installed fixtures B) floor coverings C) desks and office equipment D) personal property used to service the premises

C - desks and office equipment

Howard borrows his neighbor's car because his son took his car to college for a week while moving into the dorm. Under Howard's automobile policy, his neighbor's car is considered a (n): A) temporary substitute automobile. B) owned automobile. C) nonowned automobile. D) uninsured automobile.

C - nonowned automobile

Coverage C of the commercial general liability policy will cover reasonable medical expenses incurred within how many years of the accident? A) Three. B) Five. C) One. D) Two.

C - one

Doug, who is 7 years old, accidently throws a baseball through the neighbor's kitchen window. Which part of the homeowners policy will pay for the damages to the window? A) Part D B) Part B C) Part E D) Part F

C - part E

Paul purchased Utility Services-Time Element Coverage for his bicycle shop. Of the following, which statement best describes the type of coverage Paul purchased with this endorsement? A) Payment for damage to property due to power outages that occur with utility services B) Payment for loss of business income for any type of utility interruption C) Payment for loss of business income due to a covered loss involving certain utility services D) Payment for damage to property due to utility interruption

C - payment for loss of business income due to a covered loss involving certain utility services

Which of the following losses could be covered under a crime insurance policy? A) indirect losses B) loss due to seizure of property by government authority C) theft committed by a hotel maid D) theft committed by the insured

C - theft committed by a hotel maid

Which of the following is not part of the purpose of the Insurance Guaranty Association? A) Assist in the detection and prevention of insurer insolvencies B) Avoid excessive delay in payments and avoid financial loss to claimants or policyholders because of the insolvency of an insurer C) Provide advertising support for individual insurers D) Provide a mechanism for the payment of covered claims under certain insurance policies

C) Provide advertising support for individual insurers

Which one of the following dwellings would a HO-3-Homeowners Form cover? A) Condominium B) Apartment building C) Single-family home D) Office building

C) Single-family home

Under the Building and Personal Property Coverage Form, how much will an insurer pay for the fire department service charges? A) Actual charges B) Up to $500 C) Up to $1,000 D) Up to $2,000

C) Up to $1,000

Which of the following terms describes an insured's oval or written statement that becomes part of an insurance contract and can void a policy if they are breached? A) Waiver B) Representation C) Warranty D) Misrepresentation

C) Warranty

The unendorsed businessowners liability coverage excludes A) personal and advertising injury liability B) bodily injury liability C) auto liability D) products liability

C) auto liability

Which of the following is NOT one of the requirements for a loss to be paid under the uninsured motorists coverage of the personal auto policy? A) loss is sustained by an insured B) other vehicle meets policy's definition of uninsured vehicle C) loss involves property damage to insured's auto D) insured is legally entitled to damages

C) loss involves property damage to insured's auto

Which of the following is a contract bond? A)fidelity bond B)judicial bond C)performance bond D)public official bond

C) performance bond

A claims-made policy covers claims that are A) first reported during the policy period, provided the event occurred before the retroactive date (if any) stated in the policy B) triggered by an incident that took place during the policy period, regardless of when the claim is made C) first reported during the policy period, provided the event occurred after the retroactive date (if any) stated in the policy D) triggered by an incident that took place during the policy period, if the claim is made within 2 years of the incident

C) first reported during the policy period, provided the event occurred after the retroactive date (if any) stated in the policy

Knowingly lying on an application to obtain coverage would be an example of A) recession B) concealment C) fraud D) misrepresentation

C) fraud

Thomas has expanded his restaurant to include a parking lot next door with valet service. His insurance agent is recommending that Thomas buy a garagekeepers coverage. He advises Thomas that all of the following exposures would be covered by this coverage EXCEPT: A) if a car stored in the parking lot is stolen B) if there is collision damage to a customer's car while being parked by Thomas's employee C) if a car stored in the parking lot is stolen by a restaurant employee D) if a nearby gas station explodes and a car parked in the lot is damaged

C) if a car stored in the parking lot is stolen by a restaurant employee **theft by an insider is excluded

The garage policy covers all of the following EXCEPT A) insured's automobile liability B) insured's products and completed operations C) insured's medical bills D) insured's premises and operations

C) insured's medical bills

An insured has a $60,000 Special Form (DP-3). When a covered loss in the amount of $10,000 damages the attached garage, how much of that amount is paid under the Coverage B- other structures? A) $10,000 B) $1,000 C) $0 D) $6,000

C) $0 It is covered under coverage A not B

What is the minimum deductible for a single-family dwelling insured as a preferred risk in the regular flood program? A) $750 each for building and contents B) $750 total for both building and contents C) $1000 each for building and contents D) $1000 total for both building and contents

C) $1000 each for building and contents

Which one of the following exposures to loss is NOT covered by the equipment breakdown protection coverage form? A) spoilage damage B) utility interruption C) fire or combustion explosion D) business income

C) Fire or Combustion explosion

Bob is employed as ship's navigator on an American flagged ship in Duluth, MN, and is injured as a result of the owner's negligence. Under which law would Bob find coverage? A) Federal Employee Compensation Act. B) U.S. Longshoremen's and Harbor Workers' Compensation. C) Jones Act. D) Workers' Compensation.

C) Jones Act

After Acme construction wins a bid to build an office complex, the owner demands that Acme purchase a payment bond to cover electrical and heating subcontractors. What guarantee is the owner seeking from Acme Construction by demanding the payment bond? A) the surety will complete and deliver the work free of any liens or encumbrances B) the fidelity will complete and deliver the work free of any liens or encumbrances C) the principal will complete and deliver the work free of any liens or encumbrances D) the obligee will complete and deliver the work free of any liens or encumbrances

C) the principal will complete and deliver the work free of any liens or encumbrances

If a building has been vacant for more than 60 consecutive days before a loss occurs, which one of the following types of damages will be covered under a Building and Personal Property Coverage Form? A) attempted theft B) vandalism C) Weight of snow, ice, or sleet D) building glass breakage

C) weight of snow, ice, or sleet

Bill and Marge suffer the following losses as the result of a severe storm: $3,900 wind damage to their roof; $1,000 loss of income because a boarder in their house had to move; $1,250 loss to a grand piano destroyed by flood where it was temporarily stored; and $500 in medical expenses when Marge was hit by part of the falling roof. How much will their HO-3 policy pay for these losses? Assume all losses are within the applicable policy limit and ignore any deductible that may apply. A) $3,900.00 B) $8,500.00 C) $6,150.00 D) $6,650.00

C)6,150

Patrick's Widget Company has a small fleet of owned cars used by local salespeople. Most of the salespeople, however, travel to other cities and rent cars to make sales calls. Which coverage should Patrick include on his commercial auto policy to cover this exposure? A) Symbol 7--Specifically described autos only. B) No coverage is available for rental cars under the commercial auto policy. C) Symbol 8--Hired autos. D) Symbol 9--Nonowned autos.

