Texas Practice Exam #5
What is the additional limit under the ISO standard BOP for debris removal in case the basic coverage is inadequate? a. $25,000 b. $20,000 c. $10,000 d. $15,000
a. $25,000
Mr. Kessler has an auto policy with bodily injury limits of $15,000/$30,000. He injures two people in one accident. Mr. Brown receives injuries of $19,000. Mr. Jones receives injuries of $15,000. Legal expenses to defend Mr. Kessler total $10,000. How much is Mr. Kessler liable for after his insurance company makes its payment? a. $4,000 b. $15,000 c. $14,000 d. $19,000
a. $4,000
A commercial building is insured for $150,000 and is worth $250,000. A $100,000 loss occurs. The policy contains an 80% coinsurance clause. How much will the insurer pay? a. $75,000 b. $100,000 c. $150,000 d. $250,000
a. $75,000 To comply with the 80% coinsurance clause the insured should have carried $200,000 of coverage on the building. The insured is covered for 75% of what should have been carried and therefore, the insurer would pay $75,000.
Under a personal property floater, a loss is covered when it occurs: a. Anywhere in the world, except for fine arts. b. In the United States only. c. In the United States and Canada only. d. In the United States, Canada, and Mexico only.
a. Anywhere in the world, except for fine arts.
With a Commercial Package Policy (CPP), "interline endorsements" are endorsements that: a. Apply to more than one coverage part of the package policy. b. Are attached to the common Declarations page. c. Apply only to the common policy conditions within the package policy. d. Apply only to the Commercial Property coverages within the package policy.
a. Apply to more than one coverage part of the package policy.
An oral or written contract for temporary insurance is referred to as a: a. Binder. b. Rider. c. Declaration. d. Certificate of Insurance.
a. Binder.
Which of the following coverages may be added by endorsement to an Equipment Breakdown policy? a. Business income. b. Expediting expenses. c. Property damage liability. d. Damage to property of the insured.
a. Business income.
Which of the following is the principal in a bond? a. Contractor doing the work b. Owner of the job c. The insurance company d. The surety
a. Contractor doing the work
Claims filed against the insurance company by the insured are known as: a. First-party claims. b. Third-party claims. c. Self-insured claims. d. Subrogation claims.
a. First-party claims.
Workers Compensation policies also include Part II - Employer's Liability coverage. Which of the following claims would be covered under Part II? a. The employer fails to maintain the equipment and an employee is injured. b. A worker falls from a ladder and sustains injuries. c. A fellow worker accidentally injuries another employee. d. A worker dies from an occupational disease.
a. The employer fails to maintain the equipment and an employee is injured.
The insured is covered under a BOP policy. Contents coverage is included. If the insured buys a separate piece of machinery and insures it separately, how will the BOP policy respond to a loss to this machinery? a. The equipment policy will be primary and the BOP will be excess if the separate policy does not provide adequate limits of coverage. b. The BOP would be primary and the separate policy would be excess. c. The BOP policy will not pay since the equipment is separately insured. d. Both will share in the loss on a pro/rata basis.
a. The equipment policy will be primary and the BOP will be excess if the separate policy does not provide adequate limits of coverage.
The doctrine of adhesion gives one party power over the other party because it authored the contract. This often results in: a. Subrogation b. Problems with claims c. Ambiguity d. Non-renewal
c. Ambiguity
An adjuster has procured a photograph of the scene of an accident on a claim that he/she is adjusting. This photograph is placed into the claims file as which of the following types of evidence? a. Criminal b. Real c. Demonstrative d. Documentary
d. Documentary
An insured airplane is damaged and is being towed to a repair facility. For the purposes of Aviation insurance, her plane is: a. In motion. b. In flight. c. In transition. d. Not in motion.
d. Not in motion.
