Exam
All of the following statements describe the concept of strict liability EXCEPT
. It is imposed on defendants engaged in hazardous activities.
How does the mobilehome endorsement affect the other coverage of law or ordinance in a homeowners policy?
. It removes the coverage.
The process of determining the premium charged and how much insurance is required for a particular loss is called
. Loss valuation.
Which loss listed below would be fully covered by a homeowners policy?
1. $1,200 pedigreed golden retriever stolen 2. $24,000 bass boat destroyed in a tornado 3. $5,000 firearm collection stolen 4. $2,000 silver tea set stolen the tea set because the limit is up to 2,500
What is a method of claim settlement used in casualty insurance when the insured and insurer cannot agree on how to settle a claim?
1. Appraisal
Which of the following defenses attests that if a person recognizes and understands that there is danger involved in an activity and voluntarily chooses to encounter it, he or she may be barred from seeking recovery for injuries due to negligence?
1. Assumption of risk
All of the following are supplemental payments included in the liability section of a personal auto policy EXCEPT
1. Premiums on appeal bonds in any suit the insurer defends. 2. Up to $250 for bail bonds required because of a covered accident. 3. Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident. 4. Up to $200 a day for loss of earnings due to attendance at hearings or trials. The answer is Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident.
Which of the following entities was created to protect insureds against an insurer's insolvency?
1. The Insurance Regulation Commission 2. The Better Business Bureau 3. The Fair Credit Reporting Act 4. The Insurance Guaranty Association The Insurance Guaranty Association
Under the additional living expenses coverage, if a civil authority prohibits the insured from using the dwelling because of direct damage to a neighboring location from a peril covered in the insured's policy, loss would be covered for up to
2 weeks.
.All of the following are considered parts of the policy structure EXCEPT
3. Provisions.
How long is the waiting period after the application has been accepted before flood coverage goes into effect?
30 days
Under the dwelling policy, if an insurer chooses to repair or replace damaged or lost property, it must inform the insured within how many days of receiving proof of loss?
30 days
An insured with a homeowners policy has removed property from the insured location to protect it from loss that could be caused by a covered peril. The removal coverage applies for
30 days.
An insured insists that the insurer owes him $10,000 for liability damages, while the insurer asserts that they owe no more than $7,000. Which of the following would most likely describe the type of claim settlement that the insured and the insurer might pursue?
Arbitration When an insured and insurer cannot agree on how to settle a claim, arbitration is often used. The settlement is submitted to an arbitrator(s) whose decision may or may not be binding on both parties dependent on state law.
Which of the following describes the transfer of a legal right or interest in an insurance policy?
Assignment
While serving as Commissioner, which of the following would be allowable to that individual?
Be a policyholder of a health insurance contract
Which of the following best describes an insurance company that has been formed under the laws of this state?
Domestic
With regards to the personal auto policy, in the event of a claim or loss, the insured is required to do all of the following EXCEPT
Immediately report to an emergency room for medical examination.
What type of coverage is Coverage E in homeowners policies?
Personal liability
Section I of a boatowners policy covers
Physical damage. Section I of a boatowners policy covers physical damage.
Under what circumstances would an incident be EXCLUDED under medical payments coverage of a personal auto policy?
The insured is injured while driving his motorcycle on his resident premises.
If more than one person has an insurable interest in the property covered under a dwelling policy,
The insurer will be liable for only the insured's interest in the damaged property.
In insurance policies, contract ambiguities are automatically ruled in the favor of the insured. What privilege does the insurer have in order to balance this?
The right to determine the wording of a policy
.For the purpose of insurance, risk is defined as
The uncertainty or chance of loss.
An insured is a member of the neighborhood association, and has become liable for damage to a third party. Each member of the association has been assessed a portion of the loss equal to $2,000. How much will the Loss Assessment additional coverage of the insured's homeowners liability policy pay?
Up to $1,000 The policy will pay up to $1,000 per occurrence for the insured's share of loss assessment charged against them as owner or tenant of the residence premises during the policy period by a corporation or association of property owners.
