Louisiana Property and Casualty Insurance Exam
What documentation grants express authority to an agent? A. Fiduciary contract B. State provisions C. Agent's contract with the principal D. Agent's insurance license
C. Agent's contract with the principal The principal grants authority to an agent through the agent's contract.
Which of the following types of agent authority is also called "perceived authority"? A. Implied B. Fiduciary C. Apparent D. Express
C. Apparent Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
39. Which of the following symbols in a business auto policy indicates that coverage for newly acquired vehicles applies if the insurer already covers all autos owned by the insured? (Choose from the following options) 1. Symbol 1 2. Symbol 2 3. Symbol 7 4. Symbol 19
1. Symbol 1
The Association is obligated to pay up to $10,000 for claims seeking return of unearned premium on (Choose from the following options) 1. Property insurance policies. 2. Casualty insurance policies. 3. Workers Compensation policies. 4. All of the above.
4. All of the above.
Under Coverage C of a homeowners policy, the amount of insurance provided to cover personal property of the insured is
50% of the amount provided as Coverage A
How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card? a) $100 b) $500 c) $1,000 d) $5,000
b) $500 $500 is provided automatically, and may be increased by endorsement.
A producer has been notified by the Commissioner to stop using an unapproved trade name. How many days does the producer have to change the trade name before facing a fine? a) 5 business days b) 10 days c) 30 days d) The name must be changed immediately.
b) 10 days A producer who continues to use a unapproved trade name for 10 or more days after being notified will face a fine of up to $5,000.
Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses? a) Insuring agreement b) Additional coverage c) Exclusions d) Declarations
b) Additional coverage The additional coverage portion of a policy provides an additional amount of coverage for specific loss expense, at no additional premium.
Which of the following statements regarding coverage for the flood and earthquake perils is true? a) Flood insurance is usually provided in property policies, but earthquake coverage is available by endorsement only. b) Both flood and earthquake are excluded perils in all property policies. c) Flood and earthquake coverage is available in all policies. d) Flood and earthquake coverage is available only through government insurance
b) Both flood and earthquake are excluded perils in all property policies. Flood and earthquake are both excluded perils in all property policies. However, coverage for both or either one usually can be purchased separately for an additional premium (by endorsement).
Under which type of coverage does the insurer agree to pay for bodily injury or property damage liability which the insured has agreed to assume under a written contractual agreement? a) Bodily injury liability policy b) Contractual liability policy c) Personal liability policy d) Property damage liability policy
b) Contractual liability policy With this coverage, the insurer agrees to pay for bodily injury or property damage liability which the insured has agreed to assume under a written contractual agreement.
Because an insured owns a lot of expensive jewelry, her insurance agent has advised her to purchase a scheduled personal property endorsement. If the insured adds this endorsement to her homeowners policy, which of the following statements would be correct? a) The endorsement becomes primary coverage and the HO contract is secondary. b) Coverage C limits will no longer apply to the jewelry insured by the endorsement. c) The amount of coverage will be doubled. d) The endorsement becomes excess coverage.
b) Coverage C limits will no longer apply to the jewelry insured by the endorsement. When items are scheduled, they are excluded from Coverage C as insured items, and are covered only under the scheduled personal property endorsement.
The designation symbols used in commercial auto policies can be found in which policy section? a) Conditions b) Covered Auto c) Liability Coverage d) Definitions
b) Covered Auto Section I - Covered Auto of a commercial auto policy explains the designation symbols used in that coverage.
Which of the following statements is NOT true regarding a personal umbrella liability policy? a) It provides excess liability coverage over underlying personal liability. b) It provides errors and omissions coverage for an agency. c) It may cover certain exposures not provided under the primary layer. d) It may require the payment of a self-insured retention.
b) It provides errors and omissions coverage for an agency. Personal umbrella policies cover the personal exposure of the insured. Errors and omissions coverage is provided only in a professional liability policy.
The HO-3 homeowners policy provides a) All-risk coverage for both the dwelling and personal property. b) Open peril coverage on the dwelling and broad form coverage on personal property. c) Open peril coverage on the dwelling and basic form coverage on personal property. d) Basic coverage for the dwelling and broad form coverage for personal property.
b) Open peril coverage on the dwelling and broad form coverage on personal property. The open peril coverage applies to property insured under Coverages A and B only.
A building insured with commercial property insurance has been vacant 90 days. Which of the following is NOT true? a) Payment for unnamed perils is reduced by 15%. b) Payment for unnamed perils is reduced by 25%. c) The insured has no coverage for losses caused by theft. d) The insured has no coverage for losses caused by glass breakage.
b) Payment for unnamed perils is reduced by 25%. If the building has been vacant for more than 60 consecutive days before the loss, the insurer will not pay for damage caused by vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft. If the loss is caused by any other peril, the insurer will reduce the amount they would have otherwise paid by 15%.
Which of the following would not be a violation of Louisiana insurance regulations? a) Producer B charges his clients, in addition to the premium, a consulting fee. b) Producer C uses her license to write uncontrolled business only. c) Producer D collects premiums due on policies and deposits the funds in his own personal account. d) Producer A uses her license to write only insurance for herself and her immediate family.
b) Producer C uses her license to write uncontrolled business only. The purpose of a license is to primarily write non-controlled business.
Who is not considered an employee in a CGL? a) Full-time worker b) Part-time worker c) Temporary worker d) Leased worker
c) Temporary worker By definition in a CGL, a temporary worker is not considered an employee.
