RMI Exam 4

All of the following are exclusions in the homeowners policy that apply to medical payments to others (Coverage F) EXCEPT A) bodily injury resulting from nuclear radiation. B) bodily injury to persons who are social guests at the insured location. C) bodily injury to persons eligible to receive workers compensation benefits. D) bodily injury to residents of the household who are in the care of an insured.

B) bodily injury to persons who are social guests at the insured location.

Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred. —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover the damage to Ken's car? A) bodily injury liability B) collision coverage C) medical payments coverage D) property damage liability

B) collision coverage

Which of the following is an additional coverage provided under Section I of the Homeowners 3 policy? A) medical payments to others B) debris removal C) personal liability D) intentional property damage caused by an insured

B) debris removal

One of the "Tips for Buying a Homeowners Policy" is to consider purchasing a personal umbrella policy. What coverage is provided by a personal umbrella policy? A) blanket property coverage for any damage caused by water B) excess liability coverage and coverage for some liability claims excluded by underlying policies C) all-risk, replacement cost, property coverage D) coverage for business and professional liability

B) excess liability coverage and coverage for some liability claims excluded by underlying policies

The 2005 PAP states that the insurer has no duty to provide coverage if the insured fails to comply with certain listed duties. In practice, however, the insurer is only relieved of its duty to provide coverage if A) the insured was unaware of the listed duties. B) failure to comply with the duties is prejudicial to the insurer. C) the claim involves bodily injuries of more than $50,000. D) the claim occurred in another state.

B) failure to comply with the duties is prejudicial to the insurer.

Liability arising out of which of the following is covered under the personal injury endorsement to the homeowners policy? A) property damage liability B) false arrest C) bodily injury D) business liability

B) false arrest

Some states do not require an individual to demonstrate the ability to pay an automobile liability claim until after the individual has been involved in an accident or has been convicted for certain offenses, such as driving under the influence of alcohol. This approach to dealing with compensating innocent auto accident victims is called a(n) A) unsatisfied judgement fund. B) financial responsibility law. C) uninsured motorist law. D) compulsory insurance law.

B) financial responsibility law.

Ellen purchased a health insurance policy. Under the provisions of the Affordable Care Act, which of the following renewal provisions must the insurer use in the policy? A) cancellable B) guaranteed issue C) renewable at the insurer's option D) conditionally renewable

B) guaranteed issue

Because of the Affordable Care Act, all new medical expense plans that offer individual and group coverage must accept all individuals and employers in the state who apply for coverage. These insurers are required to continue to renew the coverage at the option of the individual or plan sponsor. Thus, under the Affordable Care Act, the renewal provision is A) conditionally renewable. B) guaranteed issue. C) nonrenewable. D) renewable at the insurer's option.

B) guaranteed issue.

Kevin has an individual disability income policy that his insurer agrees to keep in force until age 60. However, the company has the right to increase the premium each year for the underwriting class in which Kevin has been placed. Which renewal provision is found in Kevin's policy? A) noncancellable B) guaranteed renewable C) conditionally renewable D) nonrenewable.

B) guaranteed renewable

One benefit payable under a typical no-fault plan is "essential services expenses." Which of the following would be covered under this benefit? A) funeral expenses B) housekeeping expenses C) hospital bills D) loss of income

B) housekeeping expenses

In addition to providing coverage in the United States, its territories and possessions, and Puerto Rico, where else does the PAP provide coverage? A) in Mexico B) in Canada C) in both Mexico and Canada D) anywhere in the world

B) in Canada

Greta purchased a long-term care policy. Under a typical policy, Greta's eligibility for benefits may be triggered by A) how long premiums have been paid. B) inability to perform activities of daily living. C) continuous hospitalization for at least 60 days. D) eligibility for Medicare benefits.

B) inability to perform activities of daily living.

The Affordable Care Act has provisions that improve the quality of health care and lower costs. All of the following are examples of these provisions EXCEPT A) reducing paperwork and administrative expenses. B) increasing the number of medical specialists and reducing the number of primary care physicians. C) compensating physicians based on value rather than on the volume of services. D) cracking down on healthcare fraud.

B) increasing the number of medical specialists and reducing the number of primary care physicians.

All of the following are covered under the dwelling coverage (Coverage A) of the Homeowners 3 policy EXCEPT A) any structure attached to the dwelling. B) the land on which the insured dwelling is located. C) materials and supplies intended for alteration or repair of the dwelling. D) materials and supplies intended for construction of a detached garage.

B) the land on which the insured dwelling is located.

A vehicle is considered a constructive total loss when A) it cannot be repaired. B) the repair cost exceeds the actual cash value. C) it can be repaired, but the insured prefers a cash settlement. D) it can be repaired, but the insurer prefers a cash settlement.

B) the repair cost exceeds the actual cash value.

If there is a conflict between state law and a provision in a homeowners policy, A) the policy wording takes precedence. B) the state law takes precedence. C) the policyholder is entitled to whichever provides broader coverage. D) the policy is null and void.

B) the state law takes precedence.

Which of the following statements concerning the scheduled personal property endorsement with agreed value loss settlement is (are) true? 1.The endorsement provides open-perils ("all-risks") coverage on the scheduled property. 2.Losses under the endorsement are settled on an actual cash value basis. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Which of the following statements is (are) true concerning the home business insurance coverage endorsement? 1.It increases the coverage on business personal property at the insured residence from $2,500 to the Coverage C limit. 2.It excludes coverage for liability arising out of the home business. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Which of the following statements is (are) true with respect to the use of credit-based insurance scores as an auto insurance rating factor? 1.Insurers claim that drivers who have poor insurance scores are expected to have relatively more accidents. 2.The use of insurance scores has been banned as a rating factor in all states as it unfairly discriminates against certain groups of individuals. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Which of the following statements regarding health care expenditures in the United States is (are) true? 1.As a nation, the U.S. spends significantly more per-person on health care than most other industrialized nations. 2.Health care expenditures in the U.S. are high because everyone is covered by a health insurance plan. A) I only B) II only C) both I and II D) neither I nor II

A) I only

All of the following are covered autos under the liability section of the PAP EXCEPT A) a nonowned van which is driven by the insured on a regular basis. B) a trailer owned by the named insured. C) a borrowed auto used by the insured as a substitute for a stolen covered auto. D) a newly acquired auto which replaces a vehicle previously described in the policy.

A) a nonowned van which is driven by the insured on a regular basis.

Section II of the homeowners policy has exclusions applying to all of the following EXCEPT A) activities of the named insured's minor children. B) business activities. C) transmission of a communicable disease. D) intentional injuries

A) activities of the named insured's minor children.

All of the following are typical characteristics of individual medical expense coverage EXCEPT A) annual benefit limits. B) essential health benefits. C) deductibles. D) coinsurance.

A) annual benefit limits.

Under which type of automobile insurance arrangement are all automobile insurers in a state assigned their proportionate share of high-risk drivers based on the total volume of automobile business written in the state? A) automobile insurance plan B) unsatisfied judgment fund C) reinsurance facility D) specialty automobile plan

A) automobile insurance plan

Janet was unable to obtain auto insurance in the voluntary insurance market. She was contacted by the state insurance department and notified that XYZ Insurance would be her insurer. The mechanism used in Janet's state to provide auto insurance to high-risk drivers is a(n) A) automobile insurance plan. B) joint underwriting association. C) specialty automobile insurer. D) reinsurance facility.

A) automobile insurance plan.

Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred: —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover the other driver's medical expenses? A) bodily injury liability B) collision coverage C) medical payments coverage D) property damage liability

A) bodily injury liability

Some insurers are experimenting with the use of an electronic device that can be installed in a vehicle to track driving behavior. The insurers then use the information to help determine the appropriate auto insurance premium to charge. Such devices are called A) data recorders. B) radar detectors. C) original equipment manufacturer parts. D) thresholds

A) data recorders.

The Affordable Care Act requires all new medical expense plans to provide a comprehensive set of coverages and services. This comprehensive set of coverages and services that must be provided are called A) essential health benefits. B) dread disease benefits. C) long-term care benefits. D) respite care benefits.

A) essential health benefits.

A state law that requires individuals who have been involved in an auto accident or who have been convicted for certain vehicle-related offenses to demonstrate the ability to pay liability claims up to a specified dollar amount is called a(n) A) financial responsibility law. B) compulsory insurance law. C) unsatisfied judgment fund law. D) "no pay, no play" law.

A) financial responsibility law.

The concurrent causation exclusion in the Homeowners 3 policy specifies that: A) if two or more perils jointly cause a loss, there is no coverage if one of the perils is excluded. B) if the insured has two or more policies in force at the time of the loss, the loss is not covered. C) if the insured has two or more policies in force at the time of the loss, the loss is pro-rated between the insurers. D) if two or more perils jointly cause a loss, there is coverage as long as one of the perils is covered.

A) if two or more perils jointly cause a loss, there is no coverage if one of the perils is excluded.

Section I of the Homeowners 3 policy provides coverage for which of the following? A) loss of use B) personal liability C) disability of the homeowner D) medical payments

A) loss of use

One additional coverage under the homeowners policy makes available up to 10 percent of the Coverage A limit to cover increased repair costs after a loss in order to comply with a stricter building code. This additional coverage is called A) ordinance or law. B) reasonable repairs. C) concurrent causation. D) debris removal.

A) ordinance or law.

One provision of the Affordable Care Act is designed to benefit young adults up to age 26. This provision allows these young adults to A) remain covered under their parents' health insurance policies. B) receive a tax credit for their health insurance premium if they are unemployed. C) receive low-interest government loans to finance their health insurance. D) receive coverage under Medicare if they are not covered by a private health insurance plan.

A) remain covered under their parents' health insurance policies.

In Maryland, drivers who are unable to obtain auto insurance in the voluntary market are insured through a(n) A) state fund. B) reinsurance facility. C) joint underwriting association D) automobile insurance plan.

A) state fund.

