Review Questions
What is the homeowners policies property and liability coverage limit for watercraft?
$1,500
In SC, every automobile insurance policy must include liability coverage with limits not less than
$25,000/$50,000/$25,000
A premium discount is the term that describes when an insured owes a total standard premium greater than $10,000 $15,000 $1,000 $5,000
$5,000
How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card? $100 $500 $1,000 $5,000
$500
The brad theft coverage endorsement on a dwelling form specifies all of the following limitations EXCEPT $1,500 on jewelry $1,000 on silverware $200 on money $1,500 on securities
$1,000 on silverware The limit on silverware is $2,500
What is the amount of loss assessment coverage included under an HO Liability coverage section?
$1,000 per occurrence
Under a dwelling policy, which of the following is NOT a factor in determining a loss? A) The amount necessary to repair or replace the property B) The amount negotiated by the insured C) The policy limit D) The amount of the insured's interest in the property at the time of loss
A) The amount negotiated by the insured The value of a loss is decided according to the actual cash value of the property, the policy limit, the amount needed to repair or replace the property, or the amount reflective of the insured's interest in the property.
Which of the following losses would NOT be covered by a homeowners policy? A. A coin collection valued at $500 lost in a fire B. A $550 utility trailer blown away by a tornado C. A stolen silver tea set worth $2,500 D A $800 outboard motor destroyed by hail
A. A coin collection valued at $500 lost in a fire A HO policy will pay: $2,500 for silverware by theft $1,500 for boats, motors, trailers $1,500 for loss of trailers not used with boats $200 for coins
Under the conditions of a garage coverage policy, when does the loss occur?
At the time of the incident, not when the faulty work was done
Workers compensation rating is developed by applying a rating bureau job classification rate to each amount of payroll A. $500 B. $1,000 C. $100 D. $250
C. $100
What is the purpose of the coinsurance clause in property insurance policies?
Encourage insurance to value
Professional liability protects the insured agains legal liability resulting from what?
Errors and Omissions
Federal Motor Carrier Safety Administration
Federal body that regulates interstate truckers who travel across state lines
The major portion of the premium for an equipment breakdown policy pays A. For repairs after a loss B. For coverage for bodily injury and property damage of others C. For replacement parts D. For inspections and examinations
For inspections and examinations. Finding flaws that could lead to losses and requiring corrective action is the purpose.
Several insureds have become liable because of a single loss. How will the policy's limit of liability be affected? A) Pro Rata Liability applies B) A homeowners policy can have no more than one insured C) The full amount applies to each insured individually D) No more than the per occurrence limit applies, no matter how many insureds are involved.
No more than the per occurrence limit applies, no matter how many insureds are involved.
HO-3 is open peril AND named peril for what coverages?
Open Peril for Coverage A-Dwelling Named Peril for Coverage C-Contents
The legal concept that requires that workers compensation coverage benefits be accepted by an injured employee as the only recourse an employee has in the settlement of injury claims is called
The exclusive remedy provision Workers comp is the exclusive remedy for all injury claims agains employers
What is the goal of Risk Retention?
To reduce expenses and improve cash flow, To increase control of claim reserving and claims settlements, To fund losses that cannot be insured
Injunction Bond
Wrongful Action This bond is required by courts whenever someone seeks an injunction against another. It guarantees that if the injunction should not have been issued, damages will be paid to the injured party
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of? Rebating Misrepresentation Concealment Unfair claim practice
misrepresentation Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.
Private insurers that participate in a WYO program write and service policies on a
no risk-bearing basis
Unilateral
one-sided The insured is not legally bound to any particular action under the insurance contract, but the insurer is legally obligated to pay losses covered by the policy
An insured hits a deer and crashes his car into a tree. The total damage to the vehicle is $6,000. How will this loss be covered? A. $6,000 would be paid under collision coverage B. This would not be covered C. $6,000 would be paid under the other-than-collision coverage D. $3,000 would be paid under the other-than-collision coverage and $3,000 under collision coverage
$6,000 would be paid under other-than-collision coverage. Because the proximate cause of the loss was contact with an animal, all of the damage would be paid under other-than-collision coverage
The extended discovery period in the Crime general provisions for the Loss Sustained Form is
1 year
The extended discovery period in the crime general provisions for the loss sustained form is 60 days 90 days 1 year 3 years
1 year
If the actual values exceed the limit of insurance, the businessowners policy (BOP) contains a seasonal increase provision that automatically increases the limit of insurance for business personal property by
25%
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? 3 days 5 days 10 days 14 days
3 days
The Director must give a written notice of the time and place for the hearing to the person cited to appear within how many days?
