Property&Casualty
An individual has started a construction business and plans to specialize in remodeling and rewiring residential properties. Because the city where he is located and where he plans to operate the business has building codes, he will need to obtain a a)Performance bond. b)Completion bond. c)License and permit bond. d)Bid bond.
A license and permit bond would guarantee the city that permit recipients would comply with the laws, regulations, and ordinances associated with the use of any permit issued by the city.
Which of the following losses would NOT be covered by a homeowners policy? a)A $800 outboard motor destroyed by hail b)A coin collection valued at $500 lost in a fire c)A $550 utility trailer blown away by a tornado d)A stolen silver tea set worth $2,000
An HO policy will pay up to $2,500 for silverware by theft, $1,500 for boats, motors, trailers, $1,500 for loss of trailers not used with boats, but no more than $200 for coins.
What insurance concept is associated with the names Weiss and Fitch? a)Guides describing company financial integrity b)Policy dividends c)Types of mutual companies d)Index used by stock companies
Because an insurance company's strength and stability are two very crucial factors in its sustainability, independent rating services have formed to publish regular updates on the financial integrity of different insurance companies. Weiss and Fitch are two of these services, although there are more.
Events or conditions that increase the chances of an insured loss occurring are referred to as a)Hazards. b)Exposures. c)Risks. d)Perils.
Conditions such as lifestyle and existing health, or activities such as scuba diving are hazards and may increase the chance of a loss occurring.
What type of insurance can be obtained through a surplus lines insurer?
Coverage that is unavailable through authorized insurers
An additional loss that results from a direct loss of property is called a/an a)Liability loss. b)Punitive loss. c)Indirect loss. d)Proximate loss.
Direct losses come about because of perils named in the policy. Indirect losses, also known as consequential losses, come about as a result of a direct loss.
Which of the following homeowners endorsements covers liability exposures arising from an incidental business conducted within a building on the residence premises?
Permitted incidental occupancies
Mark has his auto insurance through an authorized Michigan insurance company. If he is in an accident in another state that has different auto liability requirements, what would make sure Mark's insurance meets the other state's requirements? a)Financial responsibility laws b)Personal protection insurance c)Residual liability insurance d)Reciprocity
Residual liability insurance affords coverage equivalent to that required as evidence of automobile liability insurance under the financial responsibility laws of the place in which the injury or damage occurs
The personal injury liability endorsement to an HO policy applies to all the following EXCEPT a)Invasion of privacy. b)False arrest. c)A third party breaks a leg when the insured knocks him down. d)Slander.
The broken leg is covered by personal liability coverage.
In addition to the common policy conditions, all of the following conditions apply to liability coverage EXCEPT a)Employers liability. b)Separation of insured. c)Legal action against insurer. d)Bankruptcy.
The following conditions apply to the liability coverage in addition to the common policy conditions: bankruptcy, duties in event of occurrence, claim or suit, legal action against the insurer, and separation of insured. Employers liability is an exclusion.
If an insurer wishes to appoint a producer, it must file a notice of appointment within how many days of the date that the contract is executed? a)45 days b)7 days c)15 days d)30 days
The insurer has 15 days to file a notice of producer appointment.
Under additional coverages for homeowners policies, what is the maximum amount that can be charged to the insured for fire department services? a)$500 b)$1,000 c)$5,000 d)Fire department service charges are not allowed.
a)$500
A builder's risk form is most often written as which of the following?a)Completed value form b)Scheduled form c)Reporting form d)Specific value form
a)Completed value form A building under construction could be insured on reporting forms, but the value of the building should only increase during the policy period. To prevent all the administrative work required for reporting forms, most often completed value forms are used.
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)Contractors equipment floater b)Bailee's customers form c)Builders risk form d)General property form
a)Contractors equipment floater
Which of the following property coverages would provide protection to contents damaged by fire? a)Coverage C b)Coverage D c)Coverage A d)Coverage B
a)Coverage C
The major portion of the premium for an equipment breakdown policy pays a)For inspections and examinations. b)For repairs after a loss. c)For coverage for bodily injury and property damage of others. d)For replacement parts.
a)For inspections and examinations.
