Texas Property & Casualty Guaranteed Exam FX

Which method of dealing with risk is applied when insurance is purchased?

to transfer

An insured and his spouse were traveling down an icy road and hit a sign, accumulating $1,350 damage to their car. They have a $250 deductible. They already collected on a $1,500 claim earlier this year. How much will they collect on this claim?

$1,100

An insurer wants to cancel a personal auto policy for non payment premium, the insurer must send notice of at least?

10 days.

An insurer may decline to renew a Homeowners policy if the insured has filed how many claims under the policy in any 3-year period?

3 or more.

The Commissioner of Insurance must evaluate an insurer's financial condition and its ability to comply with state laws every

5 years.

For there to be a negligent liability, all of the following must exist except? A. A breach of the legal duty which results in injury or damage to another person. B. A legal duty to act, or not to act, under the circumstances. C. Proximate cause between the wrong and the injury or damage D. A reasonable expectation that the act may cause injury or damage.

A reasonable expectation that the act may cause injury or damage

Coverage E (Personal Liability) and/or Coverage F (Medical Payments to Others) would respond to a claim arising from all of the following situations EXCEPT A. An insured's boat stored in the garage slips off of its supports and injures a visitor. B. An insured's dog left in the care of a friend bites a salesman. C. An insured's 14-year-old son was throwing rocks at the neighbor's house and broke several windows. D. While sweeping the floors, an insured's resident maid trips and falls down the stairs, breaking her leg.

An insured's 14-year-old son was throwing rocks at the neighbor's house and broke several windows.

Which of the following stipulates the procedure that insureds and insurers can use when they cannot agree on the value of a loss?

Appraisal clause

When an insured and her insurer could not agree on the amount of liability loss after her accident, the settlement was submitted to someone whose decision was then binding on both parties. What policy condition was applied?

Arbitration

In order to obtain insurance through the Texas Automobile Insurance Plan Association, the applicant must provide proof that he or she has been rejected by

At least 2 auto insurers.

Which of the following components is NOT part of a policy structure? A. Benefits B. Declarations C. Additional coverage D. Definitions

Benefits

Which of the following would be an example of an insurer participating in the unfair trade practice of discrimination? A. Charging different premium rates to the insureds in different insuring classes B. Charging the insured higher premiums based on life expectancy C. Charging the insured higher premiums based on her race D. Making malicious statements about the insured based on his race

Charging the insured higher premiums based on her race

An insured's limit of liability applies to a total of damages for bodily injury and property damage resulting from one accident, which may be used in any combination of amounts, not to exceed the single limit. What type of limit does this insured have?

Combined single

An insured's home catches fire. As a result, the insured's family must stay in a motel until the home is repaired. The cost of the motel stay would be considered

Consequential loss.

To be valid, an insurance policy must have all of the following EXCEPT A. Acceptance B. Consideration C. Offer D. Countersignature

Countersignature

Other-than-collision would cover financial losses due to

Damage to an insured's car caused by wind or hail

Which of the following perils is NOT covered the DP-2? A. Damage caused by the weight of ice and snow B. Damage caused by falling objects C. Damage to pets, birds, or fish D. Damage caused by burglars

Damage to pets, birds, or fish

Loss valuation is best described as the process of

Determining the premium charged and the amount of insurance required on a specific property

Which of the following is covered by auto other-than-collision (comprehensive) coverage? A. Awning attached to car for camping B. Electric equipment required for the normal operation of the car C. Radar detector D. Portable CD player

Electric equipment required for the normal operation of the car

The purpose of purchasing an umbrella liability policy is to provide

Excess insurance over the primary liability policy.

All of the following are factors in the determination of actual cash value EXCEPT A . Insurance premium paid B Age of property. C Replacement cost. D. Property type.

Insurance premium paid

A structure may be eligible for coverage under the National Flood Insurance Program if it meets all of the following requirements EXCEPT A. Is not located within the Coastal Barrier Resource System. B. Has 2 solid walls and a roof. C. Is principally above ground. D. Is entirely over water.

Is entirely over water

What statement must an insurer receive before it will pay benefits for a loss?

Proof of loss

Which type of damages is intended as a form of punishment for negligent, willful, or outrageous intent?

Punitive

When an insurer pays for the cost to exchange damaged property with new property of similar kind and quality, it is called

Replacement cost

What is designed to assume risks that are generally unacceptable to the normal insurance market?

Residual Markets

An insurer's right to take possession of property after having paid for the loss is referred to as the right to

Salvage.

Wagering on a sporting event is an example of what type risk?

Speculative

Upon payment for a loss, the insured is obligated to surrender to the insurer the right to sue a negligent third party. This is called A. insurable interest b. entirety C. subrogation D. indemnity

Subrogation.

Due to appreciation, the amount of insurance on a business is less than 80% of its actual value on the date of the loss. Which of the following is true? A. The policyholder is responsible for twice the amount of the deductible. B. The coinsurance penalty applies. C. The policy pays nothing. D. The full amount of the loss less any deductible is paid.