C)Symbol 8-hired autos only

Which of the following is covered by the jewelers block coverage form? A)property in transit by mail B)property being worn by the insured C)property that is sold but not delivered D)property exhibited in a showcase away from the premises

C)property that is sold but not delivered

If a building has been vacant for more than 60 consecutive days before a loss occurs, which one of the following types of damages will be covered under a Building and Personal Property Coverage Form? A)vandalism B)building glass breakage C)weight of snow ice or sleet D)attempted theft

C)weight of snow ice or sleet

All commercial package policies must include A) commercial auto coverage B) 5 or more coverage parts C) the common policy declarations and the common policy conditions D) commercial crime coverage

C- the common policy declarations and the common policy conditions

Operating a motor vehicle that is not covered by insurance is a:

Class C misdemeanor

Dennis purchased a small manufacturing firm and wants to purchase coverage for the premises-operations and products-completed operations exposures. Which type of insurance should he purchase?

Commercial General Liability

Mark wants to purchase a policy for his manufacturing company to include premises liability, products liability, and completed operations. Which policy would cover all of these losses?

Commercial General Liability

What is the difference between a commercial blanket bond and a blanket position bond?

Commercial applies separately to each loss. Position applies separately to each employee in a loss.

A contractor built a home for a family. Four month after the family moved into the home, the kitchen sink fell on a family member's foot and broke it. This is an example of what type of loss?

Completed Operations

What coverage would protect a policyholder for assumed liability under a construction contract to install water lines for a city?

Contractual Liability

An insured suffers a covered loss to some rental property that forces the tenant to move to another location. Under which section of the dwelling policy would the insured receive payment during the time the property is being repaired?

Coverage D- Fair Rental Value

Which coverage in the homeowners policy is used to protect Sam when a friend files suit after falling down basement stairs that Sam is repairing?

Coverage E - Personal Liability

Coverage form for a farm personal property:

Coverage E- scheduled farm personal property Coverage F- unscheduled farm personal property Coverage G- the barns, outbuildings, and other farm structures coverage form Coverage H- farm liability coverage Coverage I- personal and advertising injury liability Coverage J- medical payments

After business hours, someone breaks into the insured's lot behind his car dealership and steals a customer's auto. Which of the following coverage would apply to this loss?

Garagekeepers coverage in the garage coverage form

A businessowner purchases a commercial general liability (CGL) policy that includes a supplemental extended reporting period. The effective dates of the policy are December 31, 2007, through December 31, 2008. The businessowner is sued over an incident that occurs on April 15, 2008, but is not discovered or reported until June 30, 2009. What coverage, if any, will the policy provide? A) Coverage is denied because the reporting period expired. B) Coverage is denied because the owner was sued. C) Coverage is granted because the incident occurred during the policy term. D) Coverage is granted because the reporting period has not expired.

D) Coverage is granted because the reporting period has not expired

Which of the following is NOT a determining factor in work-related injuries? A) Place B) Time C) Circumstances D) Pay grade

D - Pay grade

The garage coverage form is designed specifically for all of the following EXCEPT: A) TRUCK DEALERS B) A REPAIR SHOP ON THE DEALER'S LOT C) AUTO DEALERS D) RENTAL CAR COMPANIES

D - RENTAL CAR COMPANIES

After a fire damages a home, how much is the insured entitled to recover for buying materials to board up the windows under the homeowners policy? A) 5% of the Coverage A limit. B) $500.00 C) No coverage is available. D) Whatever it will reasonably cost.

D - Whatever it will reasonably cost

The Alabama Insurance Association has the power to do each of the following EXCEPT: A) borrow money B) enter into contacts C) employ people D) assess members for fees

D - assess members for fees

Which of the following is NOT a type of surety bond? A) fiduciary B) performance C) bid D) collateral

D - collateral

Which of the following is a contract bond? A) judicial bond B) public official bond C) fidelity bond D) performance bond

D - performance bond

Which of the following unendorsed policies provides open perils coverage on Coverage C - Personal Property? A) HO-2 B) HO-8 C) HO-3 D) HO-5

D) HO-5

Which one of the following statements regarding personal liability coverage is CORRECT? A) It is added by endorsement to the homeowners policy B) It is automatically included in both the dwelling and homeowners policies C) It is added by endorsement to both the dwelling and homeowners policies D) It is added by endorsement to the dwelling policy, but automatically included in the homeowners policy

D) It is added by endorsement to the dwelling policy, but automatically included in the homeowners policy

John and Mary are a hardworking married couple. They own a sole proprietorship that sells farm produce. John has an additional sole proprietorship where, as an individual, he makes wood kitchen cabinets. John also owns a partnership with his brother, James, in which they make custom furniture. Which of these people is an insured under John's commercial general liability (CGL) policy? A) John only. B) John and James. C) John, Mary, and James. D) John and Mary.

D) John and Mary

Which of the following is NOT an unfair claims settlement practice? A) Compelling insureds to employ attorneys to receive the amount due B) Compelling an insured to accept less than the amount due C) Refusing to pay claims without a cause D) Replacing one insurance policy with another

D) Replacing one insurance policy with another

Tammy was struck by a hit-and-run driver and suffered injuries to her neck. Which part of her personal auto policy, if any, will cover this loss?

Her uninsured motorists coverage pays her medical bills

For a homeowners policy, which one of the following statements about insuring personal property normally kept at a residence other than the residence premises is CORRECT? A) It is not covered when located off the residence premises. B) It is covered for the full limit worldwide, whether on or off premises. C) It is covered only if the insured has paid an additional premium. D) It is covered for up to 10% of the coverage C limit.