Which of the following types of property would be covered in homeowners coverage forms? a)Landlord furnishings in an on-premises apartment b)Structures used for business purposes c)Structures rented to others who are not tenants of the dwelling d)Animals, birds, or fish
a)Landlord furnishings in an on-premises apartment
When is a hired and nonowned auto liability endorsement available in a businessowners policy (BOP)? a)Only if the insured does not have commercial auto coverage b)Only in addition to commercial auto coverage. c)Only if the insured has 4 or more employees. d)Never
a)Only if the insured does not have commercial auto coverage
What is the term for the entity that an agent represents regarding contractual agreements with third parties? a)Principal b)Client c)Designee d)Insured
a)Principal
Giving a client an inducement to a sale not stated in the policy is an unlawful practice known as a)Rebating. b)Twisting. c)Unlawful distribution of dividends. d)Coercion.
a)Rebating.
Which inland marine coverage condition states that payment of any claim will not reduce the limit of insurance, except in case of a total loss on a scheduled item? a)Reinstatement of limit b)Legal action against the insurer c)Privilege to adjust with the owner d)Transfer of rights of recovery
a)Reinstatement of limit
Which of the following would the livestock coverage form NOT insure against? a)The euthanasia of livestock after being hit by a vehicle b)The euthanasia of livestock suspected of carrying mad cow disease c)Death of livestock caused by accidental drowning d)Death of livestock caused by a tornado
a)The euthanasia of livestock after being hit by a vehicle
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.
All of the following are perils covered under the broad form dwelling policy EXCEPT a)Theft. b)Fire. c)Lightning. d)Collapse.
a)Theft.
All of the following are essential elements of a commercial package policy (CPP) EXCEPT a)Valuations and/or settlement provisions b)Interline endorsements c)Declarations page d)Policy conditions
a)Valuations and/or settlement provisions
All of the following are essential elements of a commercial package policy (CPP) EXCEPT a)Valuations and/or settlement provisions b)Interline endorsements c)Declarations page d)Policy conditions
a)Valuations and/or settlement provisions Regardless of how the policy is written, it will be comprised of the following essential elements: declarations page, conditions, interline endorsements, and coverage parts.
Every Standard Fire Policy issued in Michigan must contain language stating the policy may be cancelled by the insurer at any time with a prior notice of at least a)20 days. b)10 days. c)45 days. d)30 days.
b)10 days.
An insurance policy has been in force for over 55 days when it was terminated by the insurer. Which how many days of policy termination must the insurer mail or deliver a notice of termination to the named insured? a)20 days b)30 days c)5 days d)10 days
b)30 days
How long is a waiting period upon purchase of flood coverage through NFIP? a)10 days b)30 days c)60 days d)There is no waiting period.
b)30 days
Under the dwelling policy, if an insurer chooses to repair or replace damaged or lost property, it must inform the insured within how many days of receiving proof of loss? a)10 days b)30 days c)45 days d)60 days
b)30 days
An insured with a homeowners policy has removed property from the insured location to protect it from loss that could be caused by a covered peril. The removal coverage applies for a)5 days. b)30 days. c)60 days. d)90 days.
b)30 days.
Which of the following would NOT qualify as a hired auto? a)An auto rented for personal use b)An auto borrowed from an employee c)An auto hired by an employer d)An auto leased from a commercial rental company
b)An auto borrowed from an employee
Insurance companies transacting automobile insurance in Michigan must offer Uninsured Motorist coverage that equals the insured's coverage limits for a)Combined limit of liability. b)Bodily injury. c)Personal injury protection. d)Underinsured motorist protection.
b)Bodily injury.
With regards to a homeowners policy, which coverage provides for indirect or consequential losses? a)Coverage C b)Coverage D c)Coverage A d)Coverage B
b)Coverage D Coverage D provide for loss of use, which is an indirect loss.
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)Conditions. b)Exclusions. c)Declarations. d)Endorsements.
b)Exclusions.
Without endorsement, in Michigan, the Standard Fire Policy insures property against loss from the perils of a)Fire, lightning and inherent vice. b)Fire, lightning, and removal. c)Fire, lightning and extended coverage perils. d)Fire, lightning, and flood.
b)Fire, lightning, and removal.
Which of the following endorsements is used by individual business owners who use company vehicles for personal use rather than purchasing a personal vehicle? a)Hired autos specified as covered autos you own b)Individual named insured c)Drive other car d)Additional insured - lessor
b)Individual named insured
All of the following are exclusions under farm property coverage EXCEPT a)Flood. b)Loss of use. c)Earth movement. d)Ordinance or law.
b)Loss of use.
