exam 4

13) All of the following statements about the boatowners package policy are true EXCEPT A) Physical damage coverage for the boat is usually written to cover all losses except those losses specifically excluded. B) Liability coverage is provided for bodily injury only. C) Some policies provide optional uninsured boaters coverage. D) Medical payments coverage for water-skiers is available under the policy.

B) Liability coverage is provided for bodily injury only.

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

B) Medicaid recipients.

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

A) I only

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

A) I only

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

A) I only

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

A) I only

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

A) I only

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

A) I only

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

A) I only

6) Which of the following statements about the elements of negligence is (are) true? I. The negligence of the tortfeasor may arise from a failure to act. II. The damage that results must be in the form of property damage. A) I only B) II only C) both I and II D) neither I nor II

A) I only

6) Which of the following statements about the eligibility requirements for insuring mobile homes by endorsing a homeowners policy is (are) true? I. The mobile home must be designed for year-round living. II. The mobile home must be located in a fenced area with security guards. A) I only B) II only C) both I and II D) neither I nor II

A) I only

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

B) "no pay, no play" laws.

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

B) $3,300

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

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

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

B) II only

29) Which of the following statements about the Miscellaneous-Type Vehicle Endorsement to the PAP is (are) true? I. It provides bodily injury liability coverage for any vehicle rented by the insured. II. To lower premiums when a motorcycle is insured, bodily injury to passengers can be excluded. A) I only B) II only C) both I and II D) neither I nor II

B) II only

38) Which of the following statements is (are) true with regard to an unendorsed ISO Dwelling Form? I. Each form provides $100,000 in personal liability coverage. II. The Dwelling 3 form provides broader property coverage than the Dwelling 1 form. A) I only B) II only C) both I and II D) neither I nor II

B) II only

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

B) II only

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

B) II only

5) Which of the following coverages are provided by an unendorsed ISO Dwelling Program form? I. Theft of personal property II. Named-perils coverage for personal property A) I only B) II only C) both I and II D) neither I nor II

B) II only

8) Which of the following statements about monetary damages awarded by a court is (are) true? I. The purpose of general damages is to provide benefits for medical expenses or loss of earnings. II. The purpose of punitive damages is to punish the tortfeasor so that others are deterred from committing the same wrongful act. A) I only B) II only C) both I and II D) neither I nor II

B) II only

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

B) II only

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

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

32) All of the following are categories of torts EXCEPT A) intentional torts. B) breach of contract. C) strict liability. D) negligence.

B) breach of contract.

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

B) collision coverage

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

B) debris removal

26) All of the following are proposed solutions to the medical malpractice problem EXCEPT A) shortening the statute of limitations for filing lawsuits. B) eliminating arbitration panels to resolve disputes. C) placing limitations on contingent fees charged by attorneys. D) placing limitations on damage awards.

B) eliminating arbitration panels to resolve disputes.

39) Congressional action in 2012 extended the National Flood Insurance Program (NFIP) until 2017. Which of the following is a key provision of the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012? A) elimination of the waiting period for coverage to start B) elimination and phase-outs of several rate subsidies C) write-off of the multi-billion dollar deficit attributable to Hurricane Katrina claims D) elimination of deductibles in NFIP policies

B) elimination and phase-outs of several rate subsidies

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

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

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

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

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

B) false arrest

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

B) housekeeping expenses

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

B) in Canada

10) Which of the following situations is covered under Section II of an unendorsed homeowners policy? A) injuries which occur at a park resulting from a motorcycle owned by the insured B) injuries resulting from an auto not subject to registration because it is in dead storage C) injuries resulting from an auto rented by the insured while on a vacation D) injuries resulting from a trailer being pulled by the insured's auto Answer: B

B) injuries resulting from an auto not subject to registration because it is in dead storage

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

B) insurance score.

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

B) joint underwriting association.

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

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

21) Jan purchased a boat owners package policy. While using his boat, he negligently hit a pier. A person standing on the pier fell and was severely injured. Which of the boat owners package policy coverages will respond to a lawsuit filed as a result of this negligent act? A) physical damage coverage B) liability coverage C) medical expense coverage D) uninsured boaters coverage

B) liability coverage

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

B) modified no-fault plan.

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

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

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

B) personal injury protection coverage

35) Michelle had major abdominal surgery. Months after the surgery, she still did not feel well. When she was operated on again, the surgeon discovered two sponges that were not removed at the conclusion of the first operation. Michelle should be able to collect damages without having to prove negligence under the doctrine of A) joint and several liability. B) res ipsa loquitor. C) contributory negligence. D) uberrimae fidei.