D- It is covered for up to 10% of the coverage C limit

Two personal auto policies cover one vehicle. Company A's limit of liability is $100,000 and Company B's limit of liability is $300,000. How much will Company A pay for a liability loss in the event of an accident when the damages total $100,000? A) $50,000.00 B) $75,000.00 C) $100,000.00 D) $25,000.00

D) $25,000 because company A has 25% of total coverage, they would be responsible for paying 25% of the $100,000 loss

An insured buys a business income policy with a maximum policy limit of $100,000 and a 25% monthly limit of indemnity. How much can the insured collect if the lost income is $40,000 in the 1st month and $10,000 in the 2nd month? A) $50,000 B) $65,000 C) $25,000 D) $35,000

D) $35,000 The monthly limit of indemnity restricts how much the insured can collect in a single month to a specified percentage of the policy limit. The insured will collect $25,000 the first month and $10,000 the second month.

If the policy limits of the building and personal property form have been exhausted, how much additional coverage is available for debris removal? A) $10,000.00 B) 25% of the policy limit. C) 25% of the amount of the actual loss. D) $25,000.00

D) 25,000

Richard and his wife own two family cars. In addition, Richard is given a company car to makes sales calls. He occasionally uses the company car for personal use and is concerned that he may not have sufficient company coverage. Which of the following is the best advice his agent can give him? A) Richard can add the company car to his automobile policy as car number 3. B) Richard can add the extended nonowned coverage for named individual endorsement to his policy. C) Richard has to rely on the coverage his company gives him and follow their usage rules. D) Richard can add the drive other car endorsement to his policy.

D) Richard can add the extended nonowned coverage for named individual endorsement to his policy

Actual loss of business income payments by an insurer may include the following EXCEPT: A) net income that would have been earned. B) continuing normal operation expenses. C) payroll expenses. D) amount required to repair property damage that caused suspension of business.

D) amount required to repair property damage that caused suspension of business.

Which of the following is an example of adverse selection? A) a 26 yr old marathon runner applies for health insurance B) a contractor hires a worker who is always on time and does an excellent job C) a husband and wife buy a house, and the mortgage company requires homeowner insurance D) an 18 yr old male buys a sports car, and the bank requires automobile insurance

D) an 18 yr old male buys a sports car, and the bank requires automobile insurance

Which of the following applicants is required to take the prelicensing course? A) an applicant for a limited lines license B) an applicant for a property insurance license who holds the CIC designation C) an applicant for an industrial fire license D) an applicant for a casualty insurance license who holds the CLU designation

D) an applicant for a casualty insurance license who holds the CLU designation

The nationwide marine definition provides insurance underwriters with: A) greater freedom in pricing and coverage for development for unusual risks B) prefiled rates for transportation and communication risks C) strict guidelines for pricing unusual risks such as bridges and property floaters D) definitions for which type of property were eligible for inland marine insurance coverage

D) definitions for which type of property were eligible for inland marine insurance coverage

Boone's Manufacturing has several long-term contracts with customers. These contracts run for 5 years and uniformly provide that they are automatically canceled if Boone is unable to meet supply dates. If Boone's building is destroyed, it can be rebuilt in 9 months. What form of Time Element Coverage is best suited to protect Boone's against the potential loss of income from the long-term contracts? A) leasehold interest coverage B) business income without extra expense C) business income with extra expense D) extra expense coverage

D) extra expense coverage

Part Two, employers liability insurance, of a workers' compensation insurance policy includes all of the following limits of liability EXCEPT: A) for all bodily injury by disease during the policy term B) for each employee injured by disease during the policy term C) for all bodily injury arising from a single accident D) for all compensation paid under benefits required by workers' compensation law

D) for all compensation paid under benefits required by workers' compensation law

Mary is a customer at Bob's Bait Shop, which is covered by a businessowners policy. Bob's auto strikes her when she is leaving the store parking lot. Mary has medical payment expenses of $450. Bob will find coverage A) in Bob's businessowner policy under bodily injury B) under Bob's businessowners policy if he purchased hired and nonowned auto coverage C) in Bob's businessowners policy under bodily injury and medical payments D) never because the businessowners policy does not cover this type of loss

D) never because the businessowners policy does not cover this type of loss

When an employer has employees use their own autos in connection with the employer's business, the employer should purchase A) hired auto liability B) extended employee liability C) third party auto liability D) nonowned auto liability

D) nonowned auto liability

All of the following items are excluded from coverage under a Building and Personal Property Coverage Form EXCEPT: A) patios or other paved surfaces B) automobiles held for sale C) currency or securities D) outdoor furniture

D) outdoor furniture

Which one of the following types of property is NOT covered under the Building and Personal Property Coverage Form? A) improvements made by a tenant to the building B) the cost of labor for work done on customer's property in the insured's possession C) property that is 75' from the insured premises D) patios and walkwys

D) patios and walkways

Henry is a pilot who just purchased his first Cessna Skyhawk single-engine airplane. He asks his insurance agent about aviation liability insurance and learns that this type of insurance is part of a special line of insurance business requiring a different agent. To which special line of insurance business is the agent referring? A) fraternal lines B) umbrella lines C) personal lines D) surplus lines

D) surplus lines

What is meant by aggregate limit of liability? A) the max amount payable in any one occurrence B) the most the insurance company will pay for defense cost C) the most the insurance company will pay to one person D) the max amount the policy will pay per policy period, regardless of the number of claims

D) the max amount the policy will pay per policy period, regardless of the number of claims

Which department within an insurance company organization is typically responsible for helping to cover the insurer's exposure to loss? A)accounting department B)loss control department C)actuarial department D)reinsurance department

D)reinsurance department

Which of the following is NOT a type of surety bond? A) Fiduciary B) Bid C) Performance D) Collateral

D- Collateral

Janet, an employee of Ted's TV Shop, is injured while playing baseball for the company-sponsored softball team. Under which policy would Janet find coverage for her injuries? A) Part one of workers' compensation. B) Part two of workers' compensation. C) Parts one and two of workers' compensation. D) Health insurance.

D- Health Insurance

If the monthly limit of indemnity option has been selected under the Business Income form, how much will an insurer pay for loss of business income for each month of loss? (Assume the declarations page shows a limit of insurance of $150,000 and a fraction of 1/3.) A) $100,000.00 B) Lesser of $100,000 or the actual loss for each month. C) $50,000.00 D) Lesser of $50,000 or the actual loss for each month.

D- Lesser of the $50,000 or the actual loss for each month The insurer pays for loss of income in each period of 30 consecutive days following a loss. The limit of insurance is multiplied by the fraction shown in the declarations. The insurer pays this resulting amount or the actual loss amount for each month of loss, whichever is less, until the limit of insurance is reached.

