FINAL EXAM INSURANCE
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? a)Any federal report b)Consumer report c)Inspection report d)Agent's report
b)Consumer report Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.
Which of the following would be required to be licensed as an insurance producer? a)An insurance company director who performs executive, administrative and managerial duties b)A salaried employee who advertises and solicits insurance c)A person whose activities are limited to producing insurance advertisements d)A salaried full-time employee who furnishes information for group insurance
A salaried employee who advertises and solicits insurance A person does not require an insurance producer license if he or she only advertises without intent to solicit insurance. However, once there is solicitation, a license is required.
An agent who collects a premium payment from a client must hold such funds in which of the following types of accounts? As long as records are kept, any federally insured account An equity indexed account A business account A separate account from the agent's personal or business account
A separate account from the agent's personal or business account
Which of the following produces evaluations of insurers' financial status often used by state departments of insurance? a)AM Best b)NAIC c)Consumer's guide d)SEC
AM Best AM Best & Company assigns ratings to life, property and casualty insurance companies based upon the financial stability of the insurer.
Which of the following businessowners policy (BOP) endorsements provides coverage for the inability to collect monies due from customers as the result of a covered cause of loss? Valuable papers and records Accounts receivable Money and security Extortion
Accounts receivable
When transacting business in this state an insurer formed under the laws of another country is known as a/an Alien insurer. Domestic insurer. Foreign insurer. Admitted insurer.
Alien insurer.
Who is legally required to keep records pertaining to insurance transactions? a)The Commission b)All licensees c)Insureds d)Agencies and insurers only
All licensees All licensees, including agents and brokers, are required to keep records of all their insurance transactions. These must be maintained for 3 years following a completed transaction.
Which of the following would NOT qualify as a hired auto? a)An auto rented for personal use b)An auto borrowed from an employee c)An auto hired by an employer d)An auto leased from a commercial rental company
An auto borrowed from an employee Hired automobiles include those that are leased, hired, rented, or borrowed, excluding autos that are owned by employees
Which of the following could be covered by an HO policy? A sports car kept in an attached garage Property of a tenant not related to the insured An oriental rug in an on-premises apartment Birds, fish, and animals
An oriental rug in an on-premises apartment Homeowners contents coverage does not apply to animals, cars, or property of those who pay to be at your house; it does provide up to $2,500 for a loss of landlord's furnishings in an on-premises apartment.
Under a personal auto policy, in which of the following locations would a vehicle primarily garaged in California be covered? Any other state Anywhere in the world Mexico Only in California
Any other state If a covered auto is involved in an auto accident that occurs in any state or Canadian province other than the one in which the auto is principally garaged, the out-of-state coverage will apply.
While an insured's covered auto is in the repair shop following damage caused by a collision, the insured would have coverage for which of the following vehicles under a personal auto policy? Any vehicle while located inside a racing facility for the purpose of racing Any vehicle not owned by the insured, but furnished for use while the covered auto is out of normal use because of repair Any vehicle used by the insured without the reasonable belief that the insured is entitled to use such vehicle Any auto furnished for the insured's regular use, but not named on the policy
Any vehicle not owned by the insured, but furnished for use while the covered auto is out of normal use because of repair
A boatowners policy does NOT cover a)Nuclear hazards b)Damage to the boat and trailer. c)Liability. d)Medical payments.
Nuclear hazards. Boatowners policies, like homeowners policies, cover property, liability, and medical payments.
Why don't Commercial Auto Coverage Forms automatically include medical payment coverage? The business that owns the vehicles must be self-insured for medical payment coverage. Commercial auto coverage is for damage to vehicles, only. Any person occupying a commercial vehicle must have a Personal Auto Policy to cover any medical payments that result out of an accident. Often any person occupying a commercial vehicle would be covered under a workers compensation policy.
Often any person occupying a commercial vehicle would be covered under a workers compensation policy.
Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance? a)False statements about financial condition of an insurer are unlawful. b)Statements made with the intent to deceive are unlawful. c)Only written statements can be considered fraud. d)Omissions of material fact on insurance application are fraud.
Only written statements can be considered fraud. According to Title 18, Sections 1033 & 1034 of the US Code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud.
What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? a)Binder policy b)Named peril policy c)Open peril policy d)Specified peril policy
Open peril policy Open peril (special) policies cover everything except what they say they don't. Named peril policies cover only perils named in them.