Which of the following statements is (are) true concerning the use of an individual's credit history as an insurance rating factor? 1.Individuals with poor credit histories, as a group, generally file fewer homeowners claims than do individuals with good credit histories. 2.A poor credit history can be improved over time, allowing for the purchase of homeowners insurance at a lower premium. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements is (are) true regarding how the Homeowners 3 policy handles the peril of collapse? 1.Collapse is specifically excluded, and there are no exceptions to the exclusion. 2.Collapse that is caused by a Coverage C peril is covered. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements regarding watercraft liability under Section II of an unendorsed HO-3 policy is (are) true? 1.No coverage is available for watercraft liability. 2.Liability arising out of the use of watercraft that are under certain length and horsepower limits is covered. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements concerning coverage under the Homeowners 3 policy is true? A) If a power failure away from the insured dwelling causes a loss, the loss is covered. B) If a Coverage C peril causes a collapse, the resulting damage is covered. C) If an insured peril damages a portion of a pair or set (e.g. matching lamps or end tables), the insurer must pay the full value of the entire pair or set. D) If a discharge from a home appliance causes the home to flood, the loss is excluded.

B) If a Coverage C peril causes a collapse, the resulting damage is covered.

Which of the following statements is true regarding disability income insurance? A) The purchase of disability income insurance is not necessary if you are covered under workers compensation. B) Increasing the elimination period reduces the premium for disability income insurance. C) Disability income insurance usually replaces 100 percent of lost income. D) A uniform definition of disability appears in all disability income policies.

B) Increasing the elimination period reduces the premium for disability income insurance.

Which statement regarding Section II of an unendoresed homeowners 3 policy is true? A) Liability arising from intentional property damage caused by the insured's teenager is covered. B) Liability arising out of a home business is not covered. C) Medical expenses for the insured's injured child are covered. D) First-aid expenses for injuries suffered by guest at the home are not covered.

B) Liability arising out of a home business is not covered.

Which of the following is a general exclusion under Section I of the Homeowners 3 policy? A) Water damage caused by accidental discharge from a household appliance. B) Losses due to the failure of the insured to use all reasonable means to save and preserve property after the time of a loss. C) Losses resulting from a power failure caused by an insured peril at the residence premises. D) Losses due to a windstorm.

B) Losses due to the failure of the insured to use all reasonable means to save and preserve property after the time of a loss.

New Jersey's dollar-a-day auto insurance coverage is limited to A) elderly individuals. B) Medicaid recipients. C) drivers under age 25. D) high-risk drivers.

B) Medicaid recipients.

Which of the following statements about the coverage for medical payments to others (Coverage F) under the homeowners policy is true? A) Medical payments may be made for any resident of the named insured's household. B) Medical expenses incurred within 3 years of an accident are covered. C) Medical payments are made only if the insured is not legally liable. D) Covered medical expenses are limited to emergency room charges.

B) Medical expenses incurred within 3 years of an accident are covered.

All of the following losses are excluded under Part D (coverage for damage to your auto) of an unendorsed PAP EXCEPT A) vandals damaged a portable cell phone kept in the car. B) theft of a compact disc player which was permanently installed in the auto. C) damage caused to a car's engine because the named insured never changed the oil. D) destruction of a radar detector which overheated and caught on fire.

B) theft of a compact disc player which was permanently installed in the auto.

A dwelling with a replacement cost of $150,000 was insured under a Homeowners 3 policy for $100,000 at the time the roof was destroyed by a windstorm. The actual cash value of the loss was $9,000, but it will cost $12,000 to replace the roof. Ignoring any deductible, what will the insurer pay to settle this loss? A) $8,000 B) $9,000 C) $10,000 D) $12,000

C) $10,000

David has a Homeowners 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 actual cash value of $10,000 is destroyed in a fire? A) $10,000 B) $12,000 C) $14,000 D) $16,000

C) $14,000

All of the following are additional coverages under Section I of the Homeowners 3 policy EXCEPT A) the reasonable expenses of removing debris after an insured loss. B) fire department service charges for which the insured is liable by contract or agreement. C) damage to trees and shrubs caused by a windstorm. D) losses incurred from the unauthorized use of a stolen credit card.

C) damage to trees and shrubs caused by a windstorm.

A car damaged in an auto accident may have reduced market or resale value after it is repaired. Some insureds have sought to recover this reduction in market or resale value. This loss in value is called A) gap coverage. B) betterment. C) diminution. D) subrogation.

C) diminution.

The residual market for auto insurance is designed to provide insurance to A) superior risks who qualify for substantial discounts. B) owners of vintage/antique autos where the replacement cost far exceeds the actual cash value. C) drivers who are unable to obtain coverage in the standard market. D) businesses that need to insure a fleet of vehicles under a single policy.

C) drivers who are unable to obtain coverage in the standard market.

Rob purchased a Personal Auto Policy (PAP) with collision and other-than-collision coverage. Which of the following losses would be covered under his policy? A) Rob wrecked his car while using it as a taxi cab. B) Thieves took Rob's radar detector from his car. C) A flash flood washed Rob's car off the road and damaged it. D) The new tires Rob had on the car were defective and wore out after 2 months.

C) A flash flood washed Rob's car off the road and damaged it.

Which of the following is considered to be a collision loss under Part D (coverage for damage to your auto) of the PAP? A) The covered auto was damaged when the car hit a deer. B) The covered auto is vandalized by a thief after it is stolen. C) The covered auto is damaged when it slid off an icy road and hit a fence. D) The covered auto is damaged by a fire after the engine overheated.

C) The covered auto is damaged when it slid off an icy road and hit a fence.

Which of the following statements about Coverage E: Personal Liability under the homeowners 3 policy is true? A) Losses attributable to personal injury are covered. B) The liability limit stated in the policy is an aggregate limit for the policy period. C) The insured must be legally liable for insurer to pay damages. D) Bodily injury liability only applies to injuries that occur at the insured dwelling.

C) The insured must be legally liable for insurer to pay damages.

All of the following statements about the termination provisions of the PAP are true EXCEPT A) The insured can cancel the policy for any reason. B) The insurer can cancel a newly-written policy if it has been in force for fewer than 60 days. C) The insurer can cancel the policy after it has been in force for 60 days only if the insured has three or more traffic violations. D) The insurer can refuse to renew the policy at its annual anniversary date as long as proper notice is given prior to the end of the policy period.

C) The insurer can cancel the policy after it has been in force for 60 days only if the insured has three or more traffic violations

Which of the following statements about high deductible health insurance plans is (are) true? 1.Coverage under a high deductible health plan is necessary to establish a qualified health savings account (HSA). 2.High deductible health plans provide a maximum limit on annual out-of-pocket expenses. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Which of the following statements about reinsurance facilities for insuring high-risk drivers is (are) true? 1.Underwriting losses in the reinsurance facility are shared by all auto insurers in the state. 2.An insurer must accept all applicants for insurance, but the insurer has the option of placing high-risk drivers in the reinsurance pool. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Which of the following statements about the liability limits of the PAP is (are) true? 1.The policy can be written with split limits of liability. 2.Prejudgment interest is considered part of the damage award and is subject to the policy limit of liability. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Which of the following statements about the personal property coverage (Coverage C) of the Homeowners 3 policy is (are) true? 1.There are special limits of liability that apply to certain types of personal property. 2.The full amount of coverage applies only if the property is permanently located at any residence of the insured. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Which of the following statements concerning individual medical expense insurance is (are) correct? 1.Once the deductible is satisfied, no additional deductible is payable during the calendar year. 2.Family deductibles are substantially higher than individual deductibles. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Which of the following statements is (are) true concerning benefit payments under long-term care insurance? 1.Expense-incurred policies pay for actual charges up to a specified daily limit. 2.Per diem policies pay a specified daily benefit regardless of the charges incurred. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

The homeowners policy excludes a loss brought about by two or more perils where one peril is covered under the policy and the other perils are excluded. This situation is called A) ordinance or law. B) proximate cause. C) concurrent causation. D) nullification.

C) concurrent causation.

Which of the following losses to a dwelling would be covered under an unendorsed Homeowners 3 policy? A) smoke damage resulting from agricultural operations of a neighboring farmer B) damage to the structure caused by a flash flood C) damage to the structure caused by the weight of heavy snow on the roof D) damage to a floor caused by water backing up through a sewer pipe

C) damage to the structure caused by the weight of heavy snow on the roof

The Affordable Care Act has a provision that expands a public assistance program designed to make health coverage available to low-income individuals by increasing the maximum amount of income that can be earned and still qualify for benefits. As a result, millions of individuals are eligible for coverage under this program. This public assistance program is called A) Medicare. B) Health Maintenance Organization. C) Health Insurance Marketplace Exchange. D) Medicaid.

D) Medicaid.

Dennis was involved in an accident. He believes the damage to his auto is $7,000. His insurer believes the damage is only $3,500. Which PAP provision is designed to handle disputes between the insurer and the insured over the amount of the loss? A) other insurance provision B) agreed amount endorsement C) coinsurance provision D) appraisal provision

D) appraisal provision

A few states have dual automobile insurance systems. A motorist can pay a higher premium and retain the right to sue under the tort system, or pay a lower premium and be covered under the state's no-fault law. This dual system is called a A) pure no-fault plan. B) modified no-fault plan. C) "no pay, no play" law. D) choice no-fault plan.

D) choice no-fault plan

The effect of an annual out-of-pocket limit in an individual medical expense policy is to A) limit the lifetime benefits payable under the policy. B) put a cap on annual benefits the insurer will pay. C) prevent the insured from receiving duplicate benefits if medical expenses are also covered under workers compensation insurance. D) cover 100 percent of eligible medical expenses after an insured has incurred a specified amount of annual out-of-pocket expenses.

D) cover 100 percent of eligible medical expenses after an insured has incurred a specified amount of annual out-of-pocket expenses

Which of the following types of water damage is covered under an unendorsed Homeowners 3 policy? A) damage from a flood caused by torrential rain B) damage from water backing up through a drain C) damage from water below the surface of the ground that seeps into a basement D) damage from water that overflows from a malfunctioning washing machine

D) damage from water that overflows from a malfunctioning washing machine

A number of benefits are payable under no-fault plans. Under one provision, benefits are paid for tasks normally performed by the insured, including such things as lawn care, housework, and home repairs. These tasks are called A) home health care services. B) hospice services. C) activities of daily living. D) essential services expenses.

D) essential services expenses.

All of the following are considered insured locations for medical payments to others (Coverage F) under a homeowners 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.

All of the following losses are subject to special limits of liability under the Homeowners 3 policy EXCEPT A) theft of firearms. B) destruction by fire of property used for business purposes. C) storm damage to a boat at a marina. D) furniture destroyed by a fire.

