P&C Test 3

Mary's Liability coverage limits are 50/100/50. A driver who was injured in an accident caused by Mary obtains a $75,000 judgment against her. Postjudgment interest of $5,000 accrues between the time the judgment was entered by the court and the time the insurer pays. What is the total amount Mary's insurance company will pay for this loss? $50,000 $55,000 $75,000 $80,000

$55,000

If an insurer decides to not renew the CGL policy, how many days notice of nonrenewal must be provided to the first named insured? 10 days 7 days 20 days 30 days

30 days

LaTonya purchases a house from John. She borrows $75,000 from First City Bank that, along with her $25,000 down payment, equals the $100,000 purchase price of the home. Who has an insurable interest in this home? Choose all that apply. a. LaTonya b. John c. LaTonya's son, who would like to inherit the home some day d. First City Bank

A and D

Which of the following would be covered under the building coverage of a BOP? A. Restroom fixtures B. Photocopy machines C. Furnishings in the insured's private office D. Carpets and floor tiles

A and D

An employer purchases a fidelity bond to protect against potential losses by employee dishonesty. In this situation, each of the employees covered by the bond is considered which of the following? A fiduciary A principal A guarantor An obligee

A principal

Which of these statements concerning Medical Payments to Others coverage are correct? Injury to an insured is not covered. The insured does not have to be legally liable for coverage to be available. Injuries that occur off the insured location are never covered. Medical payments are covered only if the expenses are reported within six months of the occurrence.

A) Injury to an insured is not covered. B) The insured does not have to be legally liable for coverage to be available.

Who of the following would be considered an insured under Business Auto Liability coverage? The named insured Others while using a covered auto with permission The owner of a borrowed auto Others who become liable for the conduct of an insured

A). The named insured B).Others while using a covered auto with permission D).Others who become liable for the conduct of an insured

Which of the following autos owned by the named insured could be covered under a Personal Auto policy? Pickup truck used on the insured's farm Station wagon Chevrolet sedan Panel truck used to make deliveries for the insured's small manufacturing operation

A)Pickup truck used on the insured's farm B)Station wagon C)Chevrolet sedan

Which of the following statements apply to Professional Liability policies? They cover the insured's liability arising out of rendering or failing to render services of a professional nature. They duplicate the coverage provided by the CGL policy. They are tailored to fit specific occupational needs. They cover most general liability and automobile liability losses.

A)They cover the insured's liability arising out of rendering or failing to render services of a professional nature. C)They are tailored to fit specific occupational needs

Which of these statements concerning the CPP are correct? a. Almost all commercial risks are eligible for coverage under the CPP. b.The insured can choose a variety of eligible commercial coverages to tailor the package to fit his or her specific business insurance needs. c. A complete CPP includes Common Policy Declarations, Common Policy Conditions, and two or more coverage parts. d. A CPP can include Ocean Marine and Aviation insurance.

A, B, C

Which of the following benefits are paid under workers compensation laws? a. Medical b. Rehabilitation c. Disability income d. Pain and suffering

A, B, and C

Which of the following coverages are provided by Business Auto Physical Damage coverage? a. Collision b. Transportation Expenses c. Comprehensive d. Garage keepers Insurance

A, B, and C

Which of the following businesses might be covered under a Garage coverage form? a. Used car dealer b. Catering company c. Auto body shop d. Service station

A, C, D

Which of the following are true about the 60-day basic extended reporting period? Select all that apply. a. It becomes effective automatically if needed when a claims-made policy expires. b. The insured must request it in writing within 60 days after the policy expires. c. It does not require an additional premium. d. No separate endorsement is required to provide this extended reporting period.

A, C, and D

Which of the following would be considered mobile equipment under the Commercial General Liability coverage form? Select all that apply. a. Truck used to transport personnel to construction sites b. Road construction grader c. Bulldozer d. Self-propelled vehicles designed for snow removal

B and C

Which of the following would be covered under the building coverage of the Building and Personal Property coverage form? a. Inventory stored at the insured's warehouse b. An addition to the insured's store on which construction has just begun c. Fire extinguishers located in the insured's factory d. Office furniture and supplies kept in the insured's building.

