TX IA Study Guide
Both Steve and his wife, Arlene, carry DP-2 policies on their $135,000 home. Steve's policy has a limit of $108,000 and Arlene's has a $27,000 limit, and both policies pay on a pro rata basis. After a hailstorm causes $13,000 in damage to their roof, how much of the damage will be covered by Steve's policy (ignoring any deductible)? A. $10,400 B. $13,000 C. $9,630 D. $2,600
A. $10,400
Jaime made $950/week before he was killed in a work-related accident. The State Average Weekly Wage is $895. Jaime has three dependents: his wife and two children. How much will each of his children receive per week in death benefits? A. $178 B. $356 C. $238 D. $224
A. $178 Death benefits pay 75% of the deceased worker's AWW. Jaime's spouse would receive half of this amount; the other half is split evenly between his children. In this case, 75% of $950 is approximately $713. Half of this is approximately $356. This amount would be split between the children, so each of Jaime's children would receive $178/week.
Jerome was shopping at ABC Imports when a light fixture fell from the ceiling and hit him on the head. Jerome's injuries resulted in an extended hospital stay, so he sued ABC Imports and was awarded $400,000. Assuming ABC Imports carries a CGL with a General Aggregate of $750,000 and a per occurrence limit of $250,000, what is the maximum that ABC's insurer will pay for Jerome's injuries? A. $250,000 B. $750,000 C. $400,000 D. $75,000
A. $250,000
The HIPAA was enacted by the US Congress in _________. A. 1996 B. 1986 C. 2003 D. 1967
A. 1996
Once a claim has been accepted and is undisputed, the insurer has ___ days to pay the claim. A. 5 B. 10 C. 15 D. 45
A. 5
What is a reserve, in insurance terms? A. A pool of collected premiums that the insurer sets aside to pay claims B. A set of rules governing how the insurance industry should work C. A group of policyholders who pay into the same pool of premiums D. The amount of revenue that the insurer sets aside to pay employee salaries
A. A pool of collected premiums that the insurer sets aside to pay claims
Xavier owns a small insurance company. Recently the company won a bid to insure a new housing development in Omaha, NE. His company can handle any claims that arise, but if a series of tornados were to tear through the area and destroy the entire development, Xavier's company would suffer financially. Which type of insurer could help Xavier's company protect itself the most from this potential loss? A. A re-insurer B. A stock insurer C. A reciprocal insurance group D. A fraternal benefits society
A. A re-insurer
Kevin plays in a brass band using two rare antique Alexander tubas. Since they are no longer produced, the value of the tubas is difficult to determine. Which type of policy would best indemnify Kevin in the event that his tubas were ever damaged, lost, or stolen? A. Agreed value policy B. Actual cash value policy C. Franchise deductible policy D. Replacement cost policy
A. Agreed value policy
Eric works in Texas for Gemutlich Insurance. His company is licensed to sell insurance in Texas, but is based out of Munich, Germany. Gemutlich Insurance was formed under German law, but follows all applicable Texas laws and possesses a Texas certificate of authority. Which type of insurer does Eric work for? A. Alien Insurer B. Surplus Insurer C. Foreign Insurer D. Domestic Insurer
A. Alien Insurer
Which of the following statements regarding scheduled fidelity bonds is FALSE? A. All employees are bonded for the same aggregate amount. B. A limit of liability is defined for each employee or position. C. Employees can be bonded for different amounts. D. They are applicable to only select employees or positions.
A. All employees are bonded for the same aggregate amount.
John moved out of his house and put it up for sale three months ago. While he was waiting for the house to sell, John's plumbing pipes froze and burst in the icy temperatures, which eventually led to water damaging the cabinetry and hardwood floors. Which of the following statements would most likely be TRUE? A. Although John's house was still covered under an HO-3, the damage would not be covered because he didn't shut off the water supply. B. Because John's house was still covered under an HO-3, the damage would be covered. C. Although John's house was still covered under an HO-3, the surface water resulting from the damaged pipes is not a covered peril. D. Freezing is not a covered peril in an HO-3, so this loss would not be covered.
A. Although John's house was still covered under an HO-3, the damage would not be covered because he didn't shut off the water supply.
In the Business Auto Policy, what does the symbol #2 mean? A. Any Owned Vehicle B. Owned Autos Subject to No-fault Insurance C. Owned Private Passenger Autos Only D. Specifically Described Autos
A. Any Owned Vehicle
There are several terms that are often interchangeable with "endorsements." Which of the following is NOT one of these terms? A. Binders B. Attachments C. Addendums D. Riders
A. Binders
Sam suffers $6,000 in injuries when Nicole runs a red light and crashes her uninsured car into Sam's. Sam's own insurance company, ABC Insurance, immediately pays him $5,000 for his injuries. Sam then ponders whether to file a $6,000 lawsuit against Nicole. Why can't Sam sue Nicole for the full amount of his injuries? A. By accepting payment from ABC Insurance, Sam forfeited his right to collect this amount from Nichole. B. Nicole has already forfeited her rights to Sam's insurance company. C. Sam first needs to wait to see how much Nicole pays to ABC Insurance. D. Once ABC Insurance indemnifies Sam for $5,000, Sam is blocked from any further legal action.