If an insured operates a home day care business out of his house, how can he ensure the liability exposure coverage?
a)Buy additional coverage for his business b)Pay additional premium into his own liability policy c)Attach the home day care coverage endorsement to the HO policy d)Include home business endorsement in the HO policy A home day care coverage endorsement may be attached to the homeowners policy to cover the liability exposure associated with the business. The Answer is C A home day care coverage endorsement may be attached to the homeowners policy to cover the liability exposure associated with the business.
Within the first 60 days of coverage under a dwelling policy, how much notice is required for the cancellation of a policy?
10 days No matter what the reason, if a policy is canceled within the first 60 days, only 10 days advance notice is required.
Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses?
Additional coverage
An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor, who was sitting on the porch, is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have?
Combined single
Which of the following is a statutory defense?
Comparative negligence
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
Consideration
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as
Contracts of adhesion.
Which of the following examples of losses paid under an HO-3 also would be paid under an HO-2 homeowners policy?
Damage to the dwelling caused by lava or dust from a volcanic eruption An HO-3 covers losses on an open peril basis. An HO-2 covers losses on a named peril basis. Both forms cover damage to the dwelling caused by lava or dust from a volcanic eruption.
.A beauty parlor burns to the ground. What type of loss is this to the owner?
Direct
The loss ratio compares
Earned premium to losses.
What are some of the authorities that an agent can hold?
Express and implied
When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement?
False financial statement False financial statements are made when insurance companies attempt to hide their financial troubles from the public and government officials.
Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of large numbers
.On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of
Misrepresentation.
The mobilehome endorsement alters the homeowners policy to cover a mobilehome and other structures on land
Owned or leased by the resident of the mobilehome.
A situation in which a person can only lose or have no change represents
Pure risk.
Which of the following insurance options would be considered a risk-sharing arrangement?
Reciprocal
Which policy condition in HO policies states that insurance applies separately to each insured?
Severability of insurance
.Which of the following is NOT a characteristic of an insurable risk?
The loss must be catastrophic.
When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be
The proximate cause
An insured's 9-year-old son threw a ball, accidentally breaking a neighbor's plate glass window. The insured was found legally liable for the cost of replacing the window. This is an example of
Vicarious liability. Under vicarious liability, an insured may be held responsible for the acts of other family members or independent contractors engaged by the insured to perform work.
Both the broad theft and limited theft endorsements on the dwelling program exclude all of the following types of property EXCEPT
Watercraft.
The limits for uninsured motorist coverage are established
When the auto policy is purchased.
1.Which of the following terms refers to other insurance that is written on the same risk, but not on the same coverage basis?
s)1. Primary and excess 2. Pro rata 3. Contribution by equal shares 4. Nonconcurrency Nonconcurrency
How much coverage can be available for watercraft damage in the homeowners policy?
up to $1,500
A covered watercraft was damaged in an accident. The actual cash value of the damaged property was assessed at $10,000. The cost of repairs for the watercraft was assessed at $5,000. The insured's watercraft policy is written with a $25,000 limit. How much will the insurer pay for coverage to damage to the watercraft?
$5,000
Which of the following additional perils is covered under both the basic form and broad form dwelling policies?
1. Internal explosion 2. Falling objects 3. Weight of ice, snow, or sleet 4. Freezing of plumbing, heating, or air conditioning systems Internal Explosion
With respect to the personal auto policy, which of the following vehicles could be classified as a nonowned auto?
A vehicle that is titled to another person, but is being used with permission by an insured
Another person has alleged that you are responsible for damage to their property. You notify your homeowners insurer. The insurer will
Either pay or defend as it decides.
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?
Foreign
Applicants for which type of insurance license are exempt from Alabama prelicensing education requirements?
Limited license
In addition to the premium charged for the coverage provided in the policy, a surplus lines broker may collect
State or federal taxes required on the policy.
A nonadmitted insurer who provides unique insurance coverage that is not available from an admitted insurer is called a/an
Surplus lines insurer.
When a vehicle travels from one state to another, what happens to the limits of policy liability in a personal auto policy?
They do not change.