Which of the following statements regarding flood coverage is true? A) sewer backup into a dwelling is considered a flood and is not covered B) Agents have the authority to bind coverage on flood policies C) Personal Property in a basement or outside in the yard is covered D) The standard deductibles are $2,000 under the emergency program and $1,000 for the regular program

D- The standard deductibles are $2,000 under the emergency program and $1,000 for the regular program

The scheduled personal property endorsement provides a separate schedule of insurance for all of the following categories EXCEPT A)jewelry B)musical instruments C)camera equipment D)belongings while traveling

D- belongings while traveling

Wilson owns a 4-family apartment building. Which dwelling form(s) would provide coverage against building damage caused by the freezing of plumbing, heating, air conditioning, and sprinkler systems?

DP-2 & DP-3

A property owner wants to insure both the rental property and any of the tenant's belongings if they are stolen. Which policy would you recommend and why?

DP-3 Special Form and a separate tenants policy to cover personal property

Fred operates a delivery service. One day, while a customer was directing Fred as he backed his delivery van up to the customer's loading dock, Fred accidentally hit a parked car. The owner of the car filed a claim against both Fred and the customer. Fred's business automobile policy will do what?

Defend both Fred and the customer up to the policy limits

What is Coverage A under Homeowners Section I?

Dwelling

___________ policy does NOT require the home to be owner occupied.

Dwelling

What are the two flood insurance programs avaliable?

Emergency and Regular

Ralph asks his insurance agent to explain how the homeowners policy covers stolen jewelry. The agent spends some time explaining how, when, where, and what jewelry theft coverage exists in the policy. As a result, Ralph believes that his $5,000 watch is covered in full under the basic policy. After the watch is stolen, Ralph is surprised to learn that he has only limited coverage. What legal doctrine might Ralph rely upon to get full coverage for his loss?

Estoppel Ralph relied on his agent to provide an honest and detailed explanation of his homeowners coverage. The agent overstated the coverage and gave Ralph a false sense of what was covered. The insurance company will be responsible for covering the full loss, since Ralph believed he did have the appropriate amount

Which type of authority does an insurer give to its agents by means of the agent's contract?

Express

Extra expense coverage

The insured is in a hurry to get to work, fails to stop at a stop sign, speeds through an intersection, and strikes another vehicle. That vehicle hits another car that then jumps a curb and injures a pedestrian. What is the proximate cause of the accident?

Failing to stop at a stop sign

Which bond is purchased to protect an employer from the actions of dishonest employees?

Fidelity

Every state requires that each person be able to prove he is financially prepared if involved in an accident. Suppose your state requires minimum liability limits of 25/50/10. What is the name of that law?

Financial Responsibility Law

What is the retroactive date?

First date on which an event may occur and be covered by the policy if a claim is filed

Robert wants an open perils coverage on his dwelling and named perils coverage for his personal property. Which homeowners form should he choose?

HO-3

Robert wants open perils coverage on his dwelling and named perils coverage for his personal property. Which homeowners form should he choose?

HO-3

Robert wants open perils coverage on his dwelling and named perils coverage for his personal property. Which homeowners form should he choose? A) HO-6. B) HO-3. C) HO-2. D) HO-4.

HO-3

Which homeowners policy would be written to cover personal property ONLY?

HO-4

Which homeowners policy would be written to cover personal property only?

HO-4

Which one of the homeowners forms is used to cover tenants or renters?

HO-4

Which of the following unendorsed policies provides open perils coverage on Coverage C - Personal Property? A) HO-8 B) HO-3 C) HO-2 D) HO-5

HO-5

Have no duty to defend because the damages are not covered

Doreen's print shop delivers finished items to local customers. Doreen usually makes the deliveries herself, but when she is too busy, one of her employees will use his own car to drop off products with her customers. What type of an endorsement would cover Doreen's liability?

Hired auto and nonowned auto liability endorsement

Doreen's printing shop delivers finished items to local customers. Doreen usually makes the deliveries herself but when she is too busy one of her employees will use his own car to drop off products with her customers. What type of an endorsement would cover Doreen's liability?

Hired auto and nonowned auto liability endorsement

An insured owns a personal auto policy and a homeowners policy. He purchases a new TV and puts it in the trunk of his car. On the way home he hits another car, and the crash totally destroys the TV. The damage to the TV is covered under which insurance policy?

Homeowners - Coverage C

Personal Liability is automatically included in the _______ policy but is added by endorsement to the _______ policy.

Homeowners, dwelling

What makes a pickup van ineligible for coverage?

If it exceeds 10,000 lbs gross weight.

An auto is sold for salvage value following payment of a loss. Who receives the proceeds?

Insurance Company

The list of perils covered under a policy is found in which part of the policy?

Insuring agreement

Which of the following is NOT an element of a valid contract? A) Intent B) Legal purpose C) consideration D) competent parties

Intent

What is the Fair Credit Reporting Act?

It advises the applicants that we are running a consumer report * MUST BE GIVEN WITHIN 3 DAYS *

What does commercial general liability cover?

It covers bodily injury and property damage arising from the premises, operations, products, and completed operations.

What is Loyd's Association?

It is NOT an insurance company. Members are individually liable for contracts they enter. Insurance is provided by individual underwriters, not companies. It insures unusual risks like a hole-in-one contest.

Cecil sells his car and buys another one to replace it. How does the liability coverage in his personal auto policy apply to the replacement vehicle?

It is automatically covered

How does the dwelling policy provide theft coverage?

It must be added by endorsement

What is an estoppel?

It prevents the insurance company from adopting a position that is not consistent with a position it took previously if it would result in injury to the insured.

What is Peak Season Endorsement?

It provides coverage for businesses that are dependent on certain times of the year for their primary income.

What is the purpose of the MCS-90, the endorsement for motor carrier policies of insurance for public liability?

It provides proof that the company carries an amount of insurance covered by the law

What is the purpose of MCS-90, the endorsement for motor carrier policies of insurance for public liability?

It provides proof that the company carries an amount of insurance required by law

What does liberalization provision do?

It will automatically broaden coverage without additional premium if there is a revision to the policy.

Bob's construction company, based in Wisconsin, is doing a job in Illinois. Bob's declaration page for his workers' compensation policy lists Minnesota, Iowa, Illinois, and Wisconsin as states where he will do work. Pete, an employee working in Illinois, is injured on the job. How would Bobs' policy respond?

