IA Practice
Which of the following statements is NOT true of endorsements?
An endorsed policy will always provide more coverage than an unendorsed policy.
Which of these businesses would be LEAST likely to need a bailee's customer floater?
An ice cream shop
In which of the following scenarios is the insurance company NOT engaging in an unfair settlement practice?
An insurance agent fails to verbally review each provision of the insurance policy in the presence of the insured before accepting the first premium payment.
A fiduciary agent must regularly report to the principal. Which of the following is the BEST example of a principal in the context of insurance?
An insurer that employs an insurance adjuster to investigate damage claims.
An adjuster has a duty to provide which of the following to the claimant?
An open line of communication
Who is NOT eligible for a homeowners policy?
An owner of a house in which he does not live, but rents to a tenant
Andrew was recently arrested for driving while intoxicated and his driver's license was suspended. He applied for auto insurance through TAIPA. Which of the following statements is TRUE?
Andrew cannot obtain coverage through TAIPA because he does not have a valid driver's license.
Andy owns a home in Texas, which is covered by a Texas HO-A policy. Which of the following is FALSE?
Andy's detached garage is covered under Coverage B in his policy.
Joan files a lawsuit against Andy because his dog escaped and caused her to fall on an icy sidewalk. Which of the following statements is FALSE?
Andy's insurer will send Joan a reservation of rights.
All of the following pieces of information can be found in the Conditions section of an insurance policy, EXCEPT:
causes of loss that are not covered.
Cindy, a drunk driver, accidentally crashes into Nancy's house, causing $22,000 in damage. On top of that, Nancy tries to get the adjuster to add an additional $20,000 for punitive damages to punish Cindy for driving while intoxicated. However, Nancy fails in her attempts at negotiation. This is because:
the adjuster does not have authority to negotiate for punitive damages.
In a declaratory judgment action:
the court decides the legal rights of both parties.
In an insurance policy, the summary of what the insurer will do in the event of a covered loss is called:
the insuring agreement.
When Jane rear-ends Frank, she causes minor damage to Frank's car, but Frank is not hurt. However, when Jane's insurer asks him about the accident, Frank claims that his back and neck have been hurting a lot because of the collision, even though he is actually fine. Frank is guilty of:
soft fraud.
A "hazard" is defined as:
something that increases the chance of a loss.
Tim is the plaintiff in a case involving an auto accident. To recover monies he feels are due him, Tim produces documents to prove he had to pay over $55,000 in medical bills. If the court were to award Tim $55,000, the damages would be classified as:
special damages.
The Liberalization Clause in an insurance policy:
states that any change to a policy form that broadens coverage without increasing the premium will automatically apply to existing policies.
A ___________ is a law set forth by a governing body such as a state or city.
statutory law
Barbara has been negotiating a property claim with a claimant for a few hours now. She has displayed her assessments, gone over the policy, and offered a fair settlement amount within the policy limits. However, the claimant has dismissed it completely without any counter-offer. The most appropriate next step is for Barbara to:
submit her backup offer.
As a requirement for getting her New York adjuster license, Alice is required to submit proof of bonding with her application. She purchases a surety bond from PBJ Bonds. In this contract, PBJ Bonds would be considered the:
surety.
During a terrible storm, Theresa's home suffers $200,000 in damage. $60,000 of this damage was caused by flooding, which is specifically excluded from Theresa's policy. She attempts to persuade her adjuster to cover at least half of the flood damage, but her efforts are to no avail. This is because:
the policy's coverage is non-negotiable.
The purpose of a fidelity bond is to guarantee that:
the principal will not perform certain acts.
Mark incurred $8,000 damage to his car in an accident. He received $8,000 from his insurance company and $4,000 from the other driver. By receiving a profit from the loss, Mark could be in violation of:
the principle of indemnity.
Which of the following is NOT a risk management technique?
Risk equality
Which of the following is FALSE about risk retention groups in Texas?
Risk retention groups are considered an insurer of last resort
In which section of an insurance policy might you find the following statement? "Damage to insured property must be reported within 15 days of the damaging occurrence."
Conditions
A reciprocal insurer is:
an unincorporated organization of subscribers that operates through an attorney-in-fact to provide insurance benefits for its members
During a severe windstorm, a large tree in Jeff's yard was blown down and two large bushes were ripped from the ground. Jeff has an HO-3. What is the maximum amount that Jeff can receive for the replacement of the tree and bushes that were damaged by the windstorm?
$0
Frank purchased a $150,000 insurance policy for his home, which is valued at $125,000, with the hopes of making a $25,000 profit in the event his home is destroyed. After Frank burns his house down, he files a claim against his homeowners policy. Assuming that Frank's policy includes an overinsurance provision, how much will his insurer indemnify Frank for his loss?
$0
Grace purchased a recliner from XYZ Furniture. After getting it home, she decided to try out the new chair. While leaning back, the chair breaks and Grace injures her neck. She sues XYZ Furniture and is awarded $70,000. Assuming XYZ Furniture's CGL has a Products-Completed Operations limit of $500,000 with a per occurrence limit of $75,000, how much out-of-pocket expense will XYZ Furniture incur if the court costs total $85,000?
$0
Sam, who has a typical HO-3 policy, is forced to evacuate his home by civil authorities due to rising flood waters in his neighborhood. It takes a month before Sam is allowed to come back to his home. During this time, he has spent $3,000 in hotel expenses, on top of his monthly mortgage payment of $850. When he files a claim, how much will Sam receive under Coverage D - Loss of Use?
$0
Kevin has a homeowners policy with replacement cost valuation and a coverage limit of $90,000 for his personal property. Three years ago, Kevin purchased a sofa and loveseat for $1,000 and $500 respectively. Both pieces of furniture depreciate at $100 per year. A house fire damaged many of Kevin's belongings, including the sofa and loveseat, which now cost $1,200 and $700 to purchase today. Ignoring any deductibles, how much will Kevin's insurer give him for the damaged sofa and loveseat?
$1,900
Jesse's home is worth $200,000 and he has a homeowners policy with a $160,000 limit. After a covered loss, Jesse is left with a total of $10,000 in damages. Assuming the insurer requires the standard 80% level of insurance for coinsurance purposes, and ignoring any deductibles, how much will Jesse receive in indemnification?
$10,000
Clara plays the harp in an orchestra. Her harp cost $12,000, and she had it for 5 years before it was stolen from her locker at a symphony hall. She recently found out a new harp will cost $15,000. Assuming her harp depreciated at $1,000 a year, how much will an actual cash value policy indemnify Clara?
$10,000 - ACV pays at current market value minus depreciation
Acme Construction, Inc. has one contractor and one receptionist. The contractor makes $25/hr, and the receptionist makes $10/hr. The contractor worked exactly 8 hours in 2010, so he made $200. The receptionist worked 10 hours, so she made $100. Therefore, Acme's entire payroll for 2010 was $300. Assume that, for every $100 of payroll, the WC rate for contractors is $50 and the rate for receptionists is $5. How much did Acme owe in WC premiums?
$105
Melanie's $300,000 home suffers $90,000 in damage from a fire. The adjuster finds the home's value since 2008 has depreciated 25%, making the ACV loss $67,500. Although Melanie's policy covers repairs at their replacement cost, she receives $67,500 at the time of loss. Repairs to her home end up totaling $79,500. How much, if any, further indemnification may Melanie receive from the loss?
$12,000
Craig has an HO-3 policy covering his primary residence with a Coverage A limit of $250,000, Coverage B limit of $25,000, and a Coverage C limit of $150,000. Craig also has a cabin on the lake, which was burglarized. The thieves stole much of the cabin's contents, for a total loss of $18,500. Ignoring any deductibles, how much will Craig's HO-3 policy pay for this claim?
$15,000
Nancy borrows Drew's car so she can run to the grocery store. While out, she rear-ends an SUV, injuring the driver and 3 other passengers. Each of the passengers suffers $45,000 in injuries, while the driver suffers $40,000. Assuming Drew has a liability policy with limits of 50/100/50, while Nancy carries minimum coverage, how much will Nancy have to pay out of pocket? Assume the passengers will be covered first.
$15,000
James owns a masonry business and has a commercial liability policy with the following liability limits: $150,000 per occurrence / $500,000 per policy term. While at a job site, his cement truck's chute cannot reach the pour site, so the operator adds two extra chutes, extending its length. The chute collapses under the weight of the concrete, causing $35,000 in injury to one of the workers. The loss is covered by the policy, and James' insurer pays the claim. What will the new limits be for the remainder of the policy term?
$150,000/$465,000
Jaime made $950/week before he was killed in a work-related accident. The State Average Weekly Wage is $895. Jaime has three dependents: his wife and two children. How much will each of his children receive per week in death benefits?
$178
Adjuster Andy is trying to determine a final settlement amount for Stacy's claim. Stacy's house was destroyed in a fire and it will cost $185,000 to rebuild it. Stacy's homeowners policy has a limit of $178,000 and a $1,800 deductible. Typically, how much would Adjuster Andy calculate Stacy's final settlement amount to be?
$178,000
James is walking down the street when Andrea, an uninsured motorist, strikes him with her car. James suffers $12,000 in injuries from the accident. He has personal injury protection of $10,000 from his own automobile insurance policy, which immediately pays him the full amount. By accepting $10,000 from his own insurance company, James has waived the right to sue Andrea for more than _____ for personal injury.
$2,000
Lightning strikes one of Christy's trees in her backyard and starts a fire that spreads to two other trees before firefighters are able to put it out. The fire department charges her $600 for responding to her call. Christy's DP-2 policy has a Coverage A limit of $95,000. What is the maximum amount of indemnification that Christy can expect to receive for this loss (ignoring any deductible)?
$2,000
Diana is insured under a DP-2 policy with the following coverage limits: Coverage A - $150,000, Coverage B - $15,000, and Coverage C - $25,000. She and her fiancé have planned a destination wedding, but their hotel catches fire shortly after their arrival. Smoke from the fire damages all of their belongings, including Diana's $4,000 wedding dress. Diana's loss totals $5,200. When she files a claim with her insurance company, how much can she expect to receive for this loss under her DP-2 (ignoring any deductible)?
$2,500
Mark is driving along and looking for an address on the East side of Walker Street. As he squints to see the numbers posted on the buildings, he plows into the back of a car waiting at a stoplight. Both the driver and the passenger of the struck car are injured. The driver suffers $60,000 in bodily injury, the passenger suffers $55,000 in bodily injury, and the vehicle Mark hit sustains $30,000 in damage. Mark has liability coverage with split limits of 50/100/25. How much will Mark be responsible for out-of-pocket after this accident?