Which inland marine coverage condition states that payment of any claim will not reduce the limit of insurance, except in case of a total loss on a scheduled item? a)Transfer of rights of recovery b)Reinstatement of limit c)Legal action against the insurer d)Privilege to adjust with the owner
b)Reinstatement of limit
Which one of the following symbols used in business auto coverage is correctly described? a)Symbol 7 - hired autos only b)Symbol 9 - nonowned autos only c)Symbol 1 - owned auto only d)Symbol 2 - owned autos subject to no-fault
b)Symbol 9 - nonowned autos only
In which of the following situations would off-premises coverage in a broad theft endorsement of the insured's dwelling policy apply?a)The insured's vacuum cleaner is stolen from her apartment. b)The insured's camera is stolen from his suitcase while he is on vacation. c)The insured's live-in maid's quarters are burglarized. d)The insured's china set is stolen from her home while she's traveling on business.
b)The insured's camera is stolen from his suitcase while he is on vacation.
On a DP-3 Dwelling Property Special Form policy, the coverage provided for personal property is a)The same as provided on the DP-1 Basic Form. b)The same as provided on the DP-2 Broad Form. c)All risk. d)Open peril.
b)The same as provided on the DP-2 Broad Form.
Personal business property out in the open is covered under commercial property policy only while a)Within 150 feet of the described premises. b)Within 100 feet of the described premises. c)Located on the described premises. d)Specifically described on the declarations.
b)Within 100 feet of the described premises.
A commercial package policy (CPP) allows the insured to select the coverage needed and customize the policy to meet the needs of the insured's business. In a CPP, the business owner may select from all of the following types of coverage EXCEPT a)General liability coverage b)Workers compensation coverage c)Crime coverage d)Boiler and machinery coverage
b)Workers compensation coverage
A policyholder has an equipment breakdown policy with a $200,000 limit. If a boiler explosion causes $100,000 damage to the boiler itself, $50,000 damage to the insured's building, and $30,000 of expediting expenses, how much will the insured collect under the policy?a)$200,000 b)$100,000 c)$175,000 d)$180,000
c)$175,000 The limit of the equipment breakdown policy applies to property of the insured, property of others, and expediting expenses in any combination as long as expediting expense does not exceed $25,000.
What is the limit for the forgery or alteration coverage in the businessowners policy? a)$500 b)$1,000 c)$2,500 d)$5,000
c)$2,500
Equipment breakdown coverage is written with a single limit of insurance per accident. What is the sublimit for hazardous substance cleanup or repair or replacement of contaminated property?a)$15,000 b)$20,000 c)$25,000 d)$50,000
c)$25,000
The businessowners policy liability coverage will pay for necessary medical expenses of others incurred within what maximum time period? a)90 days b)120 days c)1 year d)3 years
c)1 year
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? a)Coverage C - Personal Property b)Coverage D - Loss of Use c)Coverage E - Personal Liability d)Coverage F - Medical Payments to Others
c)Coverage E - Personal Liability
Expenses that an organization would not have incurred if business interruption had not existed are known as a)Additional expenses. b)All-inclusive expenses. c)Extra expenses. d)Continuing expenses.
c)Extra expenses.
Intentionally misrepresenting or concealing a material fact to induce an insurance company to make a contract is known as a)Misrepresentation. b)Concealment. c)Fraud. d)Avoidance.
c)Fraud.
Which rating method provides an insurer with that portion of a rate that does not include provisions of expenses (other than adjusting expense) or profit and is based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time? a)Profit rating b)Components rating c)Loss costs rating d)Provision rating
c)Loss costs rating
Which policy consists of the declarations and conditions, endorsements, and other attachments applicable to a single line of insurance? a)Casualty b)Commercial package c)Monoline d)Insurance
c)Monoline
Which method of loss valuation is contrary to the basic concept of indemnity? a)Market value b)Agreed value c)Replacement cost d)Functional replacement cost
c)Replacement cost The replacement cost method of loss valuation is contrary to the basic concept of indemnity because following a loss it may provide the insured with a settlement in excess of the property's actual cash value.
All of the following statements are true regarding fire department service charge additional coverage under the businessowners policy EXCEPT a)This coverage is not subject to any deductible. b)This coverage provides an additional $2,500 amount of insurance. c)This coverage limit pays in place of the limit of insurance shown in the declarations. d)This coverage limit is payable in addition to the limit of insurance shown in the declarations.
c)This coverage limit pays in place of the limit of insurance shown in the declarations.
