Personal Lines
An insured owns a large dog. The first day he has to leave the dog home alone to go to work, the insured comes back to find his $400 couch torn apart, his $100 coffee table chewed up, his $50 window curtain shredded, and a $200 window pane shattered where his dog jumped through. The insured has personal property coverage under a special form dwelling policy. How much of this loss will the policy cover? A) $0 B) $200 C) $250 D) $750
A) $0 Damage that results from domestic animals is excluded under the special form dwelling policy.
In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation? A) Agreed value B) Replacement cost C) Stated amount D) Market value
A) Agreed value
A policy condition that stipulates how the amount of damaged or lost property will be determined if the insured and the principal do not agree on the value of a property loss is known as A) Appraisal. B) Coinsurance. C) Loss valuation. D) Third-party provision.
A) Appraisal.
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? A) Arbitration B) Proof of loss C) Restoration D) Appraisal
A) Arbitration
The part of the policy that sets forth the rules of conduct, duties, and obligations of the parties is called the A) Conditions. B) Exclusions. C) Declarations. D) Insuring clause.
A) Conditions.
The section of an insurance policy that details what perils are not insured against and what persons are not insured is known as the A) Exclusions. B) Declarations. C) Endorsements. D) Conditions.
A) Exclusions.
What type of compensatory damages will pay for pain and suffering and disfigurement? A) General B) Special (specific) C) Tort D) Normal
A) General
What insurance concept is associated with the words "Weiss" and "Fitch"? A) Guides describing company financial integrity B) Policy dividends C) Types of mutual companies D) Index used by stock companies
A) Guides describing company financial integrity
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? A) Implied B) Apparent C) Assumed D) Express
A) Implied
Which of the following perils is covered under both the basic form and broad form dwelling policies? A) Internal explosion B) Falling objects C) Weight of ice, snow, or sleet D) Freezing of plumbing, heating, or air conditioning systems
A) Internal explosion
All of the following actions by a person could be described as risk avoidance EXCEPT A) Investing in the stock market. B) Refusing to scuba dive. C) Never flying in an airplane. D) Not driving after being in an accident.
A) Investing in the stock market.
Which of the following is true regarding a risk retention group? A) It is a liability insurance company owned by its members. B) It provides support for underwriters and is not an insurance company. C) It is a benefit society formed to provide insurance for members of an affiliated lodge. D) It is a company owned by the stockholders that provides nonparticipating policies.
A) It is a liability insurance company owned by its members.
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? A) Part A B) Part B C) Part D D) Part E
A) Part A
The risk of loss may be classified as A) Pure risk and speculative risk. B) Certain risk and uncertain risk. C) Named risk and un-named risk. D) High risk and low risk.
A) Pure risk and speculative risk.
What is the term which best describes when a person develops a formal program identifying, evaluating, and funding its losses? A) Self-insuring B) Lloyd's Association C) Purchasing group D) Mutual holding company
A) Self-insuring
Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages? A) Special B) Tort C) Normal D) General
A) Special
A homeowner sells his house to a friend. The friend wants to keep the homeowner's current policy in effect. Under the assignment provision, which of the following is most likely? A) The homeowner will need to get written consent from the insurer before the policy can be reassigned. B) The policy will have to be cancelled. C) The homeowner should let the friend take over the premium payments. D) The friend will have to apply for coinsurance from another insurance company.
A) The homeowner will need to get written consent from the insurer before the policy can be reassigned.
On a DP-3 Dwelling Property Special Form policy, the coverage provided for personal property is A) The same as provided on the DP-2 Broad Form. B) All risk. C) Open peril. D) The same as provided on the DP-1 Basic Form.
A) The same as provided on the DP-2 Broad Form.
A grave marker was damaged by vandals. It would cost $3,000 to have the damage repaired. Under these circumstances, how much would a homeowners policy pay? A) $1,000 B) $3,000 C) $0 D) $500
B) $3,000 Homeowners 2000 policy will pay up to $5,000 for grave markers, including mausoleums, on or away from the premises for loss caused by a peril insured against under Coverage C.
The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called A) Sharing. B) Avoidance. C) Transfer. D) Reduction.
