Insurance Practice Questions
A property insurance policy that is not subject to any coinsurance requirements but has a set amount of insurance scheduled for the property would use what loss valuation method
stated amount
When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written
stated amount
Which of the following perils is covered by the HO2 and HO3?
sudden and accidental rupture of a heating system?
which of the following is an example of a producer being involved in an unfair trade practice of rebating?
telling a client that his first premium will be waived if he purchases the insurance policy today
An insured's accounts receivable records have been damaged. The loss may be covered with
the accounts receivable coverage form
Under a dwelling policy, which of the following is NOT a factor in determining a loss?
the amount negotiated by the insured
The claims-made trigger is based on which of the following?
the date the claim is first made in writing against an insured for injury or damage that occurred on or after the policy/s retroactive date
Which of these is defined as the maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims that may be made or the number of accidents that may occur
aggregate limit of liability
The inspections and surveys condition in a businessowners policy
allows the insurer the right to inspect the insured's premises
Which of the following is NOT covered under accounts receivable coverage form?
any loans required to offset uncollectible
Which of the following is a method of claim settlement used in casualty insurance when the insured and insurer cannot agree on how to settle a claim?
arbitration
Insurable interest in a property policy must be proven
at the time of loss
All of the following are requirements to obtain an insurance producer license in MO EXCEPT
attend an approved prelicesing course
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an
authorized insurer
Participation in the Missouri Automobile Insurance Plan is required for
auto liability insurers
Which of the following is an example of a protective safeguard in a businessowners policy?
automatic sprinkler system
If an insurer makes a change to broaden coverage in a dwelling policy while it is in effect, the changes will apply
automatically
Which of the following would NOT be considered basic property insurance?
automobile risk
Under the HO4 and HO6 homeowners policy forms, property is insured against
broad form perils
An insurer cannot transact business until it obtains a
certificate of authority
Which of the following is NOT found in a commercial package policy?
certificate of authority
An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of
concealment
When would a misrepresentation on the insurance application be considered fraud?
If it is intentional and material
Which of the following is NOT true regarding a Certificate of Authority?
It is issued to a group insurance participants
Property insurance that provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called
Specific Coverage
Which of the following losses would be covered by an unendorsed homeowners policy?
fire or lightning
A mobile homeowners policy is structured the same as a
homeowners policy
What is surplus insurance
insurance placed with an unauthorized insurer
Which of the following is NOT true of Uninsured motorist coverage?
it may be offset with workers comp coverage
Which of the following statements concerning the builders risk coverage form is correct
it may be written on a reporting form for the completed value of the structure
Which of the following statements is NOT true regarding a personal umbrella liability policy?
it provides errors and omissions coverage for an agency
How does the mobile home endorsement affect the other coverage of law or ordinance in a homeowners policy?
it removes the coverage
If an employer in a state with elective workers comp laws chooses not to be subject to those laws, what does the employer lose?
its common law defenses against liability suits
Which of the following best describes the unfair trade practice of defamation?
making derogatory oral statements about another insurer's financial condition
No insurance company may transact insurance business in MO unless it first
obtains from the director a cert of authority
The mobile home endorsement alters the homeowners policy to cover a mobile home and other structures on land
owned or leased by the resident of the mobile home
A customer was injured in a supermarket parking lot when a grocery cart collided with the customer's leg. Coverage for this claim would be provided under
premises and operations
An insured employs several people around his house for various tasks. Which of the following individuals would require workers comp coverage?
private lawn and gardening personnel
If a person wants to sell, solicit, or negotiate insurance, which license must be obtained?
producer
Under the coverage of which of the following liability policies may an insured require the insurer to defend a claim?
professional liability
What MUST an insurance company that is organized in, and has its home office in MO, do in order to legally transact insurance in the state
receive a cert of authority from the director
What type of information would be found in a policy's insuring agreement?
renewal dates
All of the following are factors in rating workers comp insurance EXCEPT
sales
Coverage A- BI and PD in the commercial general liability policy will cover
Losses due to the insured's negligence
What is the name of a program under the FAIR Plan in Missouri?