It will pay benefits on Illinois workers' compensation laws

Who is a mutual insurance company owned by?

Its policyholders

Joe is the general contractor building a new shopping center. He has hired subcontractors to do some of the work for him. What will cover the employees of the subcontractor if the subcontractor does not take out workers' compensation coverage?

Joe's workers' compensation policy

Pete owns a business that sells alcoholic beverages. A person Pete sold alcohol to injures a third party. Pete is sued by this third party and needs what kind of protection?

Liquor liability/dram shop liability

Coverage D in homeowners insurance is for what type of loss?

Loss of Use

An insurance company may measure its underwriting probability by using which ratio?

Loss ratio loss ratio is the ratio of annual claims paid by an insurance company to the premiums received

Coverage C in the Commercial General Liability policy covers:

Medical Payments

Paul's bicycle shop is covered by a businessowners policy. Pete, a customer, is injured when he slips on the wet floor. Where would Paul find coverage in his policy?

Medical expenses

Coverage C in the CGL policy covers

Medical payments

What type of endorsement would be used to insure a recreational vehicle under the personal auto policy?

Miscellaneous type vehicle endorsement

What are the three items for which a director and officer can be held liable?

Misfeasance (performance of an act in an improper manner) Nonfeasance (a person's failure to perform an act he has a duty to perform) Malfeasance (commission of an illegal act)

Dishonesty on the part of an insured is an example of what?

Moral Hazard

Which hazard can be described as a careless attitude or general indifference on the part of the insured toward the occurrence loss?

Morale

Is an earthquake covered under DP2?

Is freezing covered under comprehensive?

Bridgepoint Accounting Services is a limited liability company. Who are the insureds?

Name insured, managers, and the name insured's employees

The Broad Form/HO-2 policy provides which type of coverage?

Named perils coverage for dwelling and personal property coverage

Can a dwelling policy insure sailboats?

Is there coverage for injuries while driving an insured's business vehicle?

Greg is a truck driver with Home Furnishings, Inc., and delivers furniture to customers. Jeff is a salesman with Home Furnishings and accompanies Greg on a delivery run to an important customer. On the way Greg runs a red light, hits a bus, and rolls the delivery truck. Jeff is seriously injured. Which coverage under the unendorsed commercial auto policy will pay for Jeff's injuries?

No coverage available under the commercial auto policy for this loss medical payments can be added by endorsement

The basic extended reporting period included in the CGL form covers claims made up to 5 years after the end of the policy period, as long as an occurrence is reported within how long after the end of the policy?

ONE YEAR

One of Susan's jobs as the office manager for Acme Insurance is to drop off the daily deposits at the bank on her way home from the office. If Susan is robbed one night will making the deposit, what crime form will provide coverage to Acme Insurance for the loss?

Outside the Premises

While driving to work, Leonard is eating his breakfast, reviewing his appointment book, and talking on his phone. He runs a red light and collides with a commuter van. The van's occupants are hospitalized. Which part of Leonard's personal auto policy covers the occupants' injuries and damage to the van?

PART A - bodily injury/prop damage to others is covered under part A when the accident is due to the insured's negligence

Funeral expenses for insured will be paid by:

Part B - Medical Payments

Doug, who is 7 years old, accidently throws a baseball through the neighbor's kitchen window. Which part of the homeowners policy will pay for the damages to the window?

Part E

What bond guarantees that bills for labor and materials will be paid to the contractor as they are due?

Payment

Which bond guarantees that bills for labor and materials will be paid to the contractor as they are due?

Payment

What type of bond is used by a contractor to guarantee that work will be completed to specifications?

Performance

Barbara is demonstrating a floor model of her company's product in its showroom when something goes wrong with the demonstration and the customer is injured. This is an example of what type of loss?

Premises Liability

An insured has a CGL policy and hires a contractor to complete some work on a building. What is the best way to protect the insured from having to personally pay for damages as a result of the contractor's operations?

Purchase an owners and contractors protective (OCP) liability policy

Supplementary payments = ____________

Reasonable expenses

What does rebating mean?

Rebating is an offer or promise to give anything of value not specified in the contract to a prospect for insurance in order to persuade the prospect to purchase the insurance

Which department within an insurance company organization is typically responsible for helping to cover the insurer's exposure to loss?

Reinsurance department

Self-insurance is an example of what type of risk management?

Retention

For a surplus lines producer license, the applicant must submit:

a license application and a license fee, and file a $50,000 bond

At what level is unemployment insurance provided?

STATE not national

Which HO-3 endorsement will change coverage on specifically identified personal property from named peril to open peril?

Scheduled personal property

Which homeowners endorsement is used to insure high-value items of personal property?

Scheduled personal property

George just returned from Europe with a beautiful Swiss watch valued at $10,000. He is concerned that his homeowners policy will not provide enough coverage. His insurance agent suggests that he add which endorsement to adequately cover his watch?

Scheduled personal property endorsement

Which return premium computation is used when policyholder cancels a policy?

Short-rate

What determines the amount of a workers' compensation claim?

State Law

If an agent is unable to place business with an admitted insurer or a company licensed to do business in the state, where would he look to place this type of risk?

Surplus lines market

If an agent is unable to place business with an authorized insurer or a company licenses to do business in the state, where would he look to place this type of risk?

Surplus lines market

Which business auto coverage symbol allows coverage of all vehicles, including owned, nonowned, and hired autos?

Symbol 1

The Business Auto Coverage Form uses symbols to denote the vehicles to which each of the policy's coverages applies. Which symbol is the most restrictive?

Symbol 7 Symbol 7 is the most restrictive because it applies only to autos specifically listed in the policy. Symbol 1 is the least restrictive as it covers any auto. Symbol 2 covers owned autos only. Symbol 9 overs nonowned autos - those owned by employees or partners of the insured

Which of the Business Auto Coverage symbols is the most restrictive?

Symbol 7 because it applies only to autos specifically listed in the policy.

Symbol 8 - hired autos only

The commissioner of Insurance is appointed by:

The Governor

Symbol 1 of business auto coverage allows/affords:

The Broadest Coverage

Bob is employed as ship's navigator on an American flagged ship in Duluth, MN, and is injured as a result of the owner's negligence. Under which law would Bob find coverage?