A. By accepting payment from ABC Insurance, Sam forfeited his right to collect this amount from Nichole.
Farmer Bob would like to sell his recent harvest of lettuce to a local wholesaler. The wholesaler agrees, but only if Bob can prove he has insurance protection in the event that his lettuce causes people to become ill. What type of insurance does Bob need in this situation? A. Farm Product Liability insurance B. Scheduled Farm Personal Property coverage C. Farm Pollution Liability insurance D. Medical Payments
A. Farm Product Liability insurance
In 1945 Congress passed the McCarran-Ferguson Act. What does that act do? A. Gives the states the authority to regulate the insurance industry B. Gives the federal government the authority to regulate the insurance industry C. Provides universal insurance coverage D. Regulates the way insurance information is shared
A. Gives the states the authority to regulate the insurance industry
Loggers, roofers, and coal miners would fall into which of the following categories? A. High-risk employees B. High-maintenance employees C. Low-risk employees D. Low-maintenance employees
A. High-risk employees
Under which law is an insurer required to explain its reasons for denying coverage? A. IIPPA B. AAA C. FCRA D. HIPAA
A. IIPPA
Jason has an accident at work and ends up losing the little toe on his left foot. What type of disability benefits will Jason receive? A. Impairment Income Benefits B. Supplemental Income Benefits C. Temporary Income Benefits D. Lifetime Income Benefits
A. Impairment Income Benefits
Which of the following statements about the Standard Fire Policy is TRUE? A. It is the basis of all property insurance policies. B. It is an open peril policy. C. It offers replacement cost valuations. D. It offers coverage against wind and hail damage.
A. It is the basis of all property insurance policies.
Which of the following statements about a moral hazard is FALSE? A. It is the result of an unconscious behavior. B. A moral hazard increases risk. C. It is reckless behavior because of security offered by insurance. D. It is a hazard caused by human behavior.
A. It is the result of an unconscious behavior.
When the high-pressure feeder malfunctioned at the ACME Paper Mill, the resulting explosion severely damaged the mill and shut down operations for almost two months. Once the repairs are finished, the city inspector comes out to inspect the work and finds that the repaired scrubber needs to be replaced in order to meet current industry safety standards. Which coverage could help ACME with this added expense? A. Law and Ordinance Coverage B. Valuable Papers Business Insurance C. Extra Expenses Coverage D. Pollutant Cleanup and Removal
A. Law and Ordinance Coverage
Which one of the adjuster's reports usually includes the initial claim reserve amount? A. Preliminary report B. Final report C. Interim report D. Draft report
A. Preliminary report
Jimmy owns a pawn shop which brings with it a certain amount of risk. He decides to hire a security guard, and install a surveillance system and an alarm system to reduce his monthly premiums on his commercial property policy through the: A. Protective Safeguard endorsement. B. Protective Guardian endorsement. C. Security, Surveillance and Alarm endorsement. D. Risk Reduction endorsement.
A. Protective Safeguard endorsement.
Which of the following is an example of a hazard? A. Sandra's home is in an area of Los Angeles that is often hit by earthquakes. B. Sandra buys a lottery ticket every day. C. Sandra's home is destroyed when a massive earthquake hits. D. Sandra owns an exotic car that is extremely valuable.
A. Sandra's home is in an area of Los Angeles that is often hit by earthquakes.
Veronica owns a pottery business and is insured under a commercial property policy. She was in the process of building an extra structure for the sole purpose of kiln firing her pottery when a massive storm came through and blew down all the scaffolding, which added additional cost to the construction project. Which coverage extension of the Builder's Risk Coverage Form would cover the scaffolding? A. Scaffolding, Construction Forms, and Temporary Structures B. Debris Removal C. Property in Transit D. Preservation of Property
A. Scaffolding, Construction Forms, and Temporary Structures
Frank purchases an automobile policy from publicly-traded XYZ Insurance. He pays regular monthly premiums, and also purchases stock in XYZ and receives dividends when the company turns a profit. From which type of company has Frank purchased insurance? A. Stock insurer B. Mutual insurer C. Re-Insurer D. Reciprocal insurer
A. Stock insurer
Which Texas homeowners policy provides the most comprehensive coverage? A. Texas HO-C B. Texas HO-A C. Texas HO-A+ D. Texas HO-B
A. Texas HO-C
Jason's auto policy states that the insurer may cancel coverage if a premium is more than 30 days late. However, Jason is currently more than 30 days late, and has been so five times in the last year, and his insurer has done nothing about it. When Jason gets into an accident and files a claim, which of the following is most likely to happen? A. The insurer will pay the claim because of the implied waiver they have made by not canceling Jason's policy the previous times he was late with his payments. B. The insurer will deny the claim and cancel Jason's policy because he is more than 30 days late with his payment. C. The insurer will deny the claim and cancel Jason's policy because of the implied waiver they have made by not canceling his policy the previous times he was late with his payments. D. The insurer will pay the claim because of the express waiver they have made by not canceling Jason's policy the previous times he was late with his payments.
A. The insurer will pay the claim because of the implied waiver they have made by not canceling Jason's policy the previous times he was late with his payments.
A power surge sparks a small electrical fire in an office building. The electrical fire triggers the automatic sprinkler system. The water from the sprinklers soaks the carpets and shorts-out all the computers, causing thousands of dollars in damage. What is the proximate cause of the loss? A. The power surge B. The automatic sprinkler system C. The electrical fire D. The water from the sprinklers
A. The power surge
Greg plays trombone in his school band during football games. During a rally song in the stands one day, Greg annoys one of the opposing team's fans, who grabs his $400 trombone and hurls it down the bleachers, completely destroying it. Greg's insurance pays him $400 to replace the trombone, but then the opposing team's coach also offers to replace the instrument, at whatever the cost. So Greg orders a new $3,200 trombone and has the opposing team's athletic department absorb the cost. Which principle has Greg violated? A. The principle of indemnity B. The principal of the opposing team C. The principle of consideration D. The principle of legal purpose
A. The principle of indemnity
Which of the following is NOT a feature of a typical Business Owners Policy? A. Usually Actual Cost Valuation B. Extra Expense coverage C. Built-in inflation protection D. Liability protection for lawsuits from accidents or products
A. Usually Actual Cost Valuation
Each of the following would classify as an insurable risk, except: A. a marriage. B. a rocket. C. a brick patio. D. a barn.
A. a marriage.
The Severability of Interests condition states that: A. coverage applies to each insured separately, as if no other insured existed. B. when an insurer pays a total loss settlement, policy coverage may terminate and any unearned premiums will be refunded to the insured. C. an insurer has the right to cancel an insurance policy at any time. D. an insured has the right to cancel an insurance policy at any time.