B) res ipsa loquitor.

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

B) residual market.

36) Linda wants to purchase a homeowners policy, but she has some valuable personal property to which internal policy limits apply. Her agent said that she could obtain coverage under her homeowners policy by attaching a list of this valuable property with specific amounts of insurance. Such a listing is called a(n) A) binder. B) schedule. C) application. D) warranty.

B) schedule.

29) Martin would like to insure valuable personal property limited in coverage by his homeowners policy. Martin has two options. He can purchase the coverage through a separate personal articles floater policy or he can add an endorsement to his homeowners policy. The endorsement is called the A) extended coverage endorsement. B) scheduled personal property endorsement. C) personal injury endorsement. D) replacement cost endorsement.

B) scheduled personal property endorsement.

33) James was injured in an auto accident caused by another motorist's negligence. To reimburse him for his hospital bills and lost earnings, items which can be specifically itemized, James will receive A) punitive damages. B) special damages. C) imputed damages. D) general damages.

B) special damages.

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

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

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

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

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

B) the repair cost exceeds the actual cash value

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

B) the state law takes precedence.

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

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

26) David has a Homeowners 3 policy that provides $280,000 of insurance on his dwelling, which has a current replacement value of $400,000. Ignoring any deductible, how much will David collect if a kitchen with a replacement value of $24,000 but an actual cash value of $18,000 is destroyed in a fire? A) $18,000 B) $20,000 C) $21,000 D) $24,000

C) $21,000

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

C) both I and II

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

C) both I and II

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

C) both I and II

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

C) both I and II

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

C) both I and II

31) Which of the following statements is (are) true with respect to the use of credit-based insurance scores as an auto insurance rating factor? I. Insurers claim that drivers who have poor insurance scores are expected to have relatively more accidents. II. The use of insurance scores in personal lines underwriting is controversial. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

35) Which of the following statements is (are) true concerning the use of an individual's credit history as an insurance rating factor? I. Individuals with poor credit histories, as a group, generally file more homeowners claims than do individuals with good credit histories. II. The use of credit history as an insurance rating factor is controversial. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

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

C) both I and II

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

C) both I and II

7) Which of the following statements about mobile home insurance is (are) true? I. Coverage for the mobile home may be written on either a replacement cost basis or an actual cash value basis, depending on how much the mobile home has depreciated. II. An additional coverage pays, up to a specified dollar limit, for the cost of transporting the mobile home to a safe place when it is endangered by a covered peril. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

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

C) both I and II

9) Which of the following statements about the Personal Articles Floater is (are) true? I. It is designed to cover several classes of personal property. II. Coverage is written on an "open perils" (all-risks) basis. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

Chap 22 1) Which of the following statements about the liability limits of the PAP is (are) true? I. The policy can be written with split limits of liability. II. Prejudgment interest is considered part of the damage award and is subject to the policy limit of liability. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

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

C) concurrent causation.

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

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

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

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

24) The personal umbrella policy covers some personal injuries. Which of the following is considered a personal injury? A) bodily injury B) property damage C) defamation of character D) liability arising from professional services

C) defamation of character

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

C) diminution.

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

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

21) The doctrine of respondeat superior applies to a(n) A) parent's liability for a negligent child. B) pet owner's liability for the pet. C) employer's liability for a negligent employee. D) manufacturer's liability for a faulty product.

C) employer's liability for a negligent employee.

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

C) extended replacement cost.

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

D) neither I nor II

13) Which of the following statements about the personal property coverage (Coverage C) of the Homeowners 3 policy is (are) true? I. The coverage applies only in the United States and Canada. II. The full amount of coverage applies only if the property is permanently located at any residence of the insured. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

16) Which of the following statements about coverage under the federal flood insurance program is (are) true? I. Subsidized coverage is available for contents, but not for dwellings. II. A $10,000 deductible applies to each loss. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

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

D) neither I nor II

23) Which of the following statements about a typical personal umbrella policy is (are) true? I. Losses covered under an underlying policy and the umbrella policy are settled on a pro rata basis. II. Losses not covered by the basic underlying contracts are subject to a self-insured retention which typically is at least $25,000. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

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

D) neither I nor II

32) Which of the following statements is (are) true about the National Flood Insurance Program? I. You can't purchase flood insurance through this program if your property is located in a high-flood-risk area. II. Coverage is not available for any property which has been flooded previously. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

4) Which of the following statements about Dwelling Property 3 (special form) is (are) true? I. Personal property is covered on an "open perils" (all risks) basis. II. The dwelling and other structures are covered only for those perils specifically named in the policy. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

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

D) neither I nor II

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

D) neither I nor II

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

D) neither I nor II

Chap 20 1) Which of the following statements is (are) true regarding renters insurance? I. Renters insurance is needed if you rent a house, but is not needed if you rent an apartment. II. The ISO renter's policy provides open perils ("all-risks") coverage on the insured's personal property. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

47) Owen rents an apartment and parks his car in the lot behind the apartment building. A hailstorm occurred one evening, and his car was severely damaged. Which PAP coverage, if Owen purchased it, would cover this damage to his auto? A) property damage liability B) uninsured motorists property damage C) collision D) other-than-collision

D) other-than-collision

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

D) paying the claim with insurance company stock.