B) Avoidance.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? A) Adhesion B) Consideration C) Good faith D) Representation
B) Consideration
What term includes damage where the insured peril was the proximate cause of loss? A) Negligent loss B) Direct loss C) Indirect loss D) Consequential loss
B) Direct loss
All of the following are optional coverages that may be attached to an HO-3 policy EXCEPT A) Personal property replacement cost. B) Dwelling replacement cost. C) Home day care coverage. D) Earthquake coverage.
B) Dwelling replacement cost.
Which statement regarding insurable risks is NOT correct? A) An insurable risk must involve a loss that is definite as to cause, time, place and amount. B) Insureds cannot be randomly selected. C) Insurance cannot be mandatory. D) The insurable risk needs to be statistically predictable.
B) Insureds cannot be randomly selected.
How does the mobilehome endorsement affect the other coverage of law or ordinance in a homeowners policy? A) It has no effect on this coverage. B) It removes the coverage. C) It broadens the coverage. D) It limits the coverage.
B) It removes the coverage.
Duties of the insurer found in property policy conditions include all of the following EXCEPT A) Return any premiums to the insured. B) Notify the insured in the event of financial difficulty. C) Pay covered losses. D) Provide advance notice of cancellation.
B) Notify the insured in the event of financial difficulty.
The mobilehome endorsement alters the homeowners policy to cover a mobilehome and other structures on land A) Leased by the owner of the land. B) Owned or leased by the resident of the mobilehome. C) Owned or leased by a landlord who does not reside on the premises. D) Owned by a landlord who does not use the mobilehome located on it.
B) Owned or leased by the resident of the mobilehome.
The other insurance provision that limits the liability of the insurer to a portion of the loss no greater than the amount the insurer bears to all the insurance covering the property is called A) Excess. B) Pro rata liability. C) Contributing. D) Proportionate.
B) Pro rata liability.
Before an insurer will pay any loss under a policy, what is usually required from the insured? A) A claims-made form B) Proof of loss C) Notice of claim D) A binder
B) Proof of loss
The Gramm-Leach-Bliley Act was passed to A) Allow insurance companies access to medical information for underwriting purposes. B) Protect private customer information filed with a financial institution. C) Define insurance as interstate commerce. D) Allow consumers access to credit and private consumer reports.
B) Protect private customer information filed with a financial institution.
Which type of insurance is based on mutual agreements among subscribers? A) Reinsurance B) Reciprocal insurance C) Mutual insurance D) Limited liability
B) Reciprocal insurance
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) Retention B) Reduction C) Transfer D) Avoidance
B) Reduction
Which method of loss valuation is contrary to the basic concept of indemnity? A) Agreed value B) Replacement cost C) Functional replacement cost D) Market value
B) Replacement cost
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 the insured's policy is written on the actual cash value(ACV), how much will the policy pay toward the insured's new roof? A) $1,000 B) $4,000 C) $5,000 D) $6,000
C) $5,000 replacement cost - depreciation = ACV 6000 - (200x5)= 5000
Losses caused by vandalism and malicious mischief are excluded under a homeowners policy if the dwelling had been vacant for more than A) 30 days. B) 45 days. C) 60 days. D) 90 days.
C) 60 days.
Which of the following would be covered by the broad theft endorsement on a dwelling policy? A) Fabric and patterns in a clothing designer's studio at her home B) An antique car C) A camera the insured has with him on vacation D) A pedigreed show dog
C) A camera the insured has with him on vacation
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
According to the Law of Agency, a principal is represented by a/an A) Broker. B) Insured. C) Agent. D) Insurer.
C) Agent.
Which of the following types of agent authority is also called "perceived authority"? A) Implied B) Fiduciary C) Apparent D) Express
C) Apparent
Representations are written or oral statements made by the applicant that are A) Found to be false after further investigation. B) Immaterial to the actual acceptability of the insurance contract. C) Considered true to the best of the applicant's knowledge. D) Guaranteed to be true.
C) Considered true to the best of the applicant's knowledge.
Which of the following terms best describes a trembling or shaking of the earth that is volcanic or seismic in origin? A) Tsunami B) Geotectonic inversion C) Earthquake D) Tectonic shifting
C) Earthquake
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization? A) Stock company B) Reciprocal association C) Fraternal benefit society D) Mutual company
C) Fraternal benefit society
Persons covered under an insurance policy, whether named or not, are known as the A) First named insureds. B) Additional insureds. C) Insureds. D) Named insureds.
