Chapter 3
Coverage for water backup or sump pump overflow is excluded from the Dwelling Policy. However, with the purchase of the water backup and sump pump overflow endorsement, coverage for up to $5,000 in loss or damage can be provided for an additional premium. What is the deductible associated with this coverage? A: 300 B: 350 C: 200 D: 250
Answer 250 Explanation: Coverage for up to $5,000 in loss or damage, subject to a $250 deductible, can be provided for an additional premium with this endorsement. Pg. 18
How long is the waiting period after the application has been accepted before flood coverage goes into effect? A: 6 months B: 12:01 am the next day C: 5 days D: 30 days
Answer:
The regular National Flood Insurance Program would insure an eligible single-family dwelling for up to A: $200,000. B: $250,000. C: $100,000. D: $150,000.
Answer: $250,000.00 Explanation: It is written for the value of the dwelling up to $250,000 on a replacement cost basis. Pg.88
If an insured covered under a Mobile Homeowners Policy moves the mobile home to protect it from a covered peril, the policy will pay up to A: $350 B: $500 C: $750 D: $1,000
Answer: $500 Explanation: A Mobile Homeowners Policy will pay up to $500 if the insured moves the mobile home to a safer area to protect it from loss by a covered peril. Pg. 90
What is the maximum amount an insurer will pay under the equipment dealers pollution cleanup and removal extension of an inland marine policy? A:$20,000 all expenses incurred during a 12-month period B: $5,000 for all expenses incurred during a 12-month period C: $10,000 for all expenses incurred during a 12-month period D: $15,000 all expenses incurred during a 12-month period
Answer: 10,000 all expenses incurred during a 12-month period Explanation: The maximum the insurer will pay under this extension is $10,000 for all expenses incurred during a 12-month period. Pg.
Within how many years of a loss may an insured bring a lawsuit against an insurer, according to the dwelling policy? A: 2 years B: 3 years C: 5 years D: 7 years
Answer: 2 years Explanation: If an insured wants to bring a suit against an insurer, the insured must comply with all policy conditions and start action against the insurer within 2 years of the loss. Pg. 15
If the actual values exceed the limit of insurance, the businessowners policy (BOP) contains a seasonal increase provision that automatically increases the limit of insurance for business personal property by A: 10% B: 25% C: 30% D: 50%
Answer: 25% Explanation: The BOP contains a seasonal increase provision that automatically increases the limit of insurance for business personal property by 25% if the actual values exceed the limit of insurance. Pg. 63
The Mail Coverage Form is always written on a reporting form basis; after the end of each reporting period shown in the declarations, reports are due within A: 45 days. B: 15 days. C: 30 days. D: 31 days.
Answer: 30 Days Explanation: The Mail Coverage Form is always written on a reporting form basis, with reports due within 30 days after the end of each reporting period shown in the declarations. Pg. 85
Under the dwelling policy, if an insurer chooses to repair or replace damaged or lost property, it must inform the insured within how many days of receiving proof of loss? A: 10 days B: 30 days C: 45 days D: 60 days
Answer: 30 Days Explanation: The insurer has 30 days to tell the insured that it has chosen to repair or replace the covered property. Pg. 15
How long is a waiting period upon purchase of flood coverage through NFIP? A: 10 days B: 30 days C: 60 days D: There is no waiting period.
Answer: 30 days Explanation: Upon purchase of a flood policy, a 30-day waiting period is in place beginning from the time of application and premium payment. Pg. 88
A covered watercraft was damaged in an accident. The actual cash value of the damaged property was assessed at $10,000. The cost of repairs for the watercraft was assessed at $5,000. The insured's watercraft policy is written with a $25,000 limit. How much will the insurer pay for coverage to damage to the watercraft? A: $5,000 B: $10,000 C: $15,000 D: $25,000
Answer: 5,000 Explanation: The limit of liability for Part D will be the lesser of amount shown in the Declarations, actual cash value of the stolen or damaged property, or amount necessary to repair or replace the property. Pg. 92
How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card? A$100 B$500 C$1,000 D$5,000
Answer: 500 Explaination: $500 is provided automatically, and may be increased by endorsement. Pg. 29
According to the loss payment condition in HO policies, losses must be paid within how many days of the insurer receiving proof of loss? A:30 days B: 60 days C: 90 days D: 120 days
Answer: 60 days Explanation: All losses will be paid within 60 days of receiving the proof of loss. Pg. 37
In business income additional coverage in a businessowners policy (BOP), the waiting period that must occur before the period of restoration may begin is A: 72 hours. B: 45 hours. C: 30 hours. D: 15 hours.