Your car is damaged in an auto accident. While it is being repaired, the body shop loans you a replacement. From a coverage standpoint this replacement vehicle is known as: a. A temporary substitute. b. A non-owned auto. c. A newly acquired auto. d. A replacement vehicle.
a. A temporary substitute.
Mary has a personal auto policy in force, including other than collision (comprehensive) coverage, when her automobile is stolen. The theft is properly reported to the police and the insurance company. She then rents a car. Which of the following is true? a. After a waiting period of 48 hours her policy will pay rental costs up to $20 per day up to a maximum of $600. b. Rental costs will be covered until her vehicle is recovered. c. Rental costs are only covered if a rental car is damaged. d. Rental costs are covered up to $20 per day subject to a maximum of $600 with no waiting period.
a. After a waiting period of 48 hours her policy will pay rental costs up to $20 per day up to a maximum of $600.
All of the following are exclusions from the standard workers compensation policy, EXCEPT: a. Any bodily injury or aggravation of that injury that is unintentionally caused by the insured. b. Liability assumed under a contract. c. Bodily injury to an illegal worker knowingly hired by the insured. d. Bodily injury that occurs outside the coverage territory.
a. Any bodily injury or aggravation of that injury that is unintentionally caused by the insured.
Name the coverage that applies to the extra cost the insured incurs to make temporary repairs and speed up the permanent repairs or replacement of damaged covered equipment under an Equipment Breakdown policy. a. Expediting expense coverage b. Extra expense coverage c. Removal expense coverage d. Contributing expense coverage
a. Expediting expense coverage
Which of the following would not be considered a "first party" coverage under the personal auto policy? a. Liability b. Collision c. Other than collision d. Uninsured Motorist Coverage
a. Liability
Which of the following policies would be used to cover imports and exports? a. Ocean marine b. Personal Property c. General Liability d. Businessowners policy
a. Ocean marine
In order for a contract to be binding in a court of law, it must be designed for: a. Two parties. b. Legal purposes. c. Res ipsa loquitor. d. Easy interpretation.
b. Legal purposes.
An inland marine coverage which covers a store that has an average inventory of $250,000 or less of jewelry would need: a. A jewelers block policy. b. Commercial articles floater. c. Floor plan merchandise coverage form. d. Bailee's customers policy.
a. A jewelers block policy.
Commercial Inland coverages can be written as a stand alone policy and not included in the Commercial Package Policy (CPP), this would be called: a. A monoline policy b. A BOP c. An endorsement d. An individual policy
a. A monoline policy
Which of the following would be excluded under the Personal Auto liability coverage? a. A person transports people from the airport to nearby hotels for a fee. b. A person uses his car to transport his workmates once per week in a car pool. c. A person borrows a friend's vehicle to travel to the airport. d. A person gets a speeding ticket in addition to being cited for an accident.
a. A person transports people from the airport to nearby hotels for a fee.
All of the following are types of "independent adjusters", EXCEPT: a. A public adjuster. b. A "cat" adjuster. c. A staff adjuster. d. A property and casualty adjuster.
a. A public adjuster.
Under a personal auto policy, which of the following persons would be excluded from coverage for bodily injury and property damage liability? a. An employee of the named insured, while transporting passengers for a fee. b. The named insured's spouse who resides in the same household as the insured. c. Any person using the car with the permission of the insured. d. Any person legally responsible for the use of the automobile with the insured's permission.
a. An employee of the named insured, while transporting passengers for a fee.
Which of the following is an ideal form of protection for the frequent shipper of goods? a. Annual Transit Policy b. Trip Transit Policy c. Monthly Transit Policy d. Common Carrier Motor Truck Cargo Policy
a. Annual Transit Policy
Which of the following policy provisions would be found in a Workers Compensation policy "conditions" section? a. Certain rights of the insurer and insured b. The named insured and limits of liability c. The promises made by the insurer d. All of the responses apply
a. Certain rights of the insurer and insured
Difference in Conditions insurance is written to provide: a. Coverage for the gaps in coverage left by other property insurance forms. b. Open peril coverage only. c. Flood coverage only. d. Earthquake coverage only.
a. Coverage for the gaps in coverage left by other property insurance forms.
