quizzes from ExamFx

A business owner whose inventory changes significantly throughout the year should consider having coverage written on what type of form

Reporting form Reporting from coverage is used by those insureds whose property fluctuate in value and the insured is not able to know in advance what the values will be at any given time within the policy period. Values are reported at the times specified in the policy and the premium is adjusted based upon those reports

What would a misrepresentation on an insurance application be considered fraud?

if its intentional and material

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

Consideration is something of value that each party gives to the other.

The major portion of the premium for an equipment breakdown policy pays

For inspections and examinations

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?

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 insurance options would be considered a risk sharing arrangement ?

Reciprocal When insurance is obtained through a reciprocal insurer the insureds are sharing the risk of loss with other subscribers of the reciprocal

Which method of loss valuation is contrary to the basic concept of indemnity

Replacement cost

For the purpose of insurance, risk is defined

The uncertainty or chance of loss

a 100k house insured on a policy with 80% coinsurance requirement has a fire that causes 40k of damage. the owner has a policy with 60k coverage. How much can the owner collect for his loss?

30k for the total amount of a partial loss to be paid a house must be insured for at least 80% of its value on the date of loss. In this case, because the house is insured for only 60k (75% of the minimum requirement) the policy will pay only 75% of the loss or 30k

Assuming the insurer and the insured agree on the amount payable for a loss covered under a dwelling policy, how soon after receiving the proof of loss must the insurer pay the claim?

60 days

The employee theft crime policy from includes a coverage extension that applies to employees temporarily outside the coverage territory for up to

90 days

which of the following property coverages would provide protection to contents damaged by fire?

Coverage C Personal property provides coverage for the contents of an insured dwelling.

With regards to a HO policy which coverage provides for indirect or consequential lossess?

Coverage D loss of use

An insured's house is damaged by a fire and is uninhabitable. As a result, the insured has to rent an apartment until repairs are made. A dwelling insurance policy will pay for the expense of renting the apartment. Which type of broad or special form coverage does the insured have?

Coverage E-Additional Living Expense Coverage E is a broad or special form under the dwelling policy that pays for additional living expense while the insureds dwelling is being repaired

In dwelling policies automatic increase in insurance

Coverage by endorsement Automatic increase by endorsement in insurance may be added to a DP to increase the amount of insurance by an annual percentage to offset the effects of inflation. This requires additional premium.

Loss ratio compares

Earned premium to losses loss ratio compares the premium incomes to losses including claims paid and claim related expenses

Replacement cost is defined as

Full replacement of property at its current cost, new and without reduction for depreciation. -require that the amount of insurance that must be carried is 80% or more of the replacement cost of the property at the time of loss

Which of the following HO forms is designed to provide named peril coverage for personal property to individuals who rent an apartment

HO 4

in property insurance actual cash value is defined as which of the following

Replacement cost at the time of the loss, less depreciation (today's replacement cost (current) minus depreciation for age and obsolescence

Which of the following persons may be covered under farm Coverage J?

Resident Employees Farm employees are excluded from this coverage however resident employees are included. applies to only persons who are not insureds

The insurer may suspect that a moral hazard exists if a policyholder

is not honest about his/her health on an application for insurance

Which of the following is the basis for a claim against an insurance policy

Loss Claims resulting from loss by a peril insured against in an insurance policy

The broad theft coverage endorsement on the dwelling form specifies all of the following limitations EXCEPT

1k on silverware 2500 on silverware

Which of the following would be covered by a broad theft endorsement on a dwelling policy?

A camera the insured has with him on vacation -antique car. fabrics/designs in studio within home, pedigree show dog, are all specifically excluded under the broad endorsement

All of the following would eligible for coverage under the dwelling policy except

A house that has 5 residential units Eligibility requires that the dwelling have not more than 4 family units

Which would NOT be covered by the inside of the premises - robbery or safe burglary of other property coverage?

An employee is caught stealing cash from the register

If an insurer makes a change to broaden coverage in a dwelling policy while it is in effect, the changes will apply

Automatically Is in effect of 60 days before it goes into effect

An individual was involved in a head-on accident, recovered, and now DOES NOT WANT to drive anywhere due to fear of being in another accident. This is what method of risk?

Avoidance When a person tries to eliminate or avoid a certain risk

A farmer is remodeling his 100-year-old farmhouse. He is in the process of painting the porch and hanging shutters. He keeps his ladder, paint, and other materials used to remodel his home under the porch. Which of the following provides coverage for his remodeling materials?