73. Homeowners policies limit the amount of property and liability coverage available for boatowners. How much coverage is provided in the homeowners policy for damage to watercraft, accessories, equipment, and trailers? (Choose from the following options) 1. $2,500 2. $1,000 3. $1,500 4. $2,000
1. $2,500
108. An agent suspects that his insurer is committing insurance fraud. Within how many days of that discovery must the agent report the frau to the Department of Insurance? (Choose from the following options) 1. 10 days 2. 15 days 3. 30 days 4. 60 days
1. 10 days
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? (Choose from the following options) 1. 5 days 2. 7 days 3. 10 days 4. 3 days
1. 5 days
While an insured's covered auto is in the repair shop following damage caused by a collision, the insured would have coverage for which of the following vehicles under a personal auto policy? (Choose from the following options) 1. Any vehicle not owned by the insured, but furnished for use while the covered auto is out of normal use because of repair 2. Any vehicle used by the insured without the reasonable belief that the insured is entitled to use such vehicle 3. Any auto furnished for the insured's regular use, but not named on the policy 4. Any vehicle while located inside a racing facility for the purpose of racing
1. Any vehicle not owned by the insured, but furnished for use while the covered auto is out of normal use because of repair
28. All advertisements, regardless of their source of creation, are the responsibility of the (Choose from the following options) 1. Department of Insurance. 2. Insurer. 3. Insured. 4. Advertising agency.
1. Department of Insurance
6. Which of the following covers the interest of a secured lender in personal property? (Choose from the following options) 1. Fair value clause 2. Third-party clause 3. Indemnity clause 4. Loss payable clause
1. Fair value clause
95. When a named insured files a form with the application selecting a different level or absence of Uninsured Motorist coverage, this selection is valid (Choose from the following options) 1. For the life of that policy. 2. Until the renewal of the policy. 3. For 1 year. 4. Until the named insured reaches age 65.
1. For the life of that policy
57. When an insured had to have a tire replaced on his insured auto, he submitted a claim to the insurer. The company denied the claim as "wear and tear" and not insurable because (Choose from the following options) 1. It is a certainty. 2. It is not calculable. 3. It does not affect a large number. 4. It is subject to catastrophe hazard.
1. It is a certainty
127. Among people in the same class and life expectancy, which of the following factors can be used to influence premium rates? (Choose from the following options) 1. Occupation 2. Ancestry 3. Marital Status 4. Race
1. Occupation
While an insured was towing a utility trailer with his auto, the trailer came loose and ran into a store front. What part of the insured's auto policy would pay for the damage to the store? (Choose from the following options) 1. Property damage liability 2. Collision coverage 3. Other-than-collision coverage 4. This loss would not be covered.
1. Property damage liability
Unless the insured has rejected Uninsured Motorist Coverage, the insurer must provide coverage for damage to the insured auto caused by an uninsured auto in the amount of (Choose from the following options) 1. The actual cash value of the insured auto or $10,000, whichever is less. 2. A stated amount determined by the insured. 3. The replacement cost of the insured auto. 4. The market value of the insured auto.
1. The actual cash value of the insured auto or $10,000, whichever is less.
56. Which of the following is NOT part of Section II of the boatowners policy? (Choose from the following options) 1. Uninsured boaters 2. Watercraft damage 3. Watercraft liability 4. Medical payments
1. Uninsured boaters
Which of the following would NOT be considered part of the insured location under the liability section of a homeowners policy? (Choose from the following options) 1. Vacant farmland owned by the insured 2. A residence where an insured is temporarily residing 3. A family cemetery plot 4. A lakeside cabin rented by the insured for vacation
1. Vacant farmland owned by the insured
98. Under Coverage E - Scheduled Farm Personal Property, livestock that is not specifically insured is limited to a coverage limit of (Choose from the following options) 1. $500 per head. 2. $1,000 per head. 3. $2,000 per head. 4. $2,500 per head.
2. $1,000 per head
If an insured covered under a Mobile Homeowners Policy moves the mobile home to protect it from a covered peril, the policy will pay up to (Choose from the following options) 1. $350. 2. $500. 3. $750. 4. $1,000.
2. $500
An insured has a personal auto policy with both comprehensive (other-than-collision) and collision coverage. His car is stolen and recovered five days later. If the insured claims transportation expenses of $20 per day, how much will his policy pay? (Choose from the following options) 1. $45 2. $60 3. $75 4. $100
2. $60
140. An insurer must notify the consumer in writing that an investigative consumer report has been requested, within how many days of the initial request? (Choose from the following options) 1. 3 days 2. 5 days 3. 10 days 4. 30 days
2. 5 days
92. An insured has a maximum limit of coverage available under her liability policy during a policy year, regardless of the number of claims made or the number of accidents. Her limits are restored at the policy anniversary. What type of limit does this insured have? (Choose from the following options) 1. Per occurrence 2. Aggregate 3. Split 4. Combined single
2. Aggregate
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company? (Choose from the following options) 1. Disclosure rule 2. Fair Credit Reporting Act 3. Consumer Privacy Act 4. Conditional receipt
2. Fair Credit Reporting Act
A home is insured under an HO-2 policy. The homeowner decides to replace the roof on the house. He wasn't able to complete the roof in one day and left a portion of it unfinished overnight. A heavy rainstorm caused $20,000 of damage to the interior of the house and some furniture. In this situation, the policy will pay (Choose from the following options) 1. 80% of replacement cost. 2. Nothing. 3. The ACV of the damage. 4. Replacement cost of the damage.
2. Nothing.
48. How is a professional liability policy written? (Choose from the following options) 1. Excess liability 2. Occurrence 3. Claims-made 4. Open peril
2. Occurrence
All of the following are parts of a personal auto policy EXCEPT (Choose from the following options) 1. Liability coverage. 2. Physical damage coverage. 3. Medical payments coverage. 4. Duties after an accident or loss.