If an insurance company covered an excluded claim it may have to continue paying other such claims because of: a. Estoppel. b. Indemnity rule. c. Comparative payment. d. Policy language.
a. Estoppel.
A person may be negligent if he or she: a. Fails to do what a reasonable and prudent person would do. b. Injures another person even though he acted prudently. c. Commits a deliberate act that injures another. d. Hires someone to damage another's property.
a. Fails to do what a reasonable and prudent person would do.
All of the following are excluded under the Commercial Building and Personal Property form, EXCEPT: a. Furniture and fixtures. b. Petty cash and IOUs. c. A watch dog. d. The insured's panel truck.
a. Furniture and fixtures.
Under an Ocean Marine policy, which of the following is considered to be the most important implied warranty? I. Seaworthiness. II. Condition of the cargo. III. Legality. a. I b. II c. I and II d. III
a. I
Which of the following types of property would be included under Coverage A of a Building and Personal Property Coverage form? I. A central air-conditioning system. II. Wall-to-wall carpeting. III. Permanently installed intercom system. IV. Fire extinguishers. a. I, II, III, and IV b. I and III only c. I and II only d. I, II, and III only
a. I, II, III, and IV
Coverage for goods in transit is usually provided by which of the following types of insurance? a. Inland Marine b. Casualty c. Surety d. Automobile
a. Inland Marine
Aircraft liability coverage is very similar to auto insurance coverage with which of following exceptions? a. Liability to passengers is treated as a separate exposure. b. Usually written with a deductible. c. Does not apply to property damage of others. d. Cannot exclude passenger liability.
a. Liability to passengers is treated as a separate exposure.
Which of the following types of property may not be insured under the valuable papers and records coverage form? a. Money and securities b. Books, maps, and film c. Property of others d. Mortgages and manuscripts
a. Money and securities
Under a surety bond, the owner of the project is called the: a. Obligee. b. Surety. c. Principal. d. Administrator.
a. Obligee.
Under the provisions of the Standard Fire Policy, an insured may file a suit to recover for a loss only if all of the policy requirements have been complied with. The suit must be brought within: a. One year. b. Two years. c. Three years. d. Four years.
a. One year.
Surety bonds guarantee the fulfillment of specific obligations. Each of the following may be the subject of a surety bond, EXCEPT: a. Protection of funds handled by employees. b. Payment of a debt. c. Meeting contractual commitments. d. Performance of certain duties.
a. Protection of funds handled by employees.
John's next door neighbor, Sam, dumps hot ashes in John's trash dumpster starting a fire and causing severe damage to John's home. John's insurance company pays the loss and then looks to Sam for payment. This is an example of: a. Subrogation. b. Appraisal. c. Assignment. d. Pro rata liability.
a. Subrogation.
During a tornado, Natalie's house is destroyed when a section of a wall is blown down, knocking over a heater, which sets the house on fire and creates smoke. The proximate cause of this loss is: a. The tornado. b. The fire. c. The collapse of the wall. d. The heater.
a. The tornado.
Under the law of agency, all of the following are the types of authority an agent might have, EXCEPT: a. Uncertain Authority. b. Express Authority. c. Implied Authority. d. Apparent Authority.
a. Uncertain Authority.