$20,000
Ajax has a HO-A policy through the Texas FAIR plan. His Dwelling limit is $220,000. This means that his coverage for Other Structures is ______ and his coverage for personal property could be up to_______.
$22,000; $110,000
Kelly took her eyes off the road and ended up smashing into the back of a passenger van. All five passengers were injured, and each one ended up with $25,000 in medical costs. Assuming Kelly has liability coverage with limits of 50/100/50, how much will she have to pay out of pocket?
$25,000
Jerome was shopping at ABC Imports when a light fixture fell from the ceiling and hit him on the head. Jerome's injuries resulted in an extended hospital stay, so he sued ABC Imports and was awarded $400,000. Assuming ABC Imports carries a CGL with a General Aggregate of $750,000 and a per occurrence limit of $250,000, what is the maximum that ABC's insurer will pay for Jerome's injuries?
$250,000
Cody made $800/week before he lost an arm in a work-related injury. By the time his Impairment Income Benefits run out, he has a job answering phones in an office, where he makes $300/week. How much could Cody receive per week in Supplemental Income Benefits?
$272
A processing and servicing company would qualify for a BOP only if they have less than _____ in annual revenues.
$3 million
Greta's Ski Supply is covered under the Building and Personal Property Coverage Form with limits of $50,000 for business personal property and $100,000 for the building. The policy also has a $500 deductible. When a tornado tears through the vicinity, the store suffered $10,000 in damage to the building and $20,000 in losses to the contents. In addition, Greta has to fork out an extra $1,000 for debris removal. How much will Greta receive from her insurer?
$30,500
While Andrea was grocery shopping in BB Mart, the large Dairy sign fell off the wall and landed on her. Because of her extensive injuries, Andrea sued BB Mart and was awarded $375,000 in damages. BB Mart's Commercial General Liability policy has a general aggregate limit of $1,000,000 and a per occurrence limit of $300,000. What is the per occurrence limit after this claim is settled?
$300,000
Jasmine was working as a waitress and making $650/week before she tripped over a customer's bag and broke her ankle. While she is on crutches, the restaurant pays her $200 per week to polish glasses and roll silverware. How much will Jasmine receive per week in Temporary Income benefits until she can return to waitressing?
$315
During a strong storm, Missy's grain drill was mangled by a tornado, which rendered it useless. Before the damage, the grain drill was worth $25,000, but it would cost $45,000 to buy a new one today. Missy's farm policy has a replacement cost endorsement, and the grain drill is scheduled on a Mobile Agricultural Machinery and Equipment form with a $36,000 limit. Missy replaces her grain drill with one she found on sale for $40,000. How much total indemnification will she receive?
$36,000
Jane has a $150,000 homeowners policy with a 3% percentage deductible. One night, an oven fire destroys her kitchen, causing $50,000 in damage. How much of the damage falls under Jane's responsibility?
$4,500
Dmitri's PIP limit is $5,000, and it covers 100% of medical expenses and 80% of lost wages. One day, Dmitri gets into a bad accident with a pickup truck, incurring $2,200 in medical expenses and missing five weeks of work. If he makes $600/week, how much will Dmitri's insurance pay for his injury?
$4,600
Jerry is using an expensive video recorder near the family pool when he slips and falls in, destroying the camera. Jerry bought the camera three years ago for $4,000, and it depreciates at $500 per year. A new, similar camera costs $5,000 today. Assuming the loss is covered, if Jerry had a replacement cost policy, how much would Jerry's insurer indemnify Jerry for the destroyed camera?
$5,000
Marlene has been living in her $120,000 home for 31 years. Because she has paid off the mortgage, she decides to save some money on her monthly insurance premiums by reducing her homeowners coverage to $40,000. After a severe hailstorm totals her roof, her adjuster estimates the damage at $12,000. Assuming the insurer imposes the standard coinsurance penalty, and ignoring the deductible, how much will Marlene receive in the settlement?
$5,000
Stephanie owns a house that she rents out for $2,500 a month. A massive kitchen fire forces her tenants to move out while the interior is overhauled. After two months, the repairs are complete, and Stephanie contacts her tenants, only to find that they've found a new place to live. It takes Stephanie another month and a half to find new tenants. Assuming that Stephanie had a $100,000 DP-2 policy, what is the maximum amount she could receive for lost rental income under Coverage D?
$5,000
Grace purchased a recliner from XYZ Furniture. After getting it home, she decided to try out the new chair. While leaning back, the chair breaks and Grace injures her neck. She sues XYZ Furniture and is awarded $300,000. The costs for the legal defense come to $45,000. XYZ Furniture's CGL policy has a Products-Completed Operations Aggregate limit of $750,000, with a per occurrence limit of $250,000. How much will XYZ Furniture have to pay out-of-pocket for this claim?
$50,000
Norris borrows Arnold's truck to pick up some lumber from the hardware store. On the way to the store, Norris collides with a car, injuring the three people inside. The driver suffers $15,000 in injuries, one passenger suffers $25,000, and the other passenger suffers $20,000. Norris has a PAP with liability limits of 50/100/50, and Arnold's policy has liability limits of 25/50/10. How much will the primary policy pay for the injuries?
$50,000
How much of a limit is included for Credit Card Fraud or Forgery, an additional coverage in a homeowners policy?
$500
Stan built a porch for his home three years ago at a cost of $10,000. The value of the porch has depreciated by $6,000, and it would cost $12,000 to replace it today. After Stan's porch burnt down during a BBQ today, how much would a Standard Fire Policy indemnify Stan for his porch?
$6,000
While Andrea was grocery shopping in BB Mart, the large Dairy sign fell off the wall and landed on her. Because of her extensive injuries, Andrea sued BB Mart and was awarded $375,000 in damages. BB Mart's Commercial General Liability policy has a general aggregate limit of $1,000,000 and a per occurrence limit of $300,000. What is BB Mart's general aggregate limit after the claim for Andrea's injuries is paid?
$700,000
Sam's Ocean Marine hull policy has a franchise deductible of $50,000. When Sam's ship suffers $75,000 in damage after being overtaken by pirates, how much indemnification can Sam expect to get from his insurer?
$75,000
Sue decides to get a valued insurance policy on her antique car. She and her insurance company agree to a value of $85,000. Three years later, the car is destroyed when a tree falls on it in a parking lot. The car depreciates at $2,000 a year, and its replacement cost is $100,000. Ignoring any deductible, how much can Sue expect her insurer to indemnify her?
$85,000
Under the Longshore and Harbor Workers' Compensation Act, how much would the surviving spouse of a deceased worker receive in benefits?
50% of the deceased worker's Average Weekly Wage
The BOP provides loss of income on an "actual loss" sustained basis for up to:
12 months.
A worker's Average Weekly Wage is based on his earnings during the ____ weeks preceding his injury.
13
According to the Unfair Settlement Practices Act, how long does an insurer have to affirm or deny a claim?
15 business days
The Standard Fire Policy is also known by a nickname: The "___ " Policy.
165 Line
The HIPAA was enacted by the US Congress in _________.
1996
According to the commercial property policy, a commercial building is considered vacant if less than ____ of the available square footage is occupied for ____ consecutive days.
31%, 60
What requirements must Wholesalers and Distributors meet in order to be eligible for a BOP?
25% or less of floor space is available to the general public, and less than 25% of gross income may come from retail sales.
The state of Texas requires insurance companies to keep all records of complaints against the company for a period of at least:
3 years
Which settlement option is most often used when a claimant misses work because of bodily injury, but a settlement has not yet been reached?
Advance payment settlement
Which of the following would be considered an insurable risk?
A squadron of police cars
Anna's Rare Books in Birmingham needs to ship three F.Scott Fitzgerald first editions to a customer in Mobile. The combined value of the books is over $400,000. What type of Inland Marine insurance policy should Anna's Rare Books buy to cover this shipment?
A trip transit policy
Which of the following is most likely a third party claim?
A woman files an insurance claim when she is injured by an employee at a local bar.
The insured carries a BOP policy with protective systems such as a sprinkler system. If the system becomes inoperative, the insured must advise the insurance company of the problem within _______ if the system cannot be restored to working order.
48 hours
Once a claim has been accepted and is undisputed, the insurer has ___ days to pay the claim.
5
What is the waiting period for Temporary Income Benefits under Texas workers compensation insurance?
7 days
Which of the following is NOT one of the differences between a BAP and a truckers policy?
A BAP uses coverage symbols to designate covered autos.
Which of the following statements regarding Commercial Package Policies (CPP) is TRUE?
A CPP is an elective-based policy.
Dr. Smith has a claims-made malpractice insurance policy with a policy period from June 30, 2006 to June 30, 2007. Which claim would trigger this policy?
A claim filed on January 13, 2007 for surgery performed on June 28, 2005.
Which of the following is a hazard?
A driver's tendency to text while driving
Jack has been appointed to manage Margaret's financial estate, but Margaret requires Jack to be bonded. What kind of bond might Jack seek?
A fiduciary bond
Which of the following is an insurable risk?
A football stadium
Which of the following best describes a Fraternal Benefit Society?
A fraternal benefit society is a social organization based around common interests and beliefs.
Martin works as an accountant for Smith Manufacturing. Smith Manufacturing has tasked Martin with finding an insurance provider to meet the company's needs, so Martin interviews several insurers. At the end of one interview with PRO Insurance, the insurance representative hands Martin an envelope containing $5,000 in cash, on the condition that Smith Manufacturing selects PRO Insurance as its insurance provider. What would we call the $5,000 in cash?
A kickback
Which of the following incidents would a liability insurance policy cover?
A man slips inside a grocery store and injures himself.
Dr. Jones' current occurrence malpractice policy is in effect from July 1, 2005 through July 1, 2006. Which lawsuit would trigger this malpractice insurance policy?
A man sues Dr. Jones on July 26, 2009 for a damaging knee surgery performed on March 3, 2006.
A fire burns down Jenny's Hardware, leaving virtually nothing salvageable. Which of the following items would NOT be covered under Coverage B of the Building and Personal Property Coverage Form in her commercial property policy?
A paint mixer permanently affixed to the floor
Which of the following is NOT considered a covered theft in a Commercial Crime policy?
A periodic assessment of inventory reveals that 4% of a store's inventory is inexplicably missing.