Coverage A Covers material and supplies used to construct alter or repair the dwelling. These materials are used to service the dwelling are located on or next to the insured dwelling

Which of the following are true concerning the special form dwelling policy

Coverage A is for all risk perils and Coverage C is for the board form perils All risk perils is covered under A&B only

Which of the following dwelling coverage forms would pay replacement cost for the dwelling?

DP2 and DP3 DP2 and DP3 pay replacement cost as long as the house is insured for at least 80% of its value on the date of loss

Additional coverages in the liability section of a homeowners policy cover all the following except

Damage to a third party property for which the insured is legally liable Legal liability coverage is a primary liability coverage not an additional coverage

The commercial property declarations page contains which of the following information.

Description of the property insured. The declarations page provides the information as to who what when where and how much. The interline endorsements policy conditions and cause of loss forms are modular parts that are combined to create the contract.

Which of the following is consider to be a morale hazard?

Driving recklessly Morale hazards arise from the state of mind that causes indifference to losses, such as carelessness this person shows carelessness or is irresponsible because they know the insurance company will cover it

A basic dwelling policy automatically provides coverage against fire, lightning and

Internal Explosion Riot, windstorm, and smoke are extended coverages

In a dwelling policy which of the following is true regarding personal liability coverage?

It must be added as a supplement or written on a separate policy The dwelling policy does not include any coverage for personal liability; the personal liability can be be added to the dwelling policy or written on a separate policy. Coverage form includes; personal liability and medical payments to others

Dwelling coverage includes all of the following EXCEPT

Land on which the dwelling is located Land is not covered and nothing that happens to the land would be considered a covered loss. Covered: -Building and outdoor equipment used to service described location -The dwelling used principally for residential purposes -Materials on the described location used to alter or repair the dwelling

Rates that are established based on the similarities of the risk with other risks are known as

Manual rates

An individual's tendency to be dishonest would be indicative of a

Moral Hazard someone who displays dishonesty or submitting fraudulent claims on an application is deemed a moral hazard and could be uninsurable from an underwriting process These people also lie on applications

A person who does not lock their doors or does not repair leaks shows and indifferent attitude. What type of hazard does this person present?

Morale

A loss has occurred before the first report has been filed on a value reporting coverage form which is not true

Never more than 75% of the loss is paid If the loss is before the first report is due, full amount of the loss will be paid. Because provisional premium is based on 75% of the full amount of the coverage only 75% of the loss is paid if the first report is overdue

Which of the following terms refers to other insurance that is written on the same risk but not on the same coverage basis?

Nonconcurrency

Damage to insured property causes by earth movement or earthquake is covered under which of the following HO forms

None Damage by earthquake is specifically excluded from coverage in ALL HO forms. However, coverage may be purchased by endorsement if purchased the coverage will be subject to a different deductible than other property losses

A property insurance policy that insures a commercial building on a replacement cost basis includes the ordinance or law coverage endorsement. this endorsement will cover all of the following expenses EXCEPT

Ordinance with which the insured was required to comply prior to the loss

Under a dwelling policy which of the following clauses applies if an insured has lost one of two matching sliver candlesticks?

Pair or set The pari or set is a clause stating that if only one item of a set has been lost the insurer is not obligated to pay the total value of the set

Robbery is

Taking of property by use of force violence or fear

the coverage under HO 8 is restricted to

The ACV of hat was stolen with limits for certain classes of property Since HO8 policies are for older homes, they insure dwelllings at ACV not replacement cost because the cost of rebuilding with the materials and details o the original home would make replacement cost coverage prohibitively expensive

The abandonment provision in property insurance policies states that

The insured may not relinquish ownership of damaged property to claim a total loss but must protect damaged property from further loss.

if more than one person has insurable interest in the property covered under a dwelling policy

The insurer will be liable for only the insured's interest in the damaged property

All of the following are perils covered under the broad form dwelling policy except

Theft not a named peril

The authority granted to an agent through the agents contract is referred to as

express written into contract between insurer and agent

an additional loss that results from a direct loss of property is called

indirect 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.

The causes of loss insured against in an insurance policy are known as

perils

Which of the following is the most common way to transfer risk?

purchase insurance

At the time of loss insured against in a property and casualty policy, the insurer's claim settlement options include all of the following EXCEPT

replacing the property with other property of lesser kind or quality -include: pay the value of the lost or damaged property, pay the cost of repairing or replacing the lost or damaged property, take all or part of the property at an agreed or appraised value, or repair rebuild or replace the property with other property of like kind and quality

What will happen if a house covered by a standard mortgage clause is a total loss>

the insurer pays the mortgagee according to the mortgagee's interest in the property.