B and C

The name of a liability insurance policy that provides high limits of coverage above underlying coverage and may fill a number of insurance gaps is A general liability policy. An umbrella policy. An errors and omissions policy. A difference in conditions policy

B) An umbrella policy

Trailer Interchange coverage is included in which of the following forms? All Commercial Auto coverage forms The Truckers coverage form The Motor Carrier coverage form The Garage coverage form

B) The Truckers coverage form C) The Motor Carrier coverage form

Consuela's Homeowners policy has an 80% Coinsurance condition. Her home's value is $125,000. What is the minimum amount of coverage she must carry to avoid a coinsurance penalty for partial losses? a. $125,000 b. $100,000 c. $80,000 d. $75,000

B. $100,000

Three policies, totaling $300,000 in coverage, apply to an $80,000 loss. Policy A's limit of insurance is $100,000, policy B's limit is $50,000, and policy C's limit is $150,000. Use the pro rata method to determine how much policy C would pay for this loss. a. $26,640 b. $40,000 c. $13.280 d. $60,000

B. $40,000

Which of the following would not be covered under Coverage A or Coverage B of a Dwelling policy? a. A storage shed 100 feet in back of the insured's dwelling where she keeps various yard tools b. A detached garage that has been altered to house a manufacturing operation c. A stack of lumber placed at the edge of the insured's property that will be used to construct a storage shed d. A water heater located in the insured's attached garage

B. A detached garage that has been altered to house a manufacturing operation.

Commercial insureds who need more Liability coverage than provided by a certain policy or want coverage for losses excluded by a certain policy should purchase which of the following? a. Difference in Conditions policy b. Commercial Umbrella policy c. Surety bond d. Fidelity bond

B. Commercial Umbrella Policy

Which of the following losses could be covered under the Theatrical Property coverage form? a. Theft of costumes from an unlocked vehicle b. Damage to a vehicle used as a prop in the production c. Destruction of admission tickets for the production in a fire d. All of the above

B. Damage to a vehicle used as a prop in the production.

Claims that are paid by general liability coverage are charged against the aggregate policy limits and reduce the amount of insurance remaining to pay future claims. However, CGL aggregate limits will be reinstated in full a. If there are more than five claims during a policy period. b. On the next policy anniversary date. c. If the insured pays an extra premium for reinstatement. d. As soon as the aggregate is actually exhausted.

B. On the next policy anniversary date.

Under a National Flood Insurance policy, losses to which of the following could be paid on a replacement cost basis? a. Personal property b. Single family homes c. Mobile homes d. Both A and B

B. Single Family Homes

An agreement between the insured and the insurer that certain conditions will be met is which of the following? a. Misrepresentation b. Warranty c. Estoppel d. Certificate of insurance

B. Warranty

Which of the following is not one of the duties of an agent? a. Making appropriate coverage recommendations to prospective customers b. Writing the provisions of a customer's policy c. Helping prospective customers complete the application d. Assuring that customers understand the coverage they are purchasing

B. Writing the provisions of a customer's policy

Which of the following business liability exposures are either excluded altogether from the CGL or covered only in certain circumstances? Select all that apply. a. Premises and operations b. Indirect/contingent liability c. Pollution d. Work-related injuries to employees

C and D

Which of the following could be covered by an unendorsed homeowners policy? a. Mobile home b. Home that is rented to another person c. Home occupied by the insured and two boarders d. Home that is owned and occupied by the insured

C and D

In the event of a physical damage loss that makes a covered auto unavailable for a period of time, a personal auto policy will provide coverage for transportation expenses at the rate of $20 per day up to how much? A maximum payment of $300 A maximum payment of $460 A maximum payment of $600 A maximum payment of $740

C) A maximum payment of $600

Which of the following losses could be paid under Uninsured Motorists coverage? (Assume that there are no endorsements attached to the policy.) Tabb, the insured, drives the wrong way down a one-way street and collides with another car. Tabb is seriously injured. The driver of the other car has no Liability insurance. Barb, the insured, is hit by a drunk driver who is uninsured. She is not injured, but her car is totaled. Leslie, the insured, is injured when she is struck by a car that runs a red light. The driver has no Liability insurance. Bernard, the insured, is on his way to work when his vehicle is rear-ended by a car that was following too closely. Bernard suffers a back injury. The driver of the other car carries the minimum amount of insurance required in the state.

C) Leslie, the insured, is injured when she is struck by a car that runs a red light. The driver has no Liability insurance.