46) Following catastrophic hurricane losses, South Coast Insurance Company changed its deductible provision. Rather than using a specified dollar value, $250 for example; the dollar value of the deductible increases with the size of the loss. The type of deductible that South Coast changed to is called a(n) A) calendar-year deductible. B) aggregate deductible. C) straight deductible. D) percentage deductible.

D) percentage deductible.

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

D) property damage liability

3) A situation in which a person is held legally liable even though fault or negligence cannot be proven is an example of A) general damages. B) comparative negligence. C) an intentional tort. D) strict liability

D) strict liability

40) Jan was injured in a work-related auto accident. She sued the other driver, and the case went to court. While questioning Jan, the defendant's lawyer asked if her injuries and lost earnings were covered under workers compensation. Jan's lawyer objected to the question. The judge ruled the question was improper and instructed the jury to disregard the question. Based on the judge's reaction to the question, we can conclude that which of the following rules is in force where this trial took place? A) the joint and several liability rule B) the last clear chance rule C) the comparative negligence rule D) the collateral source rule

D) the collateral source rule

34) Len is considering the purchase of a home. As a home is a large investment, Len wants to make sure that there are no liens, easements, or other encumbrances preventing him from an unchallenged right to possess and enjoy his property. Len can protect this right through the purchase of A) extended coverage insurance. B) replacement cost insurance. C) personal umbrella insurance. D) title insurance. Answer: D

D) title insurance.

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

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

47) A legal wrong for which the law allows a remedy in the form of money damages is a A) crime. B) breach. C) misdemeanor. D) tort.

D) tort.

17) All of the following are considered floods under the federal flood insurance program EXCEPT A) the overflow of tidal waters. B) the accumulation of surface water after a heavy rain. C) a mudslide caused by an accumulation of water after a heavy rain. D) wind-driven rain which enters a dwelling through storm-damaged doors or windows.

D) wind-driven rain which enters a dwelling through storm-damaged doors or windows.

31) Alternative techniques for resolving legal disputes without litigation include which of the following? I. Arbitration II. Mediation A) I only B) II only C) both I and II D) neither I nor II

I. Arbitration II. Mediation

2) Which of the following is an intentional tort? A) slander B) negligence C) strict liability D) murder

slander

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

A) $10,000

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

A) $90,000

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

A) Amber could increase her physical damage deductible.

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

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

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

A) I only

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

A) I only

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

A) I only

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

A) I only

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

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

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

A) It includes personal liability coverage.

18) Which of the following statements about federal flood insurance is true? A) It is available even if property has been previously flooded. B) It is unavailable in high-risk flood areas. C) It is available only for residences, not for businesses. D) Waiting periods are not used in the federal flood insurance program. Answer: A Question Status: Previous Edition

A) It is available even if property has been previously flooded.

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

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

40) Which statement is true about medical expense coverage under the boatowners package policy? A) It pays the medical expenses of a covered person who is injured while in the boat. B) It pays the medical expenses of another boat operator who is injured as a result of negligent operation of the boat by the insured. C) It pays the medical expenses of a swimmer or a water skier being towed by another boat if he or she is hit by the insured's boat. D) It pays the medical expenses of someone on a dock or pier if the insured's boat hits the dock or pier and injures someone.

A) It pays the medical expenses of a covered person who is injured while in the boat.

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

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

14) All of the following statements about yacht insurance are true EXCEPT A) Property damage coverage includes damage from insects, weathering, and wear and tear. B) Liability coverage includes the cost of raising, removing, or destroying a sunken or wrecked yacht. C) Coverage can be added for maritime workers covered by the United States Longshoremen and Harbor Workers Compensation Act. D) Medical payments coverage pays for medical expenses because of accidental bodily injury.

A) Property damage coverage includes damage from insects, weathering, and wear and tear.