D) furniture destroyed by a fire.

A few states have enacted laws to make minimum amounts of liability insurance available at reduced rates to individuals who cannot afford regular insurance or who have limited financial assets to protect. The coverage made available through such a plan is called A) probationary insurance. B) uninsured motorists insurance. C) no-fault auto insurance. D) low-cost auto insurance

D) low-cost auto insurance

Mike and Susan built their "dream home." They insured their home for its full replacement cost. They also added an endorsement that will pay up to an additional 20 percent of the policy limit in case the cost of rebuilding the home after a loss is greater than the policy limit. The basis under which Mike and Susan insured their home is called A) actual cash value. B) valued policy coverage. C) extended replacement cost. D) guaranteed replacement cost.

C) extended replacement cost.

The Affordable Care Act requires that most U.S. citizens and legal residents have qualifying health insurance or pay a financial penalty. This provision of the Affordable Care Act is known as the A) Health Insurance Marketplace option. B) public option. C) individual mandate. D) premium subsidy option.

C) individual mandate.

In which of the following situations would medical payments be paid under an unendorsed PAP? A) injuries incurred while riding a motorcycle B) injuries incurred while an auto is being used without the presumption that permission would have been granted to use the auto C) injuries incurred in an auto while it is used in a share-the-expense car pool D) injuries incurred during the course of employment if workers compensation benefits are available

C) injuries incurred in an auto while it is used in a share-the-expense car pool

Which of the following losses would be covered under the medical payments coverage of the Homeowners 3 policy? A) injuries to another person arising out of the insured's negligent operation of an automobile B) medical payments resulting from the transmission of a communicable disease C) injury to a resident employee at the insured's home D) workers compensation medical payments

C) injury to a resident employee at the insured's home

A credit-based score that insurers claim is highly predictive of future claims costs is an individual's A) combined ratio. B) loss ratio. C) insurance score. D) underwriting score.

C) insurance score.

The purpose of the Miscellaneous-Type Vehicle Endorsement to the PAP is to A) add coverage for newly-acquired autos. B) provide coverage for when the insured is using someone else's auto with the permission of the owner. C) insure motorcycles, mopeds, motor scooters, and similar vehicles. D) provide coverage for when the insured is using someone else's auto without the permission of the owner.

C) insure motorcycles, mopeds, motor scooters, and similar vehicles.

If the insurer broadens coverage during the policy period without an increase in premium, and the broadened coverage is not part of a general program revision, the insured is entitled to the broadened coverage under which policy provision? A) waiver of policy provisions B) subrogation C) liberalization clause D) pair or set clause

C) liberalization clause

Kelly was hit by a car while she was walking to the park. She incurred $750 in medical costs at a hospital emergency room. Kelly has coverage for this charge under which of her Personal Auto Policy (PAP) coverages? A) bodily injury liability B) other-than collision C) medical payments D) collision

C) medical payments

Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred. —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover Ken's medical expenses? A) bodily injury liability B) collision coverage C) medical payments coverage D) property damage liability

C) medical payments coverage

All of the following persons are insured for personal liability under the homeowners 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.

Robert purchased an unendorsed Homeowners 3 policy. He is concerned that if his personal property is destroyed, the insurer will take depreciation into consideration when determining the loss settlement and will pay him less than the amount needed to purchase new property. Which endorsement can Robert add to his Homeowners 3 policy to address this concern? A) inflation guard endorsement B) personal injury endorsement C) personal property replacement cost endorsement D) earthquake endorsement

C) personal property replacement cost endorsement

Beth's disability income insurance policy provides benefits for accidental death, dismemberment, and loss of sight. The maximum amount payable under this benefit is known as the A) face value. B) cash value. C) principal sum. D) monthly benefit.

C) principal sum.

All of the following are major rating factors for determining private passenger automobile insurance premiums EXCEPT A) gender. B) age. C) race. D) marital status.

C) race.

Prior to passage of the Affordable Care Act, insurers could go back to the date a health insurance policy became effective and render the policy void due to a clerical error. This practice, which is prohibited under the Affordable Care Act except in cases of fraud or intentional misrepresentation of a material fact, is called A) estoppel. B) retention. C) rescission. D) reformation.

C) rescission.

The term used to describe plans in which automobile insurers participate to make insurance available to drivers unable to obtain coverage in the standard market is the A) foreign market. B) fair market. C) residual (shared) market. D) high-premium market.

C) residual (shared) market.

The purpose of the appraisal clause in the Homeowners 3 policy is to A) determine the appropriate amount of homeowners insurance to purchase. B) set a value on the home for estate purposes if the homeowner dies. C) settle valuation disputes between the insurer and insured after a loss has occurred. D) determine a mortgage lender's insurable interest after a loss has occurred.

C) settle valuation disputes between the insurer and insured after a loss has occurred.

Liability arising out of which of the following is covered under the personal injury endorsement to the homeowners policy? A) bodily injury B) property damage C) slander D) professional liability

C) slander

Dirk required surgery for a kidney impairment. His total bill for medical services was $50,000. Dirk has a medical expense policy with a $1,000 calendar-year deductible and a $5,000 annual out-of-pocket limit. His coinsurance percentage is 20 percent. The out-of-pocket limit applies to coinsurance only. Assuming this surgery and hospitalization were the first medical care that Dirk received during the year and that all of the hospital services were eligible for coverage under the policy, how much of the $50,000 bill will the insurer pay? A) $39,000 B) $39,200 C) $40,000 D) $44,000

D) $44,000

Which of the following statements is true regarding unsatisfied judgment funds? A) An accident victim can choose to collect from the negligent driver or from the fund. B) The negligent driver is relieved of legal responsibility when the fund makes a payment to the accident victim. C) The maximum amount an individual can collect from the fund is usually much more than the minimum liability limits required by the state. D) An accident victim must have exhausted other means of recovery before collecting from the fund.

D) An accident victim must have exhausted other means of recovery before collecting from the fund.

Shauna purchased a condominium unit. Which homeowners policy is specially designed for condominium unit owners? A) HO-2 B) HO-3 C) HO-4 D) HO-6

D) HO-6

One provision of the Affordable Care Act provides creates in each state a transparent and competitive insurance marketplace where individuals and small firms can purchase affordable and qualified health coverage. This marketplace is called a A) Medicaid plan. B) Medicare plan. C) Health Maintenance Organization (HMO). D) Health Insurance Marketplace.

D) Health Insurance Marketplace.

Jose and Maria would like "open-perils" coverage on their home and their personal property. Which unendorsed homeowners form provides this coverage? A) Homeowners 2 B) Homeowners 3 C) Homeowners 4 D) Homeowners 5

D) Homeowners 5

Which of the following statements is true regarding the Homeowners 3 policy and identity theft? A) Identity theft is covered under Coverage D—Loss of Use. B) Identity theft is covered under Coverage C—Personal Property. C) Identity theft is covered under Coverage E—Personal Liability. D) Identity theft is covered by adding an endorsement.

D) Identity theft is covered by adding an endorsement.

All of the following statements about conditions under a Homeowners 3 policy are true EXCEPT A) If an insurer broadens coverage without an additional premium during the policy period, the broadened coverage applies immediately to the present policy. B) A waiver or change in any policy provision must be approved in writing by the insurer to be valid. C) The insurer must give written consent for an assignment of the policy to be valid. D) If the named insured dies, coverage automatically ceases with respect to any property of the deceased.

D) If the named insured dies, coverage automatically ceases with respect to any property of the deceased.

John has an auto which is covered for collision losses subject to a $250 deductible. Kate's auto also has collision coverage but her deductible is $500. Which of the following statements describes how a $2,000 collision loss will be paid if it occurs when John borrows Kate's car because his car is in the shop for repairs? A) John's policy will pay $1,500, and Kate's policy will pay nothing. B) John's policy will pay $1,750, and Kate's policy will pay nothing. C) Kate's policy will pay $1,750, and John's policy will pay nothing. D) Kate's policy will pay $1,500, and John's policy will pay $250.

D) Kate's policy will pay $1,500, and John's policy will pay $250.

Glenda insured her home for its full replacement cost under an unendorsed Homeowners 3 policy. Which of the following statements is true? A) The dwelling and other structures are covered on a named-perils basis. B) Losses to personal property are settled on a replacement cost basis. C) The personal property is covered on an open-perils basis. D) Losses to the dwelling and other structures are settled on a replacement cost basis.

D) Losses to the dwelling and other structures are settled on a replacement cost basis.

Which of the following statements about individual disability income policies is true? A) Benefits are typically paid only for disabilities resulting from sickness. B) Benefits paid for partial disabilities are usually greater than benefits paid by the same policy for total disabilities. C) Most policies pay a benefit equal to 100 percent of the disabled person's lost income. D) Many policies provide or make available a residual disability benefit for persons who are able to work but at a reduced income.

D) Many policies provide or make available a residual disability benefit for persons who are able to work but at a reduced income.

Betty's personal property is insured for $100,000 under her Homeowners 3 policy. If she usually keeps some personal property at a mountain cabin that she owns, how much coverage for this property is available under her homeowners policy? A) $10,000 B) $20,000 C) $40,000 D) $50,000

A) $10,000

Sarah purchased a Personal Auto Policy with liability limits of 50/100/25. Sarah ran a stop sign and hit a van. The van sustained $15,000 in damages. The following bodily injuries were suffered by passengers in the van: Passenger #1, $15,000; Passenger #2, $60,000; and Passenger #3, $10,000. Sarah sustained $5,000 in medical expenses, and Sarah's car sustained $10,000 in damages. How much will Sarah's insurer pay under Part A: Liability Coverage? A) $90,000 B) $100,000 C) $115,000 D) $125,000

A) $90,000

Amber believes that her auto insurance premium is too high. Which of the following would most likely lower Amber's premium? A) Amber could increase her physical damage deductible. B) Amber could move from the rural area where she lives to an urban or suburban area. C) Amber could increase the amount of liability insurance that she carries. D) Amber could add "other-than-collision loss" coverage to her policy.

A) Amber could increase her physical damage deductible.

Which of the following statements about uninsured motorists coverage is true? A) An innocent motorist must establish that the uninsured motorist is legally liable. B) The amount of coverage in most states must be at least $300,000. C) Property damage is covered in all states but bodily injury is not covered in all states. D) The coverage is very expensive and beyond the affordability of all but wealthy insureds.