Requiring a claimant to travel a long distance to have his or her automobile repaired violates which of the following standards for prompt investigations and fair and equitable settlements? a. Unreasonable Travel b. Avoidance of Payment c. Notice of Applicable Time Limitations d. Denial of Claims
a. Unreasonable Travel
When the Agreed Value Option is used, the coinsurance requirement is: a. Waived b. Still applies c. Converted to a reporting form d. Never reinstated
a. Waived
Under "pollution cleanup and removal" coverage under the standard ISO BOP form, when must a loss be reported? a. Within 180 days b. Within 60 days c. Immediately d. Within 90 days
a. Within 180 days
A Homeowners Form has a $50,000 personal property limit. Disregarding any deductibles, what is the most the insured can collect if a boat valued at $1,500 is stolen from the premises? a. $1,000 b. $1,500 c. $1,400 d. $2,000
b. $1,500
The insured carries $100,000 loss of income coverage with a 25% monthly limitation. He sustains a loss of $35,000 for the first month and $20,000 the second month. How much will be paid? a. $55,000 b. $45,000 c. $35,000 d. $20,000
b. $45,000 The policy will pay $25,000 for the first month and $20,000 for the second month.
Under Personal Liability - Section II of homeowner coverage, a cemetery plot is considered to be: a. The insured premises. b. An insured location. c. A non-insured location. d. A non-insured premises.
b. An insured location.
Medical coverage under a personal auto policy will cover the insured if he/she is injured while a passenger on a: a. Train. b. Bus. c. Subway. d. Airplane.
b. Bus.
Mr. and Mrs. Smith own a building worth $100,000 and have it insured under three policies, each containing a pro-rata "Other Insurance" clause. Carrier A provides $10,000; Carrier B provides $10,000, and Carrier C provides $80,000. If there is a $20,000 fire loss, how will the claim be divided, if at all? a. Carrier C will pay the entire loss since its limit is higher than the loss. b. Carrier A will pay $2,000, Carrier B will pay $2,000, and Carrier C will pay $16,000. c. Carrier A will pay $10,000 and Carrier B will pay $10,000. d. Each carrier will pay $6,666.66.
b. Carrier A will pay $2,000, Carrier B will pay $2,000, and Carrier C will pay $16,000.
Mr. Jamison owns a summer home in the woods that he rents to others. During his absence, bears enter the home and cause considerable damage. The insured reports the claim to his insurance company. The adjuster advises Mr. Jamison to report the claim as vandalism damage. The claim report is investigated by the state insurance department. How should the Department treat this action on the part of the adjuster? a. Require the company to pay the claim. b. Charge the adjuster with an unfair claims practice. c. Require the company to deny the claim because animal damage is excluded. d. Charge the adjuster with an unfair trade practice.
b. Charge the adjuster with an unfair claims practice.
An insurance company would be guilty of an Unfair Claims Practice violation if it: a. Paid claims quickly to avoid law suits. b. Failed to acknowledge within reasonable time, communications with respect to claims. c. Failed to pay an uncovered claim. d. Terminated an appraiser for filing fraudulent claims.
b. Failed to acknowledge within reasonable time, communications with respect to claims.
A Texas employer who chooses NOT to provide workers' compensation coverage: I. Loses civil immunity. II. May be sued for damages when an employee is injured in the of employment. III. Will have to pay a fee of $500. a. I only b. I and II only c. II and III only d. I, II, and III
b. I and II only
After a claim has been paid, any recovery rights applying to the amount paid by the insurance company belong to: a. The insured. b. The insurance company. c. Both the insured and the insurance company. d. Either the insured or the insurance company, depending upon which paid the greater share of the loss.
b. The insurance company.
Which of the following losses would be paid under the "Other than Collision" coverage of the Personal Auto policy? a. Gradual corrosion of the grillwork on the insured automobile due to continuous exposure to salty air. b. The insured automobile was stolen and never recovered. c. The insured automobile skidded on icy pavement and overturned. d. The insured automobile was damaged when it was hit by another car that failed to stop at a red traffic light.
b. The insured automobile was stolen and never recovered.
Trevor purchases a condemned house in a run-down neighborhood that is scheduled for demolition by the city. He paid $10,000 for the house and wants to protect his financial investment by purchasing insurance. Which of the following statements is true? a. The property is not insurable because it is not definable. b. The property is not insurable because the loss is expected. c. The property is not insurable because it does not have a quantifiable value. d. The property is not insurable because the loss would not be substantial.
b. The property is not insurable because the loss is expected.
