Insurance State Exam Practice

Misrepresentations, fraud, or concealment of material facts by the applicant or policyholder may lead to the insurer voiding the policy. With respect to requirements for a valid contract, a policyowner's payment of the policy premium is called a(n):

.consideration

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

general damages

Erica, Connor, Shannon, and Manuel are licensed producers in New York. The Superintendent would most likely not suspend or revoke which producer's license for engaging in the following activities?

Connor, who was charged with a misdemeanor for a traffic accident

Coworkers who live near her residence ride to work in Felicia's car and help pay for her gas and other expenses. An exclusion in Felicia's auto insurance policy says it does not cover a vehicle while it is carrying persons for a fee but then seems to contradict that statement by saying the exclusion does not apply to a share-the-expense carpool. What is this apparent contradiction?

an exception to an exclusion

As defined in a homeowners insurance policy, the broad term "motor vehicle" includes the following EXCEPT

an outboard motorboat

Which business would be eligible for coverage under a businessowners policy?

apartment building seven stories tall

Excalibur Insurance Company sends periodic privacy notices to all customers to comply with which of the following federal laws?

Gramm-Leach-Bliley (GLB) Act

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

HO 4

Insurance Services Office (ISO) farm forms essentially combine which of the following types of coverages?

homeowners coverage and commercial property and liability coverage

Stephanie keeps valuable hobby supplies in a self-storage warehouse. The policy was just renewed, and the new policy imposed new limits for property in a self-storage facility, which Stephanie's agent did not point out to her. If a fire destroys the warehouse, Stephanie might be able to collect in full under what doctrine?

reasonable expectations

More than half of Darryl's home suffers tornado damage. Because the home did not comply with current building codes, Darryl must tear down the undamaged portion and rebuild it with more expensive components. The ordinance or law additional coverage in his HO 3 policy will NOT cover

replacement cost of repairing the damaged portion of the home

Phil currently buys insurance from another agent, but Connie, a new agent, convinces Phil that he will save money by moving his insurance to a policy she recommends. She does not tell him that the recommended policy's premium is lower because the policy provides much less coverage than his current policy. What duty did Connie violate?

to disclose all pertinent information concerning a proposed policy

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

$250,000

Best Insurers terminated the appointment of Agent James on March 1 for engaging in unfair trade practices when selling insurance. Within how many days must it notify the Superintendent?

30

A temporary producer's license issued in New York is generally valid for up to how many days?

90

Which of the following is a requirement of an insurable risk?

A covered loss must be definite as to time, cause, and location.

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

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

Which would NOT be a legal basis for an insurer to cancel an auto liability policy that has been in effect for at least 60 days?

Cancellation would harm the insurer

The crime insurance policy Jodie is applying for will provide blanket coverage against employee theft. What does this mean?

Coverage will apply to theft by any of Jodie's employees.

Don, a repairman employed by Brady HVAC, accidently cut off his finger while repairing Jeannine's furnace ductwork. Brady carries liability and workers compensation insurance. How will Jeannine's homeowners insurance policy address the loss?

It does not cover Don's injuries because he is eligible for workers compensation benefits.

Federal legislation which protect privacy of information relevant to insurance transactions include all of the following EXCEPT

McCarran-Ferguson Act

A mutual insurance company is owned by its

Policyholders

Abby lives in Oklahoma, where she is licensed as an insurance producer. She wants to apply for a nonresident license in New York. Which of the following conditions must she satisfy?

She must show her Oklahoma license to be in good standing

What must an insurer provide the insured before cancelling an auto liability policy that has been in effect for less than 60 days?

Specific reasons for the cancellation

Insurance is primarily regulated at which level of government?

State

Which statement correctly describes how risk retention groups are regulated?

They are subject to less state regulation than regular insurance companies.

Which is NOT an objective of the Fair Credit Reporting Act?

To ensure fair lending rates based on consumer information

Alex sold an insurance policy before his license lapsed and earned a commission on the sale. Is he entitled to a commission if the policy is renewed?

Yes, because he was licensed when the policy was sold.