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

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

25) Which of the following losses would be covered under Section II of an unendorsed Homeowners 3 policy? A) The homeowner accidentally dropped a bowling ball, injuring another bowler's foot. B) The homeowner's nanny was injured on her day off while hiking at a state park. C) The insured slandered a city council member at a city council meeting. D) The homeowner's dog bit the homeowner's daughter.

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

8) Which of the following is a characteristic of most inland marine floater policies? A) The insurance can be tailored to the specific type of personal property insured. B) Coverage amounts are prespecified by the insurer and cannot be changed. C) Coverage is normally written on a named-perils basis. D) Covered property is insured only when it is at a specified location.

A) The insurance can be tailored to the specific type of personal property insured.

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

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

17) Which of the following statements about the additional coverages under Section I of the Homeowners 3 policy is true? A) There is coverage for the reasonable cost incurred to protect property from further damage after a covered loss occurs. B) There is unlimited coverage for furnishings of the landlord in an apartment on the premises that is rented to others. C) Property removed from the premises because it is endangered by an insured peril is covered on a named-perils basis while it is outside the insured premises. D) Damage caused by the settling of the insured structure is covered as a collapse.

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

15) Which of the following statements about the federal flood insurance program is true? A) Under the write-your-own program, each insurer services the policies it writes. B) The regular portion of the program does not allow the purchase of higher amounts of coverage than are available under the emergency portion of the program. C) No coverage is available for property owners in areas where flooding has occurred previously. D) The maximum amount of coverage that can be written on any single dwelling is $25,000.

A) Under the write-your-own program, each insurer services the policies it writes.

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

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

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

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

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

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

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

A) automobile insurance plan

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

A) automobile insurance plan.

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

A) bodily injury liability

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

A) financial responsibility law.

15) Under certain conditions, the wrongful acts of one person can be attributed to another person. This practice is called A) imputed negligence. B) mediation. C) comparative negligence. D) strict liability

A) imputed negligence.

38) Louise was in a hurry and tried to cross the street in the middle of the block rather than at a street corner. A car struck her. Even though Louise placed herself in danger, she may still be able to collect for her injuries if the driver had an opportunity to avoid hitting her but failed to do so. This rule is called the A) last clear chance rule. B) collateral sources rule. C) alternative dispute resolution rule. D) joint and several liability rule.

A) last clear chance rule.

37) All of the following are ISO personal umbrella liability policy exclusions EXCEPT A) liability arising out of uncompensated board service for a nonprofit organization. B) liability arising out of expected or intentional injury. C) liability arising out of business operations. D) liability arising out of operation of watercraft not covered by an underlying policy. Answer: A

A) liability arising out of uncompensated board service for a nonprofit organization.

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

A) loss of use

9) Heather sued Robert for injuries suffered in an automobile accident. Based upon the facts presented, the jury concluded that Heather was 40 percent at fault in the accident and Robert was 60 percent at fault. Under the common law doctrine of contributory negligence, the jury should award Heather A) nothing. B) 40 percent of her actual damages. C) 60 percent of her actual damages. D) 100 percent of her actual damages

A) nothing

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

A) ordinance or law.

19) The basic purpose of FAIR plans is to provide A) property insurance to persons who cannot obtain it in normal markets. B) automobile insurance to persons who cannot obtain it in normal markets. C) health insurance to persons who cannot afford it in normal markets. D) workers compensation insurance to employers who do business in several states. Answer: A

A) property insurance to persons who cannot obtain it in normal markets.

39) The purpose of the collision damage waiver when renting an auto is to A) relieve the renter of financial responsibility if the rented car is damaged or stolen. B) relieve the renter of legal liability to third parties arising out of operation of the rented car. C) relieve the renter's insurer of legal liability to third parties arising out of operation of the rented car. D) waive the insured's deductible if the rented car is damaged or stolen.

A) relieve the renter of financial responsibility if the rented car is damaged or stolen.

40) "No pay, no play" laws A) restrict uninsured motorists from suing for noneconomic damages. B) limit recovery by accident victims to the amount of liability coverage that they have purchased. C) result in the automatic termination of driving privileges if the vehicle operator is stopped by the police and does not have liability insurance. D) require auto insurance purchasers to subsidize state unsatisfied judgment funds. Answer: A

A) restrict uninsured motorists from suing for noneconomic damages.

7) Damages awarded for losses that can be determined or measured are A) special damages. B) general damages. C) punitive damages. D) comparative damages.

A) special damages.

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

A) state fund.

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

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

5) All of the following are elements of negligence EXCEPT A) the ability to pay damages. B) the failure to perform a legal duty to use reasonable care. C) damages or injuries to a claimant. D) proximate cause between the negligent act and the injury or harm that occurs.