Emily owns a home that she has covered under a Homeowners policy. Because Emily lives alone, she had to leave her home and stay with her parents for the past six months while she recovers from major surgery. Except for the day-to-day items that Emily needs while she stays at her parents' home, all of her other belongings are still located in her home. Which of the following best describes the condition of Emily's home? a. Deserted. b. Unoccupied. c. Vacant. d. Empty.
b. Unoccupied.
A storm has caused heavy damage to property adjacent to but not owned by the insured. Debris from the damage caused by the storm has blown onto the insured's covered property. How much coverage under the ISO standardized Businessowners policy is provided for removal of this debris? a. $25,000 b. $10,000 c. $5,000 d. There is no coverage because the debris was not from the insured's property.
c. $5,000
All of the following would have an insurable interest in a home and be insurable under the homeowners program, EXCEPT: a. A co-owner of a 2-family house occupying the second floor apartment. b. The owner of a seasonal dwelling who has his primary dwelling insured under an HO-3. c. A non-occupant realtor. d. An individual who owns a house under construction.
c. A non-occupant realtor.
What should be the central goal of the claims adjuster? a. Follow the rules dictated by the principal b. Not violate state insurance laws c. Comply with the provisions of the insurance contract to obtain a full release settlement of the claim. d. Maximize profit for the insurance company
c. Comply with the provisions of the insurance contract to obtain a full release settlement of the claim.
A method of replacing damaged property with something not exactly like the damaged item, but will perform the same is known as: a. Agreed Replacement Value. b. Stated Amount Value. c. Functional Replacement Cost. d. Replacement Cost.
c. Functional Replacement Cost.
The Commercial Articles Coverage Form is designed to cover: a. Jewelry in excess of $250,000 b. Bulldozers and other construction equipment c. Musical instruments and related equipment; cameras and related equipment d. Retail sporting equipment
c. Musical instruments and related equipment; cameras and related equipment
Damages awarded to a plaintiff in a tort action that are in excess of the cash value of the economic loss, as a punishment to the wrongdoer and as a deterrent to similar conduct by others, is known as: a. Compensatory damages. b. General damages. c. Punitive damages. d. Special damages.
c. Punitive damages.
Which of the following is a valid defense an employer may use to deny paying a Workers Compensation claim? a. The employee assumed the risk arising out of the employment. b. The injury was caused by another employee. c. The injury was caused by the willful negligence of the employee. d. The employee as a minor.
c. The injury was caused by the willful negligence of the employee.
Under the medical payments coverage included in an aviation policy, when are the passengers covered? a. Before entering the aircraft b. Once they have departed the aircraft c. While entering, exiting and while on the aircraft d. Only while in flight
c. While entering, exiting and while on the aircraft
In claims adjusting, which of the following is not considered an unfair claims act? a. Failing to acknowledge or act promptly upon communications regarding policy claims. b. Refusing to pay claims without conducting a reasonable investigation upon all available evidence. c. Failing to adopt and implement reasonable standards for prompt investigation of claims. d. Failing or refusing to separate the damaged from the undamaged property in order to properly evaluate the loss and damages owed the insured.
d. Failing or refusing to separate the damaged from the undamaged property in order to properly evaluate the loss and damages owed the insured.
Which of the following perils is covered for earth movement under the DP-2 Dwelling form? a. Earthquake b. Subsidence c. Landslide d. There are no perils covered for earth movement under the Dwelling forms.
d. There are no perils covered for earth movement under the Dwelling forms.