What is a reserve, in insurance terms?
A pool of collected premiums that the insurer sets aside to pay claims
Which of the following losses would be excluded from coverage under a Personal Articles Floater?
A rat slipped inside a golf bag before it was packaged for shipping and chewed several holes in the bag before it arrived at its destination.
Xavier owns a small insurance company. Recently the company won a bid to insure a new housing development in Omaha, NE. His company can handle any claims that arise, but if a series of tornados were to tear through the area and destroy the entire development, Xavier's company would suffer financially. Which type of insurer could help Xavier's company protect itself the most from this potential loss?
A re-insurer
In which of the following cases would Mechanical Breakdown Insurance NOT apply?
A rock strikes and shatters Horace's windshield.
Which of the following statements regarding actual cash value is FALSE?
Actual cash value is always most beneficial to a policyholder.
Adam is shopping for a car in a local automobile dealership. While visiting the showroom, he trips over a rug that has folded over and breaks his arm in the fall. Which of the following is true?
Adam may file a third party claim with the dealership's insurance company.
What is it called when an insurer makes a habit of delaying payment on legitimate claims?
An Unfair Claims Settlement Practice
Peter works as a real estate agent and uses the internet extensively for sales leads and advertising. One day, he finds another realtor's ad online and copies it, using his own information as the contact info. This generates a lot of business for Peter, but unfortunately Peter gets a call one day and is informed that he is being sued for copyright infringement. This is an example of what type of claim covered under Peter's Commercial General Liability policy?
Advertising Injury
Which of the following best defines the principle of indemnity?
After a loss, the insured should be restored to his approximate financial condition before the loss.
Kevin plays in a brass band using two rare antique Alexander tubas. Since they are no longer produced, the value of the tubas is difficult to determine. Which type of policy would best indemnify Kevin in the event that his tubas were ever damaged, lost, or stolen?
Agreed value policy
Eric works in Texas for Gemutlich Insurance. His company is licensed to sell insurance in Texas, but is based out of Munich, Germany. Gemutlich Insurance was formed under German law, but follows all applicable Texas laws and possesses a Texas certificate of authority. Which type of insurer does Eric work for?
Alien Insurer
Which of the following statements regarding scheduled fidelity bonds is FALSE?
All employees are bonded for the same aggregate amount.
John moved out of his house and put it up for sale three months ago. While he was waiting for the house to sell, John's plumbing pipes froze and burst in the icy temperatures, which eventually led to water damaging the cabinetry and hardwood floors. Which of the following statements would most likely be TRUE?
Although John's house was still covered under an HO-3, the damage would not be covered because he didn't shut off the water supply.
In the Business Auto Policy, what does the symbol #2 mean?
Any Owned Vehicle
Which of the following statements about the negotiation process is FALSE?
Apologizing for minor mistakes can weaken the adjuster's power in the negotiations.
Arlene's house suffered structural damage in an earthquake last year, but her policy does not cover earthquake damage, so Arlene never got it fixed. When a tornado rips through her neighborhood, it causes some roof damage totalling $2,000, and Arlene sees an opportunity in the situation. She files a claim for the roof damage, but also claims that the tornado caused the structural damage to her house that was actually caused by the earthquake last year. Which of the following statements is true?
Arlene has just committed soft fraud.
Bob has been in the construction business a long time and is ready to retire. He sells the company to his friend Scott and then lets the insurer know that any claims against his policy should be paid to Scott from now on. The insurer informs Bob that they cannot do this due to which condition?
Assignment
In order to adjust claims for the NFIP, adjusters must meet several requirements. Which of the following is NOT one of these requirements?
Attend an NFIP claims presentation every 3 months
Which statement BEST describes the additional coverages available for both commercial and residential policies?
B. They add coverage for very specific losses or expenses.
The coverage limit in Bob's commercial property policy goes up 2% every time the policy renews. Which optional coverage might Bob have included as part of his insurance package?
Inflation Guard
Kyle operates a collision repair garage and has many vehicles in his care, some for extended periods of time. Which type of coverage protects Kyle from any liability claims which may arise if one of the cars is further damaged or destroyed while in his possession?
Bailee Coverage
Francis owns a small shoe store. Since his business isn't particularly risky, he has a commercial property policy that provides named-peril coverage to his building and personal property, without any additional coverages. Which Causes of Loss form does Francis have attached to his coverage form?
Basic Form
Sarah is playing with a basketball on the stairs at Bob's house. In doing so, she trips, falls, and breaks her leg. She files a claim against Bob's insurance policy for her injuries. The adjuster determines that Sarah was 50% responsible for her own injuries, and therefore should only receive indemnification for 50% of her medical bills. What defense is the adjuster using?
Comparative negligence
Bobby is adjusting a complicated auto claim. Which of the following is TRUE?
Because the policyholder (Jane) is 84 years old and seems to have trouble remembering what happened before the accident, Bobby should feel free to contact her 45-year-old caretaker for clarification.
There are several terms that are often interchangeable with "endorsements." Which of the following is NOT one of these terms?
Binders
Bobby just purchased an insurance policy for his home from XYZ Insurance. Which of the following would be a reason this policy may not be legally binding?
Bobby has been diagnosed as mentally incompetent.
Amanda is walking her dog in a rural area when a small plane suddenly crashes only 15 feet in front of her. Amanda is not hurt, but she is so distressed that she files an insurance claim for mental anguish. Which aviation coverage would pay this claim?
Bodily Injury Excluding Passengers
Which of the following would NOT be covered under Errors and Omissions insurance?
Bodily injury claim
Bonnie's PAP includes Comprehensive coverage. Which of the following losses could this coverage pay for?
Bonnie's car catches fire.
Which of the following may be covered under a Mechanical Breakdown Insurance policy?
Breakdown due to electrical system malfunction
In a DP-2 Broad Form, which of the following would be covered under the peril of Theft?
Broken windows caused by a burglar breaking in.
Which of the following is a feature typically found in a Business Owners Policy?
Inflation Guard for buildings and structures
Which of the following lines of coverage could be found in a Commercial Package Policy?
Business Auto insurance
A short circuit in one of the refrigeration units in the Ice Queen ice cream shop sparked a fire that severely damaged the shop, and it had to shut down for two months while repairs were made. What type of additional coverage would indemnify the Ice Queen for the lost income during these two months?
Business Interruption Coverage
Sam suffers $6,000 in injuries when Nicole runs a red light and crashes her uninsured car into Sam's. Sam's own insurance company, ABC Insurance, immediately pays him $5,000 for his injuries. Sam then ponders whether to file a $6,000 lawsuit against Nicole. Why can't Sam sue Nicole for the full amount of his injuries?
By accepting payment from ABC Insurance, Sam forfeited his right to collect this amount from Nichole.
A plane was damaged while on its takeoff run down the airport runway. By policy definition, this damage is considered to have occurred while the aircraft was:
in flight.
Wendy hires Jim to build an addition to her house. Jim takes the job and finishes it in good time. Unfortunately, as Wendy is walking across the threshold of the new addition, a floorboard gives way and Wendy falls into the crawl-space below, injuring her leg and back. Which commercial general liability coverage could help cover the cost of Wendy's injuries?
Completed Operations Liability
Cary is an insurance agent who has started to work as a third party administrator for Jamie, another insurance agent. Which of the following statements is TRUE?
Cary does not need to be licensed as a TPA, since she is an insurance agent.
As an insurance adjuster, Heather is responsible for updating and maintaining an accurate record of all the information pertinent to an individual's insurance claim, including copies of all written documentation, photos and property sketches, witness statements, and copies of medical bills. What is this record called?
Claim file
On January 27, 2004, Ryan was using an exercise bike from NusquamCycle when the chain broke, causing him to fall and bruise his knee. Seven years later, on January 25, 2011, Ryan's knee gave out while jogging. His doctor told him that he'll need surgery and that this deterioration was probably caused by his bruise from the exercise bike. Assuming NusquamCycle is no longer in business, which CGL policy would cover Ryan's claim filed on January 25, 2011?
Claims-Made policy from Jan 1 2003-Jan 1 2004 with a supplemental extended tail
Robert applies for an auto loan from his local bank. He meets with a loan officer, who goes over Robert's paperwork. The loan officer tells Robert: "I'll give you a loan as long as you insure the car with ABC Insurance." This is an example of:
Coercion
Acme Insurance Group agrees to act as a surety to Willis Construction in the development and construction of a new shopping mall. As a condition of the agreement, Acme Insurance Group requires Willis Construction to post $500,000 in a bank account controlled by Acme Insurance Group. If Willis Construction completes their obligation, Acme Insurance Group will return the cash to Willis Construction. What would we call the $500,000 in the bank account?
Collateral
Which of these is NOT a party to a surety bond?
Collateral
D'Anton spills coffee in his lap while driving, causing him to veer off the road and smash into a telephone pole. Which part of his Auto Insurance Policy will help him pay for the repairs to his car?
Collision Coverage
In which section of a Standard Fire Policy would you find information on rules of conduct and obligations the policyholder must follow in order for insurance coverage to apply?
Conditions
Jay's Chip Factory makes potato chips, and it gets chip bags from Bags, Inc. One day, the bag-making machine at Bags, Inc. broke down, and thus, Jay's Chip Factory couldn't get the bags it needed to bag its potato chips. Jay's Chip Factory had to shut down production temporarily while waiting on Bags, Inc. to fix their machine. Jay's lost business income may be covered under what coverage in its Equipment Breakdown Protection Coverage Form?
Contingent Business Income and Extra Expense
John, a contractor, just purchased a new backhoe and wants to get an insurance policy to cover it. He's looking for a policy that will provide coverage not only on the job site, but also while transporting it back and forth between sites. What type of inland marine insurance policy would likely fit John's needs?
Contractor's Equipment floater
Sam is a claimant seeking damages from XYZ Insurance. The XYZ adjuster comes to meet with Sam to hear the circumstances of her injury. The adjuster determines that Sam played an active role in her own injuries, and therefore XYZ Insurance will pay her nothing at all for her injuries. What defense is the adjuster using?
Contributory negligence
Larry owns a restaurant downtown and employs his cousin Vinny as one of the line cooks. Vinny is a rather careless individual, and one night he leaves the stove on, leaking gas throughout the kitchen. When the ice machine turns on, it sparks a massive explosion. Which condition in Larry's commercial property policy indicates that he may be covered for this loss?