The insured's car was hit and damaged by a deer. Under which of the following coverages in a personal auto policy would this loss be paid? Liability Uninsured motorist Collision Other-than-collision
Other-than-collision
The causes of loss insured against in an insurance policy are known as Perils Losses Risks Hazards
Perils
If a person is using an auto with the belief that he is entitled to do so, subrogation rights under a personal auto policy would apply to all coverages EXCEPT Uninsured motorist. No-fault medical payments. Liability. Physical damage.
Physical damage.
Which of the following liability exposures is most likely for a small specialty clothing retail boutique? a)Completed operations liability exposure b)Premises liability exposure c)Operations liability exposure d)Product liability exposure
Premises liability exposure The premises liability exposure exists when there is use of the premises. Operations liability exposure relates to activities in addition to use. Product liability exposure is the possibility that the public might be injured by the product. Completed operations liability refers to liability for work already performed or completed. For a boutique retail store, the only possible liability would arise from customer injury while on the premises.
All of the following are considered parts of the policy structure EXCEPT a)Provisions. b)Exclusions. c)Insuring clause. d)Conditions.
Provisions. Provisions is a broad term used to refer to the sections or clauses of an insurance policy that communicate the policy's benefits, conditions, etc. The essential parts of the policy are declarations, insuring clause, conditions and exclusions.
What type of damages may be awarded by the court to create disincentives that discourage behavior that is deemed highly undesirable by society? Punitive General Compensatory Specific
Punitive Punitive damages are a form of punishment, intended to serve as an example to others to discourage undesirable behavior.
After a loss, an insured covered by a business property coverage is NOT required to Resume business operations as soon as possible. Send the insurer a sworn proof of loss within 60 days. Take all reasonable steps to protect property from further damage. Reconstruct for the insurer a timeline of activities leading up to the loss for use in an investigation.
Reconstruct for the insurer a timeline of activities leading up to the loss for use in an investigation.
After a loss, an insured covered by a business property coverage is NOT required to a)Send the insurer a sworn proof of loss within 60 days. b)Take all reasonable steps to protect property from further damage. c)Reconstruct for the insurer a timeline of activities leading up to the loss for use in an investigation. d)Resume business operations as soon as possible.
Reconstruct for the insurer a timeline of activities leading up to the loss for use in an investigation. Although the insured is required provide a description of how, when, and where the loss or damage occurred, there is no demand for a timeline leading up to the loss.
Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? Retention Reduction Transfer Avoidance
Reduction
The Federal Fair Credit Reporting Act a)Regulates consumer reports .b)Protects customer privacy. c)Regulates telemarketing. d)Prevents money laundering.
Regulates consumer reports. The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.
Which inland marine coverage condition states that payment of any claim will not reduce the limit of insurance, except in case of a total loss on a scheduled item? Reinstatement of limit Legal action against the insurer Privilege to adjust with the owner Transfer of rights of recovery
Reinstatement of limit
An insured owns a large dog. The first day he has to leave the dog home alone to go to work, the insured comes back to find his $400 couch torn apart, his $100 coffee table chewed up, his $50 window curtain shredded, and a $200 window pane shattered where his dog jumped through. The insured has personal property coverage under a special form dwelling policy. How much of this loss will the policy cover? a)$0 b)$200 c)$250 d)$750
$0 Damage that results from domestic animals is excluded under the special form dwelling policy.
How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card? a)$100 b)$500 c)$1,000 d)$5,000
$500 $500 is provided automatically, and may be increased by endorsement.
If an insured covered under a Mobile Homeowners Policy moves the mobile home to protect it from a covered peril, the policy will pay up to a)$350. b)$500. c)$750. d)$1,000.
$500. A Mobile Homeowners Policy will pay up to $500 if the insured moves the mobile home to a safer area to protect it from loss by a covered peril.
An insured hits a deer and crashes his car into a tree. The total damage to the vehicle is $6,000. How will this loss be covered? This would not be a covered loss. $6,000 would be paid under other-than-collision coverage. $3,000 would be paid under other-than-collision; $3,000 would be paid under collision coverage. $6,000 would be paid under collision coverage.
$6,000 would be paid under other-than-collision coverage.
A new set of continuing education hours must be completed every a)2 years. b)3 years. c)5 years. d)1 year.
2 years Continuing education is required biennially (every 2 years) of resident and nonresident agents.