Missouri Basic Property Insurance and Placement Program
Within how many days of a decision may an applicant appeal the decision related to their acceptance to the FAIR program?
30 days
Proof of insurance is required in all of the following situations EXCEPT
Any accident causing minor property damage of $500 or less
How long is the waiting period upon purchase of flood coverage through NFIP?
30 days
What is the fine, per violation, when found guilty by the Director of unfair method of competition or an unfair or deceptive act or a prohibited practice?
$1,000
The All-industry Placement Facility accepts a commercial property risk on a warehouse valued at $2,500,000. Just 5 months later, a fire completely destroys the warehouse. The property owner will receive
$1,000,000
According to state law, an employer will pay for the burial of their deceased employee. What is the maximum amount the employer will have to pay for burial services?
$5,000
In Missouri, owners of registered vehicles must remain proof of financial responsibility in the event of motor vehicle accidents that results in property damage of at least
$500
An auto dealer reported $500,000 worth of cars on its lot t the end of May to its insurer. On June 10, it received $200,000 worth of cars. By June 20, the dealership sold $100,000 worth of cars and a hail storm on June 21 caused $50,000 worth of damage to the inventory. W/o deductibles, how much will the insurer pay for damages?
$500,000 + $200,000 = $700,000 THEN $700,000 - $100,000= $600,000. The insurer will pay $50,000 X 5/6 = $41,667
How many days do insurers have to acknowledge any claims made by first-party claimants?
10 days
A producer completed an insurance transaction in 2007. When can the producer dispose of the records for this transaction
2010
In order to form a business entity providing medical malpractice insurance, how many licensed persons are required?
3
how many hours of continuing education must be completed in ethics and MO law each licensing period
3
An employer carrying worker's compensation insurance must notify its employees within
30 days
An individual would like to be covered under the Missouri Basic Property Insurance and Placement Program. Before he can apply, the inspection bureau must examine his property. How soon after that inspection can he expect the bureau to file their report?
5 days
Homeowners policies with terms of less than 6 months will be considered as though they were written for terms of
6 months
Assuming the insurer and the insured agree on the amount payable for a loss covered under a dwelling policy, how soon after receiving the proof of loss must the insurer pay the claim?
60 days
The employee theft crime policy includes a coverage extension that applies to employees temporarily outside the coverage territory for up to
90 days
Which of the following statements is true regarding the premium computation for works comp insurance?
A premium auditor has the right to examine the insured's compensation records at the end of the policy period to determine the actual premium basis
What is material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
Workers comp statuses provide coverage for diseases that occur as a result of working in the employer's working environment. Which of the following is an example of a disease that would NOT be covered by such provisions?
An employee of a medical facility who suffers from a common cold
The Missouri Basic Property Insurance and Placement Program is available to
Any person in the state entitled to have but unable to obtain property coverage through the voluntary market, subject to program maximums
An installation floater is used to insure
Appliances intended to become a permanent part of the building
How can inland marine coverage be written in this state?
As a combination policy with fire casualty
What term best describes the act of withholding material information that would be crucial to an underwriting decision?
Concealment
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
Consideration
An insured has four separate but identical policies written by different insurers to cover her $100,000 building. Each policy is written for $100,000, and each has the pro lata liability other insurance clause. In the event of a total loss to the building, what would each insurer pay?
Each policy will pay $25,000 of the loss
Replacement cost is defined as
Full replacement of property at its current cost, new and without reduction for depreciation
When a property policy is cancelled under the Missouri Basic Property Insurance and Placement Program, the insurer must send the insured a notice of cancellation. Which of the following is FALSE regarding the notice?
It must be sent as least 15 days prior to the date of cancellation (must be at least 30 days)
A binder was issued on June 1, and 30 days later, the insurer issued a policy. What happens to the binder coverage?
It will be replaced by the policy coverage
For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become
Larger
Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of large numbers
Which of the following covers a carrier for liability for loss to cargo while its being transported in a truck?
