Questions Exam FX
If an auto policy has split limits of 30/50/25, how much will the policy pay for property damage in a single accident?
$25,000
If an auto policy has split limits of 30/50/25, what is the maximum amount the policy will pay for injuries to one person in a single accident?
$30,000
If an auto policy has liability limits of 40/60/20, what would be the equivalent combined single limit?
$80,000 - combined total of coverage for bodily injury and property damage
In dwelling policies, within how many years of a loss may an insured bring a lawsuit against the insurer?
2 years
Under a personal auto policy (PAP), coverage for medical payments applies to expenses following a covered accident that are incurred within what time period?
3 years
In dwelling policies, any volcanic activity will be considered part of one occurrence if it happens within how many hours?
72 hours
What is a deductible in an insurance policy?
A specified dollar amount that the insured must pay before the insurer will pay the policy benefits
What is a binder?
A temporary insurance contract that goes in effect prior to the policy issue
What would be considered a newly acquired auto?
A vehicle acquired by the insured during the policy period
Who is a covered auto?
A vehicle shown in the policy Declarations
Persons who are not named on the Declarations page of a policy but who are protected by the policy are known as what type of insured?
Additional Insureds
What are the four elements of an insurance contract?
Agreement (offer and acceptance), consideration, competent parties and legal purpose
DP-3 (Special) is an open-peril form. What does that mean>
All perils are insured unless specifically excluded
In a personal auto policy, coverage territory is defined as what geographical region(s)?
Any U.S. state, its territories and possessions and Canada
What type of property can be covered under Inland Marine insurance?
Any type of property that is portable and in transit over land or in the air
What type of agent authority is based on the agent's actions or words?
Apparent
When the insured and the insurer cannot agree on a settlement in an auto policy, which provision applies?
Appraisal
What process is used to settle a casualty claim when the insured and the insurer cannot agree?
Arbitration
Replacement cost coverage is provided in both the broad and special DP forms when the amount of insurance on the dwelling is what percentage?
At least 80% of the replacement cost
When must insurable interest exist in a property insurance policy?
At the time of loss
Who does the garage coverage form insure?
Auto dealers, service stations, auto repair shops
What are the three types of coverage forms available in dwelling policies?
Basic, broad and special
What type of policy insures all the property at multiple locations for a single amount?
Blanket Policy
Coverage A in the Commercial General Liability (CGL) form protects against what type of losses?
Bodily injury or property damage suffered by a third party
What types of losses are indicated by the split limits in an auto insurance policy?
Bodily injury per person, bodily injury per accident and property damage per accident
Under the HO-4 and HO-6 policy forms, property is insured against what type of perils?
Broad Form Perils
Which commercial property form is used to insure buildings while under construction?
Builders Risk
What is the difference between cancellation and nonrenewal?
Cancellation is the termination of an insurance policy by either the insured or insurer prior to the policy's expiration date. Nonrenewal is the termination of a policy by the insurer at its expiration date
What part of an insurance policy sets forth the rules of conduct, duties and obligations of the parties to the contract?
Conditions
What are the 5 coverages of dwelling policies?
Coverage A - Dwelling Coverage B - Other structures Coverage C - Personal Property Coverage D - Fair Rental Value Coverage E - Additional Living Expenses
Which dwelling policy coverage will insure a garage not attached to the primary insured dwelling?
Coverage B - Other Structures
Which dwelling policy coverage will provide protection for contents damaged by fire in an insured dwelling?
Coverage C - Personal Property
How is the actual cash value of a property calculated?
Current Replacement Cost Minus Depreciation
Which of the three Dwelling Policy forms provides the most limited coverage?
DP-1 (Basic)
Which dwelling coverage form(s) will pay for the replacement cost of a dwelling?
DP-2 (Broad) and DP-3 (Special)
What are the four additional coverages under the builders risk coverage form?
Debris removal, preservation of property, fire department service charge and pollutant cleanup and removal
What part of a policy shows the amount of insurance, premium and policy terms?
Declarations
If an insured peril was the proximate cause of loss, what type of loss is it?
Direct
A basic dwelling policy automatically provides coverage against what perils?
Fire, lightning and internal explosion
In commercial property policies, who has control of the policy and who can cancel it?
First Named Insured
What are the two types of compensatory damages?
General and Special
What is the most limited HO coverage?
HO-8 (Modified Coverage Form)
Conditions that increase the chance of a loss are known as what
Hazards
A vehicle rented from a commercial rental company is known as what type of auto?
Hired Auto
Under what conditions can broad theft coverage be added to a dwelling policy?
If the insured is the owner-occupant of the dwelling
Whom does an insurance agent represent?
Insurance Company
A general liability policy will respond to claims against the insured when bodily injury or property damage is caused by what?
Insured's Negligence
How does the auto medical payments coverage endorsement modify a commercial auto policy?
It adds medical payment coverage to a commercial auto policy
How does an endorsement affect an insurance contract?
It modifies the contract's original terms
What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of Large Numbers
What determines an insurer's responsibility for payment on a claim under an insurance policy?