2. Physical damage coverage.
Which workers compensation conditions states that the first named insured will act on behalf of all insureds under the policy? 1. Cancellation 2. Sole representative 3. Transfer of your rights and duties (assignment) 4. Inspection
2. Sole representative
104. Coverage for loss by some perils under a building and personal property form is suspended if (Choose from the following options) 1. An uninsured peril causes a partial loss. 2. The insured building is vacant for over 60 days. 3. A loss occurs while a hazard beyond the insured's control is increased. 4. The insured fails to satisfy the coinsurance provision
2. The insured building is vacant for over 60 days
89. Which of the following is the least amount of controlled business that would be considered illegal? (Choose from the following options) 1. 51% 2. 6% 3. 11% 4. 26%
4. 26%
40. If the premiums collected by an insurer participating in the WYO flood program are insufficient to cover losses, which of the following would be true? (Choose from the following options) 1. Federal Insurance Administration will remove the insurer from the NFIP. 2. The insurer will be reimbursed for the excess costs by the NFIP. 3. The insurer must cover the loss out of its surplus. 4. The insurer must apply for disaster relief funds.
2. The insurer will be reimbursed for the excess costs by the NFIP
32. Which provision defines how the policy will respond if there is other valid insurance written on the same risk? (Choose from the following options) 1. Concurrent coverage 2. Other insurance 3. Coinsurance 4. Overinsurance
3. Coinsurance
Which of the following coverages will respond if a claim is made or a suit is brought against an insured for damages due to bodily injury or property damage caused by an occurrence to which the coverage applies? (Choose from the following options) 1. Coverage C - Personal Property 2. Coverage D - Loss of Use 3. Coverage E - Personal Liability 4. Coverage F - Medical Payments to Others
3. Coverage E - Personal Liability
69. Which of the following perils is NOT covered the DP-2? (Choose from the following options) 1. Damage caused by the weight of ice and snow 2. Damage caused by falling objects 3. Damage to pets, birds, or fish 4. Damage caused by burglars
3. Damage to pets, birds or fish
Which of the following best describes the aleatory nature of an insurance contract? (Choose from the following options) 1. Ambiguities are interpreted in favor of the insured 2. Policies are submitted to the insurer on a take-it-or-leave-it basis 3. Exchange of unequal values 4. Only one of the parties being legally bound by the contract
3. Exchange of unequal values
126. Which of the following losses would be excluded from coverage under the farm property special form? (Choose from the following options) 1. Theft of property from the insured's residence 2. Drowning of livestock 3. Fire caused by curing tobacco 4. Loss of livestock caused by attack by dogs or wild animals
3. Fire caused by curing tobacco
21. According to the law of agency, insurance producers represent (Choose from the following options) 1. The public. 2. The State. 3. Insurers. 4. Insureds
3. Insurers
When is liability coverage included in a homeowners policy? (Choose from the following options) 1. If the insured has form HO-4 2. If there is an endorsement 3. It is included automatically. 4. If the insured has forms HO-2 or HO-3
3. It is included automatically
Extended nonowned coverage endorsement in a PAP broadens which of the following coverages? (Choose from the following options) 1. Uninsured motorists 2. Physical damage 3. Liability and medical payments 4. Duties after an accident or loss
3. Liability and medical payments
Which policy consists of the declarations and conditions, endorsements, and other attachments applicable to a single line of insurance? (Choose from the following options) 1. Casualty 2. Commercial package 3. Monoline 4. Insurance
3. Monoline
The penalty to an insurance producer who issues a binder for an insurer for whom he or she does not hold an appointment is (Choose from the following options) 1. Imprisonment in the state penitentiary. 2. Imprisonment at Penn State. 3. Suspension or revocation of license. 4. Imprisonment in the county jail.
3. Suspension or revocation of license.
Supplementary payments on a CGL provide all of the following EXCEPT (Choose from the following options) 1. Pre-judgment and post-judgment interest. 2. The cost of bonds to release attachment. 3. Up to $500 a day for lost earnings and $2,000 for the cost of bail bonds. 4. $100 in gasoline costs by the insured driving a witness to and from court.
3. Up to $500 a day for lost earnings and $2,000 for the cost of bail bonds.
Under the business auto coverage form, mobile equipment is covered for liability insurance (Choose from the following options) 1. When listed on the declarations. 2. When coverage is written as Symbol 1. 3. When being carried or towed by a covered auto. 4. On an excess basis.
3. When being carried or towed by a covered auto.
61. What is the main distinction between a hired auto and a nonowned auto? (Choose from the following options) 1. The length of time the insured uses the auto 2. The amount of premium 3. Whether a payment is made for the use of the auto 4. Who owns the auto
3. Whether a payment is made for the use of the auto
A couple bought tickets to a college hockey tournament. At the game, a stray puck flies into the stands and hits the wife in the face, breaking her nose. Which legal defense may bar her from recovering damages for the injury she received at the hockey game? (Choose from the following options) 1. Comparative negligence 2. Contributory negligence 3. Defense against negligence 4. Assumption of risk
4. Assumption of risk
Which of the following endorsements under an Equipment Breakdown policy is used for calculating the amount to be paid on a lost business claim after a direct loss? (Choose from the following options) 1. Refrigeration Interruption Coverage 2. Turbine Units Explosion Coverage 3. Refrigeration Interruption - Report of Values 4. Business Income - Report of Values
4. Business Income - Report of Values
The difference in the contents coverage on an HO-3 and HO-5 is which of the following? (Choose from the following options) 1. Contents are covered open peril on HO-3, and named peril on HO-5. 2. Contents are covered for replacement cost on HO-5, and ACV on HO-3. 3. Contents are covered for replacement cost on HO-3, and ACV on HO-5. 4. Contents are covered open peril on HO-5, and named peril on HO-3.