A) the ability to pay damages.

30) A defendant who is only slightly liable may be required to pay the full amount of damages under which of the following? A) the joint and several liability rule B) the collateral source rule C) arbitration D) res ipsa loquitor

A) the joint and several liability rule

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

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

49) Under a dram shop law, a business may be held liable for damages resulting from A) the sale of alcohol. B) the creation of an unsafe work place. C) the sale of prescription drugs. D) the creation of a hostile work environment.

A) the sale of alcohol.

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

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

31) Jerry built a home in a flood plain. He did not purchase flood insurance. Recently, a noted meteorologist predicted torrential rains for the area for the next 7 days. Jerry attempted to purchase flood insurance through the National Flood Insurance Program. Which flood insurance provision is likely to block Jerry's efforts to obtain coverage for protection against the predicted torrential rain? A) waiting period B) definition of covered flood C) deductible D) insurance limit

A) waiting period

3) Which of the following perils is covered under the Dwelling Property 2 (broad form) policy? A) weight of ice, snow, or sleet B) flood C) theft D) earthquake

A) weight of ice, snow, or sleet

30) Carolyn is considering the purchase of a large (60-foot) boat. She called her insurance agent to see if she needs a separate policy for the boat. The agent said that a special category of insurance policies was designed to insure large watercraft. These policies are called A) yacht insurance policies. B) flood insurance policies. C) floater policies. D) Dwelling Property 3 (special form) policies.

A) yacht insurance policies.

42) Compensatory damages include A) general damages and special damages. B) special damages and punitive damages. C) punitive damages and general damages. D) general damages, special damages, and punitive damages.

Answer: A general damages and special damages.

11) Nancy was injured when she drove her car through a stop sign and was struck by Philip's car. Philip saw Nancy and could have stopped. However, he failed to do so since he had the right-of-way. Nancy can recover damages from Philip under which of the following legal doctrines? A) vicarious liability B) the last clear chance rule C) contributory negligence D) the assumption of risk doctrine

Answer: B the last clear chance rule

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

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

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

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

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

B) Coverage is provided for bodily injury liability.

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

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

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

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

33) Frank purchased a building in a run-down area of a city. When Frank was unable to obtain property insurance in the voluntary insurance market, an agent suggested that he contact a state pool created in the 1960s that makes property insurance available in riot-prone areas. The state pool the agent referred to is called a(n) A) unsatisfied judgment fund. B) FAIR plan. C) guaranty fund plan. D) assigned risk plan. Answer: B

B) FAIR plan.

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

B) Homeowners 4

10) Which of the following statements about comparative negligence laws is (are) true? I. Under the pure rule, any negligence by the plaintiff automatically bars recovery for damages. II. Under the 50 percent rule, parties who are equally at fault are each allowed to recover damages. A) I only B) II only C) both I and II D) neither I nor II

B) II only

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

B) II only

12) Reasons why an insured might add a scheduled personal property endorsement to a homeowners policy include which of the following? I. To lower the premium by limiting the perils covered II. To obtain higher limits for certain personal property A) I only B) II only C) both I and II D) neither I nor II

B) II only

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

B) II only

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

B) II only

2) Perils insured under Dwelling Property 1 (basic form) include which of the following? I. Earthquake II. Smoke A) I only B) II only C) both I and II D) neither I nor II

B) II only

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

B) II only

20) Which of the following statements concerning FAIR plans is (are) true? I. All property is eligible for coverage regardless of physical condition. II. Losses and expenses are shared by insurers who participate in a plan. A) I only B) II only C) both I and II D) neither I nor II Answer: B

B) II only

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

B) II only

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

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

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

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

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

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

14) All of the following requirements must be met to satisfy the doctrine of res ipsa loquitur EXCEPT A) The injured party has not contributed to the accident in any way. B) The injured party must prove negligence on the part of the defendant. C) The event is one that normally does not occur in the absence of negligence. D) The defendant has exclusive control over the instrumentality causing the accident

B) The injured party must prove negligence on the part of the defendant.

7) Which of the following situations would be covered by the liability section of an unendorsed PAP if the insured is legally liable? A) The insured injures a pedestrian while operating a friend's new motorcycle. B) The insured backs into and damages the garage door of his rented house. C) A friend's suitcase and laptop computer were damaged in an auto accident while the insured and the friend were vacationing together. D) The insured damages a parked car while driving a dump truck for his or her employer

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

49) Which of the following statements is true about uninsured motorists coverage under the Personal Auto Policy? A) The benefits are paid without regard to fault. B) The insured collects from his or her own insurer, and the insurer can recoup the loss payment from the other driver. C) Uninsured motorists benefits are limited to the medical expenses of the insured. D) States require the purchase of uninsured motorists coverage to be able to license an auto.