Other structures are excluded from coverage under the HO-3 when they are: a. Smaller than 100 square feet or larger than 1,000 square feet b. Smaller than 100 square feet or larger than 500 square feet c. Used for storage purposes d. Used for business purposes
d. Used for business purposes
The liberalization clause of a Businessowners policy automatically applies favorable expansions of coverage, for which a premium is not charged if the changes are made during the policy period or within ______ prior to the effective date of the policy. a. 45 days b. Six months c. Three months d. 30 days
a. 45 days
Generally, an employee's average weekly wage is determined in Texas by which of the following computations? a. The employee's wages for the 13 consecutive weeks preceding the injury divided by 13. b. The employee's annual income preceding the injury divided by 52. c. The state's annual wage divided by 52. d. The federal minimum wage multiplied by the average number of weekly hours worked by the employee.
a. The employee's wages for the 13 consecutive weeks preceding the injury divided by 13.
The Now Company carries a special BOP policy with a liability limit of $500,000. The company is involved in an accident causing $200,000 bodily injury damage and $200,000 property damage. The total amount collectible under the policy is: a. $500,000 b. $400,000 c. $200,000 d. $100,000
b. $400,000
Homeowner policies typically provide coverage for all of the following, EXCEPT: a. Personal liability b. Personal injury c. Claim expenses d. Medical payments
b. Personal injury
Which of the following is a violation of the unfair claims practice laws? a. Knowingly misrepresenting to insureds or third-party claimants pertinent facts or policy provisions relating to coverages at issue, or providing misleading information with respect to the coverages b. Failing to acknowledge with reasonable promptness pertinent communications with respect to a claim c. Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims d. All of the responses are violations.
d. All of the responses are violations.
Under "Coverage A - Building" of the BOP form, which of the following is NOT covered? a. Completed additions, and additions under construction b. All permanently installed fixtures, machinery and equipment c. Outdoor fixtures d. Valuable papers and records
d. Valuable papers and records
Under the "additional coverages" of the Homeowners Section II - Liability coverage, "damage to property of others" will not be covered if it is caused intentionally by an insured who is at least: a. 13 years of age. b. 15 years of age. c. 16 years of age. d. 18 years of age.
a. 13 years of age.
Coverage for earthquakes and volcanic eruptions may be attached to Commercial Property Insurance. When the Earthquake Cause of Loss Form is attached, a series of earthquakes or volcanic eruptions will be treated as a single event whenever the series of shocks or eruptions occurs within a: a. 168-hour period. b. 24-hour period. c. 48-hour period. d. 96-hour period.
a. 168-hour period.
When preparing an auto body repair estimate to submit to an adjuster, the included operations that may be performed simultaneously are known as: a. Overlap areas b. Shared areas c. Co-occurrence tasks d. Coinciding tasks
a. Overlap areas
All of the following are violations of "good faith duty" by the adjuster, EXCEPT: a. Paying a settlement within 30 days after an agreement is reduced to writing. b. Denying coverage or attempting to settle a claim on the basis of an application which the insurer knows was altered without notice to, or knowledge or consent of, the insured. c. Failing to pay the amount of any claim due any person insured by the contract within 60 days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause. d. Misrepresenting pertinent facts or insurance policy provisions relating to any coverages at issue.
a. Paying a settlement within 30 days after an agreement is reduced to writing.
Replacement cost coverage is best defined as: a. Replacement without deduction for depreciation. b. Replacement cost minus tax depreciation. c. Original cost minus physical depreciation. d. Original cost minus tax depreciation.
a. Replacement without deduction for depreciation.
What is the maximum that will be paid under replacement cost coverage under the HO forms for dwellings? a. The total price to replace the dwelling up to the dwelling limit, if adequate coverage is in place b. 50% of Coverage A c. The actual cash value of the dwelling d. The full market value of the dwelling
a. The total price to replace the dwelling up to the dwelling limit, if adequate coverage is in place
An insured has a $2 million limit of insurance under a Personal Umbrella policy with a $2,000 self-insured retention limit. The insured is sued for $1 million in personal injury damages and $1.5 million in property damages arising from the same occurrence. The insured's underlying liability policies exclude coverage in this case, but the claim is covered under the Umbrella policy. In this case, the umbrella policy will pay: a. $1 million of the damages. b. $1,998,000 of the damages. c. $2 million of the damages. d. $2,500,000 of the damages.
b. $1,998,000 of the damages.