Motor truck cargo policy- truckers form
ABC Trucking hauls products for Acme, Inc. as a contract carrier. On one shipment, the driver stopped at a truck stop for lunch. Leaving the truck in the parking lot, he made certain that the truck was locked before leaving it. Upon returning to the truck, he discovered that someone had broken into the truck and stolen the cargo. Is ABC legally liable for this loss?
No, the driver had taken reasonable measures to protect the property by locking the truck
A binder became effective on October 1, and the replacing policy was issued on November 15th. What is the first day of the policy coverage?
October 1
In a watercraft policy, which coverage part will respond to a claim for damages for bodily injury or property damage for which the insured becomes legally liable because of a watercraft accident?
Part A
Which of the following entities is responsible for assisting applicants in securing basic property insurance and issuing policies under the Missouri Basic Property Insurance and Placement Program?
The All-Industry Placement Facility
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?
The Fair Credit Reporting Act
Peril is most easily defined as
The cause of loss insured against
All of the following situations would be covered under a professional liability policy EXCEPT
The failure of an attorney to properly defend a client due to his personal dislike of the client
Negligence may be defined as
The failure to use reasonable and prudent care
The Missouri Insurance Code has set out standards for the investigation and disposition of claims arising under contracts and certificates of insurance. All of the following would be considered Unfair claim practices, EXCEPT
The insurance company requires the claimant to submit a proof of loss
Missouri law requires that the records of insurance transactions kept by producers must be orderly. What does that mean
The records must be retrievable within 5 days upon request
The owner of a standard fire insurance policy suffers a total loss due to fire. The insurer receives the insured's Proof of Loss statement along with evidence of arson. How soon may the insurer cancel the policy?
Within 10 days
Coverage under a Floor Plan Merchandise form is written on a reporting form basis that required the insured to file reports with the insurer. What is the time frame for those reports?
Within 30 days after the end of each month
A contract for the transport of goods between the shipper and the carried is called
a bill of lading
What must every insurance carrier writing workers comp insurance establish for its insured employers upon request
a comprehensive safety engineering and management program
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT
conditions (offer/acceptance, consideration, competent parties, and legal purpose)
Which of the following risks is eligible for coverage under a businessowners policy?
condos
A Transportation Network Company (TNC) does which of the following?
connects riders with drivers that will transport them for a fee
An auto policy issued in Missouri may
contain a named driver exclusions
Employment practices liability insurance (EPLI) would NOT cover claims arising from
deliberate law violation
When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered
discrimination
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT
dividends from a mutual insurer
All of the following conditions must exist for injury or damage to be included in the products and completed operations hazard of a CGL policy EXCEPT
the injury or damage must occur within 90 days after the insure's work is completed (there is no time period)
Which of the following is most likely to occur if it is determined by the audit that the deposit premium was too high?
the insured will receive a return premium
The insured failed to pay the premium on his property policy issued under the FAIR Plan. Before the insurer may cancel the policy, what needs to be done?
the insurer must send the notice of cancellation to the insured
The most the insurer will pay for a loss under a businessowners policy is
the limit of insurance after the deductible is paid
Which of the following statements is true concerning a bonded contractor who defaults on a construction performance contract?
the obligee may engage another contractor and then seek reimbursement from the surety
An insurer send Form 26 to the Missouri Department of Motor Vehicles for a motor vehicle owner. Which of the following is likely
the owner's drivers license may be suspended
In MO, it is illegal to receive a commission from the sale of insurance UNLESS
the payee holds a valid insurance producer license
Which of the following is true regarding single dwellings that are insured to at least 80% of the replacement value
they are automatically provided with replacement cost coverage
When workers comp pays for permanent total disability, at what rate is the compensation paid?
weekly
When does a binder expire?
within 60 days
A producer just renewed a Missouri Basic Property Insurance and Placement Program policy. The policy is valued at $12,000. What can the producer expect to receive as commission?
$1,200 (10% for renewal)
The regular National Flood Insurance Program would insure an eligible single-family dwelling for up to
$2,500,000
An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and must be replaced. The new roof will cost $6,000 at today's prices. If the roof has been depreciating at $200 per year and his policy is ACV, how much will it pay toward the insured's new roof?
