RMI 3011 Exam 2
Twila's PP is insured for $100,000 under her HO-3 policy. If she usually keeps some PP at a mountain cabin that she owns, how much coverage for this PP is available under her HO policy
$10,000
David has a HO-3 policy that provides $280,000 of insurance on his dwelling, which has a current replacement value of $400,000. Ignoring any deductible, how much will David collect if a roof with a replacement value of $16,000 but an ACV of $10,000 is destroyed in a fire?
$14,000
Connie has an individual medical expense policy with a $1,000 deductible. She is required to pay 20% of covered expenses in excess of the deductible. The insurer will pay 80% of expenses in excess of the deductible. If Connie has eligible medical expenses of $26,000, how much will be paid by her insurer?
$20,000
Joe owns a brewery that he insurers with a commercial insurance policy with a $20,000 aggregate deductible. During a single policy period, He experiences the following covered losses. Loss 1: $10,000 Loss 2: $6,000 Loss 3: $7,000 How much will Joe's insurer pay Joe for Loss 3?
$3,000
Moira owns a commercial building she insured for $400,000 subject to an 80% coinsurance clause. The building was completely destroyed by a fire (covered loss). At the time of loss, the building's replacement cost was $800,000. How much will Moira collect from her insurance company as a result of this fire?
$400,000 - it's a total loss
David owns a commercial building with a replacement cost of $4 million. The building is insured on a replacement cost basis for $2.4 million under a fire insurance policy that has an 80% coinsurance clause. How much will David collect if the building sustains a covered fire loss with a replacement cost of $80,000?
$60,000
Which of the following types of water damage is covered under an unendorsed HO-3 policy? (a) Damage from water the overflows from an malfunction washing machine (b) Damage from a flood caused by torrential rain (c) Damage from a flood caused by a tsunami (d) Damage from water that backs up through a drain.
(a) Damage from water the overflows from an malfunction washing machine
One of the "Tips for Buying a HO Policy" is to consider purchasing a personal umbrella policy. What coverage is provided by a personal umbrella policy? (a) Excess liability coverage and coverage for some liability claims excluded by underlying policies (b) Blanket property coverage for any damage caused by water (c) Coverage for business and professional liability (d) Open-perils, replacement cost, property coverage
(a) Excess liability coverage and coverage for some liability claims excluded by underlying policies
Which of the following losses would be covered under Section II of an unendorsed HO-3 policy? (a) The Ho accidentally dropped a bowling ball, injuring another bowler's foot (b) The Ho's nanny was injured on her day off while hiking at a state park (c) The insured slandered a city council member at a city council meeting (d) The Ho's dog bit the Ho's daughter
(a) The Ho accidentally dropped a bowling ball, injuring another bowler's foot
Which of the following statements about the coverage for OS (coverage B) under the HO-3 policy is true? (a) Coverage B doesn't insure structures on the residence premises connected the dwelling by a fence (b) A detached barn located on the resident premises is a structure covered under Coverage B (c) A horse stable located on the resident premises rented to another is covered under Coverage B. (d) 30% of the dwellings coverage limit applies as additional insurance for OS
(b) A detached barn located on the resident premises is a structure covered under Coverage B
Ella believes the value of the loss to her home is $30,000. The insurer has offered $18,000 to settle the loss. If Ella and the insurer cannot agree on the value of the loss, which HO policy provision specifies how this dispute will be settled? (a) Insurer's option (b) Appraisal clause (c) Mortgage clause (d) Loss payment clause
(b) Appraisal clause
Each of the following are exclusions in the HO policy that apply to medical payments to others (Coverage F), EXCEPT (a) Bodily injury resulting from nuclear radiation (b) Bodily injury to person who are social guests at the insured location (c) Bodily injury to person eligible to receive workers comp benefits (d) Bodily injury to residents of the household who are in the care of the insured
(b) Bodily injury to person who are social guests at the insured location
Each of the following statements concerning Coverage C special limits of liability are true EXCEPT : (a) Watercraft of all types are limited to $1,500 (b) Firearms and related equipment damaged by fire are limited to $2,500 (c) Passports are subject to a $1,500 limit (d) Loss of money is subject to a $200 limit
(b) Firearms and related equipment damaged by fire are limited to $2,500
Which homeowners policy is specifically designed for tenants who rent apartments, houses or rooms? (a) HO-3 (b) HO-4 (c) HO-6 (d) HO-8
(b) HO-4
Which of the following situations is covered under Section II of an unendorsed HO policy? (a) Injuries which occur at a park resulting from a motorcycle owned by the insured (b) Injuries resulting from an auto not subject to registration because it is in dead storage (c) Injuries resulting from an auto rented by the insured while on a vacation (d) Injuries resulting from a trailer being pulled by the insured's auto