A. coverage applies to each insured separately, as if no other insured existed.
The Insurance Commissioner: A. enforces state laws relating to insurance. B. sets insurance rates. C. writes insurance policies. D. passes state laws relating to insurance.
A. enforces state laws relating to insurance.
All of the following are typical exclusions in an insurance policy, EXCEPT: A. explosion. B. flooding. C. nuclear hazards. D. earthquakes.
A. explosion.
Mental anguish would be an example of: A. general damages. B. special damages. C. punitive damages. D. tangible damages.
A. general damages.
XYZ Films is getting ready to shoot a new Western film. As with most film productions, XYZ Films uses a surety bond from ABC Bonds to help protect the distributor's financial investment in the movie. Because of the magnitude of the budget for the film, ABC Bonds has XYZ Films secure a/an _____________ to act as a co-signer. A. indemnitor B. suretyship C. co-principal D. obligee
A. indemnitor
The factual statements of the insured upon which an insurance policy is based are called: A. representations. B. utmost good faith. C. misrepresentations. D. allegations.
A. representations.
A ___________ is a law set forth by a governing body such as a state or city. A. statutory law B. liability law C. complaint law D. common law
A. statutory law
Barbara has been negotiating a property claim with a claimant for a few hours now. She has displayed her assessments, gone over the policy, and offered a fair settlement amount within the policy limits. However, the claimant has dismissed it completely without any counter-offer. The most appropriate next step is for Barbara to: A. submit her backup offer. B. enter into arbitration. C. remain silent. D. tell a joke to lighten the mood.
A. submit her backup offer.
Eloise borrows Uriah's car so she can run to the grocery store to pick up a few things. While out, she rear-ends a minivan, injuring the driver and 3 other passengers. Each of the passengers suffers $45,000 in injuries, and the driver suffers $40,000. Uriah has a liability policy with limits of 50/100/50, while Eloise carries the minimum liability coverage for Texas. How much will the primary policy pay for this occurrence? A. $60,000 B. $100,000 C. $50,000 D. $160,000
B. $100,000
Sam's Ocean Marine hull policy has a franchise deductible of $50,000. When Sam's ship suffers $75,000 in damage after being overtaken by pirates, how much indemnification can Sam expect to get from his insurer? A. $0 B. $75,000 C. $50,000 D. $25,000
B. $75,000
Bonnie's PAP includes Comprehensive coverage. Which of the following losses could this coverage pay for? A. Bonnie rear-ends another vehicle. B. Bonnie's car catches fire. C. Bonnie rolls her vehicle in a one-car accident. D. Bonnie's car breaks down due to an engine malfunction.
B. Bonnie's car catches fire.
Sam is a claimant seeking damages from XYZ Insurance. The XYZ adjuster comes to meet with Sam to hear the circumstances of her injury. The adjuster determines that Sam played an active role in her own injuries, and therefore XYZ Insurance will pay her nothing at all for her injuries. What defense is the adjuster using? A. No negligence B. Contributory negligence C. Comparative negligence D. Full negligence
B. Contributory negligence
Honey's Bakery is a local coffee shop run by two sisters. In a rush to leave one afternoon, their new employee forgets to turn off the gas stove. The leaking gas causes an explosion, destroying the kitchen. Which condition in their commercial property policy could help the sisters cover the cost of the damage? A. Non-Owner Condition B. Control of Property C. Legal Action Against the Insurer D. Other Insurance
B. Control of Property
Which of the following situations does NOT involve an insurable risk? A. Melody just bought a gas station and convenience store. B. Dale just bought 30 shares of a hot new startup company online. C. Hank just bought a new outboard motor for his fishing boat. D. Christine just bought her husband an expensive new watch.
B. Dale just bought 30 shares of a hot new startup company online.
Which of the following would NOT be covered by Comprehensive Coverage? A. Jamie's truck is damaged by a stray bullet in a bad part of town. B. Eddie overturns his parents' Jeep on the way to a baseball game. C. Sharon's new Lamborghini is ruined in a flood during her vacation in Louisiana. D. A careless construction worker drops a large brick from a crane, breaking Marjorie's windshield.
B. Eddie overturns his parents' Jeep on the way to a baseball game.
David just opened his own consulting business, and has taken on several new clients. He's having difficulty managing his schedule on top of all the other responsibilities related to owning his own business, so he hires Tina via contract to work as his full-time office manager for $15 per hour. According to the definitions in David's Commercial General Liability policy, which of the following best describes Tina? A. Leased Worker B. Employee C. Volunteer Worker D. Temporary Worker
B. Employee
RWW Insurance creates a radio promotion where they advertise that they will insure any car for $200 a year. They don't actually offer such a plan, but they figure they will be able to sell hundreds of policies to people who show up looking for the bargain. What type of unfair insurance trade practice does this behavior exemplify? A. Unfair discrimination B. False information and advertising C. Misrepresentations D. Illegal kickbacks
B. False information and advertising
When Phyllis passed away, she left an inheritance for her three children, including ten ounces of gold for each of them. To execute her will, her lawyer hires another attorney, Williams, to oversee the careful distribution of the gold. The court requires a bond to assure Williams will conduct himself honestly. Which type of bond has the court required? A. Faithful Performance of Duty bond B. Fiduciary bond C. Fidelity bond D. Gold bond
B. Fiduciary bond
Which of the following is NOT a form of insurance fraud? A. Lighting a candle and leaving it next to your window curtains before leaving for work. B. Increasing your insurance coverage when you think a loss is likely. C. Staging an accident. D. Faking a death.