An agent is licensed for life and property insurance. How many hours of CE is the agent required to earn every 2 years? 10 16 24 40
24
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? a)3 days b)5 days c)10 days d)14 days
3 days Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.
An insurance agent changes his residential address. Within what time period must the agent notify the Commission of the change? Immediately 10 business days 30 calendar days There is no requirement for residential addresses.
30 calendar days
Losses caused by vandalism and malicious mischief are excluded under a homeowners policy if the dwelling had been vacant for more than 30 days. 45 days. 60 days. 90 days.
60 days.
What is the required limit of insurance in the coinsurance clause for Coverage F - Unscheduled Farm Personal Property? 75% 80% 85% 90%
80%
An installation floater is used to insure All types of for-sale merchandise. Dams, power plants, water plants, and other such installations. Appliances intended to become a permanent part of the building. Buildings under construction.
Appliances intended to become a permanent part of the building. The installation floater covers the interest of the owner, seller, or contractor of refrigeration systems, elevators, or other pieces of large equipment intended to become a permanent part of the building on location awaiting or in the process of being installed or tested.
The insured's mother-in-law broke her leg falling down the front steps of the insured's premises. The insured's homeowners medical payments coverage will Pay as excess over the mother-in-law's health insurance. Pay only if the mother-in-law has no health insurance of her own. Share equally in the cost with the mother-in-law's health insurance. Apply to injuries of any guests or visitors.
Apply to injuries of any guests or visitors.
First aid costs for others injured on the insured's premises a)Are paid in addition to the liability limit. b)Apply only if the insured is legally liable. c)Also cover injuries to the insured's family members. d)Are deducted from the liability limit.
Are paid in addition to the liability limit. First aid costs for others apply even if you are not legally liable and are in addition to the stated limits, but do not apply to those regularly at the location.
Which of the following describes the transfer of a legal right or interest in an insurance policy? Assignment Abandonment Obligation Legal purpose
Assignment Assignment is the transfer of a legal right or interest in an insurance policy. In property and casualty insurance, assignments of policies are usually valid only with the prior written consent of the insurer.
If an insured has an umbrella liability policy in addition to his personal auto policy, which would be considered the underlying policy? Umbrella policy Excess policy General liability policy Auto policy
Auto policy
How are state Insurance Guaranty Associations funded? a)By NAIC b)By the Government c)By their members - authorized insurers d)By the Department of Insurance
By their members - authorized insurers Guaranty Associations are funded by their members: all authorized insurers are required to contribute to a fund to provide for the payment of claims for insolvent insurers.
The at-fault driver in an insured's auto crash had the state required minimums for auto liability coverage, but not enough to pay for all the damage done to the insured. This driver is Considered underinsured. Not liable for the damages in excess of his limits. Required to post a bond for the amount of damages above his limits. Considered uninsured.
Considered underinsured.
The designation symbols used in commercial auto policies can be found in which policy section? Conditions Covered Auto Liability Coverage Definitions
Covered Auto
Additional coverages in the liability section of a homeowners policy cover all of the following EXCEPT a)Damage to a third-party property for which the insured is legally liable. b)Claims expense. c)Expenses the insured incurs rendering first aid for bodily injury to third parties. d)Damage to the property of others.
Damage to a third-party property for which the insured is legally liable. Legal liability coverage is a primary liability coverage, not an additional coverage.
Which of the following examples of losses paid under an HO-3 also would be paid under an HO-2 homeowners policy? a)Interior damage caused by water seeping under the shingles on the roof b)Damage to the dwelling caused by ash or dust from a volcanic eruption c)Damage to the dwelling caused by the insured when moving furniture d)Accidental scorching caused when a hot iron is placed upon a built-in counter top
Damage to the dwelling caused by ash 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 ash or dust from a volcanic eruption
The part of a property policy that shows the amount of insurance, premium, and policy term is the a)Endorsements. b)Declarations. c)Insuring clause. d)Conditions.
Declarations. Who, what, when, where, and how much insurance and premium all are stated in the policy Declarations.
Employment practices liability insurance (EPLI) would NOT cover claims arising from Wrongful termination. Discrimination. Deliberate law violation. Sexual harassment.
Deliberate law violation. Claims arising because of intentional acts of the insured are not covered.