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

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

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

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

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

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

B) add-on no-fault law.

39) Bruce believes a local manufacturer is responsible for contaminating some land he owns. He filed suit against the company. Rather than have the case go to court, the manufacturing company's legal team suggested mediation or arbitration to settle the case. Methods that are employed to resolve legal disputes without litigation, such as mediation, are called A) collateral source rules. B) alternative dispute resolution techniques. C) joint and several liability techniques. D) comparative negligence rules.

B) alternative dispute resolution techniques.

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

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

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

B) appraisal clause

23) Under one doctrine, a person who understands the danger inherent in an activity cannot recover damages in the event of injury from the activity. This doctrine is called the A) contributory negligence doctrine. B) assumption of risk doctrine. C) comparative negligence doctrine. D) fellow servant doctrine.

B) assumption of risk doctrine.

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

B) betterment.

12) A common situation involving strict liability includes which of the following? A) operating a motor vehicle B) blasting operations C) manufacturing a product D) mining operations

B) blasting operations

19) What is the intent of the family purpose doctrine? A) to impose liability on children for the care of elderly parents B) to impose liability on the owner of an automobile for the negligence of immediate family members operating the automobile C) to impose liability on a parent for any negligence caused by a child D) to impose strict liability on the owner of a wild animal for any injuries caused by the animal

B) to impose liability on the owner of an automobile for the negligence of immediate family members operating the automobile

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

B) underinsured motorists coverage.

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

B) uninsured motorists

22) Bill was severely injured by an uninsured driver. Bill did not purchase uninsured motorists coverage, and the other driver, although held liable, could not pay the damages awarded. After exhausting all sources of recovery, Bill obtained some relief from a state fund designed to compensate individuals like Bill. These state funds are called A) guaranty funds. B) unsatisfied judgment funds. C) rainy-day funds. D) second injury fund

B) unsatisfied judgment funds.

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

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

39) A dwelling with a replacement cost of $150,000 was insured under a Homeowners 3 policy for $100,000 at the time the roof was destroyed by a windstorm. The actual cash value of the loss was $9,000, but it will cost $12,000 to replace the roof. Assuming no deductible, what will the insurer pay to settle this loss? A) $8,000 B) $9,000 C) $10,000 D) $12,000

C) $10,000

35) Tina purchased a personal umbrella policy with a $1 million limit. Her insurer required her to carry liability limits of 250/500/50 under her auto insurance policy. The personal umbrella policy was written with a $1,000 self-insured retention. Tina was responsible for an auto accident in which the other driver was severely injured. The other driver's bodily injuries were $400,000 and the property damage was $20,000. How much will the insurer pay under Tina's umbrella policy? A) nothing B) $149,000 C) $150,000 D) $170,000

C) $150,000

41) Andrea purchased an auto insurance policy with bodily injury liability limits of 250/500 ($250,000/$500,000). She also purchased a personal umbrella policy with a $1 million limit and a $500 self-insured retention. Andrea was talking on her cell phone while driving, and her car struck and killed a pedestrian in a crosswalk. The court ordered her to pay $750,000 to the spouse of the person she killed. How will this claim be settled? A) The umbrella policy will pay $749,500. B) Each policy will pay $375,000. C) $250,000 will be paid under the auto policy and $500,000 will be paid by the umbrella policy. D) The auto policy will pay $250,000, Andrea will pay $500, and the umbrella policy will pay $499,500. Answer: C

C) $250,000 will be paid under the auto policy and $500,000 will be paid by the umbrella policy.

36) Tina purchased a personal umbrella policy with a $1 million limit and a $1,000 self-insured retention. Her insurer required her to carry a $300,000 liability limit under her homeowners policy. Tina was held responsible for slandering a public official. The public official won a $100,000 judgment against Tina. The insurer that wrote Tina's homeowners policy denied coverage. How much will the insurer pay under Tina's personal umbrella policy? A) nothing B) $49,000 C) $99,000 D) $100,000

C) $99,000

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

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

11) Which of the following statements about types of property covered under the Personal Articles Floater is true? A) Golfer's equipment is covered only in the United States. B) Furs are covered on a blanket basis without the necessity to schedule individual items. C) A higher premium must be paid to insure musical instruments if they are played for pay. D) Coverage for silverware and goldware is not available under the Personal Articles Floater. Answer: C

C) A higher premium must be paid to insure musical instruments if they are played for pay.