B. Increasing your insurance coverage when you think a loss is likely.
Which of the following situations does NOT involve an instance of "pure risk?" A. Loss of a house due to a hurricane B. Loss of money invested in the stock market C. Loss of a company car in an unfortunate accident D. Loss of crops due to an infestation of parasites
B. Loss of money invested in the stock market
Which of the following best describes how losses are valued under a Commercial Crime policy? A. Money is valued at face value; securities are set at their value on the day the settlement is paid; and other property is valued at the lesser of the cost to repair or replace. B. Money is valued at face value; securities are set at their value on the day the loss is discovered; and other property is valued at the lesser of the cost to repair or replace. C. Money is valued at face value; securities are set at their value on the day the loss is discovered; and other property is valued at actual cash value. D. Money is valued at face value; securities are set at their value on the day the settlement is paid; and other property is valued at replacement cost.
B. Money is valued at face value; securities are set at their value on the day the loss is discovered; and other property is valued at the lesser of the cost to repair or replace.
Nick has a comprehensive individual health insurance policy that he purchased through an HMO, and Charity has a PPO plan through her employer. Which of the following statements is TRUE? A. Nick's policy was automatically accepted by his insurer, but Charity had to prove her current health status before being accepted. B. Nick was assigned a primary care physician who must coordinate his health care within a network, but Charity may choose a primary physician outside the network. C. Nick's plan allows him to go to any hospital for emergency services, but Charity is restricted to approved hospitals within the network. D. Nick has a higher level of flexibility in choosing his health care than Charity, but Charity has lower medical costs than Nick.
B. Nick was assigned a primary care physician who must coordinate his health care within a network, but Charity may choose a primary physician outside the network.
When is someone considered a passenger, and thus covered under Passenger Bodily Injury Liability? A. Once she takes a seat on the plane B. Once she begins to board the plane C. After clearing the airport security checkpoint D. After booking a plane ticket
B. Once she begins to board the plane
Which of the following would be most likely to purchase an Errors and Omissions policy? A. Actor B. Real Estate Agent C. Logger D. Professor
B. Real Estate Agent
Which of the following is NOT a risk management technique? A. Risk reduction B. Risk equality C. Risk avoidance D. Risk retention
B. Risk equality
Ron's truck experiences a mechanical breakdown and he has it towed to an auto repair facility. Upon further examination of Ron's claim, his Mechanical Breakdown Insurance provider denies coverage. Which of the following would be a valid reason for this denial? A. The auto shop determines the transmission caused the breakdown of the automobile. B. Ron had been hauling a large boat, which overloaded the vehicle and caused the breakdown. C. The repairs were very expensive. D. The auto shop determines the alternator caused the breakdown of the automobile.
B. Ron had been hauling a large boat, which overloaded the vehicle and caused the breakdown.
According to the Mortgagee Clause, what is NOT one of the rights of the mortgagee? A. The mortgagee may receive a portion of claim payments. B. The mortgagee may change the coverage amount. C. The mortgagee may be indemnified, even in the event of fraud by the insured. D. The mortgagee will be notified if the insurer intends to cancel the policy.
B. The mortgagee may change the coverage amount.
Generally speaking, which of the following has the broadest coverage? A. Stand alone excess liability B. Umbrella coverage C. Stand alone umbrella liability D. Follow form excess liability
B. Umbrella coverage
What BOP endorsement would cover a company's lost business income and extra expense due to loss of electrical service? A. This type of loss cannot be covered B. Utility Time Element C. Utility Services - Direct Damage D. Spoilage
B. Utility Time Element
Jane's shed burns to the ground during a tornado, when the high winds break a wall of the shed, knocking over a lantern inside. What is the proximate cause of the loss? A. Fire B. Wind C. The lantern D. Wall collapse
B. Wind
Phil owns a public pool. One day, Phil has an altercation with a woman visiting the pool. Phil doesn't like the way she looks, so he tells her that she has to leave the premises right away. The woman takes Phil to court for violating her civil rights. This is an example of what type of personal injury covered under Phil's Commercial General Liability policy? A. Malicious Prosecution B. Wrongful Eviction C. Advertising Injury D. Libel and Slander
B. Wrongful Eviction
James and Eric want to play a prank on Bob for Halloween. They dress up like headless horsemen and throw ignited Jack O'Lanterns at his house. Unfortunately, one of the inflamed pumpkins catches the porch on fire, causing $3,500 in damages. Bob doesn't find this tomfoolery very entertaining and sues both James and Eric for the cost of the repairs. In court, James and Eric would be: A. the plaintiffs. B. a joint tortfeasor. C. a tortfeasor. D. intentional tort.
B. a joint tortfeasor.
A reciprocal insurer is: A. a non-profit mutual aid organization that engages in charitable or benevolent activities and provides insurance to its members. B. an unincorporated organization of subscribers that operates through an attorney-in-fact to provide insurance benefits for its members. C. an insurance company that is owned by its policyholders, is not traded publicly, and is governed by a board of directors elected by the policyholders. D. a publicly-traded insurance company owned by stockholders, which provide capital and participate in the insurer's profits and losses.
B. an unincorporated organization of subscribers that operates through an attorney-in-fact to provide insurance benefits for its members.
When Sally applies for an auto policy, her agent issues her a ________ so that she can benefit from insurance protection while he underwrites the policy. A. representation B. binder C. warranty D. waiver
B. binder
A lightning strike causes one of the storage buildings on John's farm to burn to the ground, aided by the fuel tanks he kept in the building. John knows he wasn't supposed to store any fuel in the building, so he keeps that piece of information to himself when he files a claim. John's insurer may deny his claim based on his: A. liberalization. B. concealment. C. hard fraud. D. arson.
B. concealment.
Coverage C - Personal Property of a homeowners policy typically excludes: A. furniture. B. fish. C. dishes. D. blanket coverage of personal property.
B. fish.
An insurer that adheres to the laws of a state but is located outside of that state is called a(n) ___________ insurer. A. domestic B. foreign C. national D. alien
B. foreign
The Standard Fire Policy divides a basic property insurance policy into ________ parts. A. three B. four C. five D. two
B. four
When a car stops short in front of Mike's car, he manages to hit the brakes in time and avoids a collision. To Mike's surprise, the other driver then throws the car into reverse and backs into Mike's car! The other driver's actions are an example of: A. negligence. B. hard fraud. C. soft fraud. D. arson.