The coinsurance penalty applies.

What information is found in the conditions part of an insurance policy?

The description of the duties and obligations of the insured

Which of the following would NOT be covered by uninsured motorist coverage? a) The insured's car is hit by someone whose auto insurer is insolvent. b) The insured's family member is struck by a hit-and-run driver. c) The insured causes a head-on collision with the car of an uninsured motorist. d) The insured's neighbor borrowed the insured's car and was hit by an uninsured motorist.

The insured causes a head-on collision with the car of an uninsured motorist.

An insured's diner suffered a fire loss. In addition to the damage caused by the fire, the floor covering had to be replaced because of the water damage. It took 4 weeks for the repairs to be completed. The insured was without income for that period of time. The insured's policy includes both direct and indirect loss coverage. What part of the loss would be paid as indirect loss?

The loss of income for the time the diner was closed

If an insurance policy has the additional coverage provision, how does it affect the policy premium?

There is no additional premium (Additional coverage is a provision in an insurance policy that provides an additional amount of coverage for specific loss expense, at no additional premium.)

What amount of coverage is provided on HO policies for watercraft?

Up to $1,500

A structure that is not inhabited by anyone and stores no property is considered

Vacant.

What is the main distinction between a hired auto and a nonowned auto?

Who owns the auto

An insured has a maximum limit of coverage available under her liability policy during a policy year, regardless of the number of claims made or the number of accidents. Her limits are restored at the policy anniversary. What type of limit does this insured have?

aggregate

An insurer who transacts insurance in this state but whose articles of incorporation are registered in Canada is considered what type of insurer?

alien

When do binders expire?

as soon as the policy is issued

Which of the following is NOT true regarding the automatic increase in insurance endorsement in dwelling policies? A. It is optional. B. It provides protection from inflation. C. It does not require additional premium. D. It increases the amount of coverage by an annual percentage.

c. it does not require additional premium

A lender who conditions approval of a loan on the condition that the borrower purchase insurance from that lender may be guilty of

coercion

During policy solicitation, an insurer exaggerates the financial condition of one of its competitors, and makes it sounds worse than it is. This is an example of an unfair trade practice of

defamation

If a fire erupts in the kitchen and spreads to the upstairs bedroom, resulting in the destruction of furniture, what type of loss has occurred?

direct

Which of the following would be considered a peril? A. Fire B. Smoking C. Driving too fast for conditions D. Playing golf in a thunderstorm

fire

An agreement that is enforceable by law is known as what kind of contract?

legal

Which of the following is the cause of loss?

peril

A property and liability insurer may write business on all of the following EXCEPT a) Property transported on water b) Any home or building c)A person's life

person's life

An applicant for a disability insurance policy has a heart condition of which they are unaware and therefore they answer no to the question pertaining to heart problems on their application. Their answer is considered to be a

representation

For an additional premium, the extended coverages written on the basic form dwelling policy would cover which of the following?

riot

An insured has a personal umbrella with a $2,000 self-insured retention (SIR). Assuming no other policy is involved, how much would the umbrella pay after a $12,000 personal injury liability claim?

$10,000

The maximum monetary penalty for an agent who violates an insurance law, rule or order is

$25,000

The Texas Property and Casualty Insurance Guaranty Association will cover all other claims arising from the same occurrence, except Workers Compensation claims, up to what limit?

$300.000

Resident agents must complete how many hours of continuing education every 2 years?

24 Hours

In a personal auto policy (PAP), a covered auto includes all of the following EXCEPT a) A nonowned temporary substitute vehicle. b) A van used in the delivery business, c) A trailer owned by the insured. d) A farm implement being towed behind the insured's pickup.

A van used in the delivery business,

After a covered loss on a homeowners policy, the insured must do all of the following EXCEPT A. If requested, submit to an examination under oath. B. Prepare an inventory of damaged and undamaged property, including bills, receipts, and related documentation. C. Abandon the property involved to the insurer. D. Allow the insurer to inspect the property as often as reasonably necessary.

Abandon the property involved to the insurer

John had a disagreement with his insurer on the value of his damaged property. After making a written demand, both John and the insurer each selected an appraiser. The appraisers then agreed on a fair value without having to select an umpire. What condition did John use?

Appraisal (If there is a disagreement between the insured and the insurer on the value of any property loss, either party can make a written demand for an appraisal. Each party can select a competent appraiser who will then select an umpire if they are unable to agree on a fair value. A similar condition found in the Personal Auto policy for Motorists coverage is called arbitration.)

If an insurer declares that the value of a loss is $5,000, but the insured is confident that the amount of the loss is substantially different, which of the following would most likely be used to settle the dispute? A. Small claims court B. Umpire hearing C. Third party settlement D. Arbitration

Arbitration

Which of the following is NOT an indicator of a competent party? A. Business profession B. Legal age C. Mental proficiency D. Comprehension of contract

Business profession

To obtain a Texas producer license, an applicant must do all of the following EXCEPT A. Complete prelicensing training. B. Pass an exam. C. Be 18 years of age. D. Submit fingerprints.