(b) Injuries resulting from an auto not subject to registration because it is in dead storage
Each of the following statements concerning an earthquake endorsement are true EXCEPT: (a) The majority of property owners in earthquake zones do not have earthquake insurance (b) One reason for not buying earthquake coverage is a mistaken belief the federal government will provide adequate amounts of disaster relief (c) A single earthquake is defined as all earthquake shocks that occur within a 48-hour period (d) Earthquake coverage in earthquake prone areas is usually expensive and includes high deductibles
(b) One reason for not buying earthquake coverage is a mistaken belief the federal government will provide adequate amounts of disaster relief
When each insurance policy applicable to a loss only pays its share of the loss based on its proportion of the total available insurance coverage, it is an example of: (a) Primary and excess insurance (b) Pro rata liability (c) contribution by equal shares (d) all of the above
(b) Pro rata liability
Valerie want to purchase a HO policy. She has some valuable PP to which internal policy limits apply. Her agent said that she could obtain coverage under her homeowners policy by attaching a list of this valuable property with specific amounts of insurance. Such a listing is called a(n) (a) Binder (b) Schedule (c) Warranty (d) Application
(b) Schedule
Polly purchased an unendorsed HO-3 policy. She has a swing set in the backyard of her home. While her son and the neighbor's child were using the swing set, it collapsed. Both of the children required medical care. (a) The medical expenses of the neighbor's child are covered under Coverage F of the policy (b) the medical expenses Polly's son are covered under Coverage F of the policy (c) The medical expenses of the neighbor's child are covered under Coverage E of the policy if Polly is found legally liable for her injuries (d) There is no coverage under Coverage E of the policy if Polly's son sues Polly for his injuries
(b) the medical expenses Polly's son are covered under Coverage F of the policy
Which of the following statements about the personal liability coverage (Coverage E) of an unendorsed HO is true? (a) Coverage is provided for business and professional liability (b) Coverage is provided for bodily injury to a named insured (c) Coverage is provided to an insured for bodily injury or property damage caused by an insured's negligence (d) all of the above
(c) Coverage is provided to an insured for bodily injury or property damage caused by an insured's negligence
Disability income insurance uses a special type of deductible. No benefits are paid during the initial period of disability (e.g. 30 days). What is this type of deductible, which is expressed in time rather than in dollars, called? (a) Aggregate deductible (b) Straight deductible (c) Elimination (waiting period) (d) Calendar-year deductible
(c) Elimination (waiting period)
Jose and Maria would like "open-perils" coverage on their home and their PP. Which unendorsed HO form provides this coverage? (a) HO-2 (b) HO-3 (c) HO-5 (d) HO-8
(c) HO-5
Manny is worried that over time, the amount of property insurance he purchased to protect his home (dwelling) won't be of sufficient to fully compensate him in the event of a covered partial loss. Which endorsement should Manny purchase in order to allay his concerns? (a) Earthquake Endorsement (b) PP Replacement Cost Loss Settlement Endorsement (c) Inflation Guard Endorsement (d) Scheduled PP Endorsement
(c) Inflation Guard Endorsement
Which of the following statements about the additional coverages included in Section II of the HO policy is true? (a) First aid expenses incurred by the insured for a bodily injury covered under the policy are not covered (b) Damage to property arising out of most businesses engaged in by the insured is covered (c) Interest that accrues on a judgement after the judgment is awarded but before the judgment is paid is covered under claims expenses (d) Damage to property of other is covered only if the insured is legally liable
(c) Interest that accrues on a judgement after the judgment is awarded but before the judgment is paid is covered under claims expenses
All of the following persons are insured for personal liability under the HO policy EXCEPT (a) Children of the named insured under age 24 who are attending college full time and temporarily residing elsewhere. (b) Foster children under the age of 21 who reside with the named insured (c) Nonresident employees of the named insured (d) The spouse of the named insured if a resident of the same household
(c) Nonresident employees of the named insured
Each of the following is covered under the dwelling coverage (Coverage A) of the HO3 policy EXCEPT: (a) An attached garage (b) Materials intended for repair of the dwelling (c) The land on which the insured dwelling is located (d) At attached carport
(c) The land on which the insured dwelling is located
Deductibles are used for all of the following reasons EXCEPT (a) To reduce premiums (b) To eliminate small claims (c) To achieve rating equity (d) To reduce attitudinal and moral hazard
(c) To achieve rating equity