B. hard fraud.
After a loss covered under a dwelling policy, Ordinance or Law coverage pays for: A. confiscation of property by the government. B. increased repair costs due to laws or codes. C. any change that decreases the value of the property. D. remediation of pollutants.
B. increased repair costs due to laws or codes.
Clark is filling out an application for an insurance policy. The application asks for his birth date, and Clark writes 1-24-67. His actual birthday is 1-24-63, but he likes to appear younger so he uses a different date. This would be called: A. warranty. B. misrepresentation. C. representation. D. concealment.
B. misrepresentation.
States that have special legislation that requires workers' compensation coverage to be provided exclusively by the state's workers' comp program are: A. competitive. B. monopolistic. C. elective. D. compulsory.
B. monopolistic.
Cindy holds an insurance policy from Sine Nomine Insurance. This is not a publicly traded company, and Cindy can participate in the election of the board, receiving dividends if the company does well. Sine Nomine Insurance could be best described as a: A. a risk retention group. B. mutual insurance company. C. stock insurance company. D. fraternal benefits society.
B. mutual insurance company.
Jim is out turkey hunting on a private ranch when he hears some movement in the brush. Assuming it's a turkey, Jim raises his shotgun and fires. Unfortunately for Jim, he has not taken a turkey, but has severely injured one of the landowner's calves instead. Jim is responsible for the cost of the calf because he acted with: A. great care. B. negligence. C. liability. D. responsibility.
B. negligence.
The Employee Retirement Income Security Act (ERISA): A. safeguards medical patient privacy and establishes rules about how patients' personal information should be treated. B. requires that every fiduciary of an employee benefit plan and every person who handles funds or other property of those plans must be bonded. C. regulates how insurance companies collect, use, and share personal information about their policyholders. D. regulates how financial institutions collect, share, and use consumers' personal and financial information.
B. requires that every fiduciary of an employee benefit plan and every person who handles funds or other property of those plans must be bonded.
A "hazard" is defined as: A. an insured item. B. something that increases the chance of a loss. C. the likelihood of experiencing a loss. D. an unexpected event that causes loss.
B. something that increases the chance of a loss.
Steve has just purchased a wedding ring for his new bride. If something were to happen to the ring, he'd be out a lot of money, so he purchases an insurance policy. He is able to do this because: A. the ring is a sure risk. B. the ring is a pure risk. C. the ring is a speculative risk. D. the ring is a safe risk.
B. the ring is a pure risk.
In a __________, only one party is legally obligated to perform. A. contract of adhesion B. unilateral contract C. conditional contract D. contract of utmost good faith
B. unilateral contract
In order to qualify for an insurance policy, Lydia's Fine Jewels must agree to have a security guard on the premises 24/7. This is called a:
B. warranty.
While making a right-hand turn from the right lane, Ben is sideswiped by Roxanne, totaling the car he bought new 12 years ago for $15,000. Roxanne is judged to be at fault. She has an auto policy with limits of 50/100/25 and a $500 deductible on her collision coverage. Assuming Ben's car depreciates at a rate of $1,100 a year, how much will Roxanne have to pay out of pocket when Ben files a claim against her insurer for the damages? A. $1,100 B. $1,800 C. $0 D. $500
C. $0
A flood inundates Howard's property, causing $100,000 of damage to the dwelling and $25,000 of damage to the detached garage. If Howard has a Dwelling Form flood policy with a $150,000 limit, how much will the policy pay for the damage to Howard's home and detached garage combined? (Ignore deductible amounts.) A. $150,000 B. $100,000 C. $115,000 D. $90,000
C. $115,000
Andrew was recently arrested for driving while intoxicated and his driver's license was suspended. He applied for auto insurance through TAIPA. Which of the following statements is TRUE? A. Andrew cannot obtain coverage through TAIPA because he has been convicted of driving while intoxicated. B. Andrew can only obtain coverage through TAIPA if he has been rejected for coverage by two insurers in the voluntary market. C. Andrew cannot obtain coverage through TAIPA because he does not have a valid driver's license. D. Andrew can still obtain coverage through TAIPA as long as his car has a valid registration.
C. Andrew cannot obtain coverage through TAIPA because he does not have a valid driver's license.
Joan files a lawsuit against Andy because his dog escaped and caused her to fall on an icy sidewalk. Which of the following statements is FALSE? A. Andy must submit an answer to avoid a default judgment. B. Andy's insurer is obliged to defend him in court until it proves that there is no coverage under the policy in question, or until the suit is settled. C. Andy's insurer will send Joan a reservation of rights. D. Andy must notify his insurer that he is being taken to court.
C. Andy's insurer will send Joan a reservation of rights.
Arlene's house suffered structural damage in an earthquake last year, but her policy does not cover earthquake damage, so Arlene never got it fixed. When a tornado rips through her neighborhood, it causes some roof damage totalling $2,000, and Arlene sees an opportunity in the situation. She files a claim for the roof damage, but also claims that the tornado caused the structural damage to her house that was actually caused by the earthquake last year. Which of the following statements is true? A. Arlene has just committed hard fraud. B. Arlene has just created a morale hazard. C. Arlene has just committed soft fraud. D. Arlene has just created a physical hazard.
C. Arlene has just committed soft fraud.
Cary is an insurance agent who has started to work as a third party administrator for Jamie, another insurance agent. Which of the following statements is TRUE? A. Cary must become licensed as a TPA as soon as possible. B. If Cary is working as a TPA without a license, he will likely be disciplined by the Insurance Commissioner. C. Cary does not need to be licensed as a TPA, since she is an insurance agent. D. Cary does not need to be licensed as a TPA because Texas does not license TPAs.
