Exam 2
$30,000
A $100,000 house insured on a policy with a 80% coinsurance requirement has a fire that caused $40,000 of damage; the owner has a policy with $60,000 coverage. How much can the owner collect for his loss?
coercion
A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan.
vacant
A building is insured, but no one has lived or worked in it for 10 years. The building Is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered
premiums would go down
A contractor who builds homes has never made a claim on his business insurance policy. His agent discovers that his policy is written on a scheduled rating. If the contractor changes to an experience rating policy, which is most likely?
assumption of risk
A couple bought tickets to a college hockey tournament. At the game, a stray puck flies into the stands and hits the wife in the face, breaking her nose. Which legal defense may bar her from recovering damages for the injury she received at the hockey game?
pay to defend the policy owner in the lawsuit because liability coverage contains a duty-to-defend provision
A deli owner has a businessowners liability policy. When a customer slipped and hurt herself at the deli, the liability policy paid for medical expenses. The customer, however, is not suing the business owner because she claims there was no caution sign warning her that the floor was wet. What is the insurer obligated to do?
$2,500/$5,000
A licensed producer may be fined for nonwillful and for willful violations of insurance laws with the following respective fines:
the loss is payable to the insured and the mortgagee
A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true?
additional insured
A person who is not named as an insured on the declarations page of a policy but is protected by the policy is known as
it applies to both real and personal property
All are true of the SC Valued Policy law EXCEPT
provisions
All of the following are considered parts of the policy structure EXCEPT
insurance premium paid
All of the following are factors in the determination of actual cash value EXCEPT
the coinsurance formula will also be applied to total losses
All of the following statements concerning coinsurance are true EXCEPT
it is imposed on defendants engaged in hazardous activities
All of the following statements describe the concept of strict liability EXCEPT
indirect loss
An additional loss that results from a direct loss of property is called a/an
fraud
An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act?
conditional
An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What characteristic does this describe?
combined single
An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor, who was sitting on the porch is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. What type of limit of liability does the insured have?
80% of the property's replacement cost or more
An insured owns a building that is valued at $400,000. To comply with the 80% coinsurance provision of his insurance policy, how much should he insure the property for?
specific
An insured owns several buildings, each at a different location and insured on a separate policy. What type of coverage does the insured have?
vicarious liability
An insured's 9 year old son threw a ball, accidentally breaking a neighbor's plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of
$30,000
An insured's building has an actual cash value of $200,000 and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?
the producer photographed the wrong house; the insured's house would not pass underwriting standards
An insured's fire policy has been in force for over 120 days. For which of the following reasons may the insurer cancel the policy?
$5,000
An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today's prices. If the roof has been depreciating at $200 per year and the insured's policy is written on the actual cash value (ACV), how much will the policy pay toward the insured's new roof?
a loss caused by an act of God
An insurer CANNOT renew a homeowners policy because of
$15,000/$30,000
An insurer may be fined for non willful or for willful violations of insurance laws with which of the following respective fines
$100
Anyone who willfully violates. cease and desist order can be fined what maximum amount per day?
replacing the property with other property of a lesser kind of quality
At the time of loss insured against in a property and casualty policy, the insurer's claim settlement options include all of the following EXCEPT
experience
Compared with other drivers in his age group, a driver has had more minor accidents and traffic violations. Which of the following rating types would most accurately reflect the driver's true insurance risk?
contracts of adhesion
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as
misrepresentation
During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes
5 years
How must a licensee keep records of insurance transactions on file, available for inspection by the Director
90 days
If the insurer non renews a homeowners policy during the hurricane season, how many days' notice must the insurer provide to the policy owner?
company
In any case where there is a controversy or dispute between the insurance company and the insured, the soliciting agent is the agent of the
the factors that determine rates
In insurance terms, what are components?
an applicant submits an application to the insurer
In insurance, an offer is usually made when
obtain an insurance agency license
In order to transact business in this state, an agency must meet all of the following requirements EXCEPT
deductible
In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit?
the person must have at least completed secondary education
In terms of parties to a contract, which of the following does NOT describe a competent party?
the cause of loss insured against
Peril is most easily defined as
manual rates
Rates that are established based on the similarities of the risk with other risks are known as
may be in writing or electronically
Required privacy policy notices to consumers and customers
cancellation
Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as
company A will pay $16,000; company B will pay $8,000
The ABC Corporation has $100,000 of coverage on its building through insurance Company Amanda $50,000 of identical coverage on the same building through insurance Company B. Assuming coinsurance is not an issue, when a $24,000 loss occurs and the pro rata method is used, how much will each insurer pay?