A beauty parlor burns to the ground. What type of loss is this to the owner? Consequential Specific Consecutive Direct
Direct
An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act? Direct response marketing Independent agency marketing Illegal Insurance telemarketing
Direct response marketing A direct response marketing system effectively bypasses the insurance agent. Business is conducted over the phone, through the mail, or online. This is a perfectly legal approach to selling insurance. It is not mandatory in all situations for the insured to physically sign any documents in order for coverage to go into effect.
Which commercial crime form would provide coverage for a loss that did not necessarily happen during the policy period but was revealed during the policy period? Retro form Reporting form Loss sustained form Discovery form
Discovery form
In addition to the common policy conditions, all of the following conditions apply to liability coverage EXCEPT Bankruptcy. Employers liability. Separation of insured. Legal action against insurer.
Employers liability.
What is the purpose of the coinsurance clause found in property insurance policies? a)Prevent insureds from profiting from a loss b)Encourage the insured to insure the property closer to its full value c)Encourage higher standards of care by requiring the insured to pay a portion of every loss d)Ensure that insureds do not overinsure their property
Encourage the insured to insure the property closer to its full value In return for the insured's promise to insure the property to some certain percent of its value, the insurer agrees to give the insured a reduced rate per hundred on the insurance and pay partial losses in full.
How often must continuing education requirements be met? a)Every year b)Every 2 years c)Every 3 years d)Every year for the first 5 years, then every 3 years
Every 2 years Continuing education is required biennially (every 2 years) of resident and nonresident agents.
Which of the following is NOT a duty of the Commission of Insurance? Examining each domestic insurer at least once a year Appointing the Commissioner of Insurance Enforcing the Insurance Code Suspending or revoking licenses of Insurance Code violators
Examining each domestic insurer at least once a year
When injured employees are not allowed to seek damages outside the workers compensation law, this is known as which of the following? Law of large numbers A FAIR Plan A Second Injury Fund Exclusive remedy principle
Exclusive remedy principle According to the exclusive remedy principle, the rights and remedies granted to an employee to accept workers compensation on account of injury or death by accident must exclude all other rights and remedies of such employee.
All of the following actions can be described as twisting EXCEPT Misrepresenting the terms and conditions of the existing policy to make the new one more attractive Embellishing the terms of the proposed policy in order to convince the insured to switch Making an incomplete comparison between the existing and proposed policies Explaining to client the advantages of permanent insurance over term and suggesting changing policies
Explaining to client the advantages of permanent insurance over term and suggesting changing policies
All of the following violations may result in an agent's imprisonment EXCEPT a)Engaging in the business of insurance after being convicted of breach of trust. b)Failing to report to the department a criminal prosecution taken against the agent in another jurisdiction. c)Embezzling funds from the insurer. d)Knowingly obtaining information about a consumer under false pretenses.
Failing to report to the department a criminal prosecution taken against the agent in another jurisdiction. While the agents are required to notify the department about any administrative action or criminal prosecution taken against them, that act alone will not result in imprisonment. All the others are violations that may be punished by imprisonment.
Which of the following losses would be covered by an unendorsed homeowners policy? a)Collapse caused by earthquake b)Fire or lightning c)Faulty or defective zoning d)Theft in a structure under construction
Fire or lightning Fire and lightning are included in the basic perils, which in turn are included in almost all homeowners policies. Earthquake coverage is only by endorsement. Theft in or to buildings under construction is not covered. If the insured's own acts, decisions, or failure to act causes the loss, it is not covered.
Which of the following homeowners forms is designed to provide named peril coverage for personal property to individuals who rent an apartment? HO-6 HO-2 HO-3 HO-4
HO-4
Which of the following homeowners forms is designed for individuals that own and reside in a condominium? HO-6 HO-2 HO-3 HO-4
HO-6
In insurance transactions, fiduciary responsibility means Handling insurer funds in a trust capacity. Maintaining a good credit record. Being liable with respect to payment of claims. Commingling premiums with agent's personal funds.
Handling insurer funds in a trust capacity.
The State Corporate Commission (SCC) has the authority to do all of the following EXCEPT a)Have interest in insurance companies regulated by the Commission. b)Issue cease and desist orders. c)Issue licenses and certificates of authority. d)Impose fines or other penalties for violations of insurance laws.
Have interest in insurance companies regulated by the Commission. The Commission may not have ownership of, interest in, or any transactions in any capacity with any financial institution or insurance company licensed or regulated by the SCC.
Events or conditions that increase the chances of an insured loss occurring are referred to as Hazards. Exposures. Risks. Perils.