Coverage for earthquake losses is which of the following? Included in an unendorsed Dwelling or homeowners policy Provided by the federal government Available by adding an endorsement to the Dwelling or homeowners policy Available by purchasing a separate policy

C)Available by adding an endorsement to the Dwelling or homeowners policy D) Available by purchasing a separate policy

Which one of the following is not required in a CGL coverage part? a. CGL declarations b. One or more CGL coverage forms c. Causes of Loss form d. Common Policy Conditions

C. Cause of Loss Form

Which of the following statements applies to Mechanical Breakdown coverage? a. It is not available in a BOP. b. It is automatically provided in a BOP. c. It is an optional BOP coverage that is activated by an entry in the declarations. d. It is specifically designed to cover insured objects while they are being tested.

C. It is an optional BOP coverage that is activated by an entry in the declarations.

Which of the following is not one of the common law defenses against an employer's liability? a. Assumption of risk b. Fellow servant rule c. Proximate cause d. Contributory negligence

C. Proximate Cause

Which of the following statements concerning regulation of the insurance industry is correct? a. The insurance industry is regulated exclusively by the federal government. b. The insurance industry is very loosely regulated. c. The state insurance department is responsible for controlling insurance matters within the state. d. The state insurance department serves only the interests of the insurance industry.

C. The state insurance department is responsible for controlling insurance matters within the state.

Under a homeowners policy, in addition to any payments for damages awarded against an insured, the insurance company will reimburse the insured for reasonable expenses incurred at the company's request, including loss of earnings of up to how many days? a. $500 a day b. $300 a day c. $250 a day d. $100 a day

D. $250

According to the terms of the Mortgage condition, which of the following does not apply to the rights and duties of the mortgagee? a. The mortgagee might have to pay the premium if the insured doesn't. b. The mortgagee can file a proof of loss when the insured fails to do so to protect its rights under the policy. c. The mortgagee might have coverage under the policy even if something the insured does causes a claim to be denied. d. The mortgagee has no insurable interest in the covered property

D. The mortgagee has no insurable interest in the covered property.

What is the largest office building risk that might be eligible for a BOP? a. Three stories and 50,000 square feet b. Three stories and 75,000 square feet c. Six stories and 75,000 square feet d. Six stories and 100,000 square feet

D. six stories and 100,000 square feet

A device that is used to minimize small nuisance claims and that helps to keep insurance premiums down is called what? Arbitration Deductible Valued policy Coinsurance

Deductible

At DEF Insurance Company, agents are employees of the company who are paid a salary plus commissions. This is an example of what type of insurance marketing system? Captive Independent Direct writer Direct response

Direct writer

Each of the following is true about the National Flood Insurance Program except which one? There are maximum limits on the amount of coverage available. Coverage may be written by private insurance carriers. Eligibility requirements are set by private insurance carriers. The federal government reimburses insurance companies for losses that exceed premiums collected.

Eligibility requirements are set by private insurance carriers.

The Excel Insurance Company is incorporated in the state of Tennessee. It is also authorized to do business in Georgia. In Georgia, Excel is known as what type of company? Alien Foreign Domestic Non-admitted

Foreign

Which of the following would not normally be excluded under a property insurance contract? Catastrophic losses Nonaccidental losses Losses to personal property Extra-hazardous perils

Losses to personal property

The Special Dwelling policy form provides which of the following? Basic coverage for the dwelling and broad coverage for personal property Broad coverage for the dwelling and basic coverage for personal property Open peril coverage for the dwelling and broad coverage for personal property Open peril coverage for both the dwelling and personal property

Open peril coverage for the dwelling and broad coverage for personal property

Under which part of a Workers Compensation and Employers Liability policy would you find a description of employers liability coverage provided? Part One Part Two Part Three Part Four

Part two

Which one of the following answer choices lists all of the parties to a Surety bond? Principal and obligee Principal, obligee, surety Surety and obligee Principal and surety

Principal, obligee, surety

A woman is injured when she breaks a tooth on a rock that mysteriously found its way into a box of cereal. This is an example of which of the following? Premises and operations exposure Products-completed operations exposure Contingent liability exposure Contractual liability exposure

Products-completed operations exposure

Which one of the following coverages is not included in the BOP? Bodily injury and property damage liability Personal and advertising injury liability Medical expense Professional liability