Control of Property
Jones' Auto in Dallas, Texas buys 50 cars from ABC Auto in Tokyo, Japan. They sign a contract whereby Jones' Auto assumes the risk of any damages to the cars until they are delivered. What term of sale have they agreed to?
Cost and Freight
Cameron is fully insured by a DP-2 on his $130,000 home. His monthly mortgage payment is $775 per month, and he usually pays $400 per month in groceries. When a kitchen fire damages his house, causing $61,000 in damage, he is forced to move out for a month while the repairs can be made. Cameron's hotel bill for the month comes to $1,250 and he spends $600 eating at restaurants. Based only on this information, how much indemnification can Cameron expect to receive for this claim?
Coverage A - $61,000; Coverage E - $1,450
A dryer fire scorches the interior of Bill's home, forcing him to move out while repairs are made. In addition to paying for temporary housing, he also loses the rental income he received from his roommate Frank. Which two Dwelling policy coverages could help Bill with the lost rental income AND his additional living expenses?
Coverage D & Coverage E
Due to decreased demand, the market price of beets dropped dramatically during the recent growing season. Consequently, Michelle's crop of beets did not make as much money as she was expecting this year, based on her production history and the harvest-time futures price. However, Michelle is insured for this type of situation. What kind of insurance does she have?
Crop-Revenue
On January 27, 2008, Ryan was using an exercise bike purchased from NusquamCycle when the chain broke, causing him to fall and severely bruise his knee. It seemed to heal just fine, but three years later, on January 25, 2011, Ryan's knee gave out while jogging. His doctor told him that he'll need surgery and that this deterioration resulted from the earlier accident with the exercise bike. Which of the following CGL policies may cover Ryan's claim filed January 25, 2011?
D. A claims-made policy from Jan 31 2009-Jan 31 2011
Which of the following situations does NOT involve an insurable risk?
Dale just bought 30 shares of a hot new startup company online.
Which of the following would NOT be covered under Part A of a Personal Auto Policy?
Damage the insured causes to his own garage
Daryl has a PAP with Comprehensive Coverage and Miscellaneous Vehicle Coverage. Having just gotten a raise, he decides to spend his extra money on a new car. Three weeks later, while driving his new BMW, Daryl swerves to avoid a squirrel and hits a telephone pole. He files a claim with his insurance, explaining that he was going to add the car to his PAP on the following Monday. Why might his insurance company deny his claim?
Daryl waited too long to inform his insurance company of his purchase.
John works for ABC Insurance. He is paid on a commission basis and needs to meet certain sales goals in order to draw a reasonable salary. To help in this endeavor, John regularly tells potential clients that XYZ Insurance and Integritas Insurance often fail to pay claims, and that they charge unreasonably high premiums. In speaking falsely of his competition, John has indulged in which unethical practice?
Defamation
If an adjuster needs to find clarification about what actually constitutes a collision, in which section of an insurance policy would she find that information?
Definitions
In which section of an insurance policy might you find the following statement? "'We, us, and our' refers to ABC Insurance company."
Definitions
In a homeowners policy, Coverage B - Other Structures provides insurance for which of the following?
Detached garages
Which of the following statements about Electronic Data Processing (EDP) insurance coverage is FALSE?
EDP excludes coverage for all "intangible" electronic data.
Why has Pollutant Cleanup and Removal coverage become more popular recently?
EPA fines and penalties have increased.
Which of the following would NOT be covered by Comprehensive Coverage?
Eddie overturns his parents' Jeep on the way to a baseball game.
Which of the following best describes who adjusters can work for?
Either insurers or claimants
What kind of adjuster is only allowed to work on claims relating to a disaster and may be from another state?
Emergency adjuster
David just opened his own consulting business, and has taken on several new clients. He's having difficulty managing his schedule on top of all the other responsibilities related to owning his own business, so he hires Tina via contract to work as his full-time office manager for $15 per hour. According to the definitions in David's Commercial General Liability policy, which of the following best describes Tina?
Employee
Which Business Auto Policy endorsement covers employees while using their personal cars for business purposes?
Employee as Additional Insured
Which of the following may be covered under an Equipment Breakdown Protection Coverage Form?
Equipment built to operate under internal pressure or vacuum
Which of the following is NOT considered "covered equipment" under an Equipment Breakdown Protection Coverage Form?
Equipment that is buried in the ground
Which of the following statements about the principle of estoppel is TRUE?
Estoppel protects the insured party from an insurer who initially approves coverage, but then later denies coverage after the insured pays for repairs.
Which statement BEST describes the "Follow Form" in excess liability coverage?
Excess liability insurance that "follows" the base insurance policy to the letter
Which statement BEST describes Umbrella coverage?
Excess liability insurance that can also provide additional coverages not provided by the base policy
Which section of an insurance policy is designed to OMIT certain risks from coverage?
Exclusions
Robert's tomato crop production was well below the revenue guarantee this year, and Robert files a claim against his Crop-Revenue policy for the low yield. However, the adjuster denies Robert's claim after completing her inspection. What might be a reason for the denial?
Failure to use the required amount of fertilizer
Randy owns a clothing store. One day, he notices a shady character with a backpack who is hanging around acting nervous. Randy becomes suspicious and approaches the young man. As the boy makes an effort to avoid him, Randy grabs his arm and detains him until the police arrive. Not finding any stolen merchandise, the police let the boy go. Two weeks later Randy is notified that he will be sued for violation of the young man's civil rights. This is an example of what type of personal injury covered under Randy's Commercial General Liability policy?
False Arrest, Detention, or Imprisonment.
RWW Insurance creates a radio promotion where they advertise that they will insure any car for $200 a year. They don't actually offer such a plan, but they figure they will be able to sell hundreds of policies to people who show up looking for the bargain. What type of unfair insurance trade practice does this behavior exemplify?
False information and advertising
Farmer Scott owns a farm and raises goats, producing a lot of manure. Occasionally, after a strong rain, some of the waste washes into a nearby river. Which insurance coverage can protect Scott from any liability caused by the goat waste runoff?
Farm Pollution Liability
Which Farm policy would cover animal waste overflow and chemical spills?
Farm Pollution Liability
When Phyllis passed away, she left an inheritance for her three children, including ten ounces of gold for each of them. To execute her will, her lawyer hires another attorney, Williams, to oversee the careful distribution of the gold. The court requires a bond to assure Williams will conduct himself honestly. Which type of bond has the court required?
Fiduciary bond
Which of the following is NOT an adjuster's duty in the claim process?
Filing a claim
Driving home from work one night, Judy is pulled over by a state trooper. When she asks why she was stopped, the trooper informs Judy that her auto insurance has lapsed. This is Judy's first offense. What penalty will Judy face, if any?
Fine between $175 and $350
Which of these statements is true?
Flood insurance is always backed by the National Flood Insurance Program.
Flora is driving in the rain when she skids off the road and slams into Cam's billboard, totaling her car and causing $2,000 in damage to the billboard. Flora has an auto policy with ABC Insurance, and both Cam and Flora submit claims against this policy for their damages. Which of the following is TRUE?
Flora will file a first-party claim for the damage to her car, and Cam will file a third-party claim for the damage to his billboard.
Which of the following would be covered under Coverage A in a dwelling policy?
Gas furnace in the basement
Which of the following is TRUE about workers' compensation insurance?
It benefits both the employee and the employer.
This provision in Ocean Marine insurance obligates insurers of various interests to share the cost of losses associated with a captain's decision to voluntarily sacrifice a part of the ship or its cargo.
General Average
An explosion takes place at Acme manufacturing plant. Four employees are injured. Gina broke her leg and has third degree burns on her left hand. George lost one foot above the ankle and one hand at the wrist. Taylor is permanently blind in one eye, and Jason lost his left leg at the knee. Which of these employees is eligible for lifetime income benefits?
George
In 1945 Congress passed the McCarran-Ferguson Act. What does that act do?
Gives the states the authority to regulate the insurance industry
Which of the following statements is TRUE regarding Mechanical Breakdown Insurance?
It will not cover the cost of repairs that exceed the value of a vehicle.
Bill is going to switch employers, and therefore switch healthcare providers. Which federal law ensures that he won't be denied coverage when he switches health plans?
HIPAA
Anton is purchasing homeowner's insurance for his new house. He wants to make sure his policy offers the BEST coverage available. Which policy should Anton choose?
HO-5
Which of the following homeowners policies provide coverage on an open-peril basis for personal property without endorsement?
HO-5
Hank has collision coverage with a $2,000 deductible on his 2010 truck. One dark, rainy night, Hank's truck slips off the road and rolls over down the embankment. The truck sustains $45,000 in damages, but the actual cash value of the vehicle is only $25,000. Which of the following statements is TRUE?
Hank will be indemnified by his insurer for $23,000.
Haley takes a bottle of water into a store, pours some of it on the floor when no one is looking, and then pretends to slip and fall. She cries out for help in apparent pain until someone comes to her aid. She then sues the store for her fake injury in an effort to collect an insurance settlement. What has Haley committed?
Hard fraud
Which of the following claims may be covered under an Equipment Breakdown Protection Coverage Form?
Hazardous material remediation was needed after a mechanical breakdown of the exhaust system's turbine caused ammonia to be released into the factory, contaminating the entire area.
Ryan has been adjusting claims for six years, but he must complete continuing education courses before he can renew his license. Ryan has been putting off his coursework and now it's time to renew. He is 8 hours short in terms of the requirement. What can he expect?
He will be fined $400 for his missing credit hours.
Which of the following statements best explains why residual market insurance programs exist?
High-risk consumers need insurance, yet no private insurer wants to issue high-risk policies.
Loggers, roofers, and coal miners would fall into which of the following categories?
High-risk employees
Bill's new home is in the final stages of construction, and he has purchased an HO-2 policy to insure his financial interest in the property. This morning, Bill's contractor calls to tell him that an electrical fire has destroyed his new kitchen, and all of the crown molding that was supposed to be installed today has been stolen. It will be $15,000 to rebuild the kitchen and another $4,200 to replace the trim. How will Bill's insurer respond when he files a claim?
His insurer will pay $15,000 to rebuild the kitchen and nothing for the stolen trim.
Maria was in the hospital for five days, recovering from a stroke. The bill she received for her hospital stay broke down the charges for room, lab fees, meals, and nursing care. However, her insurer paid a flat daily rate and she was left responsible for paying the remaining charges. What type of insurance does Maria have?