no later than 5 years from now
The Director has just finished examining a domestic insurer. When is the Director next required to examine the same insurer?
total loss by fire
The SC valued policy law is effective for which loss
the insured may not relinquish ownership of damaged property to claim a total loss, but must protect damaged property from further loss
The abandonment provision in property insurance policies states that
express authority
The authority granted to an agent through the agent's contract is referred to as
perils
The causes of loss insured against in an insurance. policy are known as
A statement that earthquake damage is not covered
The declarations page of the homeowners policy provides all of the following information EXCEPT
definitions
The part of a policy that clarifies terms in the policy is the
declarations
The part of a property policy that shows the amount of insurance, premium, and policy term is the
insuring agreement
The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the
conditions
The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the
how parties to the contract must act following a loss
The policy conditions define
subrogation
The policy provision found in property insurance policies that prevents the insured from collecting twice for the same loss is called
primary policy
The policy that pays first in the event of a covered loss is known as
underwriting
The process an insurer uses to evaluate applications and determine if a policy should be issued and on what terms, conditions, and rates is known as
abandonment
The property condition that precludes the insured from simply turning over damaged property to the insurer and claiming a total loss is called
loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as
pure risk and speculative risk
The risk of loss may be classified as
discrimination
Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called?
respond to the consumer's complaint
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must
proximate cause
What fundamental principle in property insurance holds that when there is an unbroken connection between an occurrence and damage that grows out of the occurrence, then the resultant damage is all a part of the occurrence?
physical
What hazard would you be concerned about if you lived next to an explosives contractor?
other insurance
What insurance policy provision determines how the policy will respond if there is more than one insurance policy written on the same risk?
encourage the insured to insure the property closer to its full value
What is the purpose of the coinsurance clause found in property insurance policies?
reinsurance
What method do insurers use to protect themselves against catastrophic losses?
direct loss
What term includes damage where the insured peril was the proximate cause of loss?
renewal dates
What type of information would be found in a policy's insuring agreement?
absolute
What type of liability would a person who owns wild animals have?
vicarious liability
When a parent is required to pay for damages caused by his or her children, this is an example of
30 days
When a producer's appointment is cancelled by the company, the Department of Insurance must be notified within
concealment
When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of
on the declarations page of the policy
Where is the policy period stated?
implied
Which authority is NOT stated in an agent's contract but is required to conduct insurance?
making derogatory oral statements about another insurer's financial condition
Which of the following best describes the unfair trade practice of defamation?
loss of use
Which of the following coverages in dwelling and homeowners policies is for indirect losses?
reciprocal
Which of the following insurance options would be considered a risk-sharing arrangement?
fraternal
Which of the following insurance providers must be nonprofit and sell insurance only to its members?
the loss must be catastrophic
Which of the following is NOT a characteristic of an insurable risk?
Federal Deposit Insurance Corporation (FDIC)
Which of the following is NOT a government health insurance program?
counteroffer
Which of the following is NOT an essential element of an insurance contract?
declarations
Which of the following is a mandatory part of an insurance policy that varies with each individual policy?
warranty
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
exposure
Which of the following is a unit of measurement an underwriter uses when determining the premium rates for insurance?
liberalization
Which of the following policy provisions would automatically broaden coverage under a policy without requiring additional premium?
concurrency
Which of the following terms refers to other insurance that is written on the same risk, but not on the same coverage basis?
supplemental policies, life insurance policies and annuities, accident and health insurance policies
Which of the following type of policies are protected by the SC Guaranty Association?
agreed value
Which of the following types of valuation works best for property whose value does not fluctuate much?
discriminating in benefits and coverages based on the insured's habits and lifestyle
Which of the following will NOT be considered unfair discrimination by insurers?
a house
Which of the following would NOT be classified as personal property for insurance purposes?
confirming future dividend in a life insurance policy
Which of the following would be considered an illegal inducement to purchase insurance?
endorsements
Which of the following would modify the original insurance contract by either adding or removing coverage?
signing blank applications or insurance policies is prohibited
Which statement regarding signing of blank forms by a producer is true?
twisting
Which type of misrepresentation persuades an insured, to his or detriment, to cancel, lapse, or switch policies from one to another?
all admitted P&C insurers
Who are required to be members of the SC Property and Casualty Insurance Guaranty Association?
