Simulated Exam Review

What is the maximum fine for submitting a false or fraudulent claim to the insurer?

$1,000

What is the maximum amount an insurer will pay under the equipment dealers pollution cleanup and removal extension of an inland marine policy?

$10,000 for all expenses incurred during a 12-month period.

What is the basic limit for costs incurred at the place a vehicle is disabled provided by the towing and labor costs endorsement?

$25

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?

$25,000

What is the correct formula for computing a loss ratio?

(incurred losses + loss adjusting expense)/earned premium.

A trucking company owns a large fleet of trucks that transport oil across state lines. According to the financial responsibility requirements set by the Motor Carrier Act of 1980, what is the minimum amount of insurance the company must carry on vehicles that transport oil?

1 million

The business owners policy liability coverage will pay for necessary medical expenses of others incurred within what maximum time period?

1 year

Within what time period after completing pre-licensing education must an applicant file a certificate of education with the Commissioner?

12 months

When an insurer refuses to renew an auto policy, within how many days must it mail a notice of nonrenewal to the insured?

20 days

If an insurer terminates a producer, the Commissioner must be notified. How many days does the insurer have to deliver this notice?

30 days

Under business owners 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 mortgage holder?

30 days

An insured 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?

30 days.

Licensees who are currently licensed, and have recently become residents of the state of Michigan may not have to complete any pre-licensing education. To qualify for this exemption, they must apply to become resident licensees within a few days of establishing a legal residence within how many days?

90 days

Name a situation where a jewelers block extension would cover a loss.

A jeweler fixes a necklace and sends it by registered mail to the owner. When the necklace arrives it has been damaged.

Coverage F (medical payments) under a homeowners policy would cover...

A residence employee who is injured on the job.

What type of liability would a person who owns a swimming pools have?

Absolute

According to the law of agency, a principal is represented by an

Agent

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?

Apparent

What type of agent authority is also called "perceived authority?"

Apparent

An employee is injured while visiting the employer's out-of-state site. How will the workers compensation benefits be determined?

Benefits will be provided if the state was listed on the policy information page.

What would be included in the farm liability coverage forms?

Bodily injury to a residence employee

Which of the following could be used when a corporation, association, partnership, or limited liability partnership acts as a producer?

Business Entity

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?

Business auto coverage form may apply

What is an additional coverage that is covered by the broad causes of loss form?

Collapse

The transfer of money from inside a banking premises to a person other than a messenger outside those premises or to a place outside those premises is covered under which commercial crime coverage?

Computer fraud

Something of value exchanged between the insurer and the insured is considered an _________________.

Consideration.

What is NOT covered under the Utility Services - Time Element endorsement?

Damage to the insured's property caused by utility service disruption.

When twin brothers applied for life insurance from company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate of insurance. This practice is considered...

Discrimination

Describe the aleatory nature of an insurance contract?

Exchange of unequal values

Circulating deceptive sales material to the public is what type of unfair trade practice?

False advertising

Which federal act provides benefits to injured civilians who are employed by the federal government?

Federal Employees Compensation Act

An insurance company assures its new policyholders that their premium costs will not increase for a period of at least 5 years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next 2 years. What term best describes this act?

Fraud

The main difference between and HO-4 and an HO-6 is...

HO-6 provides limited dwelling coverage as well as contents coverage.

What endorsements is used by individual business owners who use company vehicles for personal use rather than purchasing a personal vehicle .

Individual named insured

What is NOT true regarding Certificate of Authority?

It is issued to group insurance participants

While cutting grass in your yard with your brother's borrowed lawnmower, the fuel line ruptures and the lawnmower is destroyed in the fire. How will your HO liability react?

It will cover the damage.

To perform work on a customer's car, a mechanic in an auto shop had to put the vehicle on a service hoist. The hoist collapsed, damaging the vehicle and injuring the mechanic. In regard to the garage coverage form...

No coverage is applicable

If a policy is terminated by the insurer within the first 55 days after the initial issuance of the policy, when can the termination be made effective?

No sooner than 20 days after the mailing of the notice.

The purpose of the Michigan automobile insurance placement facility is...

None of the above

An insured has a personal property replacement cost endorsement under her homeowners policy. If an expensive painting and an antique chair are stolen from the insured's home, what will the insured receive on the claim under that endorsement?

Nothing.

What insurance policy provision defines how the policy will respond if there is more than one insurance policy written on the same risk?

Other insurance

First aid costs for others injured on the insured's premises are...

Paid in addition to the liability limit.

A participating insurance policy may...

Pay dividends to the policy owner.

Which professional liability form provides coverage for liability arising out malpractice, error, or mistakes made in rendering professional services?

Physicians, surgeons and dentists malpractice.

Which inland marine coverage condition says that an insurer will settle with the actual owners of property involved in a loss?

Privilege to adjust with the owner.

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...

Pro rata liability

What is NOT regulated by the insurance department?

Producer commission schedules

_______________ is not considered part of the policy structure.

Provisions

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?

Residual liability insurance

Which policy condition in HO policies states that insurance applies separately to each insured?

Severability of insurance

In the event of a claim under a commercial general liability policy, the insured does NOT have this duty to the insurer...

Submitting to a medical exam when requested

Under a dwelling policy, what is NOT a factor in determining a loss?

The amount negotiated by the insured.

When the condominium association coverage form and the condominium commercial unit-owners form both cover the same loss...

The association coverage form will be considered primary and pay the loss.

What is a true statement regarding the commercial general liability policy's Coverage C - Medical Payments?

The coverage is considered good will because payments are made without regard to fault.

The contents coverage on a homeowners policy would pay how much after the loss of one of a pair of golden candle sticks?

The difference in the actual cash value as a pair and as a single.

What is true regarding mobile equipment endorsement in commercial auto policies?

The endorsement is available for additional premium

According to the standard workers compensation and employer liability policy form, a state should be listed in Part Three - other states' insurance of the workers compensation and employers liability policy when...

The insured expects to extend operations to that state.

With respect to commercial auto policies, the garage coverage form does NOT provide coverage for...

The insured's business income losses due to personal injury.

What is NOT a characteristic of an insurable risk?

The loss must be catastrophic

The cancellation provision in a business owner's policy does NOT specify...

The method of transferring the owner's rights

What is an example of a producer's fiduciary duty?

The trust that a client places in the producer in regard to handling premiums.

What is NOT an other coverage included in both the broad and special form dwelling policy?

Theft of personal property

What is true regarding single dwellings that are insured to at least 80% of the replacement value?

They are automatically provided with replacement cost coverage

Uncle Billy's burger bar

Time element

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

Unilateral

An insured is a member of the neighborhood association, and has become liable for damage to a third party. Each member of the association has been assessed a portion of the loss equal to $2,000. How much will the Loss Assessment additional coverage of the insured's homeowners liability policy pay?

Up to $1,000

What would not be considered part of the insured location under the liability section of a homeowner's policy?

Vacant farmland owned by the insured.

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.

What is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty

Under the business auto coverage form, mobile equipment is covered for liability insurance...

When being carried or towed by a covered auto.

A claim is considered to have been made...

When notice is received and recorded by any insured or the insurer, whichever comes first.

The insured with a claims-made commercial general liability (CGL) policy may request in writing claim and occurrence information from the insurer at any time up to 60 days after the policy period ends. The insurer must provide the information.

Within 45 days

Medical benefits under Workers Compensation statutes are provided...

Without limit

If a farm building or structure is vacant or unoccupied...

for 120 consecutive days, the limits applicable to the building and its contents are reduced by 50%