4. Contents are covered open peril on HO-5, and named peril on HO-3. ?
67. Other than perils, the difference in the three DP forms is in coverage provided. Which of the following coverage options is covered by the DP-2 and D-P3 but not DP-1? (Choose from the following options) 1. Coverage E - Additional Living Expense 2. Coverage A - Dwelling 3. Coverage B - Other Structures 4. Coverage D - Fair Rental Value
4. Coverage D - Fair Rental Value
76. Which of the following would NOT generally be included in the supplementary payments portion of a liability policy? (Choose from the following options) 1. Cost of first aid to others at the time of an accident 2. Expenses the insured incurs, as part of defense, at the company's request 3. Loss of earnings due to the accident 4. Damage to property owned by the insured
4. Damage to property owned by the insured
144. The defendant being released on a surety bail bond is the (Choose from the following options) 1. Principal. 2. Surety. 3. Obligee. 4. Insured
4. Insured
If a guest's property is lost or damaged while on the insured's premises or in their control, Crime Coverage Form L - Liability for Guests' Property - Premises covers the insured's (Choose from the following options) 1. General liability. 2. Crime liability. 3. Employee liability. 4. Legal liability.
4. Legal liability
142. How often must organizations consult the National Do Not Call Registry? (Choose from the following options) 1. Once a year 2. Every 31 days 3. Once every 6 months 4. On the first Monday of every month
4. On the first Monday of every month
A deli owner has a businessowners liability policy. When a customer slipped and hurt herself at the deli, the liability policy paid for medical expenses. The customer, however, is now suing the business owner because she claims there was no caution sign warning her that the floor was wet. What is the insurer obligated to do? (Choose from the following options) 1. Automatically renew the owner's policy, but they have nothing to do with the lawsuit 2. Provide legal aid to the elderly woman suing the policyowner 3. Nothing, they have paid the claim and their responsibility ends there. 4. Pay to defend the policyowner in the lawsuit because liability coverage contains a duty-to-defend provision
4. Pay to defend the policyowner in the lawsuit because liability coverage contains a duty-to-defend provision
112. The exact, direct, uninterrupted cause of loss is the (Choose from the following options) 1. Actual cause. 2. Intervening cause. 3. Absolute cause. 4. Proximate cause
4. Proximate cause
107. In contrasting stock insurers with mutual insurers, which statement is true? (Choose from the following options) 1. Stock dividends are tax free while policy dividends are taxable. 2. Nonparticipating policies can pay out dividends to the policyholders. 3. Mutual insurers are owned by the shareholders and issue participating policies. 4. Stock insurers are owned by the shareholders and issue nonparticipating policies.
4. Stock insurers are owned by the shareholders and issue nonparticipating policies
In which of the following situations would off-premises coverage in a broad theft endorsement apply? (Choose from the following options) 1. The insured's live-in maid's quarters are burglarized. 2. The insured's jewelry is stolen from her vacation home after she returns home. 3. The insured's vacuum cleaner is stolen from her apartment. 4. The insured's camera is stolen from his vacation home while he is there.
4. The insured's camera is stolen from his vacation home while he is there
13. Which of the following statements regarding surety bonds is true? (Choose from the following options) 1. A surety bond is also known as third-party guarantee insurance because it always involves three parties. 2. The principal is the designated beneficiary of the holder of the surety bond. 3. The person who promises to fulfill the obligation of the bond is known as the obligee. 4. The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled.
4. The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled.
Which of the following statements is NOT true regarding mobile agricultural machinery and equipment coverage? (Choose from the following options) 1. It relates to devices used in the everyday farm operation. 2. It covers detached parts and accessories of mobile devices. 3. It insures eligible equipment for open perils. 4. This coverage must be written as part of farm coverage.
4. This coverage must be written as part of farm coverage
14. Coverage E (Personal Liability) and/or Coverage F (Medical Payments to Others) would respond to a claim arising from all of the following situations EXCEPT (Choose from the following options) 1. An insured's boat stored in the garage slips off of its supports and injures a visitor. 2. An insured's dog left in the care of a friend bites a salesman. 3. An insured's 14-year-old son was throwing rocks at the neighbor's house and broke several windows. 4. While sweeping the floors, an insured's resident maid trips and falls down the stairs, breaking her leg.
4. While sweeping the floors, an insured's resident maid trips and falls down the stairs, breaking her leg.
An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? A. Material misrepresentation B. Waiver C. Utmost Good Faith D. Estoppel
A. Material misrepresentation A material misrepresentation will affect whether or not a policy is issued. If the insured had been truthful, it is very likely that the policy would not be issued.
Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? A. Reduction B. Transfer C. Avoidance D. Retention
A. Reduction The insured's change in lifestyle and habits would likely reduce the chances of health problems.
A Standard Fire Policy may be written to cover all of the following EXCEPT A. Reinsurance. B. There are no exceptions. C. Personal property. D. Commercial property.
A. Reinsurance. The Standard Fire Policy will not be used for reinsurance between insurers.
What are the two types of compensatory damages? A. Special and general B. Pure and speculative C. Tort and general D. Normal and punitive
A. Special and general Compensatory damages are intended to compensate someone for both tangible and intangible elements of a loss. Special damages are for the actual measurable losses, such as value of property or medical bills. General damages cannot be specifically measured in dollars, such as pain and suffering.
Which of the following is NOT a goal of risk retention? A. To minimize the insured's level of liability in the event of loss B. To reduce expenses and improve cash flow C. To increase control of claim reserving and claims settlements D. To fund losses that cannot be insured
A. To minimize the insured's level of liability in the event of loss Retention usually results from three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured.