30
An uninsured motor vehicle includes all of the following EXCEPT A) A vehicle being used for public livery B) The accident was a hit-and-run C) The insurance company denies coverage D) The vehicle has no liability bond or insurance in force
A) A vehicle being used for public livery
First aid costs for others injured on the insured's premises A) Are paid in addition to the liability limit B) Apply only if the insured is legally liable C) Also cover injuries to the insured's family D) Are deducted from the liability limit
A) Are paid in addition to the liability limit First aid costs for others apply even if you are not legally liable and are in addition to the stated limits, but do not apply to those regularly at the location.
Which of the following is owned by a corporation to serve that organization's needs at lower rates than would otherwise be available with commercial insurance? A) Captive Insurer B) Internal Insurer C) Custom Insurer D) Reinsurer
A) Captive insurer Corporations organize captive insurers in order to obtain lower insurance rates and avoid the uncertainties and risk associated with commercial insurance.
Which policy consists of the declarations, conditions, endorsements, and other attachments applicable to a single coverage part? A) Monoline B) Businessowners C) Commercial Package D) Casualty
A) Monoline
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
Which of the following could be covered by an HO policy? A. An oriental rug in an on-premises apartment B. Birds, fish, and animals C. A sports car kept in an attached garage D. Property of a tenant not related to the insured
A. An oriental rug in an on-premises apartment Homeowners contents coverage does not apply to animals, cars, or property of those who pay to be at your house; it does provide up to $2,500 for a loss of landlord's furnishings in an on-premises apartment.
Which type losses are covered by the South Carolina Wind and Hail Underwriting Association? A. Both direct and indirect losses B. Only total loss by wind or hail C. Direct losses only D. Consequential losses only
A. Both direct and indirect losses
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. Business auto coverage form may apply B. Any coverage form applies C. Coverage can continue under the truckers coverage form D. Farm liability coverage applies
A. Business auto coverage form may apply Private carriers must obtain coverage for their trucks through the business out form or the motor carrier form
All of the following are true regarding flood insurance EXCEPT A. Coverage may be provided for growing crops and livestock B. Coverage is excluded for money and securities C. It is available in designated areas only D. Coverage is provided for dwellings or commercial property
A. Coverage may be provided for growing crops and livestock NFIP is available for buildings and their contents in designated geographic areas only
Limited fungi, wet or dry rot, or bacteria endorsement in HO policies applies to A. Property and Liability Losses B. Specified Losses C. Property Losses Only D. Liability Losses Only
A. Property and Liability Losses
Under the commercial property coverage program, the basic causes of loss form insures against loss caused by A. Sprinkler leakage B. Earth movement C. Nuclear hazard D. Power failure off the premises
A. Sprinkler leakage
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. Coverages A and B on a DP-3 are written on an open peril or all-risk basis, the coverage for personal property is written on a named peril basis.
Which of the following other coverages is NOT included in the basic form dwelling policy? A) Tenant's alterations and additions B) Breakage of glass C) Personal property temporarily away from the insured premises D) Removal Coverage
B) Breakage of glass
The mobile home endorsement alters the homeowners policy to cover a mobile home and other structures on land A) Leased by the owner of the land B) Owned or leased by the resident of the mobile home C) Owned or leased by a landlord who does not reside on the premises D) Owned by a landlord who does not use the mobile home located on it
B) Owned or leased by the resident of the mobilehome The mobile home endorsement alters the homeowners policy to cover a mobile home and other structures on land owned or leased by the resident of the mobile home
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
An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay? A. $0 B. $30,000 C. $32,000 D. $40,000
B. $30,000 This insured only carried 75% of the amount of insurance he had agreed to carry ($120,000 of the agreed $160,000), so the insurer will only pay 75% of the loss, or $30,000. If the insured had carried the required amount of insurance, partial losses would be paid in full. If the full amount is not carried, divide the actual amount carried by the amount that should be carried (the coinsurance amount), and multiply it by the loss.