The Jones Act

What is the benefit for the employee covered by either the Federal Employers' Liability Act or the U.S. Longshoremen's And Harbor Workers' Compensation Act?

The benefits are broader than workers' compensation coverage

A fire destroys the new clothes an employee has brought in to work to show her friends. Coverage applies under the insured's Building and Personal Property Coverage Form because the clothes are an employee's personal property. When the insurance company settles, who will receive the payment?

The employee

What does the Jewelers Block Coverage Form cover?

The insured's stock in trade, which includes jewelry, precious, and semiprecious stones, precious metals, and alloys, and other stock used in the business; and property that is sold but not delivered.

Max and Sam are neighbors who get into an argument over the placement of their common property line. The argument becomes a fight in which Sam's nose is broken. Sam sues Max for his medical expenses. How will Max's homeowners policy respond to this loss?

The insurer will deny the claim because of the intentional injury exclusion

Limit of Liability

The max amount an insurer will pay in case of a loss

What is meant by aggregate limit of liability?

The maximum amount the policy will pay per policy period, regardless of the number of claims

The insured rear-ends another vehicle that is stopped at a red light. The driver of the car struck by the insured is badly injured. The insured, his daughter and her friend were in the car and were also injured. Part B of the insured's personal auto policy will pay medical expenses for everything EXCEPT:

The occupant of the car struck by the insured

Surplus lines accommodate:

The placement of insurance for applications with unusual risks. Ex: aviation, earthquake, professional liability

After Acme Construction wins a bid to build an office complex, the owner demands the Acme purchase a payment bond to cover electrical and heating subcontractors. What guarantee is the owner seeking from Acme Construction by demanding the payment bond?

The principal will complete and deliver the work free of any liens or encumbrances

The boatowners policy provides liability and physical damage coverage. What is the value and size of a boat eligible for the boatowners policy?

The value is less than $25,000, the watercraft is less than 26' in length, or both

Under worker's compensation law, which of the following individuals would not be considered to be wholly dependent on an injured or deceased worker?

The worker's parent who lives with and is totally dependent on them

License and permit bonds are required by government entities, including states, cities, towns, from individuals requesting permission or license to take certain actions that may affect the public. What do these bonds do?

They guarantee that the principal will perform the described activity in conformance with the specifications, terms, and codes governing such activites

Section II of the Homeowners policy covers:

Third parties

Bob's Trucking Company contracts with boat companies to haul its boats and boat parts. The trailers are left at an interchange for pick up. What physical damage coverage is important for Bob to have to cover this exposure?

Trailer interchange coverage

Bob's Trucking Company contracts with boat companies to haul its boats as well as boat parts. Bob is concerned that he has enough coverage if he is contracted to haul a trailer owned by the boat company. What coverage should be used to provide this coverage?

Trailers in insured's possession

Which marine policy would an owner of goods most likely purchase to insure a single shipment of property from Chicago to Los Angeles?

Trip transit insurance

With regard to insurance, risk can be defined as:

Uncertainty regarding loss

What is the criminal fine for insurance code violations?

Up to $1,000 for each intentional violation

What is the producer/service rep civil fine for code violations that could also result in suspension or revocation of license?

Up to $10,000 for each violation

What is short-rate cancellation?

Upon cancellation, the insurer keeps all earned premium plus overhead expenses incurred.

Recently the local utility company's main power supple depot was damaged by high winds. Mike, who owns a TV store, wants to make sure he has coverage for damage to all the TV components demonstrated in his store if the power goes out. What does Mike need to purchase?

Utility Services - Direct Damage Coverage

Jennifer and David signed a homeowners insurance application for coverage on their home. They did not divulge that last year their garage burned down after their 16-year-old son left a cigarette burning. The agent sent in the application and a policy was issued. When another fire occurred 2 months after the policy was issued, the company voided the policy because the agent would not have sent in the application if he had known of the prior loss. Which contract principle does this situation describe?

Utmost good faith

Which endorsement is used to provide coverage based on actual values at certain locations at specific times?

Value reporting endorsement

Waiver

Voluntary surrender of a known right, claim or privilege

What type of damage is excluded from the personal property coverage in the HO-3 Special Form?

Water Damage

Absolute Liability

When a person is liable for a dangerous condition, regardless of the amount of care taken.

How often must the Commissioner examine domestic insurers?

Whenever a violation is suspcted

What coverage is NOT available under the commercial package policy?

Workers' compensation

What type of coverage is typically found in a professional liability policy?

Wrongful acts, errors, or omissions the insured commits, and in some cases, bodily injury

Joan and Steven have applied for automobile insurance with ABC Auto Insurers. The ABC agent asked Joan and Steven if their resident 18-year-old son, Henry, has had any moving traffic violations in the past 2 years. Both answer no. The fact is, Henry had 4 speeding tickets, but never told his parents. Once the company found out about Henry's record, they voided the policy citing misrepresentation as the reason. Did Joan and Steve misrepresent Henry's driving record?

Yes. Though not fraudulent, the misstatement was material.

An insurer may not transact business in Alabama unless authorized by:

a certificate of authority

Speculative Risk

a chance of both loss or gain

When a policy is written on a reporting basis, a premium is paid at the beginning of the policy period that is based on an estimate of what the final premium will be. This is called:

a deposit premium

Each intentional violation of the Alabama insurance code is punishable upon conviction as a misdemeanor by:

a fine of up to $1,000, a county jail sentence of hard labor for up to one year, or both

Insurance that is placed with unauthorized or nonadmitted insurers must be placed through:

a licensed surplus lines broker

The garage policy is:

a package policy that includes coverage for both general liability as well as auto exposures. The health expenses of the insured are not covered.