C) Insureds.
All of the following are conditions commonly found in the insurance policy EXCEPT A) Subrogation. B) Appraisal. C) Insuring agreement. D) Cancellation and nonrenewal.
C) Insuring agreement.
All of the following are true regarding deposit premium EXCEPT A) It must be paid in advance. B) It is an estimated premium paid at the policy issue. C) It is 50% of the actual premium. D) It could be adjusted by the audit.
C) It is 50% of the actual premium.
U.S. vs. South-Eastern Underwriters was decided in 1944. To what extent does the Supreme Court's decision still apply to insurance today? A) The decision has changed. Insurance and Securities are now regulated by the different federal agencies. B) It has changed. Insurance is not considered to be interstate commerce and is therefore not subject to regulation by the federal government. C) It still stands in full. Insurance is considered to be interstate commerce and is therefore subject to regulation by the federal government. D) It still stands in full. Insurance and Securities are still regulated by two distinct agencies.
C) It still stands in full. Insurance is considered to be interstate commerce and is therefore subject to regulation by the federal government.
Which of the following would NOT be considered causes for flood conditions covered by the National Flood Insurance Program? A) Unusual and rapid accumulation or runoff of surface waters from any source B) Mudflow and collapse C) Landslides D) Overflow of inland or tidal waters
C) Landslides
The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as A) Hazard. B) Risk. C) Loss. D) Exposure.
C) Loss.
Most insurance policies exclude losses by A) Burglary. B) Robbery. C) Mysterious disappearance. D) Theft.
C) Mysterious disappearance.
Which of the following organizations defends a state's rights to oversee the insurance industry? A) Office of the Insurance Commissioner B) National Association of Insurance Commissioners C) National Conference of Insurance Legislators D) Insurance Guaranty Association
C) National Conference of Insurance Legislators
An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor, who was sitting on the porch, is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have? A) Split B) Aggregate C) Per occurrence D) Combined single
C) Per occurrence
Which services are associated with Standard & Poor's and AM Best? A) Providing employment histories for investigative consumer reports B) Storing medical information collected by insurance companies C) Rating the financial strength of insurance companies D) Investigating violations of The Fair Credit Reporting Act
C) Rating the financial strength of insurance companies
The legal process that gives the insurer, after payment of a loss, the right to seek recovery from a third party that was responsible for the loss is known as A) Right of rescission. B) Principle of indemnity. C) Subrogation. D) Adverse selection.
C) Subrogation.
Which of the following led to the creation of the New York Insurance Code, setting a precedent for other states to create their own insurance codes? A) U.S. v. South-Eastern Underwriters Association B) The McCarran-Ferguson Act C) The Armstrong Investigation D) Paul v. Virginia
C) The Armstrong Investigation
When a mortgagee is named in a mortgagee clause attached to a fire or other direct damage policy, A) The loss reimbursement is paid to the insured. B) The loss reimbursement is not awarded if damages arose from the insured's negligence. C) The loss reimbursement is paid to the mortgagee. D) The mortgagee is prohibited from bringing a suit against the insurer.
C) The loss reimbursement is paid to the mortgagee.
An insured covered under a Mobile Homeowners Policy wants to move the location of the covered mobile home. Which of the following must the insured obtain from the insurer? A) Loss of Use Coverage B) Additional Coverage Property Removed Endorsement C) Transportation/Permission to Move Endorsement D) Housing and Transportation Coverage
C) Transportation/Permission to Move Endorsement
How long is the waiting period after the application has been accepted before flood coverage goes into effect? A) 6 months B) 12:01 am the next day C) 5 days D) 30 days
D) 30 days
The dwelling insured on HO-2, HO-3, or HO-5 forms is covered for replacement, provided that it is insured for at least what percentage of replacement cost on the date of loss? A) 25% B) 40% C) 75% D) 80%
D) 80%
Which of the following definitions best defines the term "accident"? A) Injury to the character of another person caused by libel, slander, false arrest, invasion of privacy and other acts B) Physical damage to tangible property of others caused by the negligence of an insured C) The negligent or purposeful act or omission by an insured that results in physical trauma or death to a person D) A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended
D) A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended
Through which branch(es) of the government is insurance currently regulated? A) Legislative B) Judicial C) Executive D) All of the above
D) All of the above
What is reinsurance? A) An agreement between an originating insurer and a ceding insurer B) An agreement between a domestic insurer and a foreign insurer C) An agreement between an insurer and an insured D) An agreement between a ceding insurer an assuming insurer
D) An agreement between a ceding insurer an assuming insurer
In insurance, an offer is usually made when A) The insurer approves the application and receives the initial premium. B) The agent hands the policy to the policyholder. C) An agent explains a policy to a potential applicant. D) An applicant submits an application to the insurer.