A) An innocent motorist must establish that the uninsured motorist is legally liable.

Defects of financial responsibility laws include which of the following? 1.Accident victims may not be fully compensated for their injuries. 2.They apply only to property damage losses, not to bodily injury claims. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Disadvantages of automobile insurance plans include which of the following? 1.High premiums may cause many high-risk drivers to go uninsured. 2.Large underwriting profits have resulted in high-risk drivers subsidizing the cost of insurance for good drivers in the voluntary markets. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Duties of an insured after a collision loss covered under the PAP include which of the following? Take reasonable steps to protect the vehicle from further damage. Admit fault if the insured believes he or she caused the collision. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Tony has an unendorsed Personal Auto Policy which provides medical payments coverage. Under which of the following circumstances would the injured person be eligible for benefits under Tony's policy? 1.A friend in the car is injured while Tony is driving a covered auto. 2.A passenger on a motorcycle driven by Tony is injured when Tony hit another vehicle. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Which of the following statements about an earthquake endorsement for a homeowners policy is (are) true? 1.The endorsement also covers landslides and volcanic eruptions. 2.The coverage for earthquakes is written without a deductible. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Which of the following statements about endorsements to the homeowners policy is (are) true? 1.The purpose of the inflation guard endorsement is to help prevent home owners from being under-insured. 2.The purpose of the watercraft endorsement is to provide coverage for watercraft when they are used outside the United States. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Which of the following statements about joint underwriting associations for insuring high-risk drivers is (are) true? 1.Underwriting losses are proportionately shared by all auto insurers based on premiums written in the state. 2.Each company participating in a joint underwriting association sets it own rates. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Which of the following statements about the payment of defense costs by the PAP is (are) true? 1.They are paid in addition to the policy limits. 2.They are payable even after the limit of liability is exhausted. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Which of the following statements about unsatisfied judgment funds is (are) true? 1.An accident victim must obtain a judgment against the motorist who caused an accident and must show the judgment cannot be collected. 2.The major disadvantage is that the negligent uninsured motorist is relieved of legal liability. A) I only B) II only C) both I and II D) neither I nor II

A) I only

Which of the following statements about coverage for loss of use (Coverage D) under the Homeowners 3 policy is true? A) If a covered loss makes the home unfit for living, the insurer pays additional living expenses the insured may incur as a result of the loss. B) The duration of payments for additional living expenses is limited to a maximum of 30 days. C) There is no coverage for loss of rent if an insured peril makes the part of the premises rented to others uninhabitable. D) There is coverage for loss of business income if an insured peril forces a home business to be terminated.

A) If a covered loss makes the home unfit for living, the insurer pays additional living expenses the insured may incur as a result of the loss.

Which of the following statements about the Homeowners 6 (unit-owners form) policy is true? A) It includes personal liability coverage. B) It covers personal property on an open-perils basis. C) It covers the dwelling on an open-perils basis. D) It is designed for tenants who rent an apartment or a home.

A) It includes personal liability coverage.

Arguments often used against no-fault automobile insurance laws include all of the following EXCEPT A) It is often difficult to determine which driver was negligent when a multiple-vehicle accident occurs. B) Many injured persons will not be compensated for their full losses because payments for pain and suffering will be eliminated. C) The defects of the negligence system are exaggerated, and the system needs only to be reformed. D) Claims of efficiency and premium saving are exaggerated, and automobile insurance premiums might actually increase.

A) It is often difficult to determine which driver was negligent when a multiple-vehicle accident occurs.

Which of the following statements regarding Section II coverage under the Homeowners 3 policy is true? A) Medical payments to others are covered regardless of whether the insured is legally liable. B) Legal defense costs incurred by the insurer to defend the insured reduce the per-occurrence limit of liability available. C) The insurer is not required to defend the insured against a groundless, false, or fraudulent lawsuit. D) Any amount paid under medical payments coverage reduces the personal liability limit available for the same claim.

A) Medical payments to others are covered regardless of whether the insured is legally liable.

Some managed care plans use physicians, hospitals, and health care organizations that agree to make medical services available to insureds at discounted fees. Insureds are not required to use these entities, but if they do, health care costs are less than if these entities are not used. Such health care entities are called A) Preferred Provider Organizations (PPOs). B) Health Maintenance Organizations (HMOs). C) Blue Cross/Blue Shield Plans. D) Health savings accounts (HSAs

A) Preferred Provider Organizations (PPOs).

All of the following statements about long-term care insurance are true EXCEPT A) Premiums can be reduced by electing shorter elimination periods. B) A common benefits trigger is the inability to perform a certain number of activities of daily living. C) Protection against inflation is usually made available as an optional benefit. D) Policies currently sold are guaranteed renewable.

A) Premiums can be reduced by electing shorter elimination periods.

Which of the following statements about the coverage for other structures (Coverage B) under the Homeowners 3 policy is true? A) The coverage applies to a detached garage or tool shed on the residence premises. B) Structures attached to the dwelling by a fence or utility line are considered to be part of the dwelling rather than other structures. C) Coverage applies even if the other structure is used for business purposes. D) There is no coverage for a private garage if it is rented to a tenant of the dwelling.

A) The coverage applies to a detached garage or tool shed on the residence premises.

Which of the following losses would be covered under Section II of an unendorsed Homeowners 3 policy? A) The homeowner accidentally dropped a bowling ball, injuring another bowler's foot. B) The homeowner'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 homeowner's dog bit the homeowner's daughter.

A) The homeowner accidentally dropped a bowling ball, injuring another bowler's foot.

Which of the following statements about covered perils under the personal property coverage (Coverage C) of the Homeowners 3 policy is true? A) Theft losses to boats and watercraft are covered only if they occur at the insured's residence. B) Damage from an explosion is covered only if the explosion is the result of fire or lightning. C) Property damage from vehicles is covered only if it is caused by the insured. D) Smoke damage is covered only if it arises from agricultural or industrial operations.

A) Theft losses to boats and watercraft are covered only if they occur at the insured's residence.

Which of the following statements about the additional coverages under Section I of the Homeowners 3 policy is true? A) There is coverage for the reasonable cost incurred to protect property from further damage after a covered loss occurs. B) There is unlimited coverage for furnishings of the landlord in an apartment on the premises that is rented to others. C) Property removed from the premises because it is endangered by an insured peril is covered on a named-perils basis while it is outside the insured premises. D) There is no coverage for the increased cost of construction or repair to comply with an ordinance or law

A) There is coverage for the reasonable cost incurred to protect property from further damage after a covered loss occurs.

"No pay, no play" laws have which of the following characteristics? A) Uninsured motorists are prevented from suing for noneconomic damages. B) Recovery by accident victims is limited to the amount of liability coverage that they have purchased. C) Driving privileges are automatically terminated if the vehicle operator is stopped by the police and does not have liability insurance. D) They require auto insurance purchasers to subsidize state unsatisfied judgment funds.

A) Uninsured motorists are prevented from suing for noneconomic damages.

Which of the following is a covered person under the medical payments coverage of the PAP? A) a family member of the named insured if struck by an auto while crossing the street B) a pedestrian struck by the named insured's auto C) the named insured while she is operating her car as a taxi D) a carjacker who is involved in an accident after stealing the insured's car

A) a family member of the named insured if struck by an auto while crossing the street

The major difference between the dwelling coverage (Part A) of the Homeowners 2 (Broad From) policy and the Homeowners 3 (Special Form) policy is that A) the HO-3 provides open perils ("all risks") coverage and the HO-2 provides named-perils coverage. B) the HO-3 provides actual cash value coverage, the HO-2 provides replacement cost coverage. C) the HO-3 is always written without a deductible, the HO-2 always written with a deductible. D) the HO-3 can be used for any type of construction, the HO-2 is limited to wood frame homes.

A) the HO-3 provides open perils ("all risks") coverage and the HO-2 provides named-perils coverage.

All of the following situations are excluded from coverage under Section II of the homeowners policy EXCEPT A) the rental of a spare bedroom which is used by the tenant as an office. B) the use of a rented airplane to take a vacation. C) the ownership of a ten-unit apartment house as an investment. D) the performance of professional services by the insured at the residence premises.

A) the rental of a spare bedroom which is used by the tenant as an office.

All of the following are duties of the mortgagee under the standard mortgage clause EXCEPT A) to reimburse the insurer for any loss payments. B) to notify the insurer of any change in ownership of the property of which the mortgagee is aware. C) to provide a proof of loss form if the insured fails to do so. D) to pay the premium if the insured fails to do so.

A) to reimburse the insurer for any loss payments.

The multi-car discount is based on the assumption that A) two cars owned by the same person will not be driven as frequently as one car. B) multiple vehicle owners are safer drivers. C) owners of more than one vehicle are more likely to be financially responsible. D) lower liability limits are needed if there are multiple autos insured.

A) two cars owned by the same person will not be driven as frequently as one car.

If the value of a vehicle is increased after repairs, such as repainting an entire auto when only one fender or door is damaged, the insurer will not pay for the increase in value. Another name for the increase in value is A) diminution. B) betterment. C) appraisal. D) subrogation.

B) betterment.

Some states have enacted laws which prohibit uninsured drivers from suing a negligent driver for noneconomic damages, such as pain and suffering. These laws are called A) comparative negligence laws. B) "no pay, no play" laws. C) financial responsibility laws. D) unsatisfied judgment laws.

B) "no pay, no play" laws.

Darla purchased an unendorsed Homeowners 3 policy. While the policy was in force, a fire occurred that destroyed a living room set. The living room set cost $4,000 new, but was 25 percent depreciated when the loss occurred. Replacement furniture will cost $4,400. Assuming no deductible, how much will Darla receive from her insurer? A) $3,000 B) $3,300 C) $3,400 D) $4,400

B) $3,300

Kristen has an individual medical expense policy with a $1,000 calendar-year deductible, a $5,000 annual out-of-pocket limit, and a 20 percent coinsurance requirement. Kristen was hospitalized for a surgical procedure in March, her first health care treatment received during the year. The total bill was $20,000. Considering the deductible and coinsurance, how much of this amount must Kristen pay? A) $4,400 B) $4,800 C) $5,000 D) $5,100

B) $4,800

All of the following statements about the cancellation of a Homeowners 3 policy are true EXCEPT A) The insurer may cancel a new policy for any reason if it has been in force for less than 60 days and is not a renewal policy. B) At least 100 days' notice of cancellation must be given if an insurer cancels a policy for nonpayment of premium. C) A policy written for longer than 1 year can be cancelled for any reason on the anniversary date by giving the insured at least 30 days' notice of cancellation. D) After a policy has been in force for at least 60 days, it can be cancelled by the insurer if the risk has increased substantially since the policy was issued.