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
Which of the following is NOT settled on an actual cash value basis while covered under the business property coverage form?a)Manuscripts b)Works of art or antiques c)Valuable papers and records d)Property of others
c)Valuable papers and records
The insurance company that issued Fred's Businessowners insurance policy has become insolvent. Fred's policy currently has unearned premium of $675. If Fred places his insurance with another insurer, how much return premium will Fred receive?a)$450 b)$0 c)$675 d)$500
d)$500
Which of the following is the correct formula for computing a loss ratio? a)(Incurred expenses + loss adjusting expenses)/earned premium b)(Incurred losses - loss adjusting expense)/earned premium c)Loss adjusting expenses - incurred expenses d)(Incurred losses + loss adjusting expense)/earned premium
d)(Incurred losses + loss adjusting expense)/earned premium
Under the additional living expenses coverage, if a civil authority prohibits the insured from using the dwelling because of direct damage to a neighboring location from a peril covered in the insured's policy, loss would be covered for up to a)1 month. b)90 days. c)1 week. d)2 weeks.
d)2 weeks.
Coverage J under farm coverage agrees to pay reasonable medical expenses, regardless of fault, caused by an accident if the expenses are incurred and reported to the insurer within how many years of the accident date? a)4 years b)5 years c)2 years d)3 years
d)3 years
Under businessowners policy Section I, if an insurer wants to cancel a policy for any reason except nonpayment of premium, how many days before the effective cancellation date must the insurer notify the mortgageholder? a)10 days b)15 days c)20 days d)30 days
d)30 days
Which of the following statements is true regarding the premium computation for workers compensation insurance? a)The premium basis for workers compensation insurance varies by the type of industry in which the insured is involved. b)The insured pays a guaranteed premium based on an estimated value of the annual income received. c)The premium is set at the beginning of the policy period and will not change. d)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.
d)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.
The limited theft endorsement is intended for which type of property? a)A building used for commercial purposes in which the owner operates a business b)A building used for commercial purposes which the owner rents to a business c)A house in which the owner resides d)An apartment building in which the owner does not reside
d)An apartment building in which the owner does not reside
Which of the following risks would NOT be eligible for coverage under a homeowners policy? a)An applicant who lives in a duplex that she does not own b)An applicant who owns and lives in a duplex c)An applicant who owns and lives in a single-family dwelling that also contains incidental business activities d)An applicant who owns and lives on a commercial farm
d)An applicant who owns and lives on a commercial farm
A small trucking company stops transporting hay for area farmers and begins to haul hay for its own farm exclusively. In regard to the coverage on its trucks, which of the following is true? a)Any coverage form applies. b)Coverage can continue under the truckers coverage form. c)Farm liability coverage applies. d)Business auto coverage form may apply.
d)Business auto coverage form may apply.
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
What is the purpose of the coinsurance clause found in property insurance policies? a)Encourage higher standards of care by requiring the insured to pay a portion of every loss b)Ensure that insureds do not overinsure their property c)Prevent insureds from profiting from a loss d)Encourage the insured to insure the property closer to its full value
d)Encourage the insured to insure the property closer to its full value
According to the doctrine of contributory negligence, when an individual is found to have contributed to his or her own loss in any way, another party a)May be held liable, but to a reduced extent. b)May be held liable for full damages despite the other party's negligence. c)May be held liable only in the case of vicarious liability. d)May not be held liable.
d)May not be held liable.
If the insured owns a watch valued at $10,000, full coverage can be provided on a homeowners policy by purchasing the a)Special limits of liability endorsement. b)Personal property replacement cost endorsement. c)Blanket personal property endorsement. d)Scheduled personal property endorsement.
d)Scheduled personal property endorsement.
Which of the following perils is covered by the HO-2 and HO-3?a)Loss due to power interruption that occurs off the premises b)Flood c)War d)Sudden and accidental rupture of a heating system
d)Sudden and accidental rupture of a heating system
All of the following people would be considered insureds under the liability section of a homeowners policy EXCEPT a)A 15-year-old foster child residing in the premises. b)The mother of the insured who is residing in the household. c)The legal representative of a deceased insured. d)The 22-year-old niece of the insured who is visiting.
d)The 22-year-old niece of the insured who is visiting.
All of the following are other coverages included in both the broad and special form dwelling policy EXCEPT a)Collapse. b)Breakage of glass. c)Lawns, trees, shrubs, and plants. d)Theft of personal property.
d)Theft of personal property.
Which of the following is NOT an optional coverage available in a businessowners policy? a)Outdoor signs and exterior-grade floor glass b)Mechanical breakdown c)Employee dishonesty d)Workers compensation
d)Workers compensation