Answer: 72 hours Explanation: Under the business income additional coverage, there is no coverage for the first 3 days following the loss. The 72-hour deductible can be reduced by an endorsement for an additional premium. Pg.60
Which of the following is covered under the Camera and Musical Instruments Dealers floater? A: Money kept on premises of a camera shop B: A customer's camera left at a camera shop for repair C: A musical instrument sold and delivered to a customer D: Furniture, fixtures and office supplies in a music store
Answer: A customer's camera left at a camera shop for repair Explanation: Covered property includes customer's property left for repair, cleaning or service. Pg. 81
Which of the following is NOT covered under accounts receivable coverage form? A:Any loans required to offset uncollectible amounts B: Interest on loans required to offset uncollectible amounts pending payment of the insurance proceeds C: Sums due the insured that are uncollectible due to a covered loss D: Expenses to reestablish the records, if possible, and collection expenses that are in excess of normal costs
Answer: Any loans required to offset uncollectible amounts Explanation: Loan principal amounts are not covered under the form. However, other expenses, such as interest on necessary loans, are covered. Pg.63
An installation floater is used to insure A: Dams, power plants, and other such installations B: Appliances intended to become permanent part of the building C: Buildings under construction D: All types of sale merchandise
Answer: Appliances intended to become permanent part of the building Explanation: The installation floater covers the interest of the owner, seller, or contractor of refrigeration systems, elevators, or other pieces of large equipment intended to become a permanent part of the building on location awaiting or in the process of being installed or tested. Pg. 77
Business personal property coverage form covers all of the following EXCEPT A: Automobiles held for sale. B: Furniture and fixtures. C: Machinery that is not permanently installed. D: Stock.
Answer: Automobiles held for sale Explanation: automobiles held for sale are among the exclusions in the BPP form. The rest are covered types of property. Pg. 42
A property insurance policy that insures a commercial building on a replacement cost basis includes the ordinance or law coverage endorsement. This endorsement will cover all of the following expenses EXCEPT A: Demolition and removal cost B: Ordinace with which the insured was required to comply prior to the loss C: Loss to the undamaged portion of the building D: Any increased cost of repairs or reconstruction
Answer: B Explanation: no coverage will be provided for ordinances or laws the insured was required to comply with prior to the loss Pg. 54
When a regular bill of lading is issued, who will be responsible for the invoice cost of any damaged property? A: The person to whom the goods are being shipped B: The shipper C: The driver of the truck D: The carrier
Answer: Carrier Explanation: When a regular bill of lading is issued, the carrier will be responsible for the invoice cost of any damaged property, and the shipper does not have to specifically declare a value. Pg.80
A builder's risk form is most often written as which of the following? A Completed value form B Scheduled form C Reporting form D Specific value form
Answer: Completed form Explanation: A building under construction could be insured on reporting forms, but the value of the building should only increase during the policy period. To prevent all the administrative work required for reporting forms, most often completed value forms are used. Pg.46
Which of the following would provide coverage for loss of income when an insured rental dwelling is rendered uninhabitable because of a covered loss? A: Coverage A B: Coverage B C: Coverage C D: Coverage D
Answer: Coverage D Explanation: Coverage D provides fair rental value coverage when insured rental dwellings suffer a loss covered by Coverage A, B, or C. Pg. 10
A unique feature in a bailee form is that it covers A: All loss and has no exclusions. B: The building occupied by the insured whether it is owned or leased. C: Customers' property whether or not the insured has been negligent. D: Fire and theft losses to the insured's stock held for sale without any deductibles.
Answer: Customer's property whether or not the insured has been negligent Explanation: The bailee/customers form is liability coverage for the customers' property the bailee has accepted into his care. Negligence on the part of the bailee is not required for a loss to be covered. Pg. 75
Which of the following examples of losses paid under an HO-3 also would be paid under an HO-2 homeowners policy? A Damage to the dwelling caused by ash or dust from a volcanic eruption B Damage to the dwelling caused by the insured when moving furniture C Accidental scorching caused when a hot iron is placed upon a built-in counter top D Interior damage caused by water seeping under the shingles on the roof
Answer: Damage to dwelling caused by ash or dust from a volcanic eruption Explanation: An HO-3 covers losses on an open peril basis. An HO-2 covers losses on a named peril basis. Both forms cover damage to the dwelling caused by ash or dust from a volcanic eruption.
Which of the following is true of dwelling policy coverage? A: There are no exclusions in basic forms. B: Special forms only have special exclusions. C: Exclusions apply to all three policy forms. D: Exclusions only apply to broad policy forms.