Hospital Indemnity insurance
Under which law is an insurer required to explain its reasons for denying coverage?
IIPPA
Mervyn is from Kansas, a state that does not license insurance adjusters. Which of the following is TRUE?
If Mervyn wants to be licensed in Texas, he can designate Texas as his home state, and he must meet all the same requirements as a Texas adjuster.
Under which circumstances may an insurer cancel a policy after 60 days with sufficient notice?
If the policyholder has his driver's license suspended or revoked
Jason has an accident at work and ends up losing the little toe on his left foot. What type of disability benefits will Jason receive?
Impairment Income Benefits
Which of the following is NOT a form of insurance fraud?
Increasing your insurance coverage when you think a loss is likely.
Which of the following refers to being restored to the financial condition you were in before a loss?
Indemnification
One morning, Jill arrives to open the bank, only to find the door already unlocked. Upon entering the bank, she sees the vault door has been blown open and a large amount of money has been burned when an explosive charge went off. Which commercial crime insurance coverage might cover the loss?
Inside the Premises: Theft of Money and Securities
Agnes purchased a home ten years ago in an up-and-coming neighborhood for $75,000. The home's value has since tripled to $225,000! Agnes still has $25,000 left on her mortgage, but has increased her dwelling coverage to $225,000 to keep up with the home's appreciation. When it burns to the ground in a fire, her mortgage company wants to be indemnified $75,000 because the value of the home has tripled. Which policy condition protects against this claim?
Insurable Interest
Which of the following best describes inland marine insurance?
Insurance designed to protect property being transported on land and property related to transportation
Stephanie is in the process of adjusting George's auto claim. Currently, she is interviewing Shana, who witnessed George's accident and stopped to help. In what stage of the claim process is Stephanie currently working?
Investigation
Which of the following is TRUE of the vacancy condition in a typical insurance policy?
It establishes the parameters for considering a building vacant for the purpose of coverage.
Which of the following statements about the Standard Flood Insurance Policy is FALSE?
It is not subject to local courts.
Which of the following statements about Crop-Hail insurance is FALSE?
It is subsidized by the FCIC.
Which of the following statements about the Standard Fire Policy is TRUE?
It is the basis of all property insurance policies.
Which of the following statements about a moral hazard is FALSE?
It is the result of an unconscious behavior.
Which of the following is NOT a requirement for a legally binding contract?
It must be a notarized document.
Which statement about the Federal Employers Liability Act is TRUE?
It protects only interstate railroad workers and their families.
Which statement about the Federal Employees Compensation Act is TRUE?
It provides federal government insurance for civilian employees.
Which of the following statements is true about an insurance policy?
It relies on the utmost good faith of both the insured and the insurer.
Which of the following is NOT true of the Company's Options provision in the standard fire policy?
It requires the insurer to settle the claim, in whichever manner it chooses, within 30 days of receiving notice of the claim.
Which of the following statements about the original Standard Fire Policy is FALSE?
It was the first multi-line policy, combining both Physical Damage and Liability coverages.
When record-breaking rainfall causes severe flooding in Janie's home town, Janie's rental property suffers extensive damage. Which of the following is an indirect loss?
Janie loses a month of rental income when her tenant must move out while repairs are made to the home.
Caroline was involved in a car accident in which her husband was killed. Jillian is adjusting the insurance claim. Which of the following is TRUE?
Jillian should wait until Caroline seems emotionally stable before negotiating a settlement.
Nancy and Drew borrow Joe's car so they can have a picnic at the old water tower. On their way to the picnic, Drew accidentally rear-ends Mr. Jackley, causing $2,900 in damage. Whose liability insurance will pay first for the damages?
Joe's
After her water heater leaked and damaged her hardwood floors, Clarice filed a claim with her insurer, KLM Insurance, who sent their adjuster, Bob, to inspect the loss. Clarice also hired a public adjuster, Jose, to represent her in her claim. Bob has the responsibility to report to which principal?
KLM Insurance
ABC Roofing has two CGL policies that cover the same losses. Both policies are occurrence forms, thus pay out on a pro rata basis. The first policy is through KLM Insurance and has a limit of $300,000. The second is through XYZ Mutual, with a limit of $600,000. One day, ABC Roofing suffers an occurrence resulting in a $150,000 covered loss. How will this loss be indemnified?
KLM Insurance will pay $50,000; XYZ Mutual will pay $100,000
Which of the following people is eligible for coverage under the Texas FAIR plan?
Kate owns one side of a duplex.
Which of the following is an example of a moral hazard?
Ken lights a candle, sets it right next to the window draperies and leaves the house to go to work.
Which of the following losses may qualify for coverage under Coverage F - Medical Payments?
Kevin accidentally shoots himself in the foot with a nail gun while he is helping Joe build a deck in Joe's backyard.
After Tony, the owner of XYZ Cleaners, accidentally starts a fire, XYZ Cleaners burns to the ground, taking all the garments with it. Afterwards, Tony has to rent a new building and purchase new equipment and supplies. He is also responsible for all the clothing that was in his care. Which type of coverage in his commercial property policy could help Tony with the cost of paying for his customers' destroyed clothing?
Legal Liability Coverage
Phil runs a locomotive repair business, which is insured under a commercial property policy. One night, some blasting powder is accidentally ignited and blows a crowbar through one of the engines. No one is hurt, but the locomotive is severely damaged. Which coverage option may help cover the cost of repairing the engine from this unfortunate event?
Legal Liability Coverage
Which of these is NOT typically excluded from coverage in a property insurance policy?
Lightning
Which of these perils is NOT excluded from coverage in a homeowners policy?
Lightning
Logan has a small plane that he enjoys flying on the weekends, but he never takes friends or passengers with him. Which of the following is TRUE?
Logan should buy Bodily Injury Excluding Passengers and Property Damage Liability, but he doesn't need to spend the money on Passenger Bodily Injury Liability.
Which of the following situations does NOT involve an instance of "pure risk?"
Loss of money invested in the stock market
Which of the following would be covered under the peril of "theft" in a homeowners policy?
Losses caused by attempted theft
Which of the following statements about insurable interest is FALSE?
Maintaining property values allows your neighbor to have an insurable interest in your house.
What is one of the things an applicant has to do in order to qualify for coverage under the Texas FAIR plan?
Make a real attempt to secure coverage for the property in the voluntary market.
During a routine tooth extraction, Dr. Dentem administers too much laughing gas and causes brain damage to his client. The family sues Dr. Dentem for failing to follow procedure. Which kind of insurance would cover the cost of the lawsuit?
Malpractice Insurance
Marco lives in Nueces County on the Gulf Coast of Texas. His house is insured through the Texas FAIR plan, but Marco's policy doesn't cover wind or hail. Why does Marco's policy have these exclusions?
Marco lives in Nueces County, one of the 14 coastal counties where residents can obtain coverage for wind and hail through TWIA.
Mark is on vacation in Italy when his luggage is stolen, including a $2,000 laptop, a $500 suitcase, and $400 in clothes. Mark has an HO-3 homeowners policy. Excluding any applicable deductible, which of the following statements is TRUE?
Mark's homeowners policy will cover $2,400 of this loss.
When Zach purposefully burned down Matt's restaurant, Matt's insurer paid the claim and then went after Zach for the damages. Matt is furious about what Zach did and wants to sue him as well. Why is it NOT possible for Matt to sue Zach?
Matt has already received indemnification from his insurer.
Matthew works for Barry John Coal Company. One day, when all the work trucks are busy, Matthew's boss asks him to use his own truck to deliver a load of coal to a customer. On the way, Matt gets distracted looking at directions and swerves into oncoming traffic, causing a serious accident. Why might Matt's PAP liability insurer deny coverage for the damage Matt caused?
Matt's accident occurred during employment-related activities, so it will be covered by the employer's liability policy.
Cindy and her insurer cannot reach an agreement for her property claim, and have gone back and forth for weeks without coming within $10,000 of each other. At this point, since both believe they are offering a fair settlement, a third party is needed to help facilitate the negotiation. Both parties still want to retain their ability to "walk-away" if they cannot reach an agreement. What is the next best step for Cindy and her insurer?
Mediation
Stan has a personal auto policy to cover his two vehicles, but he recently purchased a custom built motorcycle as well. Which type of endorsement will Stan need to cover the motorcycle?
Miscellaneous Vehicle Endorsement
Which unfair claims settlement practice involves an adjuster making false statements about policy coverage in order to reduce the settlement?
Misrepresentation
Which of the following best describes how losses are valued under a Commercial Crime policy?
Money is valued at face value; securities are set at their value on the day the loss is discovered; and other property is valued at the lesser of the cost to repair or replace.
Stu has a collection of rare comic books. He wants to purchase theft insurance for his collection, separate from his home and other property. What term most accurately describes the type of policy Stu would purchase?
Monoline Policy
Which policy is used as an alternative to the Trucker's Policy to cover companies that offer transportation services to the public on a regular basis, rather than for hire?
Motor Carrier policy
Walter works for a shipping company, delivering packages and picking up orders. He lives very close to work and the grocery store is only a few blocks away, so he can live conveniently without owning a car. However, he would like to have some Personal Injury Protection, just in case he ever gets injured in an accident. Which BAP endorsement could his employer use to give him this coverage?
Named Individuals Broadened PIP
Which of the following steps would occur LAST in the processing of a claim?
Negotiate a settlement with the claimant
Nick has a comprehensive individual health insurance policy that he purchased through an HMO, and Charity has a PPO plan through her employer. Which of the following statements is TRUE?
Nick was assigned a primary care physician who must coordinate his health care within a network, but Charity may choose a primary physician outside the network.
Mark is a college student and frequently needs to either rent a car or borrow his friend's car. Although he doesn't own a car of his own, he wants to buy himself some liability coverage that would apply whenever he drives someone else's car. Which coverage should Mark get?
Non-Owner Coverage
Helen's business is growing rapidly, so she decided to add an annex onto her office and hire another worker. While under construction, a storm blows down most of the annex structure, forcing Helen to restart from scratch. Her commercial policy provides insurance coverage equal to 75% of the property value, despite the fact that her policy requires 80% coverage to be fully insured. Which coverage extension could help Helen rebuild at replacement cost?
None - Extensions are only available if the policyholder maintains the minimum level of insurance of 80% to value
Craig is just starting out with his business. He needs an insurance policy to cover his liability against any unknown defects within his products. Of the four types of CGL policies listed below, which offers the best coverage for Craig's business, regardless of when a claim is filed?