C. Cary does not need to be licensed as a TPA, since she is an insurance agent.
As an insurance adjuster, Heather is responsible for updating and maintaining an accurate record of all the information pertinent to an individual's insurance claim, including copies of all written documentation, photos and property sketches, witness statements, and copies of medical bills. What is this record called? A. Evaluation report B. Investigative file C. Claim file D. Field report
C. Claim file
Which of the following would NOT be covered under Part A of a Personal Auto Policy? A. Legal defense costs B. Damage the insured causes while driving his friend's car C. Damage the insured causes to his own garage D. Lost wages
C. Damage the insured causes to his own garage
When one of Frank's ovens breaks down at his wholesale bakery, it causes a dip in production that drastically affects the bottom line of the business. Luckily for Frank, he has an Equipment Breakdown Protection Coverage Form that can help cover the cost of repairing the expensive oven. Which policy coverage can help pay for costs associated with making temporary repairs and speeding up the permanent repairs? A. Oven Repair and Operations B. Supplementary Payment C. Expediting Expenses D. Automatic Coverage
C. Expediting Expenses
Which of the following homeowners policies provide coverage on an open-peril basis for personal property without endorsement? A. HO-3 and HO-5 B. HO-2 and HO-3 C. HO-5 D. HO-8
C. HO-5
Residual market insurance programs are primarily designed to meet the needs of which type of consumer? A. Consumers needing multiple policies B. Low-income consumers C. High-risk consumers D. Consumers with physical disabilities
C. High-risk consumers
Agnes purchased a home ten years ago in an up-and-coming neighborhood for $75,000. The home's value has since tripled to $225,000! Agnes still has $25,000 left on her mortgage, but has increased her dwelling coverage to $225,000 to keep up with the home's appreciation. When it burns to the ground in a fire, her mortgage company wants to be indemnified $75,000 because the value of the home has tripled. Which policy condition protects against this claim? A. Liberalization Clause B. Recoverable Depreciation C. Insurable Interest D. Severability of Interests
C. Insurable Interest
Which statement about the Federal Employees Compensation Act is TRUE? A. It protects only interstate railroad workers and their families. B. It protects injured seamen by allowing them to sue for damages and to choose a jury trial. C. It provides federal government insurance for civilian employees. D. It provides benefits in the form of monthly payments and medical coverage to coal miners.
C. It provides federal government insurance for civilian employees.
Which of the following statements is true about an insurance policy? A. The insured sets the terms of the policy. B. It is transferable if the property is sold to another party. C. It relies on the utmost good faith of both the insured and the insurer. D. The insured is obligated to the terms of the contract for the entire policy period.
C. It relies on the utmost good faith of both the insured and the insurer.
Which of the following losses may qualify for coverage under Coverage F - Medical Payments? A. Mike breaks his ankle when he trips and falls down the stairs heading to the basement apartment that he rents from Wilma. B. Kevin accidentally shoots himself in the foot with a nail gun while he is helping Joe build a deck in Joe's backyard. C. Stacy gets a full set of veneers after she chips her tooth on a softball while playing catch over at Kathy's house. D. Wilma breaks her ankle when she trips and falls down her basement stairs.
C. Stacy gets a full set of veneers after she chips her tooth on a softball while playing catch over at Kathy's house.
Which of the following is similar to a Business Auto Policy, but adds several policy provisions and protections specific to the trucking industry? A. Garagekeepers policy B. Excess Liability insurance C. Truckers policy D. Trip Transit policy
C. Truckers policy
The "Consent to Settle" clause in the Professional Liability policy is best described as: A. a clause that requires the insured to get the consent of the insurer prior to settlement. B. a clause that requires the insurance company to get approval from the insured before settling a claim. C. a clause that requires the insured's approval before the insurance company discusses settlement options with a claimant. D. a clause that requires the insurance company to settle all claims.
C. a clause that requires the insured's approval before the insurance company discusses settlement options with a claimant.
The Insurance Guaranty Association is a mechanism that covers claims in the event of: A. an insured's bankruptcy. B. government intervention. C. an insurer's insolvency. D. catastrophic disaster.
C. an insurer's insolvency.
States that allow private insurers to offer workers' comp coverage as an alternative to the state workers' comp fund are called: A. compulsory. B. monopolistic. C. competitive. D. elective.
C. competitive.
Lewis owns a computer store, and he spends many hours a day on the sales floor demonstrating his products to customers. He often gets very animated when showing the electronics and, although he does not intend for anything bad to happen, he doesn't worry too much about handling them carefully, since he knows that his insurance policy will cover any damages. This behavior would be called a: A. physical hazard. B. fraud. C. morale hazard. D. moral hazard.
C. morale hazard.
An insurance contract is an agreement between two parties where each side promises to be truthful, factual, and honest about their respective positions. Therefore, an insurance contract is said to be a contract of: A. warranties. B. truthfulness. C. utmost good faith. D. promises.