Funding for the operation and administration of the Louisiana Insurance Guaranty Association comes from A. National Association of Insurance Commissioners. B. Annual assessments paid by member insurers. C. The public. D. Federal grants.
B. Annual assessments paid by member insurers. The Association receives no public funding. The Association has the authority to annually assess insurers member insurers based upon written premiums of all property and casualty insurance policies written in the state the previous year.
An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this? A. Additional B. Consequential C. Direct D. Special
B. Consequential Consequential loss, also known as indirect loss, is a second financial loss caused by a covered direct loss.
The policy conditions define A. The amount of coverage. B. How parties to the contract must act following a loss. C. The basic underwriting information. D. The excluded perils.
B. How parties to the contract must act following a loss. Conditions is an essential part of a policy structure. Conditions define what each party to the policy is required to do contractually in the event of a loss.
All of the following are considered parts of the policy structure EXCEPT A. Conditions. B. Provisions. C. Exclusions. D. Insuring clause.
B. Provisions. Provisions is a broad term used to refer to the sections or clauses of an insurance policy that communicate the policy's benefits, conditions, etc. The essential parts of the policy are declarations, insuring clause, conditions and exclusions.
In what way can an agent demonstrate a high standard of ethics? A. Recommending qualified retirement plans to each client B. Putting the client's best interests before their own C. Making enough commissions to cover personal expenses D. Setting and meeting monthly production goals
B. Putting the client's best interests before their own The needs of the client(s) are the priority to a highly ethical agent.
If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept? A. Indemnity B. Reasonable expectations C. Cease and desist D. Nonforfeiture
B. Reasonable expectations If, because of advertising or sales literature or statements by an agent, an insured could reasonably expect the coverage, the courts have held that the insurer must provide that coverage.
Which of the following does the term proximate cause refer to? A. Duty of the defendant to act B. Reason for filing a lawsuit C. Negligence that leads to an injury D. Injury that leads to monetary compensation
C. Negligence that leads to an injury Proximate cause is the reasonably foreseeable act or event that results in an injury or damage. Negligence may often be the proximate cause of the damage; without it, the accident would not have happened. This is also called direct liability.
Who might receive dividends from a mutual insurer? A. Stockholders B. Agents C. Policyholders D. Subscribers
C. Policyholders A mutual insurer has no stock, and is owned by the policyholders. Since they may receive a dividend (not guaranteed), such policies are known as participating policies. Dividends received by policyholders of a mutual insurer are not taxable.
Insurable interest in the property covered in a policy must be proven A. When a beneficiary is changed. B. When a claim is paid. C. At time of application. D. At time of loss.
D. At time of loss. Between the time a policy is issued and a loss occurs, ownership may have changed, mortgages may have been put into place, etc. Therefore, in property and casualty insurance, insurable interest must exist at the time of loss.
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are A. Paid at a fixed rate every year. B. Taxable as ordinary income. C. Guaranteed. D. Not taxable since the IRS treats them as a return of a portion of the premium paid.
D. Not taxable since the IRS treats them as a return of a portion of the premium paid. With participating policies, policyowners are entitled to dividends, which, in the case of mutual companies, are nontaxable because they are considered a return of excess premiums.
Pertaining to insurance, what is the definition of a fiduciary responsibility? A. Helping insureds to file claims B. Performing reviews of insured's coverage C. Offering additional coverage to clients D. Promptly forwarding premiums to the insurance company
D. Promptly forwarding premiums to the insurance company Fiduciary refers to a position of trust. When an agent is handling the premiums that belong to an insurance company, they are acting in a fiduciary capacity.
A large antenna is damaged when a tree branch hits an insured farm dwelling during a storm. Coverage A of a farm property coverage form would insure damages for this occurrence up to a) $1,000. b) $2,000. c) $3,000. d) $4,000. Antennas, towers, and satellite dishes attached to the dwelling are covered under Coverage A, but have a special limit of insurance of $1,000 in any 1 occurrence.
a) $1,000. Antennas, towers, and satellite dishes attached to the dwelling are covered under Coverage A, but have a special limit of insurance of $1,000 in any 1 occurrence.
Bob's home is insured for $100,000 under a dwelling policy. Yesterday his home suffered $20,000 damage from a fire. Today the home was struck by lightning, starting another fire that completely destroyed the structure. Bob's policy will pay a) $100,000. b) $80,000. c) $20,000. d) $120,000.
a) $100,000. Bob's policy will pay $100,000. If the repairs had been made ($20,000) and then the home destroyed, the policy would have paid $120,000 as two separate losses. Due to the unrepaired damage, the total amount of coverage is only the face amount of the policy.
Which of the following is representative of the minimum liability requirement for auto policies issued in this state? a) 15/30/25 b) 20/20/20 c) 10/30/15 d) 15/30/50
a) 15/30/25
Within how many years of a loss may an insured bring a lawsuit against an insurer, according to the dwelling policy? a) 2 years b) 3 years c) 5 years d) 7 years
a) 2 years If an insured wants to bring a suit against an insurer, the insured must comply with all policy conditions and start action against the insurer within 2 years of the loss.
Professional photographers and musicians may insure their equipment with a) A commercial articles floater. b) A theatrical property coverage form. c) A contractors equipment floater. d) An installation floater.
a) A commercial articles floater. The commercial articles form covers photo equipment or musical instruments used commercially, such as by a professional band.