Professional liability

George Hawthorn is employed by Moison Appliances as a shipping clerk. As he is stacking TVs in the storage room, he is surprised by two men, both carrying guns. They proceed to empty the warehouse of TVs. This is an example of what? Burglary Robbery Mysterious disappearance A fidelity loss

Robbery

Adequate coverage for large, powerful boats is provided by which of the following? A homeowners policy A homeowners policy with the Watercraft endorsement attached Specialized personal watercraft policies, such as Outboard Motor and Boat, Boatowners, or Personal Yacht policies The reinsurance component of FAIR Plans

Specialized personal watercraft policies, such as Outboard Motor and Boat, Boatowners, or Personal Yacht policies

What is the purpose of a retroactive date in the claims-made form? Extends the period of time in which a claim can be covered under the policy Stipulates a date as the first date on which an event can occur and be covered by the policy if a claim is filed Extends the policy period Stipulates a date after which any loss that occurs will not be covered

Stipulates a date as the first date on which an event can occur and be covered by the policy if a claim is filed

The only significant difference between the occurrence and claims-made forms of general liability insurance is found in which of the following? The coverages provided by the policy The policy's exclusions The "trigger," or the way in which coverage is activated under the policy The policy's conditions

The "trigger," or the way in which coverage is activated under the policy

Which of the following are contained in the Common Policy Declarations? The policy period The name and mailing address of the insured Conditions specifying the insured's duties following a loss The insured's premium for each coverage part purchased

The policy period The name and mailing address of the insured The insured's premium for each coverage part purchased

Which of the following statements concerning binders is correct? They guarantee that a policy will be issued. They can be issued by insurance companies, but not agents. They expire on the effective date of the policy to which they apply, or on the expiration date of the binder if the policy is not issued. They show an intent to consider issuing insurance, but do not include any commitment to provide coverage.

They expire on the effective date of the policy to which they apply, or on the expiration date of the binder if the policy is not issued.

When the special causes of loss form is attached to a commercial property coverage part, coverage for theft of furs and fur garments is limited to how much? a. $2,500 b. $2,000 c. $1,500 d. $1,000

a. $2,500

What is the standard deductible for the BOP property coverage? A. $500 B. $1,000 C. $750 D. $250

a. $500

When insurance is written on a dwelling form, each of the following types of property would be insured under Coverage A (dwelling coverage) except which one? a. A storage shed connected to the dwelling by a utility line b. A laundry room attached to the dwelling c. A laundry room attached to the dwelling d. Materials and supplies used for construction or repair of the dwelling

a. A storage shed connected to the dwelling by a utility line.

Which of the following describes the principle of indemnity? a. After a loss, an insured should be restored to approximately the same condition that existed before the loss. b. Every insured will receive full compensation for all losses in all cases. c. When property is damaged or destroyed, the insurance company must pay the full replacement cost. d. In the case of bodily injuries, liability coverage must be available without regard to any policy exclusions.

a. After a loss, an insured should be restored to approximately the same condition that existed before the loss.

Judgment rating is based on which of the following? a. An evaluation of the characteristics of the individual risk b. Manual rates developed from statistical data c. Calculation and evaluation of the insured's past loss experience d. Loss information reported by other states

a. An evaluation of the characteristics of the individual risk.

An individual lives in an apartment. Which homeowners form should he purchase to cover his personal property? a. HO-4 b. HO-6 c. HO-8 d. HO-3

a. HO-4

The Motor Truck Cargo policy does which of the following? a. Insures a truck carrier for liability arising out of the transportation of cargo b. Covers any loss to cargo in transit, regardless of whether the carrier is liable for damage c. Insures the shipper for all incoming or outgoing shipments during the policy term d. Provides coverage for a shipper on a single shipment of goods

a. Insures a truck carrier for liability arising out of the transportation of cargo.