C. utmost good faith.
Sam, who has a typical HO-3 policy, is forced to evacuate his home by civil authorities due to rising flood waters in his neighborhood. It takes a month before Sam is allowed to come back to his home. During this time, he has spent $3,000 in hotel expenses, on top of his monthly mortgage payment of $850. When he files a claim, how much will Sam receive under Coverage D - Loss of Use? A. $3,000 B. $3,850 C. $850 D. $0
D. $0
James is walking down the street when Andrea, an uninsured motorist, strikes him with her car. James suffers $12,000 in injuries from the accident. He has personal injury protection of $10,000 from his own automobile insurance policy, which immediately pays him the full amount. By accepting $10,000 from his own insurance company, James has waived the right to sue Andrea for more than _____ for personal injury. A. $12,000 B. $5,000 C. $10,000 D. $2,000
D. $2,000
Adjuster Alice is trying to determine the final settlement amount for Ted's claim. Ted's house was damaged in a covered loss, and Alice has estimated that it will cost $25,000 to make the necessary repairs. Ted's homeowners policy has a $100,000 limit and a $2,000 deductible. Typically, how much would Adjuster Alice calculate Ted's final settlement amount to be? A. $100,000 B. $98,000 C. $25,000 D. $23,000
D. $23,000
Kelly took her eyes off the road and ended up smashing into the back of a passenger van. All five passengers were injured, and each one ended up with $25,000 in medical costs. Assuming Kelly has liability coverage with limits of 50/100/50, how much will she have to pay out of pocket? A. $50,000 B. $10,000 C. $15,000 D. $25,000
D. $25,000
A fire burns down Jenny's Hardware, leaving virtually nothing salvageable. Which of the following items would NOT be covered under Coverage B of the Building and Personal Property Coverage Form in her commercial property policy? A. A portable table saw used to cut lumber to a customer's specifications B. Inventory for sale C. Computers purchased by the business D. A paint mixer permanently affixed to the floor
D. A paint mixer permanently affixed to the floor
Which of the following is NOT eligible for Dwelling coverage? A. A single-family home that is wholly rented out B. A mobile home on a permanent foundation C. A duplex owned by a corporation D. An 8-unit apartment building in which the owner resides
D. An 8-unit apartment building in which the owner resides
Which of these businesses would be LEAST likely to need a bailee's customer floater? A. An auto body shop B. A dry cleaner C. An appliance repair shop D. An ice cream shop
D. An ice cream shop
All of the following pieces of information can be found in the Conditions section of an insurance policy, EXCEPT: A. anything the insured must do for coverage to remain in effect. B. what the insured must do in the event of a lawsuit. C. the insured's duties after a loss. D. causes of loss that are not covered.
D. Causes of loss that are not covered.
John, a contractor, just purchased a new backhoe and wants to get an insurance policy to cover it. He's looking for a policy that will provide coverage not only on the job site, but also while transporting it back and forth between sites. What type of inland marine insurance policy would likely fit John's needs? A. Boiler and Machinery coverage B. Builder's Risk coverage C. Bailee's Customer floater D. Contractor's Equipment floater
D. Contractor's Equipment floater
If an adjuster needs to find clarification about what actually constitutes a collision, in which section of an insurance policy would she find that information? A. Declarations B. Conditions C. Exclusions D. Definitions
D. Definitions
Which section of an insurance policy is designed to OMIT certain risks from coverage? A. Coverage Forms B. Insuring Agreement C. Definitions D. Exclusions
D. Exclusions
Robert's tomato crop production was well below the revenue guarantee this year, and Robert files a claim against his Crop-Revenue policy for the low yield. However, the adjuster denies Robert's claim after completing her inspection. What might be a reason for the denial? A. Failure to notify the insurer that there was a problem prior to the harvest B. Failure to use state-of-the-art farming equipment C. Failure to hire enough farm employees D. Failure to use the required amount of fertilizer
D. Failure to use the required amount of fertilizer
Randy owns a clothing store. One day, he notices a shady character with a backpack who is hanging around acting nervous. Randy becomes suspicious and approaches the young man. As the boy makes an effort to avoid him, Randy grabs his arm and detains him until the police arrive. Not finding any stolen merchandise, the police let the boy go. Two weeks later Randy is notified that he will be sued for violation of the young man's civil rights. This is an example of what type of personal injury covered under Randy's Commercial General Liability policy? A. Malicious Prosecution B. Suspicion of Theft C. Wrongful Entry D. False Arrest, Detention, or Imprisonment.
D. False Arrest, Detention, or Imprisonment.
Flora is driving in the rain when she skids off the road and slams into Cam's billboard, totaling her car and causing $2,000 in damage to the billboard. Flora has an auto policy with ABC Insurance, and both Cam and Flora submit claims against this policy for their damages. Which of the following is TRUE? A. Flora will file a first-party claim for the damage to Cam's billboard and a third-party claim for the damage to her car. B. Flora will file a third-party claim for the damage to her car, and Cam will file a first-party claim for the damage to his billboard. C. Flora will file a third-party claim for the damage to Cam's billboard and a first-party claim for the damage to her car. D. Flora will file a first-party claim for the damage to her car, and Cam will file a third-party claim for the damage to his billboard. 46 / 150
D. Flora will file a first-party claim for the damage to her car, and Cam will file a third-party claim for the damage to his billboard.
Bill is going to switch employers, and therefore switch healthcare providers. Which federal law ensures that he won't be denied coverage when he switches health plans? A. FICA B. IIPPA C. FCRA D. HIPAA
D. HIPAA
Hank has collision coverage with a $2,000 deductible on his 2010 truck. One dark, rainy night, Hank's truck slips off the road and rolls over down the embankment. The truck sustains $45,000 in damages, but the actual cash value of the vehicle is only $25,000. Which of the following statements is TRUE? A. Hank will be indemnified by his insurer for $25,000. B. Hank will be indemnified by his insurer for $43,000. C. Collision coverage will not indemnify Hank for this accident. D. Hank will be indemnified by his insurer for $23,000.
D. Hank will be indemnified by his insurer for $23,000
Which of the following statements about insurable interest is FALSE? A. Insurable interest reduces the incentive for someone to cause damages intentionally to insured property. B. Purchasing an insurance policy on your home helps protect your insurable interest in a home. C. When a renter leases your house, your insurable interest in the home remains. D. Maintaining property values allows your neighbor to have an insurable interest in your house.