Hazards.
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 a)Protect the insured auto from further damage. b)Promptly contact the police if the accident was a hit-and-run. c)Immediately report to an emergency room for medical examination. d)Notify the insurer as soon as possible with a description of the accident.
Immediately report to an emergency room for medical examination. The personal auto policy states that the insurer has no duty to provide coverage under the policy if the insured's failure to comply with the duties after an accident or loss results in harm to the insurer.
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 a)Immediately report to an emergency room for medical examination. b)Notify the insurer as soon as possible with a description of the accident. c)Protect the insured auto from further damage. d)Promptly contact the police if the accident was a hit-and-run.
Immediately report to an emergency room for medical examination. The personal auto policy states that the insurer has no duty to provide coverage under the policy if the insured's failure to comply with the duties after an accident or loss results in harm to the insurer.
Which of the following additional perils is covered under both the basic form and broad form dwelling policies? a)Freezing of plumbing, heating, or air conditioning systems b)Internal explosion c)Falling objects d)Weight of ice, snow, or sleet
Internal explosion Internal explosion is included in all forms.
In a dwelling policy, which of the following is true regarding personal liability coverage? a)It does not cover medical payments to others b)It is included in all dwelling policies. c)It is the same as in homeowners policies. d)It must be added as a supplement or written as a separate policy.
It must be added as a supplement or written as a separate policy. Unlike the homeowners policy, the dwelling policy does not include any coverage for personal liability. The personal liability supplement can be added to the dwelling policy or written as a separate policy. The coverage form includes two major coverages: personal liability and medical payments to others.
While cutting grass in your yard with your brother's borrowed lawnmower, the fuel line ruptures and the lawnmower is destroyed in the fire. How will your HO liability react? It will not cover the damage because you are not liable. It will pay your brother's property insurance deductible. Your HO liability and your brother's property coverage will share on a prorated basis. It will cover the damage.
It will cover the damage. Your HO liability will cover damage to property of others even if you are not liable.
What type of property would NOT be covered under the dwelling policy special form Coverage A - Dwelling? Materials and supplies on the premises used to alter or repair the dwelling Outdoor equipment located on the premises and used to service the location Attached structures Land on which the dwelling is located
Land on which the dwelling is located
Which of the following personal auto coverages would pay for the insured's travel expenses and loss of earnings while involved in the settlement process of a covered loss? a)Comprehensive coverage b)Collision coverage c)Liability coverage d)Medical payments
Liability coverage Supplementary payments, found in Part A - Liability, include expenses incurred by the insured at the insurer's request, including $200 per day for attending trials or hearings.
Coverage A - Bodily Injury and Property Damage in the commercial general liability policy will cover Contractual liability. Damage to the insured's product. Losses due to the insured's negligence. Liquor liability.
Losses due to the insured's negligence.
An insured's home is mortgaged by the local bank. The insured is required to carry insurance on the home, showing the bank as the mortgagee. If the home is damaged by a covered peril, which of the following is true? a)Losses will be paid to the mortgagee and mortgagor as their interest appears. b)Coverage is suspended if the building is mortgaged and the insurer is not told of this indebtedness. c)The mortgagee must settle with the mortgagor in the event of a loss. d)The additional premium required for the mortgage endorsement must be paid by the mortgagee.
Losses will be paid to the mortgagee and mortgagor as their interest appears. If a mortgagee is shown on a property policy, in the event of loss, the insurer agrees to pay its financial interest of the loss up to the policy limits. If the policy is to be cancelled, the insurer agrees to give the mortgagee at least 10 days' prior notice of the cancellation.
Rates that are established based on the similarities of the risk with other risks are known as Experience rates. "A" rates. Merit rates. Manual rates.
Manual rates. Rates that are established by similarity of risk are manual rating or class rates.
All of the following would be covered under the medical expense coverage of a businessowners policy EXCEPT First aid when the accident occurred. Mental health counseling. Ambulance services. X-ray services.
Mental health counseling.
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report Are entitled to obtain a copy of the report from the party who ordered it. Must be advised that a copy of the report is available to anyone who requests it. May sue the reporting agency in order to get inaccurate data corrected. Must be informed of the source of the report.
Must be informed of the source of the report.