B) At least 100 days' notice of cancellation must be given if an insurer cancels a policy for nonpayment of premium

Which of the following statements concerning the coverage of collapse of the dwelling under an unendorsed Homeowners 3 policy is true? A) There is no coverage for collapse, regardless of the cause of the collapse. B) Collapse is covered if it is caused by one of the Coverage C perils. C) If collapse is caused by an earthquake, the loss is covered. D) There is no coverage for collapse unless the proper endorsement is added to the policy.

B) Collapse is covered if it is caused by one of the Coverage C perils.

Which of the following statements about the personal liability coverage (Coverage E) of an unendorsed homeowners policy is true? A) Coverage is written on an accident basis. B) Coverage is provided for bodily injury liability. C) Coverage is provided for business and professional liability. D) Coverage is provided for personal injury liability.

B) Coverage is provided for bodily injury liability.

Jenny purchased a Personal Auto Policy (PAP) that included property damage liability, collision coverage, medical payments coverage, and other-than-collision coverage. Jenny had too much alcohol to drink at a graduation party. While driving home from the party, Jenny ran off the road and hit a tree. Police responded to the accident, and Jenny was arrested for driving under the influence of alcohol. Which of the following statements is true regarding the damage to Jenny's car? A) Damage to the car is covered under Jenny's property damage liability coverage. B) Damage to the car is covered under Jenny's collision coverage. C) Damage to the car is covered under Jenny's other-than-collision loss coverage. D) There is no coverage as Jenny was intoxicated at the time of the accident.

B) Damage to the car is covered under Jenny's collision coverage.

Dan picked up his friend Rodney to drive to their softball game. Both Dan and Rodney have a Personal Auto Policy (PAP) with $5,000 of medical payments coverage. Dan hit a parked car, and Rodney was injured, incurring $9,000 of medical expenses. How will this claim be settled under the other insurance provision of the PAP? A) Both insurers will pay $4,500. B) Dan's insurer will pay $5,000 and Rodney's insurer will pay $4,000. C) Dan's insurer will pay $4,000 and Rodney's insurer will pay $5,000. D) Dan's insurer will pay $3,000, Rodney's insurer will pay $3,000, and Rodney must pay $3,000 out of his own pocket.

B) Dan's insurer will pay $5,000 and Rodney's insurer will pay $4,000.

All of the following statements about the tax treatment of Health Savings Accounts (HSAs) are true EXCEPT A) Contributions to a qualified HSA are tax deductible. B) Distributions from a qualified HSA used to fund medical expenses are taxable income. C) Investment income in a qualified HSA accumulates income tax free. D) Distributions from a qualified HSA prior to age 65 for nonmedical purposes are subject to a 10 percent penalty tax.

B) Distributions from a qualified HSA used to fund medical expenses are taxable income.

Which of the following statements about the replacement cost provision of the Homeowners 3 policy is true? A) It applies to personal property losses only. B) Except for small losses, the insured must repair or replace the damaged property in order to receive full replacement cost. C) The insured is required to carry an amount of insurance equal to 100 percent of the replacement value of the insured property. D) Loss settlements are equal to 50 percent of the value of the loss if the insured is carrying less than the required amount of insurance.

B) Except for small losses, the insured must repair or replace the damaged property in order to receive full replacement cost.

Which homeowners policy is designed for the tenants of a rented premises? A) Homeowners 2 B) Homeowners 4 C) Homeowners 6 D) Homeowners 8

B) Homeowners 4

Which of the following persons is (are) insured under the uninsured motorists coverage of the PAP? 1.A pedestrian struck by a covered auto if he or she has no insurance to pay medical expenses 2.The spouse of a named insured who is killed by an uninsured motorist A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following situations would be covered under the liability section of the PAP? 1.A mechanic is sued by a pedestrian who is injured when the mechanic has an accident while road testing the insured's auto. 2.The daughter of the named insured is sued after she has an accident when a new friend she just met at a campus hangout lets her drive his car. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements about automobile insurers that specialize in insuring high-risk motorists with poor driving records is (are) true? 1.The actual premium paid by an applicant is set by the federal government and is independent of an applicant's driving record. 2.The coverages available may be more limited than those written by insurers in the standard market. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements about disability and disability income insurance is (are) true? 1.Most disability income policies replace 100 percent of gross earnings. 2.The probability of being disabled before age 65 is much higher than commonly believed. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements about eligibility requirements for homeowners insurance is (are) true? 1.A contract can be written on a twenty-unit apartment complex as long as the tenants are families. 2.Separate forms are available for renters and condominium owners. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements about eligibility requirements for qualified Health Savings Accounts (HSAs) is (are) true? 1.Only individuals who are eligible for Medicare benefits can establish a qualified HSA. 2.Applicants must be covered by a high deductible health plan and not be covered by any other comprehensive health plan to establish a qualified HSA. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements about individual disability income policies that use a two-part definition of total disability is (are) true? 1.During the initial period of disability, the insured must be unable to perform the duties of any gainful occupation. 2.After the initial period of disability, the insured must be unable to perform the duties of any occupation for which he or she is reasonably fitted by education, training, and experience. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements about long-term care insurance is (are) true? Long-term care insurance is inexpensive, especially if purchased at older ages. Purchasers have a choice of daily benefits and benefit periods. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements about the Miscellaneous-Type Vehicle Endorsement to the PAP is (are) true? 1.It provides bodily injury liability coverage for any vehicle rented by the insured. 2.It can be added to PAP to insurance motorcycles and motor scooters. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements about the appraisal clause in the Homeowners 3 policy is (are) true? 1.It is used to determine a value for personal property when the policy is issued. 2.It is used to help settle disputes over the amount of a loss after a loss has occurred. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements about the insurer's obligation to provide a legal defense under the personal liability coverage (Coverage E) of the homeowners policy is (are) true? 1.The insurer agrees to defend the insured only if the suit is not groundless, false, or fraudulent. 2.The insurer's obligation to defend the insured ceases after the amount paid for damages from an occurrence equals the policy limit. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements about the scheduled personal property endorsement to the homeowners policy is (are) true? 1.It provides named-perils coverage on scheduled items. 2.It can be used to insure valuable items such as jewelry, silverware, and coin collections. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Which of the following statements concerning the collision damage waiver when renting an auto is true? 1.It relieves the renter from legal liability to third parties arising out of operation of the rented car. 2.It relieves the renter from legal liability for the vehicle if it is damaged or stolen. A) I only B) II only C) both I and II D) neither I nor II

B) II only

Ellen believes the value of the loss to her home is $30,000. The insurer has offered $18,000 to settle the loss. If Ellen and the insurer cannot agree on the value of the loss, which homeowners policy provision specifies how this dispute will be settled? A) insurer's option B) appraisal clause C) loss payment clause D) mortgage clause

B) appraisal clause

Which of the following statements about health savings accounts (HSAs) is true? A) There are no limits to annual contributions that an individual may make to his or her HSA. B) Once an individual has reached age 65 or is covered by Medicare, no additional contributions to the HSA may be made. C) The health insurance plan covering the HSA account beneficiary is not permitted to use a deductible. D) HSAs offer no tax benefits for the individual who establishes the account.

B) Once an individual has reached age 65 or is covered by Medicare, no additional contributions to the HSA may be made.

Which of the following statements about the additional coverage for damage to property of others in Section II of the homeowners policy is true? A) The maximum amount of coverage is $25,000 per occurrence. B) Payments are made on the basis of the replacement cost of the damaged property. C) There is coverage for property damage arising out of a business engaged in on a full-time basis by an insured. D) There is coverage for intentional property damage by any insured who is a teenager.

B) Payments are made on the basis of the replacement cost of the damaged property.

Which of the following statements about covered perils and loss settlement under an unendorsed Homeowners 3 policy is true? A) The dwelling is covered on a named-perils basis. B) Personal property losses are settled on an actual cash value basis. C) Losses to the dwelling are always settled on an actual cash value basis. D) Personal property is covered on an open-perils basis.

B) Personal property losses are settled on an actual cash value basis.

Which of the following statements about the uninsured motorists coverage of the PAP is true? A) The coverage usually applies only to property damage. B) The coverage applies only if the uninsured motorist is legally liable. C) Unless higher amounts are purchased, the maximum benefit is normally limited to $1,000. D) A covered person's only recourse is to sue the insurer if there is a disagreement over the amount of damages.

B) The coverage applies only if the uninsured motorist is legally liable

Which of the following situations would be covered by the liability section of an unendorsed PAP if the insured is legally liable? A) The insured injures a pedestrian while operating a friend's new motorcycle. B) The insured backs into and damages the garage door of his rented house. C) The insured intentionally runs into another motorist's car after the driver cut in front of him. D) The insured damages a parked car while driving a dump truck for his employer.

B) The insured backs into and damages the garage door of his rented house.

Which of the following statements is true about uninsured motorists coverage under the Personal Auto Policy? A) The benefits are paid without regard to fault. B) The insured collects from his or her own insurer, and the insurer can recoup the loss payment from the other driver. C) Uninsured motorists benefits are limited to the medical expenses of the insured. D) Subrogation is never used when uninsured motorists benefits are paid.

B) The insured collects from his or her own insurer, and the insurer can recoup the loss payment from the other driver.

Michelle had four matching end tables in her home. A fire damaged the home, destroying two of the end tables. Michelle's home was covered by an unendorsed Homeowners 3 policy. Which of the following is true with regard to the settlement for the end tables in this case? A) Loss to a pair or set is excluded under the policy. B) The insurer will pay the difference in actual cash value of the property before and after the loss. C) The insurer will pay the replacement cost of the loss. D) If a partial loss to a pair or set occurs, the insurer is liable for replacement of the entire pair or set.

B) The insurer will pay the difference in actual cash value of the property before and after the loss.