Limits of Liability
Complete the coinsurance formula: (Insurance Carried / Insurance Required) x Loss Amount =
Loss Payment
What are the five characteristics of an ideally insurable risk?
Loss must be due to chance, definite and measurable, statistically predictable, not catastrophic, coverage cannot be mandatory
What type of vehicle is excluded from the definition of an auto?
Mobile Equipment
Losses resulting from vandalism and malicious mischief (V&MM) will be excluded from coverage under a dwelling policy if a property has been vacant for what period of time?
More than 60 consecutive days
Losses caused by vandalism and malicious mischief (V&MM) are excluded from coverage under a homeowners policy if a dwelling has been vacant for how many days?
More than 60 days
What term describes a loss caused by continuous exposure to a condition?
Occurrence
How does the equipment breakdown coverage form value loss?
On a replacement cost basis
How is crime insurance usually written?
On an all-risk (or open peril) bases
If 3 volcanic eruptions happen within 72 hours and each contributes to property damage, how many deductibles will apply in the dwelling policy
One deductible
A policy that covers all causes of loss except for those specifically excluded is know as what type of policy?
Open Peril (or Special)
What provision defines how a policy will respond if there is more than one insurance policy written on the same risk?
Other Insurance
What personal auto coverage would pay for damages to a covered auto cause by a collision with a deer?
Other than collision
Rental reimbursement endorsement is available only if an auto policy has what type of coverage?
Other-than-Collision Coverage
What Personal Auto Coverage would pay for the insured's travel expenses and loss of earnings while the insured is involved in the settlement process of a covered loss?
Part A - Liability Coverage
If an insured is injured while driving his own car, what coverage in his personal auto policy will pay for the loss?
Part B - Medical Payments
What sublimit in a liability policy puts a ceiling on the payment for all claims that arise from a single accident?
Per-Occurrence
In insurance terms, a tornado that destroys an insured property would be considered what?
Peril
What is the difference between a personal injury and an advertising injury?
Personal injury is incurred by an individual; advertising injury is incurred by a business. Both, however, are nonphysical injuries
Under Coverage A - Bodily Injury and Property Damage in a CGL policy, contractual liability, liquor liability and the insured's work are examples of what?
Policy Exclusions
What is the fee a policyowner pays an insurance company to receive coverage?
Premium
What are an insured's duties after a loss?
Protect the damaged property from further loss, cooperate with the insurer in settling a loss and submit proof of loss
What term defines an exact, direct and uninterrupted cause of loss?
Proximate Cause
A situation in which a person can only experience a loss and no gain presents what type of risk?
Pure risk
What method do insurers use to protect themselves against catastrophic losses?
Reinsurance
Which method of loss valuation is contrary to the principle of indemnity?
Replacement Cost
What is the date stipulated on the Declaration page of a claims-made liability form as the earliest date on which an incident may occur and be covered by the policy?
Retroactive Date
What is the name for the limits of liability that are stated separately for different coverages?
Split Limits
If a manufactured product is unsafe, what type of liability applies to the manufacturer?
Strict Liablility
To whom does the term "we" refer in a personal auto policy?
The Insurer
In dwelling policies, the premium for the Dwelling under Construction endorsement is based on what?
The average amount of insurance during construction
According to the liberalization condition, if an insurer makes a change to broaden coverage in newly issued dwelling policies, how will that change affect policies in force?
The change will apply automatically
What is the occurrence form trigger based on?
The date of the loss
What law protects consumers from the circulation of inaccurate or obsolete information?
The fair Credit Reporting Act
What is the limit of liability in Part D - Coverage for Damage to Your Auto?
The lesser of the actual cash value of the vehicle or the amount needed to repair or replace the vehicle
What are policy limits?
The maximum amount an insured may collect for a loss under the terms of the policy
To whom does the term "you" refer in a personal auto policy?
The named insured shown in the Declarations and the insured's spouse (if resident of the same household)
Who is considered insured under Part A - Liability of a personal auto policy?
The vehicle owner or his or her family members, or any person using the covered auto with permission
If a specific coverage part is listed on the CPP Declarations page, but no premium is shown, what does that mean?
There is no coverage under the policy
What is the purpose of business income insurance?
To cover the loss of business income that occurs when a business must suspend its operations because of a direct loss
In dwelling policies, what is the purpose of the automatic increase in insurance endorsement?
To offset the effects of inflation
What is the purpose of a claims-made form?
To pay for bodily injuries or property damage reported during the policy period
What is the main purpose for requiring a person to be licensed to transact insurance?
To protect the general public
What method of dealing with risk is applied when insurance is purchased?
Transfer
What is the name of the process that insurance companies use to determine whether a risk is insurable?
Underwriting
What type of auto coverage will apply in a hit-and-run accident where the driver cannot be identified?
Uninsured Motorist
What is the maximum number of units in residential dwellings insurable by a dwelling policy?
Up to 4 units
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted
When does Uninsured Motorist coverage apply?
When the other party is legally liable but has no insurance