Answer: Exclusions apply to all three policy forms Explanation: Dwelling policy forms contain several general exclusions that define the actual extent of coverage provided. These exclusions are found in all three dwelling forms: broad, basic, and special. Pg.12
All of the following are exclusions that apply in all three types of Dwelling Policies EXCEPT A: Earth movement B: Fire or lightning C: Government action D: Water damage
Answer: Fire and lighting Explanation: Fire and lightning is covered in all policy forms. All the other answer choices are exclusions Pg. 12
Which of the following claims would be included under the dwelling policy? A: Theft of the insured's auto from the detached garage B: Death to the insured's pet caused by smoke inhalation C: Fire damage to the insured's rowboat stored in the attached garage D: Fire damage to a garage located on the insured premises used as an auto repair shop
Answer: Fire damage to the insured's rowboat stored in the attached garage Explanation: Rowboats and canoes are covered under the dwelling policy as personal property. Pg.
An insured condominium unit owner wants to purchase fire and extended coverage for personal property and liability coverage for himself and his family members. He should purchase A: HO-2. B: HO-3. C: HO-4. D: HO-6.
Answer: HO-6 Explanation: The H0-6 is designed specifically to provide both property and personal liability coverages for a condominium unit owner. Pg. 22
Under which of the following conditions can broad theft coverage be added to a dwelling policy? A: Broad theft coverage cannot be added to a dwelling policy. B: If the policy has been in effect for 60 days C: If the insured is owner-occupant of the dwelling D: If permission is granted by the department of insurance
Answer: If the insured is owner-occupant of the dwelling Explanation: Broad theft coverage can be added as an endorsement to a dwelling policy if the insured is owner-occupant of the dwelling. Pg. 16
Which of the following statements concerning the builders risk coverage form is correct? A: It may be written on a reporting form for the completed value of the structure. B: It usually continues in effect for one year after completion of the structure. C: It covers the interest of the builder only and cannot include coverage for the owner. D: It may not be written for perils other than fire and extended coverage.
Answer: It may be written on a reporting firm for the completed value of structure Explanation: Builders risk insurance is a property insurance form that provides direct damage coverage on structures while they are under construction. Coverage may be written on a completed value form (requires 100% coinsurance) or reporting form (values are reported as completed). Pg. 46
All of the following are true of Coverage B - Other Structures EXCEPT A: This coverage is not applicable on the HO-4 policy form. B: The amount of coverage provided by Coverage B is an amount equal to 10% of Coverage A. C: Land where the other structures are located is not covered. D: It must be added by endorsement to a homeowners policy.
Answer: It must be added by endorsement to a homeowners policy Explanation: Homeowners policies automatically provide an amount of insurance in Coverage B that is equal to 10% of the amount written as Coverage A. This amount may be increased by endorsement. Pg. 25
All of the following would be covered under the medical expense coverage of a business owners policy EXCEPT A: Mental health counseling. B: Ambulance services. C: X-ray services. D: First aid when the accident occurred.
Answer: Mental health counseling Explanation: This coverage includes accidental bodily injury only; it does not cover any counseling. Pg.
Which policy consists of the declarations and conditions, endorsements, and other attachments applicable to a single line of insurance? A: Casualty B: Commercial package C: Monoline D: Insurance
Answer: Monoline Explanation: A monoline policy contains only one coverage part. Pg. 39
A business using its own trucks to move its own cargo would insure the cargo using A: Motor truck cargo - truckers form. B: Motor carrier form. C: Trip transit coverage. D: Motor truck cargo - owners form.
Answer: Motor truck cargo-owners form Explanation: A business using its own trucks to move its own cargo would insure the cargo using the owners form. Pg.81
What type of property does a Personal Floaters policy cover? A: Movable personal property located in the insured's home, only B: Movable personal property, wherever it may be located C: Permanently attached property located on the insured's premises D: None of these
Answer: Movable personal property, wherever it may be located Explanation: Personal floaters refers to an inland marine policy designed to cover movable personal property, wherever it may be located. Pg. 72
ABC Trucking hauls products for Acme, Inc. as a contract carrier. On one shipment, the driver stopped at a truck stop for lunch. Leaving the truck in the parking lot, he made certain that the truck was locked before leaving it. Upon returning to the truck, he discovered that someone had broken into the truck and stolen the cargo. Is ABC legally liable for this loss? A: No, the driver had taken reasonable measures to protect the property by locking the truck. B: Yes, ABC's liability is absolute for the cargo in its possession. C: The truck stop would be liable for the loss. D: None of the above.