1) Which of the following statements about Dwelling Property 1 (basic form) is true? A) Coverage on the dwelling is written on a replacement cost basis. B) The full amount of personal property coverage applies to property away from the insured premises. C) Coverage for fair rental value of the dwelling is subject to both an overall maximum and a monthly maximum. D) "Open-perils" (all risks) coverage is automatically provided for both the dwelling and personal property.

C) Coverage for fair rental value of the dwelling is subject to both an overall maximum and a monthly maximum.

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

C) Covered expenses include the cost of funeral services.

43) Valerie's home does not qualify for coverage under a standard homeowners policy. Valerie would like to have "open-perils" (all-risks) coverage on her dwelling and named-perils coverage on her personal property. Which of the following policies should Valerie purchase? A) Dwelling Property 1—Basic Form B) Dwelling Property 2— Broad Form C) Dwelling Property 3—Special Form D) All of these policies provide "open perils" coverage on the dwelling and named-perils coverage on personal property. Answer: C

C) Dwelling Property 3—Special Form

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

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

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

C) HO-4

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1) Which of the following statements about torts is (are) true? I. The person who is injured or harmed by a tort is called a plaintiff or claimant. II. The punishment for committing a tort is damages in the form of money.

C) both I and II

10) Which of the following statements about various coverages under a Personal Articles Floater is (are) true? I. Each item of jewelry is described and is insured for a specified amount. II. Stamp and coin collections can be insured on a blanket basis. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

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

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

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

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

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

C) insurance score.

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

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

41) Trisha was injured when the delivery truck for a local furniture store struck her. The delivery driver claimed the brakes of the delivery truck failed, causing the accident. Trisha filed suit, and in her lawsuit named the delivery driver, the furniture store, the service station responsible for vehicle maintenance, and the manufacturer of the vehicle. Even though the manufacturer of the vehicle may be only 1 percent responsible for the accident, it may be required to pay a large percentage of the damages under the A) collateral source rule. B) assumption of risk rule. C) joint and several liability rule. D) last clear chance rule.

C) joint and several liability rule.

23) All of the following are general exclusions under Section I of the Homeowners 3 policy EXCEPT A) losses due to earthquake. B) losses due to the failure of the insured to use all reasonable means to save and preserve property after the time of a loss. C) losses resulting from a power failure caused by an insured peril at the residence premises. D) losses due to radiation from a nuclear power plant.

C) losses resulting from a power failure caused by an insured peril at the residence premises.

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

C) medical payments

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

C) medical payments coverage

Chap 21 1) All of the following persons are insured for personal liability under the homeowners policy EXCEPT A) children of the named insured under age 24 who are attending college full time and temporarily residing elsewhere. B) foster children under the age of 21 who reside with the named insured. C) nonresident employees of the named insured. D) the spouse of the named insured if a resident of the same household.

C) nonresident employees of the named insured.

42) Tom and Nancy Boyle were surprised to learn that some of their valuable personal property—a gun collection, jewelry, a mink coat, and sterling silverware—was subject to internal limits under their homeowners policy. What separate insurance policy can the Boyles purchase to obtain the desired coverage on this personal property? A) personal umbrella policy B) dwelling form C) personal articles floater D) title insurance Answer: C

C) personal articles floater

28) Steve and Mary are art collectors. They own lithographs, etchings, and vintage photographs valued at over $250,000. Steve and Mary display their art collection at their home. They can insure this valuable personal property through a A) title insurance policy. B) dwelling property form. C) personal articles floater form. D) personal umbrella policy.

C) personal articles floater form.

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

C) personal property replacement cost endorsement

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

C) race.

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

C) residual (shared) market.

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

C) slander

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

D) Identity theft is covered by adding an endorsement.

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

C) specialty auto insurer.

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

C) switching to an HO-2 policy

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

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

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

C) windstorm

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

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

27) William would like to insure his home. He does not want theft or personal liability coverage; however, he would like "open perils" (all-risks) coverage on the dwelling. William should purchase a A) Homeowners 3 Policy. B) Dwelling Property 1 Form. C) Dwelling Property 2 Form. D) Dwelling Property 3 Form. Answer: D

D) Dwelling Property 3 Form.

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

D) HO-6

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

D) Homeowners 5

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

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

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

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

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

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

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

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

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

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

25) George has a personal auto policy with a per-person liability limit of $300,000. He also has a personal umbrella policy with a limit of $2,000,000 and a self-insured retention of $1,000. How much will be paid by each policy if a person wins a judgment of $500,000 against George as a result of bodily injury arising from the auto accident? A) The auto policy will pay nothing, and the umbrella policy will pay $449,000. B) The auto policy will pay nothing, and the umbrella policy will pay $500,000. C) The auto policy will pay $300,000, and the umbrella policy will pay $199,000. D) The auto policy will pay $300,000, and the umbrella policy will pay $200,000.

