Guaranty Exam Questions
Which of the following is an endorsement that changes the actual cash value settlement on personal property to a replacement cost basis?
Personal property replacement cost
An insured has a personal umbrella with a $2,000 self-insured retention (SIR). Assuming no other policy is involved, how much would the umbrella pay after a $12,000 personal injury liability claim?
$10,000
Under Business Personal Property Limit - Seasonal Increase, if no percentage is specified in the declarations, seasonal fluctuation will automatically increase the limit for business personal property by
25%
According to homeowners Coverage A, how much of a house's value must be insured in order to qualify for replacement coverage?
80%
After a covered loss on a homeowners policy, the insured must do all of the following EXCEPT
Abandon the property involved to the insurer
The equipment breakdown coverage form provides coverage for all the following EXCEPT
Bodily injury liability
All of the following are optional endorsements that may be added to the standard equipment breakdown coverage form EXCEPT
Debris removal
A performance bond is an example of which of the following types of bonds?
Contract
To determine the actual cash value of an insured property, what must be deducted from the current replacement cost?
Depreciated value
All of the following statements about agents are true EXCEPT
Exclusive agents work for themselves
The term functional replacement cost refers to
Property loss valuation
All of the following are TRUE statements regarding cancellation procedures EXCEPT
Short-rate cancellation allows the insured to pay less for each day of coverage than if the policy had remained in force for the full term
An insured is at fault in an auto accident, damaging the insured's own car. The damage to the car is covered by
The insured's collision coverage
Each of the following may be insured under an HO-3 homeowners policy EXCEPT
The owner-occupant of a condominium unit
What was the purpose of the Motor Carrier Act of 1980?
To establish financial responsibility requirements for interstate motor carriers
in a DP-1, if the insured elects to apply Coverage B to a detached garage, Coverage A will
be reduced by 10%
The equipment breakdown coverage form values loss on a/an
replacement cost basis
If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising?
retention
Agents may be found guilty of defamation if they make false statements that are intended to
Maliciously criticize another insurance company
Which type of damage is intended as a form of punishment for negligent, willful, or outrageous intent?
Punitive
Which of the following would NOT be covered under the directors and officers liability coverage?
Reimbursement for fines and penalties
When an insurer pays for the cost to exchange damaged property with new property of similar kind and quality, it is called
Replacement value
A pharmacy offers a delivery service to its customers. When the delivery driver parked his truck in front of a customer's home, someone broke into the delivery truck and stole the money inside the vehicle. Which crime coverage will cover the loss of the money?
Outside the premises(theft, disappearance or destruction)
The cost bond guarantees
The plaintiff will pay court cost and damages to the defendant if the plaintiff loses the court case.
Which of the following statements regarding surety bonds is true
The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled
What amount of coverage is provided on HO policies for watercraft?
Up to $1,5000
An insured's limit of liability applies to a total of damages for bodily injury and property damage resulting from one accident, which may be used in any combination of amounts, not to exceed the single limit. What type of limit does this insured have?
Combined single
Other than perils, the difference in the three DP forms is in coverage provided. Which of the following coverage options is covered by the DP-2 and DP-3 but not DP-1?
Coverage E- Additional Living Expenses
An insurance broker has received notice of a claim naming the broker and a licensed producer in a suit stating that a requested coverage was not provided at the time of a claim. The insurance company denied the loss. What type of Professional Liability should the broker have added to the CGL to cover the legal fees and judgement from this suit?
Errors and Omissions
Which of the following injuries may be covered under Coverage C-Medical Payments of a commercial general liability policy?
Injuries to a member of the general public that occurs on premises
Which of the following is consideration on the part of an insurer
Paying a claim
An insured was having a new home built. While digging the fottings for teh foundation, the contractor struck a solid rock formation and found that was necessary to blast the formation in order to remove the rocks. The force of the blast broke several windows and some chainaware in a neighbor's home several blocks away. Who pay for this damage?
The contractor
Considering the California Insurance Code's definition of an insurable event, which of the following statements is true?
The more predictable a loss, the more insurable it is
Two individuals of the same age, health status, and life expectancy apply for individual insurance coverage. When policies are issued by the same insurer, the premium rate are different based on the insured's race. What practice does this describe?
Unfair discrimination
When does the federal emergency flood insurance program go into effect?
When a community applies for the program
If a car is stole and left in a snow bank, causing the radiator to freeze and sustain heavy damage, is the damage covered by the auto policy?
Yes, freezing exclusion is removed if the car is stolen
Your friend's dog that you are keeping while the fried is out of town bit a visitor in your home. Does your homeowners liability coverage apply?
Yes, the coverage would apply for any animal in your care
Which of the following risks would be eligible for coverage under a dwelling policy form?
a duplexs that is occupied by two families, each of which have a bedroom rented to a boarder
The basis of insurance is sharing which of the following among the members of a large homogeneous group with similar exposure to loss?
risk
Combined ratio is defined as the percentage of each premium dollar a property/casualty insurer spends on claims and expenses. Which of the following statements is TRUE regarding the combined ratio?
A decrease in the combined ratio means financial profitability is improving
Under Coverage B-Other Structures, a homeowners policy provides coverage for other structures on the residence premises. Which of the following statements is NOT true of this coverage?
Any loss paid under Coverage B reduces the Coverage A limit of liability.
Which of the following perils is NOT covered in the DP-2?