Each of the following statements about the HO-6 (unit-owners form) policy is true, EXCEPT (a) It includes personal liability coverage (b) It covers PP on a named-perils basis (c) it includes coverage for the building where the condo is situated (d) It is designed for owners of condo units and cooperative apartments
(c) it includes coverage for the building where the condo is situated
Which of the following statements concerning policy exclusions is true? (a) Coverage while carrying passengers for a charge is usually included under a Personal Auto Policy (PAP) (b) Coverage for use of an automobile is typically included under a HO policy (c) Coverage for flood is excluded because of moral hazard concerns (d) Particular coverage isn't needed by most insureds
(d) A particular coverage isn't needed by most insureds
Roland would like to save money on his HO premium. All of the following steps will help him to reduce his premium EXCEPT (a) raising the deductible (b) shopping around for a HO policy (c) Installing burglar alarms, smoke detectors, and dead-bold locks (d) Adding a personal property replacement cost endorsement
(d) Adding a personal property replacement cost endorsement
Each of the following are considered insured locations for medical payments to others (Coverage F) under a HO policy, EXCEPT (a) a new vacation home purchased by an insured during the policy period (b) A motel room where an insured is temporarily residing (c) A hall rented by the insured for her daughter's graduation party (d) Farmland owned by the insured
(d) Farmland owned by the insured
Following catastrophic hurricane losses, South Coast Insurance Company changed its deductible provision. Rather than using a specified dollar value, the dollar value of the deductible increases with the size of the loss. The type of deductible that South Coast changed to is called : (a) Calendar-year deductible (b) Aggregate deductible (c) Straight deductible (d) Percentage deductible
(d) Percentage deductible
Tom is planning to build a home. He is weighing many factors, including construction materials, location and other considerations. Each of the following statements is true with regard to HO insurance and Tom's new home, EXCEPT : (a) Older homes cost more to insure than newer homes (b) A wood frame home costs less to insure than a brick home. For earthquake exposure (c) The higher the HO deductible selected, the lower the premium will be (d) The higher the construction costs are in the area, the lower Tom's HO insurance premiums will be
(d) The higher the construction costs are in the area, the lower Tom's HO insurance premiums will be
Ted borrowed $140,000 for ABC Bank to purchase a home and pledged the home as collateral for the loan. Shortly after purchasing the home, Ted lost his job. He could not find another job and could not pay the monthly mortgage. Ted set fire to the home. The claims adjuster suspected arson, and an investigation proved that Ted intentionally caused the loss. Under the mortgage clause of the HO-3 policy, how will this be settled. (a) The insurer has no liability because the loss was intentional (b) The insurer will pay Ted the ACV of the loss as intentional loss is not excluded (c) The insurer will pay ABC the value of its insurable interest and pay Ted the value of his insurable interest. (d) The insurer will pay ABC the value of its insurable interest and the attempt to recoup the loss payment from Ted
(d) The insurer will pay ABC the value of its insurable interest and the attempt to recoup the loss payment from Ted
Which of the following statement regarding the Coverage E limit in the HO policy is true? (a) it is an aggregate limit, and once the amount paid for one or more claims reaches the limit, no additional coverage is provided (b) The limit applies only if a court orders the insured to pay-there is no coverage for settlements and reached out-of-court (c) Any legal defense costs incurred by the insurer are counted against the limit of liability (d) The limit applies on a per-occurrence basis to bodily injury and property damage liability
(d) The limit applies on a per-occurrence basis to bodily injury and property damage liability
Which of the following property is covered under Coverage C of the HO-3 policy? (a) A diamond ring insured under a separate personal articles policy (b) A vehicle owned by the named insured's resident spouse (c) The family's pet cat, Mittens (d) a bicycle owned by the named insured used for triathlons
(d) a bicycle owned by the named insured used for triathlons
_______ impose certain requirements on an insured before they are able to receive payment for a covered loss. (a) Declarations (b) Insuring agreement (c) Exclusions (d) Conditions
(d) conditions
Each of the following is an example of information found on the declarations page of a policy EXPECT: - Name of the insured - A summary of the insurer's major promises - Amount of the premium - Deductible amount
A summary of the insurer's major promises
Which of the following statements about problems arising from the use of a coinsurance clause is/are true? I. The amount of insurance should be periodically evaluated to avoid a coinsurance penalty because of inflation II. An agreed value coverage option is one method used to solve the problem of values that fluctuate throughout the policy term.