What is the actual cause of a loss?

a peril

Absolute Liability applies when..

a person is liable for a dangerous condition, regardless of the amount of care taken

A difference in conditions contract is

a policy issued to cover what is normally excluded in other property insurance contracts

A difference in conditions contract is:

a policy issued to cover what is normally excluded in other property insurance contracts

Coverage E in the dwelling policy provides coverage for

additional living expenses

A person who for compensation investigates and negotiates settlement of claims arising under insurance contracts on behalf of an insurer is an

adjuster

Principal operator must be age ___ or older and successfully complete an accident prevention program to receive accident prevention course discount.

age 55

A bid bond guarantees to the entity awarding the contract that the bidding contractor, if selected, will undertake the contract and will furnish a performance bond for the project. What will the bond do if the contractor does not take the job?

agree to pay difference between then selected contractor's bid and the bid that is then accepted

Examples of surplus lines coverage include:

amusement parks, music or rock concerts, movie filming, and auto/boat racing

A policy under which the insured and the insurer agree on the property value and list the value in the policy is known as:

an agreed value policy

Matt has just been nonrenewed by his auto insurance company because he had 3 speeding tickets and 2 at-fault accidents in the last 9 months. Matt will most likely need to obtain insurance from:

an assigned risk plan

A policy may be amended only with

an endorsement

A policy may be amended only with:

an endorsement

A condition or situation that presents a possibility of a loss is

an exposure

The property coverage in the unendorsed Businessowners policy is written on

an open perils basis

What are the sources of info for an underwriter?

application, agent, consumer reports, government records, financial rating services, and previous insurers

Errors and omissions policies cover:

architects, engineers, insurance agents, and accountants

Which one of the following is NOT a supplementary payment provided in the commercial general liability? A)costs of judgement interest B)medical payments C)costs of investigation and defense D)premiums for court bonds

b)medical payments

For a loss to be covered under the TRIA, the cause of loss must

be certified as an act of terrorism

Liquor Liability Insurance/Dram Shop Coverage provides coverage for:

bodily injury and property damage for which the insured may become liable as a result of contributing to a person's intoxication

Which of the following terms describes an insured's oral or written statement that becomes part of an insurance contract and can void a policy if they are breached? A)misrepresentation B)waiver C)warranty D)representation

c)warranty

The amount of payment that comes into play when an insured fails to carry the sufficient amount of insurance is sometimes referred to as the:

coinsurance penalty

All property policies contain exclusions. An insured may be interested in covering these gaps. A difference in conditions policy bridges these gaps by covering events

commercial property policies otherwise exclude and excluding coverages normally found in a commercial property policy

The 2 sources of professional liability claims against insurance agents and brokers are:

companies an agent represents and clients they represent

A valid contract must involve:

competent parties, legal purpose, offer & acceptance, and consideration

An insurance company issued a homeowner's policy that included ambiguous language regarding how a loss was settled. The insured sued the insurance company and won. The judge stated that due to the ambiguous language in the contract, the decision must be made in favor of the insured. The judge was basing this decision on which of the following types of insurance contract?

contract of adhesion

Both parties rely on statements made to each other when writing a contract. This is known as?

contract of utmost good faith

Under the CGL, insured contracts include:

contracts for lease of premises, sidetrack agreements, easement or license agreements, obligations required by local ordinance to indemnify a municipality, elevator maintenance agreements, and other contracts pertaining to the insured's business under which the insured assumes liability that would be imposed by law in absence of the contract

A hotel has added a guest's property endorsement to its commercial crime coverage form. A guest at the hotel removes her jewelry and leaves it wrapped in a towel at the front desk while she uses some exercise equipment. When she finishes her workout, the jewelry is gone. The policy provides:

coverage for the guest's jewelry in the amount shown on the declarations page

An insured bank has a commercial crime coverage form with all 7 coverage parts. During a particularly busy day, an employee is given false account information and electronically transfers a large sum of money to another account in another bank. The amount of this improper funds transfer is

covered under the Funds Transfer Fraud insuring agreement

In automobile insurance, the term supplementary payments refers to payments:

covering reasonable expenses incurred at the insurer's request and other specified expenses that are not subject to the policy limit

Loss Sustained Form under Crime Insurance:

covers losses that are SUSTAINED during the policy period and discovered either during the policy period or up to one year after the policy expires. It terminates immediately when the insured obtains other commercial crime insurance.

The nationwide marine definition provides insurance underwriters with:

definitions for which type of property were eligible for inland marine insurance coverage

In an insurance transaction, who does a licensed agent legally represent?

insurer

The coverages offered by an insurance policy are described in the:

insuring agreement

Actions covered by EPL (employee practices liability) policy:

discrimination, harassment, failure to promote, retaliation, & wrongful termination

The workers' comp laws are mandatory for employers with 5+ employees EXCEPT:

domestic employees, farm laborers, & person whose employment is casual and not in the usual course of the employer's business or profession.

In homeowners policies, what does Coverage A insure?

dwelling

The Federal Employer's Liability Act covers:

employees of interstate railroads

Joint Ownership Coverage

endorsement that provides coverage for a son living out of a household

Consideration = _____________

exchange of value

A claims-made policy covers claims that are

first reported during the policy period, provided the event occurred after the retroactive date (if any) stated in the policy

Under the Insurance Guaranty Association, the maximum liability per covered claim is _______________ for workers' comp claims & ___________ for all other covered claims.

full amount for workers; $150,000 for all other covered claims

Payments for losses that cannot be precisely measured, such as the loss of companionship of spouse from another, are called ____.

general damages

What is churning?

illegal replacement practice of misrepresenting a policy to induce a policyholder to take out an insurance policy or lapse, surrender or forfeit an existing policy and purchase a new policy FROM THE SAME INSURER.

Ocean Marine Insurance covers:

import and export

The difference between Coverage E and Coverage F in the farm personal property coverage form is

insurance is scheduled under Coverage E but a blanket limit applies to Coverage F

The commercial property conditions form contains circumstances that apply to all commercial property coverage forms, unless a coverage form contains a condition to the contrary. Commercial endorsements that apply to more than one part of a commercial package policy are called

interline

In workers' compensation insurance, the experience modification factor:

is applied as a method of rewarding those employers with better-than-average loss experience

What is the Jones Act?

it provides coverage for masters and crews of American vessels

In a short-rate cancellation, upon cancellation, the insurer:

keeps all earned premium plus overhead expenses incurred

The purpose of employers' liability insurance is to provide:

liability protection where workers' compensation does not apply

Part D coverage for damage to your auto covers:

loss caused against collision and other than collision. It does not cover any personal property in the vehicle.