Which of the following statements regarding coverage for the flood and earthquake perils is true? A. Flood insurance 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. Coverage for both or either one usually can be purchased separately for an additional premium
A fly-around commercial airplane is taxiing on the approach to the runway when a tire blows. The underside of the airplane is damaged. The airplane is insured by an All-Risk - Ground and Flight Aircraft Hull policy. Which of the following statements is true regarding this loss? A. The loss is covered because commercial use voids the wear-and-tear exclusion B. This loss is covered because the All-Risk - Ground and Flight Aircraft Hull covers losses while the airplane is on the ground and while it is in flight C. The loss is not covered because the All-Risk - Grounds and Flight Aircraft Hull policy covers only losses while in flight or while not moving on the ground D. The loss is not covered even though the aircraft is airworthy
B. The loss is covered because All-Risk - Grounds and Flight Aircraft Hull covers losses while the airplane is on the ground and while it is in flight. All-Risks - Ground and Flight Aircraft Hull is the broadest form of hull coverage and provides all-risk coverage on the aircraft both while it is on the ground and while it is in flight
Which of the following is NOT the consideration in a policy? A) The premium amount paid at the time of application B) The promise to pay covered losses C) The application given to the insured D) Something of value exchanged between parties
C) The application given to the insured
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 even of loss
For which of the following reasons can a temporary license be issued? A) To solicit new business B) To negotiate new insurance contracts C) To service existing business D) To provide temporary help to a licensed producer
C) To service existing business
Which of the following would be considered an insured under a business auto coverage form? A. Anyone using a covered auto while working in a business of selling, servicing, repairing, or parking autos if it is not the named insureds business B. A partner of the named insured for any covered out owned by that person or a member of his or her household C. Anyone while, using, with permission, a covered auto owned by the named insured D. The owner of anyone else from whom the named insured hires or borrows a covered auto
C. Anyone while using, with permission, a covered auto owned by the named insured Does not cover the exposure of other autos not owned, hired, or leased by the named insured.
SCWHUA coverage can now be purchased for A. Dwellings only B. Commercial buildings only C. Commercial and residential buildings including contents D. None of these
C. Commercial and residential buildings including contents
Which of the following best describes the aleatory nature of an insurance contract? A. Ambiguities are interpreted in favor of the insured B. Policies are submitted to the insurer on a take-it-or-leave-it basis C. Exchange of unequal values D. Only one of the parties being legally bound by the contract
C. Exchange of unequal values
In a personal auto policy, Coverage C: Uninsured Motorist defines an insured person as any of the following persons EXCEPT A. Member of the insured being struck as a pedestrian B. Occupying a covered auto C. Injured in an auto accident D. Member of the need insured
C. Injured in an auto accident
The additional living expense coverage on homeowners policies A. Does not begin to pay until the family has been out of the house for at least 7 days B. Is intended to allow the family to stay in the least expensive accommodations available C. Is intended to allow the family to maintain its normal standard of living D. Is automatically paid after any loss to the covered house
C. Is intended to allow the family to maintain its normal standard of living.
A loss has occurred before the first report has been filed on a value reporting coverage form. Which is NOT true? A. Full amount of loss up to the policy limit is paid if the loss occurs before the first report due date. B 75% of the loss is paid if the loss occurred after the first report due date. C. Never more than 75% of the loss is paid D. Provisional premium is based on 75% of the full amount of coverage
C. Never more than 75% of the loss is paid. If the loss is before the first report due, full amount of the loss will be paid, Because provisional premium is based on 75% of the full amount of coverage, only 75% of the loss is paid if the first report is overdue.