In a personal auto policy, the medical payments coverage is similar to a) Accident insurance, because it pays medical expenses regardless of fault. b) Accident insurance, because it has the same limits. c) Bodily injury coverage, because it pays the insured's doctor bills. d) Bodily injury coverage, because it provides legal protection if the insured causes injuries to others.
a) Accident insurance, because it pays medical expenses regardless of fault. Medical payments will pay for accidental bodily injury of an insured, regardless of fault or auto. It will pay medical expenses of others occupying the insured auto.
Which of the following statements is true concerning underinsured motorist coverage under a personal auto policy? a) Coverage applies only to the extent that the underinsured motorist limits exceed the bodily injury limits carried by the operator of the other vehicle. b) It will pay up to the limits of insurance for any loss which involves an underinsured driver. c) Limits must equal the bodily injury limits of the policy. d) Limits may differ from the limits for uninsured motorist coverage.
a) Coverage applies only to the extent that the underinsured motorist limits exceed the bodily injury limits carried by the operator of the other vehicle. Underinsured motorist coverage will act as excess over the at fault motorist's bodily injury coverage.
Which commercial crime form would provide coverage for a loss that did not necessarily happen during the policy period but was revealed during the policy period? a) Discovery form b) Retro form c) Reporting form d) Loss sustained form
a) Discovery form The discovery form is used for losses that are discovered during the policy period but may not have happened during the policy period. The discovery form is one of the conditions contained in the crime general provisions forms, which contain conditions and exclusions applying to all crime forms. The discovery period is normally 1 year.
Residential structures, including individual condominium units, and their contents are insured by what part of the National Flood Insurance Program? a) Dwelling policy form b) Basic coverage form c) Residential Condominium Building Association Policy (RCBAP) d) General property policy form
a) Dwelling policy form The dwelling policy form is used to insure residential structures and their contents including individual condominium units.
The main difference between an HO-4 and an HO-6 is a) HO-6 provides limited dwelling coverage as well as contents coverage. b) HO-4 does not cover additional living expenses. c) HO-6 does not cover additional living expenses. d) HO-4 provides limited dwelling coverage as well as contents coverage.
a) HO-6 provides limited dwelling coverage as well as contents coverage. HO-4 provides no dwelling coverage because a tenant does not own the dwelling; the condo owner does own the condo and is provided with coverage for improvements. Both HO-4 and HO-6 cover theft and additional living expenses.
The Residential Condominium Building Association Policy (RCBAP) is used for residential condominium building associations to cover the entire building under one policy. Which of the following statements about RCBAP is true? a) It does not protect the individual owner from loss to personal property owned exclusively by the unit owner. b) It provides limited coverage for personal property owned exclusively by the unit owner. c) It is designed to provide exclusive coverage for the individual owner and provides not coverage for the unit owner. d) This policy form is not approved for use in the states of New York or New Jersey.
a) It does not protect the individual owner from loss to personal property owned exclusively by the unit owner. The Residential Condominium Building Association Policy (RCBAP) is used for residential condominium building associations to cover the entire building under one policy, all units, improvements within the units and personal property owned in common is covered with a contents policy. The RCBAP does not protect the individual owner from loss to personal property owned exclusively by the unit owner.
All of the following are true of Coverage B - Other Structures EXCEPT a) It must be added by endorsement to a homeowners policy. b) This coverage is not applicable on the HO-4 policy form. c) The amount of coverage provided by Coverage B is an amount equal to 10% of Coverage A. d) Land where the other structures are located is not covered.
a) It must be added by endorsement to a homeowners policy. Homeowners policies automatically provide an amount of insurance in Coverage B that is equal to 10% of the amount written as Coverage A. This amount may be increased by endorsement.
What provision in a property policy applies when the insurer broadens coverage but does not increase the premium? a) Liberalization clause b) Insuring clause c) Appraisal clause d) Subrogation clause
a) Liberalization clause The liberalization clause extends broader coverages to current policies if they do not affect the premium. A modifying endorsement is not required to add such coverage
In which type of commercial crime policy coverage is triggered by a loss that happens during the policy period but is not necessarily discovered during the policy period? a) Loss sustained form b) Retroactive form c) Mysterious disappearance form d) Discovery form
a) Loss sustained form Loss sustained crime coverage pays for losses that occur during the policy period and are found for up to 1 year after the policy is terminated.
The causes of loss insured against in an insurance policy are known as a) Perils b) Losses c) Risks d) Hazards
a) Perils Perils are the causes of loss insured against in an insurance policy.
What type of coverage is Coverage E in homeowners policies? a) Personal liability b) Additional coverage c) Loss of use d) Personal property
a) Personal liability Coverage E is a personal liability coverage.
The Gramm-Leach-Bliley Act was passed to a) Protect private customer information filed with a financial institution. b) Define insurance as interstate commerce. c) Allow consumers access to credit and private consumer reports. d) Allow insurance companies access to medical information for underwriting purposes.
a) Protect private customer information filed with a financial institution. The Gramm-Leach-Bliley Act was passed to protect private customer information that is filed with a financial institution. Customers must be given two disclosure notices (one at the onset of business and one before information is disclosed), as well as a yearly updated disclosure notice.
Property insurance which provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called a) Specific coverage. b) Schedule coverage. c) Blanket coverage. d) Described coverage.
a) Specific coverage. One location insured for a specific amount of insurance on the structure and on the contents.
All of the following are supplemental payments included in the liability section of a personal auto policy EXCEPT a) Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident. b) Up to $200 a day for loss of earnings due to attendance at hearings or trials. c) Premiums on appeal bonds in any suit the insurer defends. d) Up to $250 for bail bonds required because of a covered accident.
a) Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident. A personal auto policy does not pay the cost of the release of a vehicle impounded by a law enforcement agency.