At the time of loss insured against in a property and casualty policy, the insurer's claim settlement options include all of the following EXCEPT a)Paying the value of the lost or damaged property. b)Replacing the property with other property of a lesser kind or quality. c)Paying the cost of repairing or replacing the lost or damaged property. d)Taking all or part of the property at an agreed or appraised value.
Replacing the property with other property of a lesser kind or quality. At the time of loss, the insurer's claim settlement options include the following: pay the value of the lost or damaged property; pay the cost of repairing or replacing the lost or damaged property; take all or part of the property at an agreed or appraised value; or repair, rebuild, or replace the property with other property of like kind and quality.
Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages? General Special Tort Normal
Special
Which of the following symbols is available to an insured with vehicles subject to no-fault coverage? Symbol 5 Symbol 6 Symbol 7 Symbol 9
Symbol 5
Burglary is defined as a)Taking of property from the care of a person in a violent act. b)Any act of stealing. c)Taking of property by use of force, violence, or fear. d)Taking of property from within the premises leaving visible signs of forced entry.
Taking of property from within the premises leaving visible signs of forced entry. Signs of forced entry or exit to closed premises must be present for burglary coverage to apply.
An apartment occupant's personal property would be insured under which homeowners form? Comprehensive form (HO-5) Broad form (HO-2) Unit-owners form (HO-6) Tenant broad form (HO-4)
Tenant broad form (HO-4) The HO-4 form (tenant broad form) is for the apartment dweller. It covers what the insured owns, their contents, and has no coverage for the apartment.
All of the following people would be considered insureds under the liability section of a homeowners policy EXCEPT The legal representative of a deceased insured. The 22-year-old niece of the insured who is visiting. A 15-year-old foster child residing in the premises. The mother of the insured who is residing in the household.
The 22-year-old niece of the insured who is visiting.
Which of the following statements is true regarding the commercial general liability policy's Coverage C - Medical Payments? The coverage is liability insurance because it pays only if the insured is legally liable. The coverage provides high limits of insurance for bodily injury losses. The coverage is considered good will because payments are made without regard to fault. The coverage applies to bodily injury to the named insured.
The coverage is considered good will because payments are made without regard to fault.
Which of the following statements is true regarding the commercial general liability policy's Coverage C - Medical Payments? a)The coverage is considered good will because payments are made without regard to fault. b)The coverage applies to bodily injury to the named insured. c)The coverage is liability insurance because it pays only if the insured is legally liable. d)The coverage provides high limits of insurance for bodily injury losses.
The coverage is considered good will because payments are made without regard to fault. Coverage C - Medical Payments provides necessary medical, surgical, ambulance, hospital, nursing or funeral expenses for injuries to third parties. Payments will be paid without regard to the fault or negligence of the insured.
Under the workers compensation system, who is responsible for the expenses resulting from work-related injuries and occupational diseases? The employer, but only if it was at fault for the injury or disease The employee and employer in equal shares The employee The employer, regardless of whether it was at fault for the injury or disease
The employer, regardless of whether it was at fault for the injury or disease
In insurance terms, what are components? a)The penalties paid for unfair trade practices b)The prices charged for policies c)The factors that determine rates d)The amounts paid out in benefits
The factors that determine rates Components are factors that determine rates, including loss reserves, loss adjusting expenses, operating expenses and profits.
Negligence is defined as a)Conduct that is so hazardous that the individual engaging in it will be held fully responsible for any resulting injury or damage. b)An intentional act that results in bodily injury or property damage to another person. c)The failure to do what a reasonable prudent person would do under given circumstances. d)An unbroken chain of events that results in bodily injury or property damage to another person.
The failure to do what a reasonable prudent person would do under given circumstances. The definition used for negligence is based on the English law that requires that a person use ordinary care to prevent injury to another person or damage to their property.
All of the following conditions must exist for injury or damage to be included in the products and completed operations hazard of a commercial general liability policy EXCEPT The injury or damage must occur away from the insured premises. The injury or damage must arise out of the insured's product or work. The injury or damage must occur after the insured has released physical possession of the product to another. The injury or damage must occur within 90 days after the insured's work is completed.
The injury or damage must occur within 90 days after the insured's work is completed.
Which of the following losses would be covered under the property damage liability coverage of a personal auto policy? a)A passenger in the insured's vehicle is injured following an accident caused by the insured. b)The insured damages a rented garage when he failed to stop in time. c)A temporary substitute vehicle is damaged while the insured is driving it. d)The insured's vehicle is damaged when it collides with a deer.