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

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

Hazel's store has an automatic sprinkler system that will be activated by a fire. In exchange for a reduced fire insurance premium, she signs a document stating that the automatic sprinkler system will always be in operating condition. What is this statement?

a warranty

Compared to the Farm Dwelling and Farm Property insurance forms, inland marine forms generally have

broader off-premises coverage

Jonah's Farm Livestock Coverage Form (FP 00 40) covers his livestock. As defined, this means Jonah has coverage for all of the following creatures on his farm EXCEPT:

chickens

A wildfire destroys many homes in a neighborhood but leaves James's home unscathed. Officials prohibit James from entering the area for ten days until debris has been cleared from the only access road. What coverage, if any, in his homeowners policy will cover James's additional living expenses until he can return home?

civil authority prohibited use coverage

A complete commercial property policy would NOT include

commercial general liability coverage form

Property and casualty insurance rates are based on all the following components EXCEPT

competitors' rates

When a circuit breaker fire forced a grocery store to shut down its electricity for three days, the food in its freezer section perished. This is an example of a(n)

consequential loss

The fact that insurance policy language is written by an insurance company and is nonnegotiable makes insurance policies

contracts of adhesion

The insurance risk score is based on consumer credit information obtained from

credit bureaus

When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed?

defamation

Because it is designed for tenants of houses and apartments, the HO 4 Contents Broad Form 4 (HO 4) policy does not include coverage for

dwelling

Kathleen's Victorian house is not eligible for coverage under a homeowners insurance policy. Which policy might provide comparable property coverage?

dwelling policy

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

endorsements

Which of the following is a peril?

flood

A licensed insurance company that has its home office in Wisconsin is what type of company in Florida?

foreign insurer

Which party does a broker represent in an insurance transaction?

insured

When a bank is named as a mortgagee in a customer's homeowners insurance policy, the bank

is entitled to advance written notice of any policy cancellation

When considering the suitability of an insurance product for a customer, an agent's primary duty is to determine whether the product

is most appropriate for the customer's needs

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

moveable gas grill

The standard perils covered in every Dwelling Property 1-Basic Form, do NOT include

windstorm

Carl owns a house which he insures under a dwelling policy with all coverages and rents it to Susan for $1000 per month. A fire damages the house, forcing Susan to move into a hotel at a cost of $1,800 for the one month it takes to repair the house. What amount, if any, will Carl's policy pay Susan for the hotel cost?

$800

Anthony becomes a producer for Acme Insurance Company. Acme has not filed the notice of appointment with the Superintendent. It must do so within how many days?

15

Jeff is a licensed insurance producer in both New York and Massachusetts. His license in Massachusetts is suspended on March 1 for violating the insurance laws. He must notify the New York Superintendent of Insurance of this administrative action within how many days?

30

A retired artist, Amber gives free evening lessons in her home to promising young artists. According to hers homeowners insurance policy, why is her giving lessons not considered a business?

Because she receives no money or other compensation.

A chandelier falls into the crowd attending the bridal shower at Astrid and Tony's house. The medical payments to others coverage of Astrid and Tony's homeowners policy will pay for whose medical bills?

Bridget's, the honored guest at the party

Which business personal property is not covered under a businessowner's policy unless the policy includes a coverage extension for that property?

Detached signs

Tom is an insurance broker and just sold a life insurance policy issued by ABC Insurers to his client Ella. Which party does Tom represent in the transaction?

Ella

Exclusions from coverage will NOT

Increase the premium

Which condition applies to both commercial property and commercial general liability insurance policies?

Inspections and surveys

Private School's headmaster was distressed when he learned that Agnes, a full-time teacher, helped students cheat on a college entry exam. He scolded Agnes privately but, to avoid a scandal, did nothing further. A few months later he caught Agnes stealing school equipment and made a claim under the school's employee dishonesty coverage. Is the loss covered?

No, because the coverage for Agnes ended when the headmaster learned of her first dishonest act.

What consumer information does the insurance risk score rely upon?

Payment history, number of open accounts, and bankruptcy filings

Frieda Hotel's crime policy includes a guests' property endorsement that covers all the following claims or losses EXCEPT

Property stolen from a guest's car while parked in Frieda's lot.

The declarations of his personal auto insurance policy lists Rich as the named insured. However, the policy's definition of "insured" indicates that drivers living in his household are also insured, which would seem to cover his wife, Alison, and their teenage son Johnny. When this policy uses the word "you," to whom is it referring?

Rich

Donovan is buying a home with a 20 percent down payment and a mortgage from River Bank. All the following statements concerning River Bank are correct EXCEPT

River Bank will buy an insurance policy that protects its interest in Donovan's home.

The impressions embedded in their neighbor's new concrete driveway are those of the Walker's seven-year-old daughter Margie. Will the Walker's homeowners policy pay for the driveway's repair?

The damage to property of others coverage will pay up to $1,000.

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

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

With a named perils policy, which of the following statements correctly describes the burden of proof with respect to covering a loss?

To cover the loss, the policyholder has the burden of proof to show the loss was caused by a covered peril.

Why does an underwriter guard against adverse selection?

To minimize insuring persons with the most risk

Which federal law prevents certain convicted felons from engaging in the insurance business unless they obtain a waiver from the Department of Insurance?