Agent Blondell is offering a free television to every applicant who agrees to buy insurance through his agency. In most states, this is an illegal practice known as a. Rebating. b. Twisting. c. Misrepresentation. d. Failure of fiduciary responsibility.

a. Rebating

Deirdre has a complete 12-piece tea service valued at $20,000. In an explosion covered by her insurance policy, most of the tea service comes through intact, but one of the tea cups is broken beyond repair. The cup by itself would be valued at $400, but the value of Deirdre's tea service without the broken cup is $17,000. How much will Deirdre's insurance company pay for the broken cup? a. $400 b. $3,000 c. $17,000 d. $20,000

b. $3,000

What is the standard deductible under the regular program of the National Flood Insurance Program? a. $1,000 b. $500 c. $250 d. $100

b. $500

Which of the following losses could be covered under the Theatrical Property coverage form? a. Theft of costumes from an unlocked vehicle b. Damage to a vehicle used as a prop in the production c. Destruction of admission tickets for the production in a fire d. All of the above

b. Damage to a vehicle used as a prop in the production

Which portion of the Garage coverage form covers liability for damage to property of others in the insured's care, custody, or control? a. Liability b. Garagekeepers c. Physical Damage d. Both A and B

b. Garagekeepers

Under the Equipment Breakdown Protection coverage form, which of the following causes of damage to covered equipment would not be a covered "breakdown"? a. Electrical failure, including arcing b. Leakage at any valve, fitting, shaft seal, gland packing, joint, or connection c. Failure of pressure or vacuum equipment d. Mechanical failure, including rupture or bursting caused by centrifugal force

b. Leakage at any valve, fitting, shaft seal, gland packing, joint or connection

The purpose of FAIR Plans (Fair Access to Insurance Requirements) is to do what? a. Give the federal government a major role in providing insurance b. Make property insurance available to risks that were otherwise considered uninsurable because of environmental hazards c. Require complete disclosure of the reasons for policy cancellations d. Force all insurance companies to participate in an insurance pool

b. Make property insurance available to risks that were otherwise considered uninsurable because of environmental hazards.

Highpoint Industries has an automatic sprinkler system installed in its office building. This is an example of which risk management method? a. Avoidance b. Reduction c. Retention d. Transfer

b. Reduction

Jake has two insurance policies on his house. They are issued by different companies, but they are otherwise identical. The term for this is a. Concurrent causation b. Fraud c. Concurrent coverage d. Double indemnity

c. Concurrent Coverage

Ocean marine protection and indemnity (P&I) coverage usually insures the ship owner against liability for all of the following except which one? a. Cargo lost or damaged through negligence b. Damage to other vessels when caused by collision c. Damage to or loss of the insured ship d. Job-related injuries to sailors

c. Damage to or Loss of the Insured Ship

In a competitive state, an employer can obtain workers compensation insurance from which of the following? a. A private insurance company b. The state fund c. Either A or B d. Neither A nor B

c. Either A or B

Which part of an insurance policy describes what property and/or perils will be covered by the contract? a. Definitions b. Exclusions c. Insuring agreement d. Conditions

c. Insuring Agreement

Which of the following is not excluded under Businessowners Liability coverage? a. Damages the insured causes intentionally b. Liquor liability for those in the business of serving liquor c. Liability assumed under an insured contract d. Damage to the insured's own work

c. Liability assumed under an insured contract.

If the named insured acquires a new car that does not replace a previously insured auto, what must the insured do to obtain liability coverage for the auto under her Personal Auto policy from the day it is acquired? a. Nothing coverage is automatic b. Submit a new policy application c. Notify the company of the new car within 14 days of the purchase d. Notify the company immediately; no coverage applies until the company is notified

c. Notify the company of the new car within 14 days of the purchase.

Under which of the Dwelling policy forms may the insured be reimbursed for the replacement cost when the dwelling is destroyed? a. All Dwelling forms b. The Basic form only c. The Broad and Special forms d. The Special form only

c. The broad and special forms

Which of the following losses is not excluded under the physical damage coverage of a personal auto policy? a. Loss of custom furnishings in a customized van b. Loss caused by freezing of the cooling system c. Damage to equipment designed for the detection of radar d. Damage to a covered auto while being used as part of a car pool

d. Damage to a covered auto while being used as part of a car pool.

Medical Payments coverage provides protection for all of the following except which one? a. The insured b. The insured's family c. Passengers in the insured's vehicle d. Occupants of a vehicle that is struck by the insured's vehicle

d. Occupants of a vehicle that is struck by the insured's vehicle.

Which of the following perils are covered in the Causes of LossBasic form? Collapse Explosion Volcanic eruption Nuclear hazard

explosion

Which of the following is a hazard as opposed to a peril? Fire Lightning Wet pavement Flood

wet pavement