Which of the following are NOT required to hold an adjuster license in Texas? a. A person working for a third-party administrator who adjusts workers' compensation claims. b. A person who works for an insurer and adjusts claims on losses that do not exceed $500. c. A person who works for a surplus lines company adjusting yacht losses. d. A person working for an insurer who adjusts automobile liability claims.
b. A person who works for an insurer and adjusts claims on losses that do not exceed $500.
Mr. Smith's bicycle shop enters into many written and oral agreements with customers. Mr. Smith's agent informs him that the liability on his BOP contains: a. Products and Completed Operations Liability b. Contractual Liability c. Fidelity Bond d. Premises and Operations Liability
b. Contractual Liability
Teri is a Texas adjuster who has had her license suspended by the Commissioner. What is the maximum length of time Teri's license can be suspended according to the Texas insurance code? a. Six months. b. One year. c. Nine months. d. Three months.
b. One year.
If a bond is called upon for payment, which party pays out the face amount of the bond? a. Principal b. Surety c. Obligee d. Insured
b. Surety
Linda has received an inquiry from the Texas Commissioner. She realizes that she is required by law to respond to the inquiry, however her response contains information that is confidential and privileged. Which of the following is true of Linda's response to the Commissioner's inquiry? a. The information must be provided to the Commissioner and when Linda sends her response in writing, the information is no longer considered privileged or confidential. b. The information will remain confidential and privileged until it is introduced as evidence in an administrative hearing or in a court of law. c. The portion of Linda's response that is privileged and confidential will be redacted after the Commissioner reviews her response. d. Linda is prohibited by law from including privileged or confidential information in her response.
b. The information will remain confidential and privileged until it is introduced as evidence in an administrative hearing or in a court of law.
If an employee accidentally turns off the restaurant's freezer and the entire inventory of ice cream is ruined, does the Businessowners Coverage Form cover the loss? a. The loss is covered b. The loss is not covered c. The coverage is limited to $500.00 as an extension of coverage d. The loss is covered for ACV value
b. The loss is not covered
The Equipment Breakdown policy (formerly called Boiler & Machinery) provides for replacement cost coverage in case of a covered claim. Under what conditions would the insurer only pay actual cash value in case of a loss? a. Only if the policy is endorsed to provide ACV coverage b. The policy pays replacement only if the repairs are made within twenty four months of the accident. c. The policy will pay replacement cost as long as the repairs are expedited regardless of a time limit. d. The policy always provides replacement cost coverage in case of a covered claim.
b. The policy pays replacement only if the repairs are made within twenty four months of the accident.
Heather's house is fully insured with a DP-3 with a limit of $85,000. One day, the house is struck by lightning, and despite the fire department's efforts, burns to the ground. She still had a balance of $20,000 left on her mortgage at the time of the fire. What is the maximum indemnification that would go to Heather, the fire department, and her mortgage lender respectively? a. $64,500; $500; $20,000 b. $84,500; $1,000; $20,000 c. $65,000; $500; $20,000 d. $85,000; $1,000; $85,000
c. $65,000; $500; $20,000
John's Texas adjuster license has been expired for 16 months. Which of the following describes the procedure John will need to follow to reinstate his license? a. John will need to take any continuing education courses necessary to meet the requirements and submit a license renewal application with a fine of $150. b. John can apply to the Commissioner for a waiver of continuing education and submit a license renewal application. c. John will need to take the state licensing exam again and submit an application for a new license. d. John must take the state licensing exam again, and if he passes it, his license will be automatically renewed after the test score is submitted to the Department.
c. John will need to take the state licensing exam again and submit an application for a new license.