Occurrence Policy
Which of the following is NOT a requirement of an insurer if it does not intend to renew a homeowners policy in Texas?
Offer to continue coverage until the insured has secured a new policy for the property.
Having a positive attitude can help an adjuster during negotiations. Which of the following aspects of an adjuster's attitude can hinder negotiations?
Over-confident or arrogant
Babette crosses the street and is struck by a car, causing her to sustain injuries in the amount of $45,000. The driver has minimum coverage. Which coverage section of Babette's auto policy could help pay for her medical costs?
Part B: Medical Payments
Which part of a PAP lists the insured's duties after an accident or loss?
Part E
In Ocean Marine insurance, this clause appropriates the loss to one company, rather than spreading the loss among all cargo owners.
Particular Average
Which of the following would be considered an Instrumentality of Transportation and Communication?
Pipeline
Jim has two policies that cover the same risk, but they respond differently: Policy X is primary and Policy Z is excess. Policy X has a limit of $50,000 and Policy Z has a limit of $25,000. When Jim suffers an insured loss totaling $62,000, how will each policy respond?
Policy X will pay $50,000 and Policy Z will pay $12,000
Tina has two policies (Policy X and Policy Y) that cover the same risk on a pro rata basis. Policy X has a limit of $100,000 and Policy Y has a limit of $25,000. When Tina suffers a loss totaling $75,000, how will the two policies respond?
Policy X will pay $60,000 and Policy Y will pay $15,000
When Acme Paper Mill was struck by lightning, the resulting damage included a burst waste pipe, which began leaking chemical-laden waste water into the county aquifer. Acme Paper Mill discovered the leak 2 weeks later and reported it to their insurer immediately. Which additional coverage could help Acme with the expense of cleaning up the contaminated water?
Pollutant Cleanup and Removal Insurance
Ron's truck experiences a mechanical breakdown and he has it towed to an auto repair facility. Upon further examination of Ron's claim, his Mechanical Breakdown Insurance provider denies coverage. Which of the following would be a valid reason for this denial?
Ron had been hauling a large boat, which overloaded the vehicle and caused the breakdown.
Shelly has been suffering from chronic headaches for over a year. She is sure that there is something medically wrong, despite what the doctors in her network have told her. So, she decides to visit a doctor that her friend recommended, even though he charges more and is not in Shelly's approved network. Shelly's insurer paid for the cost of the appointment up to the amount she would have reasonably been charged by an in-network physician, and Shelly was responsible for paying the remaining balance. Which type of health insurance plan does Shelly have?
Preferred Provider Organization
Which of the following statements regarding primary care physicians is FALSE?
Preferred Provider Organizations do not allow policyholders to choose a primary care physician.
Jimmy owns a pawn shop which brings with it a certain amount of risk. He decides to hire a security guard, and install a surveillance system and an alarm system to reduce his monthly premiums on his commercial property policy through the:
Protective Safeguard endorsement.
Rachel has tried to obtain insurance coverage for her home, but its location, age, and condition have made it difficult to find an insurer that is willing to insure it. Which of the following is TRUE?
Rachel can't apply directly to the Texas FAIR Plan Association for coverage, but an authorized insurance producer can file an application on her behalf.
Rachel is filling out an application for a homeowners policy. She is truthfully answering the questions regarding her home's location, size, age, etc. Which of the following is a true statement?
Rachel is providing representations.
Which of the following people committed soft fraud?
Rafael accidentally slipped on a wet floor at the supermarket. Although his only injury was a sprained ankle, he claimed he had back and neck pain when he sued the supermarket in an effort to get more money in the settlement.
Which of the following would be most likely to purchase an Errors and Omissions policy?
Real Estate Agent
Which of the following is not one of the employer's duties if injury occurs?
Remain with the injured employee until emergency assistance or a family member arrives
A passenger on a commercial airline flight was injured when the plane crashed due to a mechanical problem. In court, the injured passenger's lawyer could invoke the doctrine of:
Res Ipsa Loquitur.
Which endorsement to the Commercial Crime policy would protect a bank against its legal liability for burglary, robbery, destruction, or damage to customers' belongings kept in safe deposit at the bank?
Safe Depository
Which of the following is an example of a hazard?
Sandra's home is in an area of Los Angeles that is often hit by earthquakes.
Veronica owns a pottery business and is insured under a commercial property policy. She was in the process of building an extra structure for the sole purpose of kiln firing her pottery when a massive storm came through and blew down all the scaffolding, which added additional cost to the construction project. Which coverage extension of the Builder's Risk Coverage Form would cover the scaffolding?
Scaffolding, Construction Forms, and Temporary Structures
Monica's husband, Sam, likes to buy her expensive jewelry, and she has amassed quite the collection over the years. What endorsement would Monica and Sam need to add to their homeowners policy to fully cover Monica's jewelry collection?
Scheduled Personal Property
Which of the following is not the responsibility of the claimant?
Seek the assistance of an adjuster
In which case would the insured be indemnified by her auto liability coverage?
She has to pay a fee to retrieve relevant court documents.
Which of the following is NOT a characteristic of social insurance programs?
Social insurance programs are for-profit programs.
When Emma's house was burglarized, the thieves stole several pieces from her art collection. Although the pieces were only prints, Emma files a claim stating that they were originals, and therefore worth a good deal more than they really are. What has Emma committed?
Soft fraud
The DP-3 is known as the:
Special Form.
Which financial institution bond is designed for all types of insurance companies?
Standard Form 25
Which of the following is an example of how some insurers are fighting back against insurance fraud?
Starting fraud busting units staffed with former detectives and police officers
Which of the following would NOT be covered under Valuable Papers Business Insurance?
Stock certificates
Frank purchases an automobile policy from publicly-traded XYZ Insurance. He pays regular monthly premiums, and also purchases stock in XYZ and receives dividends when the company turns a profit. From which type of company has Frank purchased insurance?
Stock insurer
Which settlement option is usually reserved for the largest claims?
Structured settlement
Sally throws a cigarette butt into Neal's dumpster, starting a fire on Neal's property that costs him $10,000. Neal files a claim with his insurer. The insurer pays Neal and then demands $10,000 from Sally to pay for the loss she caused. What gives the insurer the right to collect payment from Sally?
Subrogation
James is in the consulting business and frequently flies from city to city to meet clients and help them improve their business practices. Most cities have adequate public transit, but sometimes it's easier to rent a car. Which coverage symbol would specifically pertain to rental cars on James' Business Auto Policy?
Symbol 8
What is a binder?
Temporary coverage for an insurance applicant until the policy is issued
Which Texas homeowners policy provides the most comprehensive coverage?
Texas HO-C
Who sets the critical production dates and assigns commodity market prices for MPCI policies?
The Risk Management Agency
An insurance adjuster acts as a fiduciary agent for her employer. Which of the following statements is FALSE about the adjuster's role as fiduciary agent?
The adjuster may not give the claimant materials showing how he came up with a settlement amount.
Which of the following events would trigger the end to a commercial property Builders Risk Coverage Form?
The building is accepted by the purchaser.
Which of the following would NOT affect the rating for comprehensive and collision coverage on a vehicle?
The color of the vehicle
Which of the following is NOT a rating factor for a personal auto liability policy?
The condition of the vehicle
Law and Ordinance, also known as Code Upgrade Coverage, covers which of the following expenses?
The cost of repairs or upgrades done to meet new building codes
What must be proven in order for Time Element Insurance to cover a loss?
The indirect losses were the result of a covered direct loss.
Which of the following would you find in the Conditions section of an insurance policy?
The insured's duty after a loss
According to the "Definitions" section of a Personal Auto Policy, which of the following would NOT qualify as a "family member"?
The insured's ex-wife who moved out of the house 4 months ago
ABC Masonry, Inc. has an aggregate liability policy with limits of 100,000/300,000. One day, an accident at a construction site leads to $150,000 in damage to public property. Assuming the cause of loss is covered under ABC Masonry's liability policy, how will this claim be paid?
The insurer pays $100,000; the aggregate limit is now $200,000; and ABC Masonry must pay $50,000.
Jared recently purchased a 25 foot watercraft with a 250 horsepower motor. While cruising on the lake, he accidentally runs into Gary's boat, causing $2,500 in damage to Gary's hull. How will Jared's insurer respond when Gary files a claim against Jared's homeowners policy for the damage he caused?
The insurer will deny the claim because Jared's boat is excluded from his liability coverage.
After a rain storm, Nancy realizes that she left her bedroom windows open the entire time. Now there is extensive water damage to her area rug and furniture, and the laptop that had been sitting on her desk is ruined. Nancy has a Broad Form homeowners policy, so she calls her insurance company and files a claim. What is the likely result of Nancy's claim?
The insurer will not cover any of the damage, since Nancy left the windows open.
Jason's auto policy states that the insurer may cancel coverage if a premium is more than 30 days late. However, Jason is currently more than 30 days late, and has been so five times in the last year, and his insurer has done nothing about it. When Jason gets into an accident and files a claim, which of the following is most likely to happen?
The insurer will pay the claim because of the implied waiver they have made by not canceling Jason's policy the previous times he was late with his payments.
The Declarations page will always provide a list of the coverages provided within the policy. What will be listed next to each type of coverage on the Declarations page?
The insurer's limit of liability for that coverage
According to the Mortgagee Clause, what is NOT one of the rights of the mortgagee?
The mortgagee may change the coverage amount.
Which of the following is found in the declarations page of an insurance policy?
The name of the insured party
Which characteristic would prohibit a convenience store/gas station from purchasing a BOP?
The operation of a car wash
Adam has a treacherous drive to work every day. Not only does he have to drive down the pothole-strewn access road to the highway, but he also must traverse several icy bridges on the way to work. Why does the insurance company call these hazards "physical hazards"?
The roads present a physical condition that increases the chance of a loss.
Which of the following would NOT be covered under a typical Ocean Marine policy?
The owner sustains a financial loss when her vessel is confiscated by the government.
A power surge sparks a small electrical fire in an office building. The electrical fire triggers the automatic sprinkler system. The water from the sprinklers soaks the carpets and shorts-out all the computers, causing thousands of dollars in damage. What is the proximate cause of the loss?