Which of the following best describes the amount of loss assessment coverage included under a HO policy liability coverage section

up to 1k per occurrence Section II loss assessment coverage, applies to assessments against the insured by a condo association or other cooperative body of property owners. Coverage is limited to 1k but an increased limit of coverage is available by endorsement

Which of the following would be covered by an HO policy

An oriental rug in an on premises apartment HO contents coverage does not apply to animals, cars, or property of those who pay to be at your house, It does provide up to 2500k for a loss of landlords furnishings in an on premises apartment

First aid costs for others injured on the insured premises

Are paid in addition to the liability limit First aid costs for others apply even if the insured is not legally liable an are in addition to the stated limits but do not apply to those reguarly at the location

Under which of the following conditions can broad theft coverage be added to a dwelling policy?

Broad theft coverage can be added as an endorsement to a dwelling policy if the insured is owner- occupant of the dwelling

Which of the following is NOT found in a commercial package policy

Cert of Authority Regardless of how the policy is written it will be comprised of the following -common policy declarations page, common policy conditions, interline endorsements and coverage parts

A builders risk form is most often written as which of the following

Completed value form

What term best describes the act of withholding material information that would be crucial to an underwriting decision

Concealment

An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of

Concealment Withholding information that will result in an impercise underwriting decision

which of the following is true regarding the difference in conditions DIC policies

Each DIC policy is an individually written contract that contains provisions unique to the particular risk that it covers. Each DIC contract is unique to the risk that it covers. No two contracts are the same. However, one of the features of most DIC policies is that the policy needs to be accompanied by a named peril property policy to provide that all risk coverage that is intended.

What is the purpose of the coinsurance clause found in property insurance policies?

Encourage the insured to insure the property closer to its full value

Which of the following IS TRUE of dwelling policy coverage?

Exclusions apply to all three policy forms. Dwelling policy forms contain several general exclusions that define the actual extent of coverage provided. These exclusions are found in all three dwelling forms, broad, basic, and special

Which of the following are the authorities that an agent can hold?

Express and implied apparent authority--appearance or assumption authority based on actions, words, deeds,

All of the following are exclusions that apply in all three types of dwelling policies EXCEPT

Fire or lightning Earth movement, government action, water damage are all exclusions

What authority is NOT stated in the agents contract but is required for the agent to conduct business?

Implied Not written in agents contract but is required to conduct business. Not every detail is stated in an agents contract

The insured's house is located one mile from the county's new landfill and across the road from the entrance of a rock quarry. It would cost 150k to rebuild the house if something happened to it but when the insured tried to sell it the best offer he received was 80k. the insurance company will insure the house only for 80k what method of valuation is used to insure property

Market Value it is insured for what a willing buyer would pay prior to loss. (diff from acv or replacement loss)

Untrue statements on the application unintentionally made by insureds that if discovered would alter the underwriting process of the insurance company

Material misrepresentation is a statement that if discovered would alter the underwriting process of the insurance company

Which of the following liability coverages must be added by endorsement to a HO policy in order to apply?

Personal Injury applies only if added by endorsement and an additional premium is paid

All of the following are examples of risk retention EXCEPT

Premiums Risk retention is a planned assumption of risk or acceptance of responsibility for loss by an insured through deductibles, co-payments, and self insurance

What is the term for the entity that an agent represents regarding contractual agreements with third parties?

Principal An agent represents the principal acting on the entity's behalf. (producer=principal, agent=principal)

A situation in which a person can only lose or have no change represents

Pure risk Pure risk the only risk insurance companies are willing to accept Speculative risk is where you can lose or win (like gambling)

In case of a loss, the indemnity provision in insurance policies

Restores an insured person to the same financial state as before the loss indemnity (sometimes called reinbursment) is a provision in an insurance policy that states in the event of loss an insured/beneficary is permitted to only collect to extent of financial loss and not allowed to financially gain anything due to insurance contract.

If the insured owns a watch valued at 10k full coverage can be provided on a HO policy by purchasing the

Scheduled personal property endorsement -Scheduled personal Property endorsement would provide all risk coverage without the limitations for theft that are found in coverage Coverage C. The amount of coverage purchased is usually based upon a recent appraisal or the purchase price if newly purchased

Which of the following would NOT be considered a flood?

Sewer Backup flood is defined by the National flood insurance program. it doesnt include sewer backup

Hazard is defined as

Something that increases the chance of loss

Under a dwelling policy which of the following is NOT a factor in determining a loss?