Polly purchased a Homeowners 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. Which of the following statements is true? A) The medical expenses Polly's son are covered under the policy. B) The medical expenses of the neighbor's child are covered under the policy. C) If Polly's son sues Polly and wins, the insurer will pay the damage award. D) If the neighbor sues Polly, Polly must pay for the lawyer who defends the suit.

B) The medical expenses of the neighbor's child are covered under the policy.

Which statement is true regarding the advanced premium tax credits for individuals and families under the Affordable Care Act? A) The tax credit is the same flat amount for individuals and families. B) The tax credit is based on income and is designed to limit the amount spent on health insurance premiums to make the insurance affordable. C) The tax credit is only available to high-income individuals and families. D) The tax credit is an expenses that lowers taxable income.

B) The tax credit is based on income and is designed to limit the amount spent on health insurance premiums to make the insurance affordable.

All of the following losses are excluded from coverage under Section II of an unendorsed Homeowners 3 policy EXCEPT A) Phyllis, a medical technician, misread a lab test and the patient is suing her. B) While using his canoe, Bert hit another canoe. The other canoe sank. Bert is being sued. C) Violet runs a for-profit daycare service in her home. The parents of a child injured while in Violet's care are suing Violet. D) The homeowner's son was injured when he fell off a swing in the homeowner's yard

B) While using his canoe, Bert hit another canoe. The other canoe sank. Bert is being sued.

Which of the following property is covered under the personal property coverage (Coverage C) of the Homeowners 3 policy? A) a pet dog owned by the named insured B) a bicycle owned by a foster child living with the named insured C) a motor vehicle owned by the named insured D) a stamp collection insured under a separate policy

B) a bicycle owned by a foster child living with the named insured

A no-fault law under which benefits are paid to an accident victim without regard to fault and the accident victim can still sue the negligent driver who caused the accident is referred to as a(n) A) pure no-fault law. B) add-on no-fault law. C) modified no-fault law. D) choice no-fault law.

B) add-on no-fault law.

The appraisal provision in the Personal Auto Policy is used to determine the A) value of a loss payable under property damage liability. B) amount paid for a physical damage loss to the insured's auto if the insured and insurer disagree. C) amount of auto insurance that should be purchased for an older/antique car. D) value of the loss payable under the medical payments coverage

B) amount paid for a physical damage loss to the insured's auto if the insured and insurer disagree.

Which of the following situations is covered under Section II of an unendorsed homeowners 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

A credit-based score that is highly predictive of future claims cost is an individual's A) CLUE score. B) insurance score. C) motor vehicle record score. D) underwriting score.

B) insurance score.

Under the Affordable Care Act, if a health insurer does not meet the minimum loss ratio requirement, the insurer must A) pay a fine to the federal government. B) issue rebates to the people the insurer covered. C) not sell any health insurance for a period of one year. D) reduce the premium on the policies it sells the following year.

B) issue rebates to the people the insurer covered.

In the state where Susan lives, drivers whom private insurance companies do not want to insure are placed in a common pool, and each insurer pays its pro rata share of pool losses and expenses. A common policy is used for all high-risk drivers. Susan's state handles high-risk drivers through a(n) A) automobile insurance plan. B) joint underwriting association. C) pure no-fault plan. D) specialty auto insurer.

B) joint underwriting association.

Which of the following losses would be covered under the personal liability coverage (Coverage E) of an unendorsed Homeowners 3 policy? A) liability arising out of the manufacture and sale of illegal narcotics B) liability arising out of damage to a neighbor's property that occurred over time C) liability arising out of a business operated in the home. D) liability arising out of bodily injury to an insured

B) liability arising out of damage to a neighbor's property that occurred over time

Sharon lives in a state that has a no-fault automobile insurance law. Under the law, an injured person has the right to sue the negligent driver only if the bodily injury claim exceeds a dollar or verbal threshold. The no-fault law in Sharon's state is a(n) A) pure no-fault plan. B) modified no-fault plan. C) add-on plan. D) choice no-fault plan.

B) modified no-fault plan

Individual medical expense insurance sold in the Health Insurance Marketplace is characterized by which of the following? A) narrow range of benefits B) no lifetime benefit limits C) no exclusions D) first-dollar coverage

B) no lifetime benefit limits

The purpose of gap insurance is to A) pay the difference between the bodily injury liability limit purchased and the actual amount of bodily injury liability if it exceeds the limit. B) pay the difference between the amount the insurer pays if a car is a total loss and the remaining amount owed on a lease or car loan. C) pay the difference between the medical payments coverage limit and the actual medical expenses of injured family members or passengers in the insured auto. D) pay the difference between the uninsured motorists coverage limit and the actual amount of the medical expenses incurred by the insured.

B) pay the difference between the amount the insurer pays if a car is a total loss and the remaining amount owed on a lease or car loan.

No-fault benefits are provided by adding an endorsement to the auto insurance policy. What is this endorsement typically called? A) uninsured motorists coverage B) personal injury protection coverage C) nonowned vehicle liability coverage D) add-on benefits coverage

B) personal injury protection coverage

Prior to passage of the Affordable Care Act, insurance policies typically contained a provision excluding coverage for impairments that were present or were treated during a specified period prior to the effective date of the policy. This provision is a(n) A) time limit on certain defenses. B) preexisting-conditions clause. C) benefit period provision. D) incontestable clause.

B) preexisting-conditions clause.

Alan has been involved in three accidents and has been ticketed for a number of driving violations. He tried to purchase auto insurance, but three insurers refused to sell him coverage. The generic name for state plans designed to insure drivers like Alan is the A) exchange market. B) residual market. C) voluntary market. D) excess market.

B) residual market.

Linda wants to purchase a homeowners policy. She has some valuable personal property 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) application. D) warranty.

B) schedule.

All the following are common exclusions in a medical expense insurance policy EXCEPT A) dental care. B) surgeons' fees. C) long-term care. D) routine eye care.

B) surgeons' fees.

The Affordable Care Act includes a provision designed to help small employers make health insurance coverage available to their employees. This provision allows small employers to reduce their federal income tax by a percentage of the employer's contribution to health insurance for employees. This subsidy, in the form of reduction of income taxes, is called a A) marginal tax rate. B) tax credit. C) tax bracket. D) tax deduction.

B) tax credit.

All of the following are covered as supplementary payments under the liability section of the PAP EXCEPT A) the cost of an appeal bond in a lawsuit stemming from an auto accident. B) the cost of a bail bond for a traffic violation when no accident is involved. C) interest which accrues on a liability judgment covered by the policy. D) reasonable expenses incurred by the insured to testify at a trial involving a lawsuit covered by the policy.

B) the cost of a bail bond for a traffic violation when no accident is involved.

Angie was injured when her car was struck by a driver who ran a red light. The other driver carried the minimum liability coverage necessary to be considered financially responsible. Angie's injuries were $15,000 above the minimum bodily injury limit. There is a coverage that can be added to the PAP that applies when a negligent driver carries the minimum liability insurance required by the state, but is less than the insured's actual damages for bodily injury. This coverage is called A) medical payments coverage. B) underinsured motorists coverage. C) bodily injury liability coverage. D) uninsured motorists coverage.

B) underinsured motorists coverage.

Patricia purchased a Personal Auto Policy (PAP). Her car was rear-ended by a driver who fled the scene. Patricia suffered whiplash, migraine headaches, and she was unable to work. Which of the following coverages will cover her lost work earnings? A) medical payments B) uninsured motorists C) underinsured motorists D) bodily injury liability

B) uninsured motorists

Bill was severely injured by an uninsured driver. Bill did not purchase uninsured motorists coverage, and the other driver, although held liable, could not pay the damages awarded. After exhausting other sources of recovery, Bill learned that his state is one of a few states that has a special fund to compensate innocent accident victims. These state funds are called A) guaranty funds. B) unsatisfied judgment funds. C) rainy-day funds. D) second injury funds.

B) unsatisfied judgment funds.

Liability arising out of which of the following is covered under Coverage E of an unendorsed Homeowners 3 policy? A) use of the insured's auto on a public road B) use of the insured's golf cart at a golf course C) use of the insured's motorcycle on a highway D) use of the insured's 40-foot boat with a 200 horsepower engine

B) use of the insured's golf cart at a golf course

All of the following statements about optional disability income benefits are true EXCEPT A) Under a cost-of-living rider, benefits are periodically adjusted for inflation. B) A Social Security rider pays additional benefits if the insured is turned down for Social Security disability benefits. C) Adding a return of premium rider results in a lower initial premium. D) Under an option to purchase additional insurance, the insured has the right to buy additional insurance at specified times without evidence of insurability.

C) Adding a return of premium rider results in a lower initial premium

Which of the following statements about the medical payments coverage of the PAP is true? A) The amount of the benefit typically is $100,000. B) Covered expenses must be incurred within 30 days of the accident. C) Covered expenses include the cost of funeral services. D) The benefit limit applies on a per-accident basis rather than on a per-person basis.

C) Covered expenses include the cost of funeral services.

Under financial responsibility laws, proof of financial responsibility is generally required under which of the following circumstances? A) The use of an auto by any driver with fewer than 3 years of driving experience B) When an individual renews his or her driver's license C) Failure to pay a final judgment resulting from an auto accident D) The accumulation of unpaid parking tickets exceeding a specified value

C) Failure to pay a final judgment resulting from an auto accident

Cal is renting an apartment. Which homeowners policy is specially designed to insure renters? A) HO-2 B) HO-3 C) HO-4 D) HO-6

C) HO-4

Which of the following statements about the additional coverages included in Section II of the homeowners policy is true? A) Damage to property of others is covered only if the insured is legally liable. B) Damage to property arising out of a business engaged in by the insured is covered. C) Interest that accrues on a judgment after the judgment is awarded but before the judgment is paid is covered under claims expenses. D) First aid expenses incurred by the insured for a bodily injury covered under the policy are not covered.

C) Interest that accrues on a judgment after the judgment is awarded but before the judgment is paid is covered under claims expenses.

Larry has $25,000 of bodily injury liability coverage under his PAP. This limit is the minimum amount required by his state to be considered financially responsible. While on a vacation, Larry visited a neighboring state which has a minimum financial responsibility limit of $50,000 for bodily injury. Which of the following statements describes the situation for Larry while he was in the neighboring state? A) Larry's policy was suspended while he was in the neighboring state. B) Larry had only $25,000 of liability coverage. C) Larry's policy automatically provided $50,000 of liability coverage. D) Larry's policy automatically provided $100,000 of liability coverage.