$5,000 ($6,000- $200 per year = $5,000)
Policies issued under the Missouri Basic Property Insurance and Placement must be issued for what term?
1 year
Under the FAIR plan, what is the commission for a producer on a new policy?
12% (on new business, 10% on renewals)
Under the conditions of a Film Coverage Form, how long must the insured maintain records of each production?
3 years after the policy expires
Within how many days of issuance may homeowners policies be canceled without notice?
60 days
Which of the following is eligible for a business owners policy?
A 6-story office building with less than 100,000 square feet total area
A building insured with commercial property insurance has been vacant 90 days. Which of the following is NOT true?
Payment for unnamed perils is reduced by 25% (15% for named perils is vacant)
Which of the following would be insured's duty in the event of a loss according to the duties in event of occurrence, claim, or suit condition?
Providing specific details regarding an occurrence
The facility just sold a Missouri Basic Property Insurance and Placement Program policy to a new customer. There was no designated licensed producer for the transaction. Which of the following would be true regarding the commission on this sale?
The commission will be deposited into a fund to be held by the Director
What statement below is FALSE about binders that insurance producers may issue?
The limits provided by the binder are for 75% of the coverage requested in the application
All of the following are true with regard to standard fire insurance policies being cancelled by an insurer EXCEPT
The notice must state that a refund of unearned premiums will be made within 15 days of the notice
A binder is issued to an applicant, but it is never replaced by a policy because of information discovered about the applicant. What action must be taken on the part of the insurer?
a binder premium charge must be made
Which of the following would be covered by the broad theft endorsement on a dwelling policy?
a camera the insured has with him on vacation
Professional photographers and musicians may insure their equipment with
a commercial articles floater
When other insurance is written on the same basic as a commercial property policy, the obligation of the insurer is to cover
a share of the loss
The declaration page of the homeowners policy provides all of the following information except
a statement that earthquake damage is not covered
Which of the following is covered under the Mail floater of a Commercial Inland Marine policy ONLY if is sent by registered mail?
currency and unsold travelers check
An insured is applying for a casualty insurance policy. One of the conditions of the policy allows the insurance company to inspect the insured's books at the end of the policy term to make sure sufficient premium has been collected for the exposure she plans to insure. Which condition is part of the insured's policy?
deposit premium audit
Which of the following terms best describes a trembling or shaking of the earth that is volcanic or seismic in origin?
earthquake
An import's marine and transportation coverage continues even when it is
en route to its final destination
The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the
exclusions
All of the following are excluded in the equipment breakdown basic policy EXCEPT
explosion of steam boilers
Which of the following is NOT true concerning the fair rental value coverage provided in the dwelling policy?
loss or expense caused by the cancellation of a lease is covered
If a material misrepresentation is discovered in a policy issued under the Missouri Basic Property Insurance and Placement Program, the policy
may be cancelled
The Physicians and Surgeons Equipment Floater is NOT intended for which of the following?
medical supplies located in a hospital
Valuable papers and records form provides coverage for the reconstruction of all of the following types of records EXCEPT
prepackage software (deeds, historical records, blueprints)
Who would participate in a Write Your Own (WYO) flood insurance program?
private insurers that wish to write and service National Flood Insurance policies on a no risk-bearing basis
Before an insurer will pay any loss under a policy, what is usually required from the insured?
proof of loss
Which of the following will be minimum sufficient proof that a policy cancellation notice has been sent by the insurer?
proof of mailing
Which of the following would NOT be considered a source of insurability information by an insurer?
the applicant's marital status
Which of the following is NOT the consideration in a policy?
the application given to a prospective insured
When a regular bill of lading is issued, who will be responsible for the invoice cost of any damaged property?
the carrier
The type of insurance used to cover goods for one specific trip is called
trip transit
Which of the following is NOT one of the available additional coverages in the builders risk form?
vadalism
Personal business property out in the open is covered under commercial property policy only while
within 100 feet of the described premises