The power surge
Greg plays trombone in his school band during football games. During a rally song in the stands one day, Greg annoys one of the opposing team's fans, who grabs his $400 trombone and hurls it down the bleachers, completely destroying it. Greg's insurance pays him $400 to replace the trombone, but then the opposing team's coach also offers to replace the instrument, at whatever the cost. So Greg orders a new $3,200 trombone and has the opposing team's athletic department absorb the cost. Which principle has Greg violated?
The principle of indemnity
Which of the following does not describe one of the implied warranties of Ocean Marine Insurance?
The vessel must not travel in stormy or otherwise dangerous weather conditions.
A fidelity bond covers:
an insured business for loss resulting from any dishonest acts committed by its bonded employees.
Which statement BEST describes the additional coverages available for both commercial and residential policies?
They add coverage for very specific losses or expenses.
Which statement about Personal Article Floaters is FALSE?
They have a $500 deductible.
The Insurance Guaranty Association is a mechanism that covers claims in the event of:
an insurer's insolvency.
After a tornado severely damaged their building, the owners of ABC Online Marketing have to rent another building for a few months while repairs are underway. Which additional coverage would help cover the cost of renting this other building?
Time Element Insurance
Which of the following automobile components is NOT covered by a Mechanical Breakdown Insurance policy?
Tires
Which of the following is NOT a purpose of insurance regulation?
To prohibit insurance-rating
Which of the following is similar to a Business Auto Policy, but adds several policy provisions and protections specific to the trucking industry?
Truckers policy
Greg, an agent for ABC Insurance Brokers, is trying to sell a new policy to Sally. Sally, however, is perfectly happy with her current policy and has no intention of cancelling it. Greg tells Sally that upcoming legislation is set to increase the minimum requirements for insurance, and that her current policy will not be available once the bill passes. He fails to tell her that if her policy is already in effect, this legislation won't affect her insurance. Which unlawful or unfair practice is Greg guilty of?
Twisting
Generally speaking, which of the following has the broadest coverage?
Umbrella coverage
Which of the following statements applies to replacement cost valuation?
Under replacement cost valuation, insurers may safeguard the principle of indemnity by requiring policyholders to replace insured items before making full reparations.
John and Lucy both apply for policies with Acme Insurance at the same time. They are exposed to similar hazards and would present essentially the same amount of risk to Acme Insurance. Acme Insurance offers Lucy a premium policy at excellent rates, but restricts John to a very limited policy with high premiums. Acme Insurance may be guilty of:
Unfair discrimination.
Lance runs a staffing service in which his main job is transporting workers to and from various jobsites. His van can carry up to 12 people at a time, and he is worried about getting hit by a driver who does not have enough liability insurance to cover all of his passengers. Which additional coverage could help pay for injuries to his passengers if this were to happen?
Uninsured/Underinsured Motorist Coverage
Which of the following is NOT a characteristic of insurance contracts?
Universal
In a dwelling policy, how much will the Fire Department Service Charge coverage pay?
Up to $500 if the fire department charges for responding to a covered peril
Which of the following is NOT a feature of a typical Business Owners Policy?
Usually Actual Cost Valuation
Which of the following BEST describes the insurance provided by residual market insurance programs?
Usually a "last resort" form of insurance
Craig must close his business for three months after being injured in an auto accident. When Craig recovers, he returns to his shop where he finds broken glass and notices some of his supplies have been pilfered. Under what condition in his commercial property policy might the insurer deny coverage?
Vacancy
Joe decides to go surfing for three months in Hawaii. Before he leaves, he locks up his surfboard shop and rents a storage unit for most of his equipment and merchandise. When Joe returns, he finds that his shop has been broken into and vandalized. Under what policy condition would Joe's insurer likely refuse to make a full payment?
Vacancy
Which of the following perils is excluded from coverage in a National Flood Insurance Program policy?
Water-main breakage
When would a default judgment occur?
When a defendant does not answer a complaint
Farmer Steve barely escapes a massive tornado, but the storm does completely destroy one of the barns on his property. Luckily, Steve has an insurance policy on his barn with a replacement cost endorsement, and the barn was fully insured. At the time of the loss, the actual cash value of the barn was $65,000, and its replacement cost is currently $85,000. When will Steve receive full indemnification for his losses on the barn?
When he replaces the barn and submits receipts to the insurer
Under which circumstance would it be legal for an insurer to charge one insured more than another insured for the same coverage?
When the insured is statistically more likely to experience a loss
Jane's shed burns to the ground during a tornado, when the high winds break a wall of the shed, knocking over a lantern inside. What is the proximate cause of the loss?
Wind
Susan is insured with a homeowners policy. After someone destroyed her late husband's gravestone with a vehicle, Susan filed a claim against her homeowners policy. Which of the following statements is TRUE?
With Grave Marker coverage, Susan can receive a maximum of $5,000 to pay for the damaged gravestone.
A typical workers' compensation policy combines two basic forms of coverage. They are:
Workers' Compensation and Employers Liability
Phil owns a public pool. One day, Phil has an altercation with a woman visiting the pool. Phil doesn't like the way she looks, so he tells her that she has to leave the premises right away. The woman takes Phil to court for violating her civil rights. This is an example of what type of personal injury covered under Phil's Commercial General Liability policy?
Wrongful Eviction
Sally has an HO-3 policy on her $150,000 home in the country. One day, a bear breaks down Sally's back door to get into her kitchen for a snack. When Sally comes home to find the damage, she files a claim with her insurance company. Will the damage to Sally's home be covered, and why or why not?
Yes. The HO-3 is an open-peril policy, without an exclusion for wildlife.
With respect to Inland Marine insurance, a "Block" policy (such as a Jewelers Block policy, or a Furriers Block policy) is an example of:
a Commercial Floater.
The "Consent to Settle" clause in the Professional Liability policy is best described as:
a clause that requires the insurance company to get approval from the insured before settling a claim.
A farm insurance policy may include all of the following EXCEPT:
a commercial package policy.
During a storm, lightning strikes a tree in Harry's yard and starts a fire that spreads to his shed where he keeps all his equipment for his landscaping business. In addition to the shed, Harry has to purchase all new equipment to stay in business. The cost to replace the equipment would be considered:
a direct loss.
SureTrust Insurance was founded and operates in Texas. In Texas, SureTrust is considered:
a domestic insurer.
An insurance company may consider each of the following a risk, EXCEPT:
a flood zone.
Edward is a member of the Knights of Columbus, a religious group dedicated to voluntary service to the benefit of society. He also recently purchased a $100,000 life insurance policy from the organization. This was possible because the Knights of Columbus is:
a fraternal benefit society.
An insurance company might consider any of the following a risk, EXCEPT:
a high crime neighborhood.
James and Eric want to play a prank on Bob for Halloween. They dress up like headless horsemen and throw ignited Jack O'Lanterns at his house. Unfortunately, one of the inflamed pumpkins catches the porch on fire, causing $3,500 in damages. Bob doesn't find this tomfoolery very entertaining and sues both James and Eric for the cost of the repairs. In court, James and Eric would be:
a joint tortfeasor.
Each of the following would classify as an insurable risk, except:
a marriage.
A dwelling policy would NOT be appropriate for:
a motorhome owned by an individual.
When Jim is involved in an accident, he immediately calls his insurer and files a claim. When his insurer denies the claim, it is required to provide Jim with:
a reason for denying the claim.
Driving home after a 14-hour shift, Sam falls asleep at the wheel and plows into Sandra's home, causing extensive damage to the East wall and roof. As a result, Sandra and her family must move into a hotel until the repairs are completed. Sam's car crashing into the house would be considered:
an occurrence.
An "occurrence" is defined as:
an unexpected event that causes loss.
In order to set a yield guarantee for Maren's policy, Maren's agent will need a record of the last four years of her crop yields. This record is called:
an Actual Production History.
Inducement can be defined as:
an action, item, or promise made to someone to motivate him toward certain desired behaviors.
Thomas Building is asked by the local youth center to build a gym for the local community. As a condition of their contract, Thomas Building must secure a surety bond. Thomas Building finds ABC Surety Bonding and works out a suretyship for the project. Thomas Building gets Williams Construction Finance to co-sign on the bond, as required by ABC Surety Bonding. William's Construction Finance would be called:
an indemnitor.
Driving home after a 14-hour shift, Sam falls asleep at the wheel and plows into Sandra's home, causing extensive damage to the East wall and roof. As a result, Sandra and her family must move into a hotel until the repairs are completed. The cost of staying in a hotel is:
an indirect loss.
Patricia is a new adjuster whose primary goal is her employer's financial benefit. This goal makes Patricia susceptible to the ethical challenge of:
bias for the insurer.
When Sally applies for an auto policy, her agent issues her a ________ so that she can benefit from insurance protection while he underwrites the policy.
binder
An oral or written statement providing temporary insurance coverage until an insurance policy can be issued is called a:
binder.
Thomas Building is asked by the local youth center to build a new recreational building for the local community. As a condition of their contract, Thomas Building must secure a surety bond. Thomas Building finds ABC Surety Bonding and works out a suretyship for the project. As part of the deal, Thomas Building will need to have $200,000 in cash reserves kept by ABC Surety Bonding. This money would be called:
collateral.
When Louise goes online and fills out phony applications with XYZ Auto Insurance in order to print the temporary insurance cards and sell them for a profit on the black market, she is:
committing hard fraud.
Dr. Nelson routinely schedules her patients for lab tests that they don't need so she can charge their insurers for more money. Dr. Nelson is:
committing health insurance fraud.
States that allow private insurers to offer workers' comp coverage as an alternative to the state workers' comp fund are called:
competitive.
A lightning strike causes one of the storage buildings on John's farm to burn to the ground, aided by the fuel tanks he kept in the building. John knows he wasn't supposed to store any fuel in the building, so he keeps that piece of information to himself when he files a claim. John's insurer may deny his claim based on his:
concealment.
In a BOP, the purpose of Supplementary Payments in conjunction with liability coverage is to:
cover costs associated with defending and investigating a claim against the insured.
The Severability of Interests condition states that:
coverage applies to each insured separately, as if no other insured existed.
Jane has a small business and has a Business Owners Policy. To save money, Jane has insured her business at 60% coinsurance. When a fire erupts inside of the store, destroying most of Jane's merchandise, her insurer:
covers the structure and contents on an ACV basis.
A CGL can provide liability insurance coverage for all of the following persons, EXCEPT:
customers.
Errors and Omissions coverage in an Equipment Breakdown Protection policy provides coverage for:
damage that would not otherwise be covered because the insured made a mistake or unintentionally omitted information required by the insurer.
