Property & Casualty General Lines

How long is the policy period for NFIP flood insurance?

1 year. NFIP flood insurance has a policy term of 1 year.

Which of the following is NOT one of the available additional coverages in the builders risk form?

Vandalism. The 4 additional coverages offered by the builders risk form are debris removal, fire department service charge, pollutant cleanup and removal, and preservation of property.

When would a misrepresentation on the insurance application be considered fraud?

If it is intentional and material. A misrepresentation would be considered fraud if it is intentional and material. Fraud would be grounds for voiding the contract.

Words or terms that appear in an insurance policy in bold face print include:

Specific definitions as to their meaning as used in the policy. Insurance companies define words used in the policy by printing them in bold face and including a specific definition as to their meaning in the contract.

Which of the following insurers are owned by stockholders?

Stock. Only stock insurance companies are owned and controlled by stockholders.

The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as

Subrogation. Subrogation is a provision found in most insurance policies that givers the insurer, after payment of a loss caused by a third party, the insured's rights to recovery against that third party. The insurer's rights are only to the extent of the loss payment.

The insured's home is covered by an HO-3. Two years ago, the insured bought the home for $58,000. Today its replacement value is $60,000. How much Coverage A does the insured need to qualify for replacement cost coverage?

$48,000. A house must be insured for at least 80% of its value on the date of loss to qualify for replacement coverage. In this example, 80% of $60,000 is $48,000.

Which of the following individuals could legally receive commissions from the sale of a life insurance policy?

A licensed life insurance agent. To receive commissions, agents must be licensed in the line of insurance being sold.

A person who is not named as an insured on the declarations page of a policy but is protected by the policy is known as the:

Additional insured. An additional insured is usually added by endorsement and is not named on the declarations page but is protected by the policy.

Which of these is defined as the maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims that may be made or the number of accidents that may occur?

Aggregate limit of liability

Which of the following types of valuation works best for property whose value does not fluctuate much?

Agreed Value. Agreed Value works best for items whose value does not fluctuate much. When a loss occurs, the policy pays the agreed value as specified on the policy schedule, regardless of the insured item's appreciation or depreciation.

In insurance, an offer is usually made when:

An applicant submits an application to the insurer. In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be:

Authorized. Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.

All of the following are supplemental payments found in liability policies EXCEPT:

Costs the insured incurred in hiring an attorney. Supplement payments pay the insurance company's expenses and will not pay expenses incurred by the insured unless insured at the insurer's request.

Which of the following would provide coverage for loss of income when an insured rental dwelling is rendered uninhabitable because of a covered loss?

Coverage D. Coverage D provides fair rental value coverage when insured rental dwellings suffer a loss covered by Coverage A, B, or C.

A unique feature in a bailee form is that it covers:

Customers' property whether or not the insured has been negligent. The bailee/customers form is liability coverage for the customers' property the bill has accepted into his care. Negligence on the part of the bailee is not required for a loss to be covered.

All of the following are factors in the determination of actual cash value EXCEPT:

Insurance premium paid. Actual cash value (ACV) is a valuation method in which the value of property is determined using the replacement cost for property of like kind and quality, minus depreciation. The original cost is not a factor.

What type of property does a Personal Floaters policy cover?

Movable personal property, wherever it may be located. Personal floaters refers to an inland marine policy designed to cover movable personal property, wherever it may be located.

What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk?

Other insurance.

Which of the following symbols is available to an insured with vehicles subject to no-fault coverage?

Symbol 5. Symbol 5 covered owned autos subject to no-fault coverage.

Bob's insurer declared bankruptcy. It has not yet paid his $1,000 claim. Which of the following is true?

The Property and Casualty Insurance Guaranty Association will cover his claim. The purpose of the Property and Casualty Insurance Guaranty Association is to pay claims due to insureds when their insurance companies become insolvent.

Negligence may be defined as:

The failure to use reasonable and prudent care. Just because something bad happens does not mean there was negligence. Negligence is when the failure to use proper care results in injury or damage.

Under the Texas Property and Casualty Insurance Guaranty Association, what is the maximum amount that a claimant may recover from an occurrence under a policy issued by an insolvent insurer?

The lesser of the above amounts. Claims will be paid by the guaranty association based upon the lesser of the amount of the loss, the amount of insurance written, not the exceed the maximum available from the Association, which is $300,000.

A specific coverage part is listed on the commercial package policy declarations page, but there is no premium shown. What does that mean?

There is no coverage. If no premium amount is shown, there is no coverage for that coverage part.

Surety bonds are written for a definite limit called:

the bond penalty. If the specific obligation guaranteed by the bond is not fulfilled, a sum of money, known as a penalty, becomes payable as damages.

The primary purpose of a surety bond is to:

Make sure obligations are fulfilled. A surety bond guarantees the performance of the principal.