C) Larry's policy automatically provided $50,000 of liability coverage.

Which of the following statements about the characteristics of current no-fault laws is true? A) Most laws in force today are pure no-fault laws. B) Most laws apply to both bodily injury and property damage. C) Most laws permit payment of survivor benefits to a surviving spouse and children. D) States with add-on plans restrict the right of accident victims to sue negligent drivers.

C) Most laws permit payment of survivor benefits to a surviving spouse and children.

Tom is planning to build a home. He is weighing many factors, including construction materials, location, and other considerations. Which of the following statements is true with regard to homeowners insurance and Tom's new home? A) The higher the construction costs are in the area, the lower Tom's homeowners insurance premiums will be. B) The lower the homeowners deductible selected, the lower the premium will be. C) Older homes cost more to insure than newer homes. D) A wood frame home costs less to insure than a brick home.

C) Older homes cost more to insure than newer homes.

Which of the following statements about buying homeowners insurance is true? A) There is no reason to carry insurance for more than 80 percent of a dwelling's replacement cost. B) The deduction for depreciation will be increased if a personal property replacement cost endorsement is purchased. C) Premiums often can be reduced substantially by selecting a higher deductible. D) There is little reason to compare cost since the lack of competition results in little price variation among companies.

C) Premiums often can be reduced substantially by selecting a higher deductible.

John occasionally borrows the car of his friend, Sophie. Sophie has a PAP with liability limits of 100/300/50. John also has a PAP, and his liability limits 250/500/50. John had an accident while using Sophie's car and was found to be legally liable for $300,000 in bodily injury liability for injuries suffered by one person. How much will be paid by each policy? A) Sophie's policy will pay $150,000, John's policy will pay $150,000. B) Sophie's policy will pay $50,000, John's policy will pay $250,000. C) Sophie's policy will pay $100,000, John's policy will pay $200,000. D) John's policy will pay the entire amount.

C) Sophie's policy will pay $100,000, John's policy will pay $200,000.

Brian purchased an unendorsed Homeowners 3 policy. Under the policy, Brian's detached garage is also covered. Which of the following statements regarding coverage on the garage is true? A) The garage is covered on a named-perils basis. B) Any losses to the garage are settled on an actual cash value basis. C) The cost of removing debris is included in the policy limit on the garage, but if the damage and cost of removing debris exceed the limit, an additional five percent of the policy limit is available. D) The garage is covered under the dwelling coverage, Part A.

C) The cost of removing debris is included in the policy limit on the garage, but if the damage and cost of removing debris exceed the limit, an additional five percent of the policy limit is available.

A fire destroyed the home next door to Brad's home. The fire department chief was concerned that the damaged home would collapse on to Brad's home, so he ordered Brad to evacuate his home. Which of the following statements is true concerning the cost of Brad's hotel room while he is complying with the fire chief's order? A) The cost of the hotel room is not covered, as Brad's home was not directly damaged. B) The cost of the hotel room is covered under the "fair rental value" coverage of Part D. C) The cost of the hotel room is covered under the "prohibited use" coverage of Part D. D) The cost of the hotel room is covered under the dwelling coverage of Part A.

C) The cost of the hotel room is covered under the "prohibited use" coverage of Part D.

Which of the following statements regarding Section II conditions under the homeowners policy is true? A) Other insurance is handled on a pro rata basis. B) Under no circumstances may the insured bring a lawsuit against the insurer. C) The liability limit is the same regardless of the number of persons injured in a covered occurrence. D) There is no requirement for the insured to submit written notification of a possible claim to the insurer.

C) The liability limit is the same regardless of the number of persons injured in a covered occurrence.

Which of the following statements about shopping for auto insurance is true? A) Adequate physical damage insurance on your auto is the most important consideration. B) Consideration should be given to dropping liability coverage if you drive an older car with a low market value. C) To obtain the lowest premium, an applicant should review his or her eligibility for all discounts offered. D) Price comparisons are of little value since auto insurers tend to charge the same premiums.

C) To obtain the lowest premium, an applicant should review his or her eligibility for all discounts offered.

All of the following are considered to be a covered auto under the Personal Auto Policy EXCEPT A) a trailer owned by the insured. B) a temporary substitute auto loaned to the insured while her care is being repaired. C) a motorcycle owned by the insured. D) a newly acquired auto.

C) a motorcycle owned by the insured.

All of the following are considered to be uninsured vehicles for purposes of the uninsured motorists coverage of the PAP EXCEPT A) a vehicle owned by an individual who is insured, but for less than the amount required by the state's financial responsibility law. B) a hit-and-run vehicle, the ownership of which cannot be determined. C) a vehicle owned by an individual who purchased just enough liability insurance to satisfy the state's financial responsibility law. D) a vehicle insured by a company which becomes insolvent before a claim can be paid.

C) a vehicle owned by an individual who purchased just enough liability insurance to satisfy the state's financial responsibility law.

The Homeowners 3 policy limits the amount of coverage provided on certain personal property (e.g. coin collections and silverware). This personal property can be adequately insured by A) lowering the deductible which applies to personal property losses. B) storing the property away from the home at another location. C) adding a schedule to the policy listing the property with specific amounts of insurance. D) adding an appraisal clause to the policy.

C) adding a schedule to the policy listing the property with specific amounts of insurance.

Tom and Tammy Evans were ready to purchase a home. The home was to serve as collateral for their mortgage loan. Two insurers declined to insure the home, citing "an adverse CLUE report." Why would an insurer reject a homeowners insurance application because of an adverse CLUE report? A) because the previous owner had defaulted on the mortgage loan B) because the home is located in an area where the zoning law had been changed C) because there had been property insurance claims filed on the home's previous owner D) because the home is located in an area that does not have a certified fire department

C) because there had been property insurance claims filed on the home's previous owner

Criticisms of compulsory insurance laws include which of the following? 1.They provide less than complete protection since they require only a minimum amount of liability insurance. 2.Even with compulsory insurance laws, a substantial number of motorists continue to operate vehicles without insurance. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Factors that affect the cost of homeowners insurance include which of the following? 1.Construction material 2.Deductible amount A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Persons insured under Section I of the Homeowners 3 policy include which of the following? 1.A spouse of the named insured if living in the same household 2.The named insured's children who are under age 24 and who are full-time college students A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Problems with the health care system in the United States that led to implementation of the Affordable Care Act included 1. Rising healthcare expenditures 2.Considerable waste and inefficiency in the healthcare system A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Purposes of the coinsurance provision in medical expense insurance policies include which of the following? 1.to reduce premiums 2.to prevent overutilization of policy benefits A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

The insurance company's options for settling a collision loss to a covered auto under the PAP include which of the following? Pay the loss in money. Repair or replace the damaged auto. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Under the Affordable Care Act, which of the following statements are true? 1.Health insurers cannot use pre-existing conditions exclusions. 2.Health insurers cannot impose annual benefit limits and lifetime benefit limits. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Which of the following is (are) included among the duties of an insured following a loss covered under the Homeowners 3 policy? 1.To file a proof of loss within a specified time period after the insurer's request 2.To prepare an inventory of damaged personal property A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Which of the following persons is (are) covered for liability insurance under the PAP? 1.a family member who drives a covered auto 2.a family member who occasionally drives a friend's auto A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Which of the following persons is (are) eligible for benefits under medical payments to others (Coverage F) of the homeowners policy? 1.A friend who slips and falls on a wet patio while visiting the named insured 2.A neighborhood child who is severely scratched by a cat in the care of the named insured A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Scott had trouble obtaining auto insurance. After three companies refused to insure him, he called the state insurance department. A representative suggested he obtain coverage through Last Chance Insurance Company because "that's all they insure—high-risk drivers." Scott contacted Last Chance. He was not refused coverage; however, the premium Scott was required to pay was three times greater than the average premium in the market. Last Chance Insurance Company is a(n) A) reinsurance facility. B) automobile insurance plan. C) specialty auto insurer. D) joint underwriting association.

C) specialty auto insurer.

Some insurance companies intentionally seek to insure motorists with poor driving records. These insurers commonly insure drivers who have been turned-down or canceled by other insurers. What name is given to insurers who provide coverage to these higher-than-average risks drivers? A) alien insurers B) guaranty fund insurers C) specialty insurers D) surplus lines insurers

C) specialty insurers

John purchased an unendorsed Homeowners 3 policy. The coverage will expire next month. Which of the following changes will lower the premium that John will pay? A) reducing the deductible B) adding a replacement cost endorsement for personal property C) switching to an HO-2 policy D) adding a personal injury endorsement

C) switching to an HO-2 policy

All of the following are insured persons under the liability coverage of the PAP EXCEPT A) a friend to whom the named insured loans a covered auto. B) the employer of the named insured for actions resulting from the named insured's use of a covered auto. C) the former spouse of the named insured who moved out of the home 2 years ago when the divorce was finalized. D) a relative of the named insured if a member of the same household.

C) the former spouse of the named insured who moved out of the home 2 years ago when the divorce was finalized.

Gary purchased a Personal Auto Policy (PAP) that included collision coverage. Gary lost control of his vehicle on an icy road. He slid across the center line into oncoming traffic. Another vehicle hit his car, causing severe damage to it. Ignoring any deductible, what is the insurer's liability for damage to Gary's car? A) the greater of the actual cash value or the amount necessary to repair or replace the vehicle B) the replacement cost of the vehicle C) the lesser of the actual cash value or the amount necessary to repair or replace the vehicle D) the original purchase price of the vehicle

C) the lesser of the actual cash value or the amount necessary to repair or replace the vehicle

All of the following are methods used to fund the Affordable Care Act EXCEPT A) an excise tax on the sale of medical devices. B) reduced payments to Medicare Advantage plans. C) tort reform measures that reduce medical malpractice claims. D) savings in the Medicare and Medicaid programs from reduced fraud and abuse.

C) tort reform measures that reduce medical malpractice claims.

All of the following are historical reasons for the increase in health care expenditures in the U.S. EXCEPT A) cost insulation because of third-party payers. B) employer-sponsored health insurance. C) universal health insurance coverage. D) technological advances in health care.

C) universal health insurance coverage.