What type of information would be found in a policy's insuring agreement? a) Insurer's address b) Renewal dates c) Location of premises d) Policy limits
b) Renewal dates An Insuring Agreement establishes the obligation of the insurance company to provide the insurance coverages as stated in the policy. The insuring agreement lists the parties to the contract, effective and renewal dates, the description of coverage provided, and perils (among other things). Location of premises, policy limits, supplemental representations, and insurer's name and address can all be found in the Declarations.
Which of the following terms refers to a person's ability to do some work or the need to do alternative work? a) Temporary total disability b) Temporary partial disability c) Permanent partial disability d) Permanent total disability
b) Temporary partial disability The insuring agreement is the part of the policy structure that describes the insured perils and the method of indemnification.
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? a) Consumer Privacy Act b) The Fair Credit Reporting Act c) Unfair Trade Practices Law d) The Guaranty Association
b) The Fair Credit Reporting Act The purpose of the Fair Credit Reporting Act is to protect consumers against the circulation of inaccurate or obsolete information and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers.
A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true? a) The entire loss is payable to the insured. b) The loss is payable to the insured and the mortgagee. c) The mortgagee should submit a claim to its insurer, and the insured should submit a claim to the HO policy. d) The entire loss is payable to the mortgagee.
b) The loss is payable to the insured and the mortgagee. Loss is payable to the insured and mortgagee to protect the mortgage company's interest. This prevents the insured from cashing the check and not completing repairs.
Which of the following best describes the amount of loss assessment coverage included under a homeowners policy liability coverage section? a) Up to $5,000 aggregate for the policy period b) Up to $1,000 per occurrence c) Up to $2,500 per occurrence d) Up to $10,000 aggregate for the policy period
b) Up to $1,000 per occurrence Section II - Loss Assessment Coverage - applies to assessments against the insured by a condominium association or other cooperative body of property owners. Coverage is limited to $1,000, but an increased limit of coverage is available by endorsement.
A claim is considered to have been made a) When notice is received and recorded by the insurer. b) When notice is received and recorded by any insured or the insurer, whichever comes first. c) When received in writing or telephonically by the insurer. d) When notice is received by any insured.
b) When notice is received and recorded by any insured or the insurer, whichever comes first. This is a standard claims-made condition.
Driver A has a personal auto policy with Part C: UM/UIM limits of 100/300. He is injured by Driver B who has Part A: Bodily Injury Liability limits of 50/100. It is determined that Driver B is at fault for the accident. Driver A has $125,000 in medical expenses. How much will his Part C: UM/UIM coverage pay? a) $125,000 b) $75,000 c) $50,000 d) $25,000
c) $50,000 Underinsured motorist coverage acts as excess over the at-fault motorist's coverage. It will pay the difference between the insured's UIM limits and the at-fault driver's bodily injury limits (in this scenario, $100,000 of the insured's coverage minus $50,000 of the other driver's). Because of the per person limits of Driver A's underinsured motorist coverage, the policy will pay the amount necessary to bring payment up to the per person limit. The policy will not pay more than the limits of liability.
Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within what maximum time period? a) 90 days b) 1 year c) 3 years d) 5 years
c) 3 years A coverage requirement in the policy states that medical expenses must be incurred within three years of the accident. The services also must be rendered within that time period.
What is surplus lines insurance? a) Any insurance on items worth more than $25,000 b) Insurance in excess of a standard policy's coverage c) Insurance placed with an unauthorized insurer d) Additional insurance placed on itemized risks
c) Insurance placed with an unauthorized insurer Insurance obtained from or placed with an unauthorized insurer is surplus lines insurance.
An insured carries a property policy on her home in the amount of $250,000. A bank is shown as the mortgagor in the policy. Last month the insured made her final mortgage payment, but did not remove the bank from the policy. In the event of a covered loss to her home, how much will the bank receive? a) The standard minimum of 10% that is paid to lenders b) All of the payment would be made to the mortgagor shown in the policy. c) Nothing d) Up to the amount of debt that the insured has with the bank
c) Nothing Because the bank does not have a financial interest in the house at the time of loss, they will receive nothing.
Charla wants to serve as a producer for Commissions Galore Insurance Company. In addition to obtaining her producer's license, what else must happen before she can officially transact insurance for CGIC? a) She must submit a list of 5 references to CGIC. b) She must be appointed by the Commissioner. c) She must be appointed specifically by CGIC. d) She must get a certificate of authority.
c) She must be appointed specifically by CGIC. Before a producer can serve as an agent for a given insurance company, the producer must first be appointed by the company.
All of the following are unfair claims settlement practices EXCEPT a) Failing to adopt and implement reasonable standards for settling claims. b) Failing to acknowledge pertinent communication pertaining to a claim. c) Suggesting negotiations in settling the claim. d) Refusing to pay claims without conducting a reasonable investigation.
c) Suggesting negotiations in settling the claim. When settling claims, negotiation can come into play.
When Commercial Crime Coverage Form M - Safe Depository Liability is written, what must be attached to the policy? a) The Robbery and Safe Burglary Provisions b) The General Provisions c) The Safe Depository General Provisions d) The Safe Depository Direct Loss Provisions
c) The Safe Depository General Provisions When this coverage is written, the Safe Depository General Provisions must be attached to the policy instead of the general provisions.
With respect to commercial auto policies, the garage coverage form provides liability protection for all of the following EXCEPT a) The insured's business autos. b) The insured's business products and work performed. c) The insured's business income losses due to personal injury. d) The insured's business premises.
c) The insured's business income losses due to personal injury. The garage coverage form does NOT cover personal injury and loss of wages from those injuries. Such coverage would be provided by a commercial general liability (CGL) policy.