Which of the following other coverages is NOT included in the basic form dwelling policy?

Breakage of glass. Breakage of glass is included in the DP-2 and DP-3 only.

In property & casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit?

Deductible. In property insurance, the amount of loss retained by the insured is called the deductible; in liability insurance, it is called retention. Most property coverages include a deductible; most liability policies do not include retention.

Which of the following would modify the original insurance contract by either adding or removing coverage?

Endorsements. Endorsements change the policy's original terms, conditions, or coverages. Endorsements can add or delete coverage, or merely correct items such as the insured's name, address, etc...

The requirement that agents not commingle insurance monies with their own funds is known as:

Fiduciary responsibility. Money collected with respect to an insurance transaction must be held in a position of trust by the agent or broker.

Which of the following would be names on the declarations page of a property or liability policy?

First names insured. First names insured is the individual whose name appears first on the policy's declaration.

In insurance transactions, fiduciary responsibility means:

Handling insurer funds in a trust capacity. An agent's fiduciary responsibility includes handling insurer funds in a trust capacity.

A Mobile Homeowners Policy is structured the same as a:

Homeowners Policy. The coverage structure of the Mobile Homeowners Policy follows the structure of the Homeowners policy.

Persons covered under an insurance policy, whether named or not, are known as the:

Insured. The insureds are persons covered under a policy, whether named or not.

Which of the following is NOT true regarding a Certificate of Authority?

It is issued to group insurance participants. Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.

An insurance producer fails to obtain automobile insurance for a client after agreeing to do so. The client is involved in an automobile accident after running a red light and is found to be at fault. The damage to the other vehicle totals $5,000. Which statement regarding the producer's errors and omissions liability policy is true?

It will provide coverage because the damage to the client resulted from the producer's negligence. Errors and omissions coverage protects insurance producers and brokers from financial losses they may suffer if an insured sues to recover his or her financial loss due to the producer giving incorrect advice or not informing the insured of important issues.

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?

Law of Large Numbers. The law of large numbers, which states that the larger group is, the more accurately losses reported will equal the underlying probability of loss, is the basis for statistical prediction of loss upon which rates for insurance are calculated.

Which of the following personal auto coverages would pay for the insureds travel expenses and loss of earnings while involved in the settlement process of a covered loss?

Liability coverage. Supplementary payments, found in Part A - Liability, include expenses incurred by the insured at the insurer's request, including $200 per day for attending trials or hearings.

Which of the following would be covered under the crime coverage inside the premises-theft of money and securities?

Loss or damage to a locked safe, vault, or cash register.

Which of the following is the basis for a claim against an insurance policy?

Loss. Claims result from losses by a peril insured against in an insurance policy.

The insured's house is located one mile from the county's new landfill and across the road from the entrance of a rock quarry. It would cost $150,000 to rebuild the house if something happened to it, but when the insured tried to sell it, the best offer he received was $80,000. The insurance company will insure the house for only $80,000. What method of valuation is used to insure this property?

Market Value When insured for market value, it is insured for what a willing buyer would pay prior to a loss. This is different from actual cash value or replacement cost.

A business using its own trucks to move its own cargo would insure the cargo using:

Motor truck cargo - owners form. A business using its own trucks to move its own cargo would insure the cargo using the owners form.

B&B Market was sued when an employee detained a person he believed to be a shoplifter, but the person turned out to be the meter reader. Which coverage would apply to this suit?

Personal and advertising injury liability. This suit would fall under the coverage of personal injury, damage to the character of the claimant.

If a person is using an auto with the belief that he is entitled to do so, subrogation rights under a personal auto policy would apply to all coverages EXCEPT

Physical Damage. Subrogation rights do not apply to physical damage coverage if the damage is caused by a person using the auto with a reasonable belief that they were entitled to do so.

All of the following are requirements for an individual to be licensed EXCEPT:

Provide a financial statement. An applicant for a license must be at least 18 years old, pass the state exam (within the last 12 months), pay the appropriate fees and provide an application before a license can be issued. A financial statement of the individual is not a requirement to be licensed.

What type of damages may be awarded by the court to create disincentives that discourage behavior that is deemed highly undesirable by society?

Punitive. Punitive damages are a form of punishment, intended to serve as an example to others to discourage undesirable behavior.

The Federal Fair Credit Reporting Act:

Regulates consumer reports. The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.

An insured under a homeowners policy who has filed two or more claims in the preceding policy year may be:

Surcharged on the premium amount. An insured who has filed two or more claims in the preceding policy year may have their premium surcharged. An insured who has filed three or more claims may be non-renewed.

Prior to state-directed workers compensation statutes being enacted, employees had:

To sue an employer for the "loss" and prove that the employer was at fault. Prior to workers compensation statutes being enacted, workers had to sue employers for damages, and few lawsuits resulted in ANY compensatory payments.

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage. In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.