Which of the following is a covered peril under the personal property coverage (Coverage C) of an unendorsed Homeowners 3 policy? A) earthquake B) nuclear radiation C) windstorm D) flood

C) windstorm

All of the following statements about individual disability income policies are true EXCEPT A) Premiums are often waived while a person is disabled but must be resumed if the insured recovers. B) At the time of purchase, the insured can choose the length of the benefit period from among several available options. C) In order to encourage rehabilitation, benefits may be continued during periods of vocational training. D) Most disability income insurance policies contain an elimination period of 10 or fewer days.

D) Most disability income insurance policies contain an elimination period of 10 or fewer days.

All of the following statements about Part D (coverage for damage to your auto) of the PAP are true EXCEPT A) Coverage may be purchased with or without collision insurance. B) Losses are paid regardless of fault. C) Coverage applies to a nonowned auto occasionally driven by an insured. D) No coverage is provided for newly-acquired vehicles.

D) No coverage is provided for newly-acquired vehicles.

Which of the following statements about the factors affecting automobile insurance rates is true? A) The cost of collision coverage increases as a car gets older. B) Because of high speeds in rural areas, rural drivers tend to pay more for auto insurance than city drivers pay for auto insurance. C) Young unmarried male drivers tend to have fewer accidents than young married male drivers in the same age category. D) People who drive a car to and from work tend to be charged higher rates than those who use a car for pleasure purposes.

D) People who drive a car to and from work tend to be charged higher rates than those who use a car for pleasure purposes.

All of the following are arguments forno-fault automobile insurance laws EXCEPT A) No-fault is unnecessary as it's easy to determine which driver was negligent when a multiple-vehicle accident occurs. B) A large portion of each premium dollar is used for purposes other than compensating accident victims for their losses. C) There are delays in compensating accident victims under the tort system. D) Seriously injured accident victims tend to be overcompensated, while those with small economic losses are inadequately indemnified.

D) Seriously injured accident victims tend to be overcompensated, while those with small economic losses are inadequately indemnified.

Gail lives near a fault line. She added an earthquake endorsement to her Homeowners 3 policy. All of the following statements about the endorsement are true EXCEPT A) The deductible is expressed as a percentage of the coverage limit rather than as a dollar amount. B) The endorsement also covers landslides and volcanic eruptions. C) Aftershocks occurring within 72 hours of an earthquake are considered part of the same occurrence. D) The endorsement also covers flood losses.

D) The endorsement also covers flood losses.

Joyce was injured by an uninsured drunk driver while she was riding in a friend's car. Joyce and her friend each have a PAP with an uninsured motorists limit of $50,000. How much will be paid by each policy if it is determined that Joyce has $70,000 of bodily injuries? A) Each policy will pay $35,000. B) Joyce's policy will pay $50,000, and the friend's policy will pay nothing. C) Joyce's policy will pay $50,000, and the friend's policy will pay $20,000. D) The friend's policy will pay $50,000, and Joyce's policy will pay $20,000.

D) The friend's policy will pay $50,000, and Joyce's policy will pay $20,000.

Ted borrowed $140,000 from 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 Homeowners 3 policy, how will this loss be settled? A) The insurer has no liability because the loss was intentional. B) The insurer will pay Ted the actual cash value 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 then attempt to recoup the loss payment from Ted.

D) The insurer will pay ABC the value of its insurable interest and then attempt to recoup the loss payment from Ted.

Which of the following statements regarding the Coverage E limit in the homeowners 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 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 statements is true with respect to a pure no-fault auto insurance plan? A) Under such a plan, you would collect from your own insurer and retain the right to sue the other party if your injuries surpass a dollar or verbal threshold. B) Most no-fault plans that have been adopted by states are pure no-fault plans. C) Under such a plan, you would collect from your own insurer and retain the right to sue the other party without having to satisfy a threshold. D) Under such a plan, an accident victim cannot sue the other party, and no payments are made for pain and suffering.

D) Under such a plan, an accident victim cannot sue the other party, and no payments are made for pain and suffering.

Which of the following statements about mandatory provisions in individual health insurance policies is true? A) Insurers are not permitted to place time limits on filing claims or providing proof of loss. B) The time limit on certain defenses provision prohibits the insurance company from denying a claim based on a fraudulent misstatement by the applicant after the policy has been in force three months. C) The usual length of the grace period is 180 days. D) Under the reinstatement provision, a health insurance policy that has lapsed can be put back in force.

D) Under the reinstatement provision, a health insurance policy that has lapsed can be put back in force.

Jane would like to save money on her homeowners premium. All of the following steps will help her to reduce her homeowners premium EXCEPT A) raising the deductible in the homeowners policy to a higher amount. B) shopping around a homeowners policy. C) installing burglar alarms, smoke detectors, and dead-bolt locks. D) adding a personal property replacement cost endorsement.

D) adding a personal property replacement cost endorsement.

Ben lives in a state that has a no-fault auto insurance law. Another motorist failed to yield the right of way, and hit his car. Ben filed a claim with his own insurer. He also contacted a lawyer to discuss suing the other driver. The lawyer told Ben that while lawsuits resulting from auto accidents are permitted in the state, Ben's injuries were not severe enough to provide legal standing for a lawsuit. What type of no-fault law is in effect in the state where Ben lives? A) pure no-fault B) add-on no-fault C) choice no-fault D) modified no-fault

D) modified no-fault

For which of the following situations would there be personal liability coverage under the homeowners policy? 1.The named insured accidentally injures her husband with a hammer. 2.The named insured breaks his wife's valuable vase while practicing his golf swing. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

Persons insured for personal liability under the homeowners policy include which of the following? Relatives while visiting the named insured. Overnight guests who are not relatives of the named insured. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

Which of the following situations would be covered under Section II of a homeowners policy? 1.The insured is sued by his girlfriend because he infected her with the AIDS virus. 2.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. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

Which of the following statements about modified no-fault laws is (are) true? 1.Claims less than a certain dollar threshold must be assumed by the injured accident victim, but the injured person has the right to sue a negligent driver. 2.Claims above a certain dollar threshold are paid in full by an injured accident victim's insurer, and the right to sue a negligent driver is eliminated. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

Which of the following statements about the Homeowners 3 policy is (are) true? 1.Losses to the dwelling are always settled on an actual cash value basis. 2.Coverage on personal property is limited to $5,000. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

Which of the following statements about the Homeowners 8 policy is (are) true? 1.Losses to the dwelling are settled on a replacement cost basis if the dwelling is insured for its full market value. 2.It is designed primarily for expensive, newer, dwellings. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

Which of the following statements about the personal property replacement cost endorsement used with the homeowners policy is (are) true? 1.The damaged or destroyed property must be repaired or replaced, no matter the size of the loss. 2.It is designed primarily for antiques and fine art. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

Which of the following statements is (are) true regarding renters insurance? 1.Renters insurance is needed if you rent a house, but is not needed if you rent an apartment. 2.The ISO renter's policy provides open perils ("all-risks") coverage on the insured's personal property. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

Which of the following statements is (are) true with respect to the collision damage waiver on rented cars? 1.It is inexpensive and is provided at no charge by most rental car companies. 2.It waives the renter's liability for bodily injury liability arising out of use of the rented auto. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

Which statement concerning towing and labor coverage under the PAP is (are) true? 1.There's no coverage for towing if the auto breaks down—towing is only covered if the auto needs to be towed after a collision has occurred. 2.Towing and labor coverage pays for repairs at a service station or garage. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

Owen's car is insured under a Personal Auto Policy (PAP). A hail storm occurred one evening, and his car was severely damaged. Which PAP coverage, if Owen purchased it, would cover this damage to his auto? A) property damage liability B) uninsured motorists property damage C) collision D) other-than-collision

D) other-than-collision

Barb was injured in an auto accident. She was totally disabled and collected disability income benefits for 8 months. She would like to return to work on a part-time basis to see if her recovery is complete. During this period, her insurer will pay reduced disability income benefits. This type of disability is called A) recurrent disability. B) presumptive disability. C) permanent disability. D) partial disability.

D) partial disability.

The inability of the insured to perform some but not all of the important duties of his or her occupation is called A) residual disability. B) total disability. C) recurrent disability. D) partial disability.

D) partial disability.

Under the Homeowners 3 policy, all of the following are options of the insurer for settling claims EXCEPT A) paying the claim in cash. B) replacing the property. C) repairing the property. D) paying the claim with insurance company stock.

D) paying the claim with insurance company stock.

Following catastrophic hurricane losses, South Coast Insurance Company changed its deductible provision. Rather than using a specified dollar value, $250 for example; 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(n) A) calendar-year deductible. B) aggregate deductible. C) straight deductible. D) percentage deductible.

D) percentage deductible.

All of the following are endorsements that can be added to an ISO Homeowners 3 policy EXCEPT: A) personal property replacement cost endorsement. B) scheduled personal property endorsement. C) earthquake endorsement. D) personal liability endorsement.

D) personal liability endorsement.

Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred. —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover the damage to the car that Ken hit? A) bodily injury liability B) collision coverage C) medical payments coverage D) property damage liability

D) property damage liability

One long-term care insurance benefit trigger considers whether the insured needs supervision to protect against threats to health or safety due to memory loss or disorientation. This benefit trigger is referred to as a(n) A) activities of daily living trigger. B) medical necessity trigger. C) needs test trigger. D) severe cognitive impairment trigger.

D) severe cognitive impairment trigger.

Several different values can be considered when determining how much insurance should be carried on a dwelling (the Coverage A limit of the Homeowners 3 policy). The appropriate value that should be used is: A) the home's market value. B) the home's actual cash value. C) the home's appraised value for property tax purposes. D) the home's replacement cost.

D) the home's replacement cost.

After the Personal Auto Policy has been in force for 60 days (or is a renewal policy), all of the following are grounds for the insurer to cancel the policy EXCEPT A) nonpayment of premiums B) the insured's license to drive is suspended C) the insurer discovers material misrepresentation by the insured in the application process D) the insured received a traffic ticket

D) the insured received a traffic ticket

What is the purpose of the extended nonowned liability coverage endorsement to the PAP? A) to provide liability coverage for an insured's employer when an insured uses his or her auto for business purposes B) to provide liability coverage for an insured who occasionally operates a nonowned auto C) to provide liability coverage for anyone who loans a covered auto to another driver D) to provide liability coverage for an insured who operates a nonowned auto on a regular basis

D) to provide liability coverage for an insured who operates a nonowned auto on a regular basis