Violent Crime Control and Law Enforcement Act

For a building that has wooden siding, which of the following losses would be excluded by one of the maintenance or wear-and-tear exclusions in a property insurance policy?

Woodpeckers make holes in the building's siding.

How may a person convicted of a crime involving interstate insurance business regain the ability to transact such business?

Written permission of the Department of Insurance

Maureen is an insurance agent who represents an insurance company. Under the common-law rules of agency, what is the insurance company she represents?

a principal

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

at the time of the loss

Which one of the following perils is least likely to be covered under a property insurance policy that covers buildings and contents against the basic causes of loss?

falling objects

Underwriters of property or casualty insurance policies commonly use all of the following sources of information when deciding to accept or reject a risk EXCEPT

genealogical records

What does the coverage territory provision in a property and casualty insurance policy explain?

in which countries coverage applies

Bert soon found a buyer for the delivery van his business no longer needed. The buyer paid him $5,000 in cash. When Bert tried to deposit the cash, his bank told him that the bills are not real money. What insuring agreement in Bert's crime policy might cover his $5,000 loss?

money orders and counterfeit money

Most of his neighbors keep their cars locked when they are parked outdoors overnight, but Cecil leaves his car unlocked with the keys in the ignition. Cecil says if his car is stolen, he'll just make a claim on his insurance policy. What is Cecil's indifference to loss an example of?

morale hazard

All the following are duties owed to a customer by an insurance producer EXCEPT

overcome the customer's objections to buying a recommended product

Loss costs, a key component of property and casualty insurance rates, reflect the insurer's

past claims and estimated future claims

Jodi's real estate office leases a photocopy machine from an office equipment supplier. Which coverage in Jodi's building and personal property coverage form would apply if the machine is damaged by a covered peril?

personal property of others

What is the name for the one-year period between a typical insurance policy's inception date and its expiration date?

policy period

Insurance companies generally refuse to issue policies to cover losses that are:

potentially catastrophic

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

property and liability coverage

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

property loss settlement

When collecting personal financial or health information, an insurance company is required to do all of the following EXCEPT

provide individuals with copies of documents disclosed to other parties.

Alan used his old truck with bald tires and leaking brake lines to move grain from his farm to the grain elevator. During the trip, his brakes failed, and he ran into a school bus. In addition to paying for damage to the bus, the court also ordered Alan to pay an additional $250,000 as punishment for his grossly negligent behavior. What is this additional payment considered?

punitive damages

Which of the following is not an unfair claims settlement practice if committed by an insurance company in New York?

raising policy defenses to reduce a claim

Although she had been told that she was getting the broadest possible property coverage, Earlene is disappointed to discover that the special causes of loss form attached to a building and personal property coverage form excludes all the following perils EXCEPT

theft

Which of the following is not considered an unfair claims settlement practice?

requiring the insured to submit a formal proof of loss form

Because Cassie's apartment is on the ground floor, she realizes it would be easy for a thief to enter her apartment through an open window, so she keeps her windows closed and locked at all times. What risk management technique did Cassie use?

risk avoidance

A policyowner who cancels her auto policy before the end of the policy period is entitled to what kind of refund, if any, of any premiums paid?

short rate refund

Lamont owns 100 shares of ABC Insurance Company stock and receives dividends from this investment. What type of insurer is ABC?

stock

Laura owns poisonous snakes on her property, which she uses for venom research purposes. One of the snakes escaped and within hours bit a neighbor who sued Laura. Though Laura was not negligent in her ownership of the snakes, the plaintiff easily won the suit based on the doctrine of

strict (absolute) liability

The doctrine of concurrent causation holds that if a loss involves more than one peril, and the insurance policy covers at least one of the perils, then

the insurance policy covers the entire loss.

All the following equipment is used on Mari's farm. Which item could Mari cover under a Mobile Agricultural Machinery and Equipment Coverage Form (FP 00 30)?

the tractor that pulls her hay wagon

When comparing her insurance company's policies to those of Zenith Insurance, Melanie makes a misleading statement to convince an insurance prospect to terminate a policy with Zenith and buy one from Melanie's company. What prohibited practice has Melanie engaged in?

twisting

Jessica is issued an insurance producer's license. Unless she submits a renewal application and renewal fee on time, Jessica's license will expire in how many years?

two

Which exclusion in a DP 3 policy applies only to the dwelling and other structures coverages?

weather conditions

James is a licensed producer in New York. He moves to New Jersey on May 1. When must he notify the New York Department of Insurance of his move?

within 30 days

Which coverage cannot be combined with other coverage forms under a single businessowners policy?

workers compensation