Answer: No, the driver had taken reasonable measures to protect the property by locking the truck Explanation: ABC, as a contract carrier, would not be legally liable for this loss. If ABC were operating as a common carrier rather than a contract carrier, it would have been legally liable. Pg.80
In a watercraft policy, which coverage part will respond to a claim for damages for bodily injury or property damage for which the insured becomes legally liable because of a watercraft accident? A: Part A B: Part B C: Part D D: Part E
Answer: Part A Pg. 91
To be eligible for coverage under the National Flood Insurance Program, an insured must live in which of the following communities? A:That is surrounded by water B: That has met the minimum population requirements C: That gets flooded at least annually D: That has met the minimum floodplain management guidelines
Answer: That has met the minimum floodplain management guidelines Explanation: To be eligible for the flood program an insured must live in a community that has met the minimum floodplain management guidelines. Pg. 87
An insured's accounts receivable records have been damaged. The loss may be covered with A: Commercial property insurance. B: The commercial articles coverage form. C: The valuable papers coverage form. D:The accounts receivable coverage form.
Answer: The accounts receivable coverage form Explanation: The accounts receivable coverage form reimburses the insured for amounts that can't be collected from customers due to damage to the company's records. Pg. 74-75
Under a dwelling policy, which of the following is NOT a factor in determining a loss? A: The policy limit B: The amount reflecting the insured's interest in the property at the time of loss C: The amount necessary to repair or replace the property D: The amount negotiated by the insured
Answer: The amount negotiated by the insured Explanation: The value of a loss is decided according to the actual cash value of the property, the policy limit, the amount needed to repair or replace the property, or the amount reflective of the insured's interest in the property. Pg.14-15
All of the following are perils covered under the broad form dwelling policy EXCEPT A: Collapse. B: Theft. C: Fire. D: Lightning.
Answer: Theft Pg. 6
All of the following types of property are covered by a standard builders risk form EXCEPT A: Tools 50 feet away from the building. B: The building itself. C: Temporary structures. D: Machinery that will be permanently attached to the building.
Answer: Tools 50 feet away from building Explanation: Property covered under a builders risk coverage form includes the building or structure, temporary structures, foundations, fixtures, machinery, equipment, materials, and supplies within 100 feet of the premises if intended to become a permanent part of the building. Tools that are not intended to become a permanent part of the structure will not be covered, no matter how close they are to the building. Pg. 46
An endorsement added to a business owners policy that provides coverage for direct damage caused by utility service disruption stemming from a covered peril is called A: Additional expense. B: Loss of business income. C: Utility Services - Direct Damage. D: Utility Services - Time Element.
Answer: Utility Services-Direct Damage Explanation: The Utility Services - Direct Damage endorsement pays the insured for loss caused by utility service disruption when such disruption of service was caused by an insured peril. Pg. 72
A contract for the transport of goods between the shipper and the carrier is called A: A bill of lading B: bailment C: binder D: bill of sale
Answer: bill of lading Pg: 80
How does the mobile home endorsement affect the other coverage of law or ordinance in a homeowners policy? A: It has no effect on this coverage. B: It removes the coverage. C: It broadens the coverage. D: It limits the coverage.
Answer: removes coverage Explanation: The mobilehome endorsement makes the other coverage of law or ordinance inapplicable to the policy. Pg. 90
What are common carriers required to issue to every shipper that it transports goods for? A: common carrier cargo liability notice B: A uniform bill of lading C: A transit coverage form D: A motor truck cargo form
Answer: uniform bill of lading Explanation: Common carriers are required to issue a uniform bill of lading to every person (shipper) for which it transports goods. Pg. 80
A business income coverage form would cover all of the following situations EXCEPT A: union strike of construction workers causes the repair of the insured's building to be delayed for a period of time. B: A hurricane damages the insured's building; a temporary relocation to another building is necessary. C: A replacement part for necessary equipment is ordered with overnight delivery charges. D: The building next door is damaged during a drug bust, and the area is barred from the public.
Answer: union strike of construction workers cause the repair of the insured's building to be delayed for a period of time Explanation: The business income form excludes coverage for the following: off-premises services interruption, finished stock exclusion, antenna exclusion, delay exclusion (delay is caused by the interference of strikers), and loss of privilege. Pg. 60-61
Johanna purchased a National Flood Insurance policy 10 days after her community entered an emergency program. When would her coverage be effective? A: 30 days after the application has been accepted B: 12:01 pm on the 5th day after the endorsement request has been mailed C: 5 days after the application and premium payment are mailed D: 12:01 am the day after the application and premium payment are mailed
Answer:12:01am the day after the application and premium payment are mailed Explanation: During the first 30 days after a community enters the emergency or normal programs, coverage on a flood policy begins at 12:01 a.m. the day after application and premium payment have been mailed. Pg. 89