The insured damages a rented garage when he failed to stop in time. Damage to a nonowned structure would be covered under PD (property damage).
According to the standard workers compensation and employer liability policy form, a state should be listed in Part Three - other states' insurance of the workers compensation and employers liability policy when The insurer is not licensed to write workers compensation in that state. The state has a monopolistic workers compensation fund. The insured expects to extend operations to that state. The insured has operations in the state where the policy is written.
The insured expects to extend operations to that state.
According to the standard workers compensation and employer liability policy form, a state should be listed in Part Three - other states' insurance of the workers compensation and employers liability policy when a)The insured expects to extend operations to that state. b)The insured has operations in the state where the policy is written. c)The insurer is not licensed to write workers compensation in that state. d)The state has a monopolistic workers compensation fund.
The insured expects to extend operations to that state. By naming a state in Part Three of a workers compensation and employers liability (WC&EL) policy, an employer provides that company operations may be conducted in that state.
Which of the following is true regarding rejection of higher uninsured/underinsured motorist limits? The rejection of higher limits is only binding upon the named insured. The insurer may reject higher limits within 10 days from the date the policy is issued. Limits established by the insurer cannot be rejected by the insured. The insured has 20 days from the receipt of a notice of raised limits to reject them.
The insured has 20 days from the receipt of a notice of raised limits to reject them.
Which of the following is true regarding rejection of higher uninsured/underinsured motorist limits? a)Limits established by the insurer cannot be rejected by the insured. b)The insured has 20 days from the receipt of a notice of raised limits to reject them. c)The rejection of higher limits is only binding upon the named insured. d)The insurer may reject higher limits within 10 days from the date the policy is issued.
The insured has 20 days from the receipt of a notice of raised limits to reject them. Insureds have 20 days from the receipt of a notice of raised limits to reject such limits. A rejection of higher limits by the named insured is binding upon all insureds under the policy.
Which of the following statements would be correct if an insured failed to maintain the underlying limits as required by a personal umbrella policy? The insured would have to pay the self-insured retention limit. The insured would be responsible for the amount required as underlying limits in the event of a claim. It would have no effect on the umbrella policy. The policy will be cancelled.
The insured would be responsible for the amount required as underlying limits in the event of a claim.
Which of the following is true regarding cancellation provision in a fire insurance policy? The insured is entitled to 100% of unearned premiums. The insurer may cancel the policy only at the renewal date. The insured may only cancel the policy on the renewal date. The insurer may impose a short-rate penalty prior to returning the unearned premium.
The insurer may impose a short-rate penalty prior to returning the unearned premium.
If more than one person has an insurable interest in the property covered under a dwelling policy, Liability will be split evenly among all people who have insurable interest. All involved insurers must decide which one will be liable for the loss. All insureds must decide which one will be liable for the loss. The insurer will be liable for only the insured's interest in the damaged property. If more than one person has an insurable interest in a property, the insurer will be liable only for the insured's interest in the loss.
The insurer will be liable for only the insured's interest in the damaged property.
Which of the following is NOT a characteristic of an insurable risk? a)The loss must be catastrophic. b)The loss must be due to chance. c)The loss must be measurable. d)The loss exposure must be large.
The loss must be catastrophic. In order to be characterized as pure risk, the loss must be due to chance, definite, measurable, and predictable, but not catastrophic.
Which of the following is NOT a goal of risk retention? a)To minimize the insured's level of liability in the event of loss b)To reduce expenses and improve cash flow c)To increase control of claim reserving and claims settlements d)To fund losses that cannot be insured
To minimize the insured's level of liability in the event of loss Retention usually results from three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured.
The cost of restoring farm records is an additional coverage offered under a farm policy. How much will the policy pay to restore the records? Up to $1,000 Up to $1,500 Up to $2,000 Up to $2,500 The cost of restoring farm records is covered up to $2,000.
Up to $2,000
A business hosted an annual holiday party for employees and customers, after which a customer who had too much to drink was involved in an automobile accident. Occupants of the other car involved in the accident sued the business for serving the customer too much alcohol. Will the businessowners policy provide coverage? Yes, employer liability obligates the company to pay. No, accidents outside the company premises are not covered. No, liquor liability is excluded. Yes, none of the exclusions will apply.
Yes, none of the exclusions will apply. The liquor liability exclusion applies only to insureds in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. In this case, the company's businessowners policy most likely will have to pay.