D. Maintaining property values allows your neighbor to have an insurable interest in your house.
Jim has two policies that cover the same risk, but they respond differently: Policy X is primary and Policy Z is excess. Policy X has a limit of $50,000 and Policy Z has a limit of $25,000. When Jim suffers an insured loss totaling $62,000, how will each policy respond? A. Policy X will pay $37,000 and Policy Z will pay $25,000 B. Policy X will pay $41,335 and Policy Z will pay $20,665 C. Policy X will pay $31,000 and Policy Z will pay $31,000 D. Policy X will pay $50,000 and Policy Z will pay $12,000
D. Policy X will pay $50,000 and Policy Z will pay $12,000
Which of the following may be covered under a DP-3? A. Earthquake B. Flood C. Water backup from sewers D. Power failure on the premises
D. Power failure on the premises
When Emma's house was burglarized, the thieves stole several pieces from her art collection. Although the pieces were only prints, Emma files a claim stating that they were originals, and therefore worth a good deal more than they really are. What has Emma committed? A. Hard fraud B. Concealment C. Tortfeasor D. Soft fraud
D. Soft fraud
After a rain storm, Nancy realizes that she left her bedroom windows open the entire time. Now there is extensive water damage to her area rug and furniture, and the laptop that had been sitting on her desk is ruined. Nancy has a Broad Form homeowners policy, so she calls her insurance company and files a claim. What is the likely result of Nancy's claim? A. The insurer will cover all the damaged property. B. The insurer will only cover the area rug. C. The insurer will pay for the furniture and the laptop, but not the area rug. D. The insurer will not cover any of the damage, since Nancy left the windows open.
D. The insurer will not cover any of the damage, since Nancy left the windows open.
Adam has a treacherous drive to work every day. Not only does he have to drive down the pothole-strewn access road to the highway, but he also must traverse several icy bridges on the way to work. Why does the insurance company call these hazards "physical hazards"? A. They take a toll on Adam physically, increasing the chance of a loss. B. Adam is indifferent to any losses he may suffer. C. Adam doesn't consciously choose to take this route. D. The roads present a physical cond
D. The roads present a physical condition that increases the chance of a loss.
Which statement about Personal Article Floaters is FALSE? A. They pay the least of the following for damaged property: actual cash value; the cost to repair or replace; or the coverage limits. B. Coverage is worldwide. C. They cover property on an open-peril basis. D. They have a $500 deductible.
D. They have a $500 deductible.
After a tornado severely damaged their building, the owners of ABC Online Marketing have to rent another building for a few months while repairs are underway. Which additional coverage would help cover the cost of renting this other building? A. Fixed Cost Insurance B. Additional Covered Property Endorsement C. Electronic Data Processing D. Time Element Insurance
D. Time Element Insurance
Which of the following is NOT a purpose of insurance regulation? A. To promote reasonable insurance rates B. To promote insurance availability C. To prohibit price-fixing D. To prohibit insurance-rating
D. To prohibit insurance-rating
An insurance company may consider each of the following a risk, EXCEPT: A. a ruby necklace. B. a race car. C. a school bus. D. a flood zone.
D. a flood zone.
Driving home after a 14-hour shift, Sam falls asleep at the wheel and plows into Sandra's home, causing extensive damage to the East wall and roof. As a result, Sandra and her family must move into a hotel until the repairs are completed. Sam's car crashing into the house would be considered: A. a physical hazard. B. an out-of-pocket expense. C. an indirect loss. D. an occurrence.
D. an occurrence.
An "occurrence" is defined as: A. the likelihood of experiencing a loss. B. something that increases the chance of a loss. C. an insured item. D. an unexpected event that causes loss.
D. an unexpected event that causes loss.
When Louise goes online and fills out phony applications with XYZ Auto Insurance in order to print the temporary insurance cards and sell them for a profit on the black market, she is: A. using a Ponzi Scheme. B. using a regular business practice. C. committing soft fraud. D. committing hard fraud.
D. committing hard fraud.
In the Standard Fire Policy, "intentional losses" and "extreme perils that cause catastrophic damage to a large number of policyholders" would be considered examples of: A. conditions. B. hazards. C. insurable risks. D. exclusions.
D. exclusions.
Strict liability: A. holds an individual to a lower level of care. B. releases an individual from liability in dealing with dangerous objects. C. does not hold up in a court of law. D. holds a person liable for his actions regardless of how much care he demonstrates.
D. holds a person liable for his actions regardless of how much care he demonstrates.
Bill holds a hull policy for his cargo ship which sails between China and the United States, transporting wooden toys. On voyage (i) his vessel is damaged by pirates. On voyage (ii) the vessel is damaged by striking employees. On voyage (iii) the vessel is destroyed when it strays into a war zone and is struck by a missile. Bill's losses will be covered by his hull coverage for which of these voyages? A. iii only B. i & ii C. ii & iii D. i. only
D. i. only
All of the following are covered under Coverage A of a Business Owners Policy, EXCEPT: A. flooring and floor coverings. B. building maintenance equipment, such as fire extinguishers. C. owner's furniture in an apartment that is rented as furnished. D. leased business personal property that must be insured.
D. leased business personal property that must be insured.
Once a claimant files a complaint to the court, the claimant will become the: A. defendant. B. negligent party. C. answering party. D. plaintiff.
D. plaintiff.
All of the following are true about mediation, except: A. the mediator is a neutral third party. B. either party may walk away. C. settlement is only legally binding if both parties agree to it. D. the mediator's decision is legally binding.
D. the mediator's decision is legally binding.
Mark has an ocean marine insurance policy with cargo coverage. The type and value of his cargo varies from one shipment to the next, so rather than having a set value for this coverage, the amount of his settlement is only determined after a covered loss. Mark's cargo coverage is written on a/an ________ basis. A. replacement cost B. actual cash value C. valued D. unvalued
D. unvalued
In which section of an insurance policy might you find the following statement? "'We, us, and our' refers to ABC Insurance company." A. Exclusions B. Definitions C. Declarations D. Conditions
Definitions
The Liberalization Clause in an insurance policy: A. voids the policy if the insured deliberately conceals or misstates pertinent info. B. states that the insurer is obligated to pay for covered losses only up to the limit set by the policy. C. states that any change to a policy form that broadens coverage without increasing the premium will automatically apply to existing policies. D. states that, in the event of a loss, the insurer will only pay up to the insured value of the risk.
states that any change to a policy form that broadens coverage without increasing the premium will automatically apply to existing policies.