Chandler is a photographer who is taking pictures at a reenactment of the Battle of Gettysburg, when Harper (Union Cavalry) crashes through the brush and into Chandler, breaking both his arms and his camera. In court, Chandler demands payment not only for his medical bills and broken camera, but for future lost business; now that he is unable to take pictures for the next 6 months, his clients are moving on and entering into contracts with other photographers. When Chandler speaks of this total amount of all damages that have resulted and will result from Harper's mistake, he is referring to:
diminution of value.
A large corporation owns a small hunting cabin in the woods, that it uses for occasional weekend getaways. The corporation can insure the cabin against property damage with a:
dwelling policy.
Risk avoidance is a risk management technique that:
eliminates risk.
The Insurance Commissioner:
enforces state laws relating to insurance.
In the Standard Fire Policy, "intentional losses" and "extreme perils that cause catastrophic damage to a large number of policyholders" would be considered examples of:
exclusions.
A captive insurance company:
exists solely to provide insurance for its parent company.
All of the following are typical exclusions in an insurance policy, EXCEPT:
explosion.
Coverage C - Personal Property of a homeowners policy typically excludes:
fish.
A stand alone excess liability policy:
follows a base policy, but may have different exclusions and limitations.
An insurer that adheres to the laws of a state but is located outside of that state is called a(n) ___________ insurer.
foreign
The Standard Fire Policy divides a basic property insurance policy into ________ parts.
four
Mental anguish would be an example of:
general damages
Ricky was watching a baseball game at XYZ Stadium, when the railing on which he was leaning gave way and he fell two stories. As a result of his fall, Ricky broke his back and is now paralyzed from the waist down. Ricky sued the owners of XYZ Stadium and was awarded $150,000 to cover his medical bills and $2.5 million in __________ because of the permanent nature of his injury.
general damages
When a car stops short in front of Mike's car, he manages to hit the brakes in time and avoids a collision. To Mike's surprise, the other driver then throws the car into reverse and backs into Mike's car! The other driver's actions are an example of:
hard fraud.
Strict liability:
holds a person liable for his actions regardless of how much care he demonstrates.
Bill holds a hull policy for his cargo ship which sails between China and the United States, transporting wooden toys. On voyage (i) his vessel is damaged by pirates. On voyage (ii) the vessel is damaged by striking employees. On voyage (iii) the vessel is destroyed when it strays into a war zone and is struck by a missile. Bill's losses will be covered by his hull coverage for which of these voyages?
i. only
After a loss covered under a dwelling policy, Ordinance or Law coverage pays for:
increased repair costs due to laws or codes.
XYZ Films is getting ready to shoot a new Western film. As with most film productions, XYZ Films uses a surety bond from ABC Bonds to help protect the distributor's financial investment in the movie. Because of the magnitude of the budget for the film, ABC Bonds has XYZ Films secure a/an _____________ to act as a co-signer.
indemnitor
As Jonathan was driving through an intersection, another driver ran a red light and crashed into the side of Jonathan's car, which caused significant physical damage to both vehicles. Jonathan must now rent a car while his is being repaired. The rental car expense would be considered a/an:
indirect loss.
When an adjuster has decided to deny a claim, it is necessary to:
inform the claimant in writing, with a full explanation.
Guaranty Associations are funded by:
insurers.
A few weeks ago Christopher's garage was destroyed by an out-of-control motorist. Fortunately, the motorist had sufficient liability insurance to cover the damages. However, the insurer insists that Christopher's garage is worth far less than the appraisals he has received from contractors. Christopher and the insurer have gone back and forth in negotiations for weeks, making little headway. Christopher decides it's time to:
issue a complaint against the policyholder.
Joe (the principal) is handling the disbursement of a deceased executive's estate, and he is required to carry a bond guaranteeing such work. The surety company requires one of its accountants to be a second signer on the disbursement checks that Joe writes. In this case, the surety has established:
joint control.
All of the following are covered under Coverage A of a Business Owners Policy, EXCEPT:
leased business personal property that must be insured.
Charlie is an independent adjuster who rents out office space in a nearby building, where he does most of his work. The address of his office should be:
listed on his adjuster license as his "place of business."
In dwelling policies, Coverage D pays for:
lost rental income.
Workers' compensation insurance can provide compensation for all of the following, EXCEPT:
lost vacation time.
Clark is filling out an application for an insurance policy. The application asks for his birth date, and Clark writes 1-24-67. His actual birthday is 1-24-63, but he likes to appear younger so he uses a different date. This would be called:
misrepresentation.
John owes a lot more on his car than it is worth. He figures he would be better off if he burned the car and collected an insurance settlement. He has someone set fire to his garage to destroy the car. John's behavior would be considered a:
moral hazard.
Lewis owns a computer store, and he spends many hours a day on the sales floor demonstrating his products to customers. He often gets very animated when showing the electronics and, although he does not intend for anything bad to happen, he doesn't worry too much about handling them carefully, since he knows that his insurance policy will cover any damages. This behavior would be called a:
morale hazard.
Lucy has insurance on an expensive necklace she likes to wear to work every day. After work, she takes it off and leaves it in her car's cupholder so she can put it back on in the morning on her way to work. Lucy's behavior would be considered a:
morale hazard.
Cindy holds an insurance policy from Sine Nomine Insurance. This is not a publicly traded company, and Cindy can participate in the election of the board, receiving dividends if the company does well. Sine Nomine Insurance could be best described as a:
mutual insurance company.
Jim is out turkey hunting on a private ranch when he hears some movement in the brush. Assuming it's a turkey, Jim raises his shotgun and fires. Unfortunately for Jim, he has not taken a turkey, but has severely injured one of the landowner's calves instead. Jim is responsible for the cost of the calf because he acted with:
negligence.
The National Flood Insurance Program:
provides flood insurance for individuals in communities complying with NFIP standards.
A plane was damaged while being towed by another vehicle. By policy definition, this damage is considered to have occurred while the aircraft was:
not in motion.
Insurance policies are unilateral contracts. This means:
only one party has an obligation to perform.
In a Personal Auto Policy, deductibles are applied on a/an ________ basis.
per claim
Once a claimant files a complaint to the court, the claimant will become the:
plaintiff.
When an insurer buys insurance to reduce its exposure to loss, this is called:
re-insurance.
The fee paid by the insured in exchange for an insurance policy is called a:
premium.
Inland Marine insurance protects:
property being transported.
After an earthquake, Jake's home is still standing, but it is a little shaken. The damage is not extensive, but Jake wants to cash in on the situation, so he takes a sledgehammer to some of his extra belongings and adds them to his claim. Jake has committed:
property insurance fraud.
An insurance adjuster will do all of the following regarding a claim EXCEPT:
protect the insurer from the claim.
When taking recorded witness statements, the adjuster should:
remain objective.
Josephine has purchased a Business Owners Policy. She insures both the real and personal property at 80% under the policy. Assuming no endorsements apply, the losses will be adjusted on a(n) _______________ basis.
replacement cost
The factual statements of the insured upon which an insurance policy is based are called:
representations.
In Texas, an insurer may not:
require a claimant to produce his federal tax returns before agreeing to settle his claim.
The Employee Retirement Income Security Act (ERISA):
requires that every fiduciary of an employee benefit plan and every person who handles funds or other property of those plans must be bonded.
Six Stars Development Company has just been offered a great deal on ten large properties in Las Vegas. The economy in Las Vegas has been declining recently, but the CEO of Six Stars expects it to recover soon. This could be an exceptional opportunity for Six Stars, but it's also pretty risky. Ultimately, the Six Stars executive team decides not to purchase the properties. This is an example of:
risk avoidance.
Amy needs more floor space in her antique furniture store, so she buys a storage building 3 miles away. She is worried about keeping the furniture in the storage building safe, so she puts in an alarm system and smoke detectors. By purchasing the alarm system and smoke detectors, Amy is practicing:
risk reduction.
Jared hopes to purchase a new insurance policy for his car, but he has an extremely poor driving record. The insurance company decides to issue Jared an insurance policy, but charges him a premium much higher than the average driver. The insurance company is practicing:
risk reduction.
Six Stars Development Company has just purchased several large properties in Las Vegas. As a result of this large purchase, they are a little short on money and decide to save money by not purchasing insurance on their new properties. Six Stars is practicing:
risk retention.
Six Stars Development Company has just been offered a great deal on a bulk purchase of dishwashers from a new company called Clean Machines. They've never purchased appliances from Clean Machines, so they're hesitant to make such a large purchase. Finally, Clean Machines offers to provide 10-year warranties for each of the dishwashers. For Six Stars Development, purchasing the warranties is an example of:
risk transference.
When an insurer issues an insurance policy, the actual item, person, or organization that is being insured is called the:
risk.
Veronica owns a pottery business and is insured under a commercial property policy. She was in the process of building an extra structure for the sole purpose of kiln firing her pottery, but after 40 days of waiting for it to be completed, she moved her business to a new location without any intention of moving back. Her Builder's Risk Coverage Form was terminated because:
the property is abandoned.
Steve has just purchased a wedding ring for his new bride. If something were to happen to the ring, he'd be out a lot of money, so he purchases an insurance policy. He is able to do this because:
the ring is a pure risk.
When Emma is found guilty of arson for burning down her $175,000 home, her insurance policy is voided and she receives no indemnification for the loss. Emma still had $155,000 left on her mortgage at the time of the fire. Under the mortgagee clause, Emma's mortgage lender can recoup:
the total amount left on the loan - $155,000.
All of the following are universal exclusions in a Commercial Crime policy, EXCEPT:
theft of money or securities outside the insured premises in the care of a messenger.
The purpose of the principle of indemnity is:
to prevent an insured from making a profit on a loss.
In a BOP, the General Aggregate Limit is:
twice the per occurrence limit.
In a __________, only one party is legally obligated to perform.
unilateral contract
Mark has an ocean marine insurance policy with cargo coverage. The type and value of his cargo varies from one shipment to the next, so rather than having a set value for this coverage, the amount of his settlement is only determined after a covered loss. Mark's cargo coverage is written on a/an ________ basis.
unvalued
An insurance contract is an agreement between two parties where each side promises to be truthful, factual, and honest about their respective positions. Therefore, an insurance contract is said to be a contract of:
utmost good faith.
In order to qualify for an insurance policy, Lydia's Fine Jewels must agree to have a security guard on the premises 24/7. This is called a:
warranty.