Both I & II
Which of the following statements concerning policy "definitions" is/are true? I. The aleatory nature of insurance contracts makes it necessary for insurers to precisely define certain words in a policy in order to avoid having to pay for losses the insurer never intended having to pay. II. Defined words make it easier to determine if a loss can be covered by the policy
Both I and II
Which of the following statements concerning renters insurance is/are true? I. Renters insurance provides coverage for personal property but not dwellings or OS II. The ISO HO-4 renter's policy covers an insured's personal property on a name-perils basis
Both I and II
Which of the following statements concerning the coinsurance clause of a property insurance policy is/are true? I. The coinsurance clause only applies to partial losses, not total losses II. The fundamental purpose of coinsurance is to achieve rating equity
Both I and II
Which of the following statements about "open perils" coverage is/are true? I. All losses are covered except those specifically excluded II. Named-perils coverage typically provides broader coverage to an insured than open-perils coverage.
I only
Which of the following statements about an earthquake endorsement for a HO policy is/are true? I. The endorsement also covers landslides and volcanic eruptions II. The coverage for earthquakes is written without a deductible
I only
Which of the following statements about the HO-8 policy is/are true? I. It is designed for an older home where the replacement cost substantially exceeds its market value II. It provides only limited coverage for theft of PP: $1,000 max per occurrence while located anywhere in the world
I only
Which of the following statements about the personal property replacement cost endorsement used with the HO policy is/are true? I. claims are paid on the basis of replacement cost with no deduction for depreciation II. If the cost to repair or replace a single item exceeds $250m the property must actually be repaired or replaced in order for the insured to receive payment based on the replacement cost; otherwise, only ACV is paid
I only
Which of the following statements concerning additional coverages available under an HO-3 is/are true? I. Tree, plants and shrubs damaged by windstorm are covered II. An additional 5% of coverage in excess of the coverage limit is available for debris removal under certain circumstances.
I only
Which of the following statements is/are true? I. Other-insurance provisions apply to the payment of losses when more than one policy provides coverage for the same loss II. Other-insurance provisions are an exception to the principle of indemnity
I only
Which of the following statements about the insurer's obligation to provide legal defense under the personal liability coverage (Coverage E( of the HO policy is/are true? I. The insurer agrees to defend the insured only if the suit is not groundless, false, or fraudulent II. The insurer's obligation to defend the insured ceases after the amount paid for damages from an occurrence equals the policy limit.
II only
Which of the following statements is/are true concerning the use of an individual's credit history as an insurance rating factor? I. Individuals with poor credit histories, as a group, generally file fewer HO claims than do individuals with good credit histories II. A poor credit history can be improved over time, allowing for the purchase of HO insurance at a lower premium
II only
Which of the following statements regarding watercraft liability under Section II of an unendorsed HO-3 policy is/are true? I. No coverage is provided for watercraft liability II. Liability arising out of the use of watercraft that are under certain length and horsepower limits is covered
II only
Which of the following situations would be covered under Section II of a HO policy I. The insured is sued by his GF because he infected her with AIDS II. The insured's son is sued after a friend suffered serious injury as a result of using illegal drugs sold to him by the son
Neither I nor II
Which of the following statements about eligibility requirements for HO insurance is/are true? I. An eight-unit apartment complex is an eligible dwelling as long as the tenants are families II. Renters and condominium owners are both eligible for coverage under an HO-6 coverage form
Neither I nor II
Which of the following statements concerning HO coverage form is/are true? I. The HO-3 coverage form insures dwellings, OS and PP against direct physical loss on an open perils basis II. The HO-6 coverage form covers PP of the condominium unit owner on an open perils basis.
Neither I nor II
Patrick purchased two property insurance policies to insure his office building. The policy from Company A provides $400,000 of coverage. The policy from Company B provides $100,000 of coverage. If Patrick suffers a $200,000 covered loss, how much of the loss will each company pay if the loss is settled on a pro rata basis by each insurance company?
Policy A: $160,000 Policy B: $40,000