D) An applicant submits an application to the insurer.
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 A) Consideration. B) Legal purpose. C) Offer and acceptance. D) Conditions.
D) Conditions.
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 rata liability other insurance clause. In the event of a total loss to the building, what would each insurer pay? A) Each policy will pay the total policy limits of $100,000. B) The first policy written will pay $75,000, and the other three policies will contribute proportionately to pay for the remaining $25,000. C) The policy with the earliest effective date will pay the entire loss, and the other policies will pay nothing. D) Each policy will pay $25,000 of the loss.
D) Each policy will pay $25,000 of the loss.
Which of the following are the authorities that an agent can hold? A) Apparent and allowed B) Authorized and admitted C) Primary and secondary D) Express and implied
D) Express and implied
Which of the following is NOT a government-funded insurance program? A) Old-age, Survivors and Disability Insurance (Social Security) B) Medicare C) Medicaid D) Federal Deposit Insurance Corporation (FDIC)
D) Federal Deposit Insurance Corporation (FDIC)
The National Conference of Insurance Legislators was created to A) Protect legislators' constituents from insurer insolvency. B) Regulate insurance rates. C) Create federal laws with greater restrictions on insurance. D) Help legislators make informed decisions on insurance issues.
D) Help legislators make informed decisions on insurance issues.
Who is responsible for filling out a notice of claim form? A) Adjuster B) Agent C) Insurer D) Insured
D) Insured
What significance did Paul vs. Virginia have on the insurance industry? A) It was decided that insurance was interstate commerce and should therefore be regulated by the federal government. B) It was decided that insurance required a separate federal regulatory agency from Securities products. C) It was decided that insurance licenses should not be issued by the federal government and should instead be issued by individual states. D) It was decided that insurance was not interstate commerce and could not be regulated by the federal government.
D) It was decided that insurance was not interstate commerce and could not be regulated by the federal government.
What type of property would NOT be covered under the dwelling policy special form Coverage A - Dwelling? A) Materials and supplies on the premises used to alter or repair the dwelling B) Outdoor equipment located on the premises and used to service the location C) Attached structures D) Land on which the dwelling is located
D) Land on which the dwelling is located
Liability is usually determined by proving A) Loss. B) Risk. C) Injury. D) Negligence.
D) Negligence.
What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? A) Specified peril policy B) Binder policy C) Named peril policy D) Open peril policy
D) Open peril policy
The McCarran Act stated that the federal government would not regulate insurance as long as an adequate job of regulating the industry was done by the A) Counties. B) Federal Government. C) Insurers in a state. D) States.
D) States.
A nonadmitted insurer who provides insurance coverages that are not available from an admitted insurer is called A) Assessment mutual insurer. B) Capitol stock insurer. C) Reciprocal insurer. D) Surplus lines insurer.
D) Surplus lines insurer.
Paul vs. Virginia was decided in 1869. To what extent does the Supreme Court's decision still apply to insurance today? A) The decision has changed. Insurance and Securities are now regulated by the same federal agency. B) It still stands in full. Insurance is not considered to be interstate commerce and is therefore not subject to regulation by the federal government. C) It still stands in full. Insurance and Securities are still regulated by two distinct agencies. D) The decision has changed. Insurance is considered to be interstate commerce and is therefore subject to regulation by the federal government.
D) The decision has changed. Insurance is considered to be interstate commerce and is therefore subject to regulation by the federal government.
Negligence is defined as A) An unbroken chain of events that results in bodily injury or property damage to another person. B) Conduct that is so hazardous that the individual engaging in it will be held fully responsible for any resulting injury or damage. C) An intentional act that results in bodily injury or property damage to another person. D) The failure to do what a reasonable prudent person would do under given circumstances.
D) The failure to do what a reasonable prudent person would do under given circumstances.