Damage to pets, birds or fish
An insured and his spouse were traveling down an icy road and hit a sign, accumulating $1,350 damage to their car. They have a $250 deductible. They had already collected on a $1,500 claim. How much will they collect on this claim?
$1,100
An insured believes that his insurer is not properly fulfilling its obligations regarding his policy. What section of the policy will give the insured more information about specific duties of the insurer?
Conditions
An insured's home catches fire. As a result, the insured's family must stay in a motel until the home is repaired. The cost of the motel stay would be considered a
Consequential loss
A standard fire policy would best be described as a/an
Named perils contract
Int eh last 72 hours, there were 3 instances of volcanic eruptions that damaged a property covered by a dwelling policy. How many deductibles will the insured have to pay before the policy covers the damages caused by the eruptions?
One
AN insured is injured while driving his own car. Which of teh following coverage will pay for the loss?
Part B - Medical Payments
Due to appreciation, the amount of insurance on a business is less than 80% of its actual value on the date of the loss. Which of the following is true?
The coinsurance penalty applies.
What is the written document called in which insurance coverage is set forth?
The contract
The property policy condition that automatically provides broader coverage when an insurer makes revisions to a current policy edition without charging the insured additional premium is called the
liberalization clause
Which of the following dwelling policies require insurance equal to at least 80% of the replacement value of the dwelling at the time of loss in order to provide replacement cost coverage?
DP-2 and DP-3
Which of the following statements is true concerning a workers compensation and employers liability policy?
Exposures in states listed on the information page are covered
The limited theft endorsement designed for a landlord excludes all of the following EXCEPT
A lawnmower the landlord owns and keeps at rented premises.
A personal auto policy has the limits of 15/30/5. What is the least amount the policy will pay for the bodily injury to one person.
$15,000
According to the principles of ocean marine insurance, a total loss may occur in which of the following ways?
Actual
Which action by an insurer or its representatives is NOT considered an unfair claims violation
An agents advises a claimant to obtain the services of an attorney
An audit revealed the administrator for a pension plan has made investments that were not consistent with the risk tolerance set forth in the plan for its members. The earnings for the past year are substantially below the average for comparable funds. The governing board wants to take action against the administrator. What type of commercial liability would the board need to provide for this risk?
Fiduciary liability policy paid by the pension fund
How does insurance distribute the financial consequences of individual losses?
It transfers the risk to all persons insured
An applicant for a disability insurance policy has a heart condition of which they are unaware and therefore they answer no to the question pertaining to heart problems on their application. Their answer is considered to be a
Representation
Eligibility requirements for obtaining property coverage it the FAIR Plan include all of the following, EXCEPT
Risk must be owner occupied
Which of the following would be eligible for Homeowner Coverage F- Medical Payments in the event of injury at the insured's premises?
a full-time maid
Which of the following is NOT a cause of loss form for commercial property coverage?
Specific
A home is insured for $200,00 under an HO-3. Last week, the owner purchased a new home and began to move his personal property to the new residence. Last night vandals did $8,000 of damage to the property that had been moved to his new residence. Disregarding any deductible, how much will the HO-3 pay?
$8,000
The declarations section in a homeowners policy provides all fo the following information EXCEPT
Poly exclusions
While engaged in a pick-up soccer game in the neighborhood park, the insured collides with another player, breaking his nose. Would the insured's homeowners medical payments cover the injury?
Yes,medical payments coverage also applies off the insured premises
What is a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected or intended called?
Accident
The exact, direct, uninterrupted cause of loss is the
Proximate cause
Which of the following is NOT available in a package policy
Business auto liablity
Two men are partners in a moving company. They have two trucks used to move property of others. They should insure their trucks under a
Business auto policy
Which of the following is NOT an indicator of a competent party?
Business profession
Employers liability coverage under a workers compensation policy includes
Damages claimed by third parties
To have insurable interest, what risk must the policy owner face in the event of a loss?
Financial loss
An insurer incorporated under the laws of another state but doing business in this state is considered
Foreign
Super Safe Construction has the best safety record of any construction company in the country. It has been recognized by OSHA for its record and received an award for having no accidents int eh past five years. Super Safe has suffered economically due to increased lumber costs, insurance costs and labor costs. One method by which Super Safe could lower its insurance costs for its commercial policy is through the use of
Scheduled ratings risk assessment which allows the insured to receive credits and debits for business practices which increase or decrease the risk of loss.
In a liability policy with split limits of 25/50/25, which number is the maximum amount that would be payable in the event of damage to a person's property?
The amount of the third number, $25,000
What information is found in the conditions part of an insurance policy?
The description of the duties and obligations of the insured
A pair of insured run a travel business out of their home. Due to the terrorist acts that a have occurred recently, the insured want to get a property and liability policy that will cover their home-based business. A plan that is suitable for their needs would be a
Home-based business policy endorsement.
Which of the following becomes part of the contract, is guaranteed to be true, and if untrue may be ground for rescinding the policy?
warranty
Which of the following would not be covered as a loss under Coverage D of a homeowners policy?
An insured leased a dwelling for 5 years. Two years later, the property owner died and the new property owners wanted to make the property their principal residence, so the lease was canceled.
Which of the following is NOT true regarding the automatic increase in insurance endorsement in dwelling policies?
It does not require additional premeium
Which of the following is NOT one of the independent rating services that publishes guides to insurance companies' financial integrity?
NIAC