3 days
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?
false advertising
An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?
foreign
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?
rebating
Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as
fraud
D'Seevum Insurance Company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the net two years. What term best describes this act?
$2,500
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
pay dividends to the policyowner
A participating insurance policy may do which of the following?
aleatory
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?
false advertising
Circulating deceptive sales material to the public is what type of Unfair Trade Practice?
in favor of the insured
Courts will interpret any ambiguity in an insurance contract
without receiving written consent from an insurance regulatory authority
Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce
inviting prospective clients to the grand opening of the company's new office
State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT
guides describing company financial integrity
What insurance concept is associated with the names Weiss and Fitch?
one-sided: only one party makes an enforceable promise
What is a definition of a unilateral contract?
comparative negligence
What is the legal defense that can be used in most states in which proportionate damages may be awarded when both the plaintiff and defendant were negligent?
180 days
What is the maximum duration of a temporary license?
agent
According to the Law of Agency, a principal is represented by a/an
twisting
Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of
salvage
When the insured's car was totaled in a recent accident, the ownership of the car was transferred to the insurer. The insurer then sold off the wrecked car to recover some of the loss it paid to the insured. What is the term for this action?
express and implied
Which of the following are the authorities that an agent can hold?
a certificate of authority is the license given by the insurer to its producers
Which of the following statements is INCORRECT about appointments of producers?
agent's contract with the principal
What documentation grants express authority to an agent?
illegal
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
commission
Any payment to a producer from an insurer that is contingent on the sale of an insurance policy or contract is called a
it does not cover workers compensation claims
All are true about the SC Property and Casualty Insurance Guaranty Association EXCEPT
illegal under any circumstances
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following describes this act?
apparent
Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?
additional coverage
Claim related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses are covered by which part of a policy?
reduction
Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe?
larger
For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become
reasonable expectations
If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?
restores an insured person to the same financial state as before the loss
In a case of loss, the indemnity provision in insurance policies
reinsure policies of the insolvent insurer through other companies
In the event of an insurer's insolvency, the SC Life and Health Guaranty Association will
It is never legal to limit coverage based on marital status
In which of the following situations is it legal to limit coverage based on marital status?
insuring agreement
All of the following are conditions commonly found in the insurance policy EXCEPT
dividends from a mutual insurer
All of the following would be considered rebates if offered to an insured in the sale of insurance EXCEPT
an agent misrepresents policy benefits to convince a policy owner to replace policies
All of the following would be considered rebating EXCEPT
the policy will not be affected
An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?
direct response marketing
An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act?
is unauthorized and may not transact insurance within the state
An insurance company that has not applied, or has applied and been denied a Certificate of Authority
Certificate of Authority
An insurance company's license to transact business in this state is known as
make laws relating to the business of insurance in this state
The Director of Insurance has all of the following duties EXCEPT
driving recklessly
Which of the following is considered to be a morale hazard?
anyone found guilty of insurance fraud is charged with a misdemeanor
Which of the following statements is INCORRECT concerning the Insurance Fraud Act?
Lloyd's association
An insurance organization that does not issue insurance policies but provides a meeting place for underwriters to conduct business is known as a
the client
An insurance producer has not been appointed to an insurance company. Who is the producer considered to represent?
the foreign company
The Director is conducting an examination of a foreign company transacting business in SC. Who is responsible for the cost of the examination?
regulates consumer reports
The Federal Fair Credit Reporting Act
utmost good faith
The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as
fraternal benefit society
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?
a ban on selling insurance up to 5 years
Which of the following is NOT a penalty for transacting insurance without being properly licensed?
a producer promptly forwarding premiums to the insurance company
Which of the following is an example of a producer's fiduciary responsibilities?
not taxable since the IRS treats them as a return of a portion of the premium paid
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are
nonrenewal
When an insurance policy does not offer a continuation or replacement at its expiration date, it is considered a
moral hazard
An individual's tendency to be dishonest would be indicative of a
sexual orientation
An insurance application cannot ask about which of the following information about an applicant?
8
A producer licensed in Life and Health, as well as Property and Casualty, must complete a minimum of how many hours in each line of authority every 2 years?
150 days
A producer was issued a temporary license 30 days ago. How much longer can the license remain in effect?
defamation
Which of the following describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?
6 months
A producer failed to complete the required continuing education credit hours for this compliance period. Within what time period after the deadline may the license be reinstated?
Fair Credit Reporting Act
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company?