The amount negotiated by the insured The value of a loss is decided according to the ACV of the property, the policy limit, the amount needed to repair or replace property or the amount reflective of the insured's interest in property

Replacement cost coverage is provided in both the broad and special form dwelling policies when

The amount of insurance on the dwelling is at least 80% of its replacement cost at the time of loss

How much is the premium for the dwelling under construction endorsement under the dwelling policy?

The average amount of insurance during construction based on building materials from the first day of construction until completion

Professional photographers and musicians may insure their equipment with

The commerical articles from covers photo equipment or musical instruments used commerically such as y a professional band

The regular National Flood insurance program would insure an eligible single family dwelling for up to

up to 250,000 on a replacement cost basis

Within the first 60 days of coverage under a dwelling policy, how much notice is required for the cancellation of a policy?

10 days NO matter what the reason if a policy is canceled within the first 60 days only 10 days in advance notice is required

within how many years of a loss may an insured bring a lawsuit against an insurer according to the dwelling policy

2 years

If an insured is in the process of moving to a new location, his personal property coverage under the dwelling policy will apply on a pro rata basis at both locations for

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

30 days

an insured added the scheduled personal property endorsement to her HO policy to cover musical instruments. If the insured purchases a new musical instrument when must the insurer be notified for the musical instrument to be covered?

30 days New property must be reported within 30 days of acquisition and the insured may be required to pay the additional premium from that date

What is the max number of roomers or boarders for properties insured under a dwelling policy

5

According to the insured duties after a loss provision in HO policies if the insurer requires a signed sworn proof of loss the insured must provide within how many days

60 days

All of the following are characteristics of the dwelling policy EXCEPT

The dwelling must be owner occupied Dwelling policies insure residential exposures with only limited service type business exposure allowed. The dwelling can be completed or under construction and can be owner or-tenant occupied the dwelling policy can insure the dwelling only, contents only or both

Under which of the following circumstances would an insurer be allowed to cancel a dwelling policy midterm?

The insured knowingly lied about the year the property was constructed -can cancel if there is reason to believe a misrepresentation of a material fact or risk that has substantially changed since first being insured

In which of the following situations would OFF-premises coverage in a broad theft endorsement of the insured's dwelling policy apply?

The insured's camera was stolen from suitcase while on vacation a broad theft endorsement on the OFF premises coverage covers property that is either owned or used by the insured when property is away from the insured's premises

On a DP-3 Dwelling form property special form policy the coverage provided for personal property is

The same as provided on a DP-2 broad form Although Coverages A&B on DP3 are written on an open peril or all risk basis, coverage for personal property is written on a named or specified peril

Which of the following losses would NOT be covered under Coverage A in a dwelling policy?

Theft of a renter's lawnmower used to service the premises Coverage A on the dwelling includes all attached structures and outdoor personal property or equipment used to maintain or service premises if not covered elsewhere. The lawnmower would likely not be covered due to it being rented to others without content coverage. if the landlord furnishes lawnmowers/other equipment then there is no need schedule a small amount of content coverage.

All of the following are other coverages included in both the broad and special form dwelling policy EXCEPT

Theft of personal property The theft of personal property can only be added by endorsement

Which of the following is NOT a goal of risk retention?

To minimize the insured's level of liability in the event of loss. 3 basic desires; reduce expenses and improve cash flow, increase control of claim reserving and claim settlements, AND to fund losses that cannot be insured

When an individual purchases insurance what type of risk management technique are they displaying?

Transfer

Farm policy Coverage B structures would pay how much for loss of an outside antenna tower or satellite dish

Up to 1k per occurrence

A type of policy that is used to provide a specific amount of replacement cost for a given risk after an insured property has been destroyed is called

Valued policy a valued policy provides for payment of the full policy amount in the event of a total loss without regard to actual cash value or deprecation

Which of the following is a statement that is guaranteed to be true and if untrue may breach an insurance contract?

Warranty a warranty in insurance is a statement guaranteed to be true. When an applicant applying for insurance the statements made by applicant are generally referred to as representations. Representations are statements that are true to the best of ones knowledge

In insurance an offer is usually made when

When an applicant submits an application to the insurer Acceptance takes place when he underwriter approves the app and issues policy

A CPP allows the insured to select the coverage needed and customize the policy to meet the needs of the insureds business. In a CPP the business owner may select from all of the following types of coverage except

Workers comp coverage

Which of the following endorsements is used to insure Coverage C personal property for values beyond the limitations of the HO policy

scheduled personal property endorsement items that are scheduled an insured under a scheduled personal property endorsement are covered on a valued basis