An insured has a standard HO-4 policy with a $30,000 limit of coverage for personal property. While he was traveling, a fire in his hotel destroys clothes and luggage with a replacement value of $10,000 and jewelry with a replacement value of $10,000. Disregarding any deductible, and assuming a depreciation of 20% has occurred in both properties, what amount is the insurer obligated to pay?
a)$16,000 b)$20,000 c)$30,000 d)$11,000 The answer is A This loss would be settled on an actual cash value (ACV) basis: $20,000 total for the loss minus $4,000 for depreciation. Remember, the limitation on loss of jewelry applies to the peril of theft only.
Driver A has a personal auto policy with Part C: UM/UIM limits of 100/300. He is injured by Driver B who has Part A: Bodily Injury Liability limits of 50/100. It is determined that Driver B is at fault for the accident. Driver A has $125,000 in medical expenses. How much will his Part C: UM/UIM coverage pay?
$50,000
Which of the following coverages will respond if a claim is made or a suit is brought against an insured for damages due to bodily injury or property damage caused by an occurrence to which the coverage applies?
Coverage E - Personal Liability Coverage E - Personal liability will respond if a claim is made or a suit is brought against an insured for damages due to bodily injury (BI) or property damage (PD) caused by an occurrence to which the coverage applies.
What type of insurance can be obtained through a surplus lines insurer?
Coverage that is unavailable through authorized insurers
In the personal auto policy, owned trailers being towed by an insured auto are automatically covered for
Uninsured motorist coverage.
An insured is in his garage with his two friends when some shelving loaded with heavy objects collapses and falls on them. All three of them are experiencing back pain, so they go to an emergency room where MRIs are performed at a cost of $750 each. How much will the medical expense coverage of the insured's dwelling policy pay for these costs?
$1,500 Medical expense coverage pays up to $1,000 per person, but not for the insured or other residents of the premises.
The policy that pays first in the event of a covered loss is known as the
Primary policy.
What is the minimum amount of coverage that should be carried on an HO-2 on a home that was purchased four years ago for $75,000, which today has a replacement value of $100,000?
$80,000
If a licensee wants to transact insurance under a different name than that listed on his or her producer's license, which of the following must occur?
. The change must be reported to the Commissioner.
A motorist whose insurance liability coverage is too low to pay for all damage after an accident is considered
. Underinsured.
.The homeowners policy covers collapse caused by all of the following EXCEPT
1. Weight of too many people attending an event hosted in the house. 2. Foundation cracks. 3. Weight of snow. 4. Hidden insect or vermin damage. Foundation Cracks because they are visible to the eye and could have been resolved
What is the term for an individual employed by a property and casualty insurance company to settle claims brought on by insureds?
An adjuster
Which of the following is a method of claim settlement used in casualty insurance when the insured and insurer cannot agree on how to settle a claim?
Arbitration Arbitration is a method of casualty claim settlement used when the insured and insurer cannot agree on how to settle a claim. The arbitrator's decision is binding to both parties.
Which of the following is NOT covered by the condominium unit owners endorsement?
Furniture in the building
Elaborate homes and those with detailed designs or decorative architecture with replacement costs greater than ACV or market value are insured on
HO-8.
.An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
Illegal
Which of the following is the basis for a claim against an insurance policy?
Loss
The limited fungi, wet or dry rot, or bacteria coverage endorsement applies to which type of losses?
Property and liability
Which of the following is a characteristic of a Reciprocal Insurance Exchange?
The chief administrator of the insurer is called an "attorney-in-fact". A "reciprocal" is an unincorporated aggregation of individuals, called subscribers, who exchange insurance risks. If the premiums charged for coverage are not sufficient to pay the losses of the group, subscribers may be assessed an additional premium. A reciprocal is administered by an attorney-in-fact who is empowered to bind each subscriber to assume a share of the losses of the group.
An insured stopped paying the premium for his auto policy. What happens next ?
The insurer must provide a 10-day notice prior to policy cancellation.
A repair facility used after-market parts in the repair of a customer's automobile, and did not notify the customer of this. Which of the following is true?
The repair facility has engaged in an unfair trade practice.
Producers will be deemed to be using their license primarily to write controlled business if, during any 12-month period
The total premiums on controlled business exceeds the total premiums on all other business written.