Personal property coverage under a homeowners policy would cover a) Property moved to a newly acquired residence after 60 days. b) A pet that the insured is temporarily keeping for a friend. c) The insured's camera if it is stolen while the insured is on vacation. d) A neighbor's fence if damaged by the insured.
c) The insured's camera if it is stolen while the insured is on vacation. Coverage C is provided on a worldwide basis.
If more than one person has an insurable interest in the property covered under a dwelling policy, a) All involved insurers must decide which one will be liable for the loss. b) All insureds must decide which one will be liable for the loss. c) The insurer will be liable for only the insured's interest in the damaged property. d) Liability will be split evenly among all people who have insurable interest.
c) The insurer will be liable for only the insured's interest in the damaged property. If more than one person has an insurable interest in a property, the insurer will be liable only for the insured's interest in the loss.
Which of the following is NOT a goal of risk retention? a) To increase control of claim reserving and claims settlements b) To fund losses that cannot be insured c) To minimize the insured's level of liability in the event of loss d) To reduce expenses and improve cash flow
c) To minimize the insured's level of liability in the event of loss Retention usually results from three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured.
In the personal auto policy, owned trailers being towed by an insured auto are automatically covered for a) Comprehensive (other-than-collision) coverage. b) Collision coverage. c) Uninsured motorist coverage. d) Towing coverage.
c) Uninsured motorist coverage. Trailers, while being towed by an insured auto, are covered automatically for bodily injury (BI), property damage (PD) and uninsured motorist (U/M) under Part A of a personal auto policy.
Personal business property out in the open is covered under commercial property policy only while a) Specifically described on the declarations. b) Within 150 feet of the described premises. c) Within 100 feet of the described premises. d) Located on the described premises.
c) Within 100 feet of the described premises. Business personal property is defined in the policy as property located in the insured structure or within 100 feet of that structure.
An individual's construction company leaves mobile equipment and construction machinery on the job site until the project is completed. What could this individual use to insure it? a) Bailee's customers form b) Builders risk form c) General property form d) Contractors equipment floater
d) Contractors equipment floater The contractors equipment floater covers equipment left unattended on a job site until the project is finished
Farm fences (except field and pasture fences) are covered by which farm coverage form? a) Coverage A b) Coverage B c) Coverage E d) Coverage G
d) Coverage G Fences, except pasture and field fences, are considered other farm structures and are covered by Coverage G - Other Farm Structures
Residential structures, including individual condominium units, and their contents are insured by what part of the National Flood Insurance Program? a) Basic coverage form b) Residential Condominium Building Association Policy (RCBAP) c) General property policy form d) Dwelling policy form
d) Dwelling policy form The dwelling policy form is used to insure residential structures and their contents including individual condominium units.
Which of the following businesses would be eligible for a businessowners policy? a) Family Fun Time Amusement Park b) Joe's Bar And Grill c) Hometown Bank & Trust d) Hill & Morton Funeral Home
d) Hill & Morton Funeral Home Specifically excluded from eligibility on a businessowners policy (BOP) are bars and grills, financial institutions, and amusement places.
If a guest's property is lost or damaged while on the insured's premises or in their control, Crime Coverage Form L - Liability for Guests' Property - Premises covers the insured's a) General liability. b) Crime liability. c) Employee liability. d) Legal liability.
d) Legal liability. This coverage is similar to Coverage K, except that it covers the insured's legal liability for loss or damage to guest's property while on the insured's premises or in their control.
Which of the following coverages is included in an unendorsed homeowners policy? a) Personal property replacement coverage b) Fungi, wet or dry rot, or bacteria c) Earthquake d) Medical payment to others
d) Medical payment to others Medical payment to others is automatically included in Section II of all HO policies.
What is a definition of a unilateral contract? a) Two or more parties go into a contract understanding there may be an unequal exchange of value. b) One author: the company wrote the contract; the insured must accept it as written. c) If one party makes a condition, the other party can counteroffer. d) One-sided: only one party makes an enforceable promise.
d) One-sided: only one party makes an enforceable promise. An insurance contract is unilateral in that only one of the parties to the contract is legally bound to do anything.
Which of the following liability exposures is most likely for a small specialty clothing retail boutique? a) Operations liability exposure b) Product liability exposure c) Completed operations liability exposure d) Premises liability exposure
d) Premises liability exposure The premises liability exposure exists when there is use of the premises. Operations liability exposure relates to activities in addition to use. Product liability exposure is the possibility that the public might be injured by the product. Completed operations liability refers to liability for work already performed or completed. For a boutique retail store, the only possible liability would arise from customer injury while on the premises.
Workers compensation statutes require employers to meet capital reserves requirements sufficient to pay any claims that might arise. Employers can meet such obligations through all of the following EXCEPT a) Self-insurance plans. b) Assigned risk plans. c) Competitive state funds. d) Second injury funds programs.
d) Second injury funds programs. Second injury funds are a method by which employers manage the risks associated with the hiring of previously injured potential employees.
All of the following statements concerning coinsurance are true EXCEPT a) It is used to help adequacy and equity in rates. b) The insured agrees to maintain insurance equal to some specified percentage of the value of the property. c) If the insurance carried is less than required, the insurance may not cover the whole loss. d) The coinsurance formula will also be applied to total losses.
d) The coinsurance formula will also be applied to total losses. In the event of a total loss, the coinsurance clause does not operate and the face amount of the policy is paid.
Under Crime Coverage Form I - Lessees of Safe Deposit Boxes, securities are only covered in the event of a) Robbery b) Vandalism c) Burglary d) Theft
d) Theft Securities are only covered for theft, disappearance or destruction