Which inland marine coverage condition says that an insurer will settle with the actual owners of property involved in a loss? A. Reinstatement of limit B. Legal action agains the insurer C. Privilege to adjust with the owner D. Transfer of rights of recovery
C. Privilege to adjust with the owner
Insurance procured from an unauthorized insurer is called A. Credit Insurance B. Ilegal C. Surplus Lines Insurance D. Unauthorized Insurance
C. Surplus Lines Insurance Surplus lines insurance is insurance procured from or renewed with an unauthorized insurance company
Which of the following best describes the amount of loss assessment coverage included under a homeowners policy liability coverage section? A. Up to $10,000 aggregate for the policy period B. Up to $5,000 aggregate for the policy period C. Up to $1,000 per occurrence D. Up to $2,500 per occurrence
C. Up to $1,000 per occurrence Section 2 - Loss Assessment Coverage - applies to assessments agains the insured by a condominium association or other cooperative body or property owners. Coverage is limited to $1,000, but an increased limit of coverage is available by endorsement
Short Rate Cancellation
Cancellation in which the premium returned to the insured is NOT in direct proportion to the number of days remain in the policy period.
What is the difference in the contents coverage on an HO-3 and HO-5?
Contents are covered open peril on HO-5 and named peril on HO-3 Ho-5 provides one peril coverage for contents; HO-3 is named peril coverage for contents. Replacement cost coverage is available only by endorsement to either form.
Which statement regarding insurable risks is NOT correct? A) Insurance cannot be mandatory B) The insurable risk needs to be statistically predictable C) An insurable risk must involve a loss that is definite as to cause, time, place and amount D) Insureds cannot be randomly selected
D) Insureds cannot be randomly selected Insureds CAN be randomly selected. It helps the insurer to have a fair proportion of good risks and poor risks.
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? A. $1,000 B. $100 per violation C. Revocation of license D. $2,500
D. $2,500
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? A. Comparative negligence B. Contributory negligence C. Defense agains negligence D. Assumption of risk
D. Assumption of risk
An individual's construction company leaves movie 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
Which endorsement adds coverage for employee use of automobiles in the insured's business and the insured's use of rented autos if no coverage is provided on a business auto policy? A. Substitue auto liability B. Newly acquired auto exposure liability C. Additional Insured D. Hired and non owned auto liability
D. Hired and non owned auto liability Coverage is provided for liability arising out of the use or maintenance of a hired or non owned auto. This typically refers to employees use of their personal autos for business purposes
Provided that a loss did not result from negligence by the assured, the owners, or the managers of the vessel, additional perils are covered under the A. General average and salvage clause B. Sue and Labor Clause C. Adventure Clause D. Inchmaree Clause
D. Inchmaree Clause Additional perils are covered, provided such loss or damage has not resulted from want of due diligence by the assured, the owners or managers of the vessel. This is commonly called the Inchmaree Clause.
When is liability coverage included in a homeowners policy? A. if the insured has forms HO-2 or HO-3 B. If the insured has form HO-4 C. If there is an endorsement D. It is included automatically
D. It is included automatically
A business using its own trucks to move its own cargo would insure the cargo using A. Motor truck cargo-truckers form B. Motor carrier form C. Trip transit coverage D. Motor truck cargo-owners form
D. Motor truck cargo - owners form
Several insureds have become liable because of a single loss. How will the policy's limit of liability be affected? A. Pro rata liability applies B. A homeowners policy can have no more than one insured C. The full limit applies to each insured individually D. No more than the per occurrence limit applies, no matter how many insureds are involved.
D. No more than the per occurrence limit applies, no matter how many insureds are involved. The insurance applies separately to each insured. This condition does not increase the insurer's liability for any one occurrence
When is a hired and non owned auto liability endorsement available in a businessowners policy (BOP)? A. Only in addition to commercial auto coverage B. Only if the insured has 4 or more employees C. Never D. Only if the insured does not have commercial auto coverage
D. Only if the insured does not have commercial auto coverage This endorsement coverage is excess over any primary insurance coverage on the hired or nonowned auto.
Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance? A. Omissions of material fact on insurance application are fraud B. False statements about financial condition of an insurer are unlawful C. Statements made with the intent to deceive are unlawful D. Only written statements can be considered fraud
D. Only written statements can be considered fraud Written or oral statements can be considered fraud
Which of the following would be the insured's duty in the event of a loss according to the duties in event of occurrence, claim, or suit condition? A. Delivering a claim to the insurer in person B. Initiating the investigation of a claim C. Promptly notifying the insurer of a claim by phone D. Providing specific details regarding an occurrence
D. Providing specific details regarding an occurrence
All of the following statements are 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
Which of the following would the livestock coverage form NOT insure against? A. The euthanasia of livestock suspected of carrying mad cow disease B. Death of livestock caused by accidental drowning C. Death of livestock caused by tornado D. The euthanasia of livestock after being hit by a vehicle
D. The euthanasia of livestock after being hit by a vehicle The livestock coverage form covers death or necessary destruction of livestock caused by basic causes of loss (except vehicles)
In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of loss above this limit? Premium Deductible Self-insured retention Coinsurance
Deducible In property insurance, the amount of loss retained by the insured is called the deductible; in liability insurance, it is called retention. Most property coverages include a deductible; most liability policies do not include retention.
In Property insurance the amount of loss retained by the insured
Deductible (most property coverages include a deductible)
Which HO form provides open peril coverage for Coverage A-Dwelling and Coverage C-Contents?
HO-5
Permitted Incidental Occupancies Endorsement
Homeowners policy endorsement that covers liability exposures arising from an Incidental Business conducted within a building on the residence premises
How does the mobilehome endorsement affect the other coverage of law or ordinance in a homeowners policy?
It removes the coverage
Reduction
Lessening the possibility or severity of a loss
Under the dwelling policy, Coverage C - Personal Property is A- Limited to covering a servant's property while at the insured location. B- Limited to 50% of the amount of Insurance that is written as Coverage A C- Automatically provided as 50% of Coverage A D- prohibited coverage in the dwelling form
Limited to covering a servant's property while at the insured location.
The insurer's responsibility for payment under a policy, as stated in the common policy provisions
Limits of Liability
A General Average
Loss that occurs through the voluntary sacrifice of a part of the vessel or cargo to save the ship, crew, or other cargo
Why don't commercial auto coverage forms automatically include medical payment coverage?
Often any person occupying a commercial vehicle would be covered under a workers compensation policy.
What personal auto coverage would pay for damage to a covered auto due to contact with a deer?
Other-than-collision (comprehensive coverage)
All of the following are additional liability coverages automatically provided in a homeowners policy EXCEPT Personal Injury Claims Expenses Damage to the property of others Loss assessment coverage
Personal Injury- PI can be added by endorsement
Monoline Policy
Policy that covers only one coverage part
FAIR plans are provided by
Private insurers
Under the personal auto policy, liability for bodily injury resulting from the insured's use of a non owned automobile is A. Provided by the insured's policy on an excess basis B. Not Covered C. Shared on a pro rata basis D. Provided by the insureds policy on a primary basis
Provided by the insured's policy on an excess basis. Auto insurance follows the insured auto, so the coverage written on the auto is primary. Automobile insurance also follows the insured as excess over the other collectible insurance.
If an insured purchased an insurance policy with a large deductible, what risk management technique is the insured exercising?
Retention
In Liability insurance the amount of loss retained by the insured
Retention (most liability policies do not include retention)
What is a Reciprocal Insurance Company's main activity?
Risk Sharing
Excluded classifications of employees under a workers comp policy are defined as what?
Statutorily Defined
Comparative Negligence
Statutory defense Damages apportioned based upon the degree of negligence of each party in an accident.
A reduced or limited amount of coverages, other than the combined single limit, that is available to pay claims resulting from passenger bodily injury
Sublimit
Insurance procured from or renewed with an unauthorized insurance company
Surplus Lines Insurance
Surety bonds are written for a definite limit called
The bond penalty.
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?
additional coverage
Which bond is required by a court before allowing one to take the assets of another to satisfy a legal obligation? A. Injunction Bond B. Attachment Bond C. Bail Bond D. Cost Bond
attachment bond An attachment bond is used to guarantee that if the action to attach property was wrong, any damage suffered will be paid.
In any case where there is a controversy or dispute between the insurance company and the insured, the soliciting agent is the agent of the Applicant Insured Company Beneficiary
company