The extortion-commercial entities pays for:

loss of money, securities, and other property resulting from extortion threat of bodily harm to insured or employee

An occurrence is best described as something that:

may take place over time

The commercial crime policy covers loss to money and securities outside the insured's premises while money or securities are in the care and custody of a :

messenger

Twisting is a form of:

misrepresentation

What does the term twisting mean?

misrepresentation

Employee theft covers loss of:

money, securities, and property other than money and securities

Driving too fast and not wearing a seat belt are examples of:

morale hazards

Workers' compensation laws vary from state to state. The categories of coverage are elective or compulsory. In compulsory states, the basic methods of providing coverage are monopolistic or competitive. The monopolistic method is when the insurance:

must be purchased from the state-run insurer

An insurance company owned by its policyholders, who receive a return of unused premiums in the form of policy dividends, is a:

mutual company

Tim purchased an auto policy for his new car. There are no other insureds listed on the declarations. Tim is considered the:

named insured

The Broad/HO-2 policy provides:

named perils coverage for dwelling and personal property coverage

Under part B, medical payments coverage, the insurer pays for reasonable expenses for _________________ & _____________ within ______ years.

necessary medical & funeral expenses within 3 years.

Under a Business Income Coverage form, business income is

net income plus continuing expenses, including payroll

Under a Business Income Coverage form, business income is:

net income plus continuing expenses, including payroll

When an employer has employees use their own autos in connection with the employer's business, the employer should purchase:

non owned auto liability

Harold owns a sports bar. As a promotion, he offers customers tastings of new German beers. One customer, after several samples, drives off and injures another person. The injured party sues the driver and Harold. Harold's commercial general liability policy will:

not cover the loss because of the liquor liability exclusion

Symbol 4 of the business automobile policy applies only to those autos owned by the business that are:

not private passenger autos

The symbol "4" on a business auto policy indicates coverage for which of the following categories of vehicles?

not private passenger vehicles can be trucks, trailers, buses, and motorcycles

Who does a surety bond protect?

obligee

What is rebating?

offering valuable consideration, other than that which is offered in the contract, as an inducement to purchase a policy (offering to pay premium, gifts, etc.)

Coverage C of the commercial general liability policy will cover reasonable medical expenses incurred within how many years of the accident?

one year

If the insured hits a deer while driving his own vehicle, which part of the personal auto policy will pay to repair the vehicle?

other than collision (part D)

What does the businessowners policy NOT cover?

parking garages, bars, and manufacturing operations

When a loss occurs, the Causes of Loss - Special Form requires the insurance company to

pay for all losses not specifically excluded or limited by the policy

A corporation located in Chicago has added an extortion-commercial entities endorsement to its commercial crime coverage form. One of the directors of the corporation is captured and held for a $3 million ransom in La Paz, Bolivia. The policy:

pays only if Bolivia is listed on the endorsement schedule as a covered territory.

The insuring agreement section of a policy describes

perils insured against

The insuring agreement section of a policy describes:

perils insured against

An employer subject to the workers' comp law must secure the payment of compensation by:

purchasing insurance or by self funding

Offering to give a prospect anything of value not specified in the contract to persuade the prospect to purchase the insurance is:

rebating

In the insurance business, the insurance company is also known as the

principal

Who are the 3 parties to a surety bond?

principal, obligee, and surety principal- the one whos acts are being guaranteed by bond obligee- the one who collects if the principal fails surety- the one giving the guarantee

What is NOT covered in flood insurance?

private property in a basement or outside yard

When an insurance company cancels a policy, what is the method used to determine the premium due?

pro rata

What is Difference in Conditions Insurance?

property insurance that covers high severity, low frequency perils- the exact opposite of what is normally accepted by insurance companies. *usually don't have a coinsurance requirement but the deductibles are quite high

Fidelity Bond is purchased to:

protect employers from the actions of dishonest employees

The purpose of extended reporting period in a commercial general liability policy is to:

provide coverage for claims made after the policy expires.

A group of individuals who agree to share each other's losses is known as a

reciprocal company

A contract in which one insurer cedes all or part of a risk to another insurer is known as:

reinsurance

Actual Cost Value (ACV) = _____________

replacement - depreciation

An insurance company takes possession of a damaged auto it has covered. When the company becomes the legal owner of the auto, it is exercising the right of:

salvage

Stock Companies are owned by ______________________ and they are organized for the purpose of _____________________________.

stockholders; making a profit for their stockholders

A parking valet at a hotel uses a guest's car to do a personal errand and damages the car in a collision. The guest has a personal auto policy (PAP). The insurance company will pay the claim and

subrogate against the parking valet

Certain transactions that may be legally conducted by nonadmitted insurers without requiring a certificate of authority are known as:

surplus lines coverage

An insurance binder is best described as:

temporary short-term evidence of coverage

Howard borrows his neighbor's car because his car is in the body shop after his oldest son had an accident on a trip home from college. Under Howard's automobile policy, his neighbor's car is considered a (n):

temporary substitute automobile

If a vehicle owner submits a false proof of insurance, then:

the Department of Revenue will suspend the owner's vehicle registration

If a vehicle owner submits false proof of insurance, then:

the Department of Revenue will suspend the owner's vehicle registration

The bailee policy pays

the bailor

The law of large numbers states that:

the larger the number of risks combined into one group, the less uncertainty there will be as to the amount of loss that will be incurred.

In a limited liability Company, the insureds are:

the name insured, managers, and employees

When calculating premiums for a workers' compensation policy, the insurer will multiply the job classification rate by:

the number of $100 payroll units paid to employees in each job classification

Commercial General Liability (CGL) pays only :

the reasonable expenses for bodily injury that is caused to a person by an accident on the premises that the insured owns or rents

Outside the Premises covers

theft, disappearance, or destruction

Medical payments coverage in the commercial general liability covers injuries to:

third parties regardless of liability

Workers' compensation laws cover employees in the course of employment. Some classes of workers, such as domestic servants, are exempt but may be covered by a voluntary compensation endorsement. This endorsement agrees to pay benefits:

to employees not covered or exempt

What term is the process of evaluating the risk and exposures to potential clients?

underwriting

The limit of liability under the dwelling under construction endorsement is provisional. If a loss occurs, the amount paid will be based on the:

value of the partially completed home

The greatest difference between the Dwelling Basic Form (DP-1) and the Broad Form (DP-2) is that the DP-2 automatically includes coverage for:

vandalism and malicious mischief

What kind of premium payment basis may be used with an industrial fire policy?

weekly or monthly

Producer's affidavit for Surplus Lines:

within 30 days after the effective date of any surplus insurance, the surplus lines producer must file a written report of the transaction stating the facts to determine if the coverage has been lawfully places as a surplus lines

Premiums for workers' compensation policies are based upon the:

work classification, number of employees, and the total payroll

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