D) The auto policy will pay $300,000, and the umbrella policy will pay $200,000.

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

D) The endorsement also covers flood losses.

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

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

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

D) The homeowner's son was injured when he fell off a swing in the homeowner's yard.

41) Ted purchased a home. To finance the purchase, he borrowed $140,000 from ABC Bank, pledging the home as collateral for the loan. Shortly after purchasing the home, Ted lost his job. He could not find another job and could not pay the mortgage each month. Ted set fire to the home. The claims adjuster suspected arson, and an investigation proved that Ted intentionally caused the loss. Under the mortgage clause of the Homeowners 3 policy, how will this loss be settled? A) The insurer has no liability because the loss was intentional. B) The insurer will pay Ted the actual cash value of the loss as intentional loss is not excluded. C) The insurer will pay ABC the value of its insurable interest and pay Ted the value of his insurable interest. D) The insurer will pay ABC the value of its insurable interest and then attempt to recoup the loss payment from Ted. Answer: D

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

12) Which of the following situations would be covered under Section II of a homeowners policy? I. The insured is sued by his girlfriend because he infected her with the AIDS virus. II. The insured's son is sued after a friend suffered serious injury as a result of using illegal drugs sold to him by the son. A) I only B) II only C) both I and II D) neither I nor II

D) neither I nor II

43) Which of the following statements regarding the Coverage E limit in the homeowners policy is true? A) It is an aggregate limit, and once the amount paid for one or more claims reaches the limit, no additional coverage is provided. B) The limit applies only if a court orders the insured to pay—there is no coverage for settlements reached out-of-court. C) Any legal defense costs incurred by the insurer are counted against the limit of liability. D) The limit applies on a per-occurrence basis so more than the limit could be paid during the policy period.

D) The limit applies on a per-occurrence basis so more than the limit could be paid during the policy period.

22) Which of the following statements about title insurance is true? A) A premium must be paid annually to keep the policy in force. B) The policy term runs for 30 years or the length of the insured's mortgage loan, whichever is shorter. C) The policy guarantees that the owner will keep possession of the property if a defect in the title is discovered. D) The policy provides protection against title defects that occurred prior to the effective date of the policy. Answer: D

D) The policy provides protection against title defects that occurred prior to the effective date of the policy.

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

D) There is no requirement for the insured to submit written notification of a possible claim to the insurer.

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

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

38) Dennis was involved in an accident. He believes the damage to his auto is $6,000. His insurer believes the damage is only $3,500. Which PAP provision is designed to handle disputes between the insurer and the insured over the amount of the loss? A) other insurance provision B) agreed amount endorsement C) coinsurance provision D) appraisal provision

D) appraisal provision

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

D) choice no-fault plan.

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

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

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

D) destruction of jewelry by fire.

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

D) essential services expenses.

7) All of the following are considered insured locations for medical payments to others (Coverage F) under a homeowners policy EXCEPT A) a new vacation home purchased by an insured during the policy period. B) a motel room where an insured is temporarily residing. C) a hall rented by the insured for her daughter's graduation party. D) farmland owned by the insured.

D) farmland owned by the insured.

30) Reggie just purchased a home. A friend told him to consider insurance coverage for natural disasters when insuring the home. A loss from which of the following perils is covered under an unendorsed Homeowners 3 policy? A) tsunami B) earthquake C) flood D) forest fire

D) forest fire

34) James was injured in an auto accident caused by another motorist's negligence. He received severe facial lacerations and injured his back in the accident. In payment for his pain, suffering, and disfigurement, losses which cannot be specifically itemized, James will receive A) punitive damages. B) special damages. C) imputed damages. D) general damages

D) general damages

29) Lu would like to save money on her homeowners premium. All of the following steps will help her to reduce her homeowners premium EXCEPT A) raising the deductible in the homeowners policy to a higher amount. B) shopping around a homeowners policy. C) installing burglar alarms, smoke detectors, and dead-bolt locks. D) insuring the value of the land beneath the house.

D) insuring the value of the land beneath the house.

26) All of the following are commonly excluded by personal umbrella policies EXCEPT A) acts committed with the intent to cause bodily injury or property damage. B) professional liability. C) aircraft liability. D) libel, slander, and other types of personal injury. Answer: D

D) libel, slander, and other types of personal injury.

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

D) low-cost auto insurance.