If the Navigational Limits or Lay-Up period shown on the Declarations page of a standardized Yacht policy is breached because of something out of the control of the insured: a. No action needs to be taken unless the breach is ongoing for more than 30 days. b. No action is necessary at all. c. The insurer must be notified within 10 days after the breach and any additional premium that is due must be paid. d. The insurer must be notified within 10 days after the breach and no additional premium is assessed.
c. The insurer must be notified within 10 days after the breach and any additional premium that is due must be paid.
A commercial property policy is written to Tom Smith and Jim Jones, d/b/a Smith & Jones Hardware. If the insurer chooses to cancel the policy, the cancelation notice will be mailed to: a. Tom Smith only b. Tom Smith and Jim Jones c. Smith & Jones Hardware d. Tom Smith, Jim Jones, and Smith & Jones Hardware
a. Tom Smith only
An insurance binder is: a. Evidence of permanent insurance. b. Temporary evidence of insurance coverage. c. A complete policy. d. Proof of insuring agreements and exclusions.
b. Temporary evidence of insurance coverage.
A Texas insurer is liable for a claim but is in violation of Texas regulations as to the timely payment of the claim. Texas requires that the insurer must pay, in addition to the settlement amount, interest on the amount of the claim at the rate of _____% per year. a. 18 b. 15 c. 20 d. 17
a. 18
An insured who had a $500,000 primary liability policy purchased a $1 million Umbrella liability policy with a $2,000 self-insured retention limit. Later, the insured allowed the required underlying primary policy with a limit of $100,000 to expire. A week after that, the insured became liable for a $100,000 loss that is not excluded by the provisions of either the primary policy or the Umbrella policy. How will this loss likely be settled? a. The insured will pay the full $100,000 loss. b. The umbrella policy will pay the full $100,000 loss. c. The underlying policy will pay the full $100,000 loss. d. The insured will pay $2,000, and the umbrella policy will pay the remainder of the loss.
a. The insured will pay the full $100,000 loss.
Mrs. Vincent is covered on a PAP policy which covers her 2012 Ford SUV. She carries liability and full physical damage coverage. Her neighbor owns a 2002 Chevrolet pick up truck with liability coverage only. Mrs. Vincent borrows the truck to pick up lawn furniture, parks the truck at Home Depot and leaves the keys in the ignition. The truck is stolen and later found wrecked. Which of the following would apply? a. The loss is covered under Mrs. Vincent's "other than collision coverage." b. The loss would be covered under her neighbor's policy. c. The loss is covered under Mrs. Vincent's collision coverage. d. The loss would be covered under her neighbor's homeowners coverage.
a. The loss is covered under Mrs. Vincent's "other than collision coverage."
An insurance contract must comply with the "Principle of Indemnity". Jarron's friend Nick, accidentally destroys Jarron's laptop computer. Nick pays Jarron for the damage, but Jarron also submits a claim to his insurance company for the laptop. The claim will be: a. Paid, the fact that Jarron has already been paid for the damage has no bearing on the insurance company's obligation to pay. b. Denied because Jarron has already been paid for the damage. c. Paid, but only at 50% of the limit of liability. d. Denied because the damage was caused by a friend and not the insured.
b. Denied because Jarron has already been paid for the damage.
Sue Stokers owns an expensive collection of jewelry. She is worried about the fluctuating values of gold, silver and diamonds. She has the collection appraised. Her agent suggests a Personal Articles Floater to insure these items. If she wants to avoid a decrease in her coverage due to a decrease in market value, what is the best clause she can have included in her policy? a. Functional replacement cost b. Actual cash value c. Agreed amount clause d. Diminished value
c. Agreed amount clause
Which of the following is NOT a claim settlement option in a property loss? a. Replace the property with like kind and quality. b. Replace the property with new. c. Repair the property. d. Pay market value only.
d. Pay market value only.