Complete prelicensing training

Which part of the policy clarifies the terms that are used throughout the policy?

Definitions

To determine the actual cash value of an insured property, what must be deducted from the current replacement cost?

Depreciated value

Which of the following contract elements best describes insurance written in support of public policy? A. Offer and acceptance B. Competent parties C. Legal purpose D. Consideration

Legal purpose

An insured was involved in an accident that was caused by a tire blowing out. The insured was severely injured and incurred medical expenses of $100,000. The insured brought a recovery action against the manufacturers of the auto and the tires. The court held that the tire was the cause of the accident. Who is required to pay for this loss?

Manufacturer of the tire

Which valuation method takes into consideration what a willing buyer would pay for an insured property?

Market value

An insurance agent visits a potential client and explains various types of policies. The customer displays a lack of interest, so the agent guarantees higher dividends than he knows would be possible. Which term describes what the agent has done?

Misrepresentation

An insurance policy form that lists specific covered perils provide

Named peril coverage.

Which of the following terms means termination of an insurance policy at its expiration date by not offering a policy continuation or replacement? A Cessation B Cancellation C Nonrenewal D Suspension

Nonrenewal

An insured has extended coverage on her dwelling that includes coverage for vandalism and malicious mischief. One evening, she is sitting in her living room when she hears a crash and the sound of glass breaking. She runs to the door and discovers a brick has been thrown through her glass door. To inform her insurer of a possible claim, she fills out a form detailing the events leading to the loss. What is the name of the form?

Notice of Claim form

Which of the following documents notifies the insurer of events that may lead to a possible claim? A. Notice of claim B. Subrogative statement C. Binder D. Appraisal statement

Notice of claim

Prior to paying a claimant under a professional liability policy, the insurer must

Obtain the consent of the insured.

What term includes losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected?

Occurrence

What kind of coverage does Form DP-3 provide?

Open Peril

In contrasting stock insurers with mutual insurers, which statement is true? A. Stock dividends are tax free while policy dividends are taxable. B. Nonparticipating policies can pay out dividends to the policyholders. C. Mutual insurers are owned by the shareholders and issue participating policies. D. Stock insurers are owned by the shareholders and issue nonparticipating policies.

Stock insurers are owned by the shareholders and issue nonparticipating policies.

When an insurer acquires the insured's rights against a third party for the purposes of receiving indemnification for loss, this is called

Subrogation.

If an agent suspects that a fraudulent insurance act has been committed in this state, whom should the agent notify first and foremost?

The Insurance Fraud Unit of the Texas Department of Insurance

An insured was backing his car out of the driveway and hit a fire hydrant. The automobile sustained $1,300 of damage to the bumper. The insured's auto policy has a $500 deductible. Which of the following is true? a) The insured will pay all but $500 of any claims he makes on his policy. b) The insured is responsible for the first $500 of any claim that he makes on his policy, c) The insured is responsible for the total of $500 on claims made for the calendar year on the policy. d) The insured will receive a $500 discount on all repair work that is contracted by his insurer.

The insured is responsible for the first $500 of any claim that he makes on his policy.

Which of the following statements is true regarding personal injury protection (PIP) coverage in auto liability policies issued in this state? A. PIP does not cover funeral expenses. B. Insurers may offer the coverage upon the insured's request. C. The insured may reject this coverage in writing. D. The maximum allowed amount of coverage is $1,000

The insured may reject this coverage in writing.

Under an HO-2 policy, the insurer will pay no more than the actual cash value of the property damage until

The property repair or replacement is complete.

Claims from which of the following types of insurance will be covered by the Texas Property and Casualty Insurance Guaranty Association? A. Workers Compensation B. Credit insurance C. Title insurance D. Fidelity or surety bonds

Workers Compensation

If a car is stolen and left in a snow bank, causing the radiator to freeze and sustain heavy damage, is the damage covered by the auto policy?

Yes, freezing exclusion is removed if the car is stolen

Answers to questions in an insurance application are called representations and, as such. they are

believed to be true to the best of the applicant's knowledge

an insured is at fault in an auto accident, damaging the insured's own car. the damage to the car is covered by a. the insured's comprehensive coverage b. uninsured motorist coverage c. the insured's collision coverage d. the other driver's liability coverage

c. the insured's collision coverage

In order to receive transportation expenses under the personal auto policy following damage to your auto caused by collision, you must have

collision coverage

An insured intentionally did not disclose a material fact on an application for insurance. This would be considered

concealment

Restoring an insured financially after a claim is known as

indemnity

Supplementary payments under the personal auto policy include all of the following EXCEPT

unlimited cost of bail bonds

A single property insurance policy that can provide coverage for multiple classes of property at one location, or one or more classes of property at multiple locations, with one total amount of coverage and no single item assigned a specific amount of coverage is called

Blanket insurance.

Which of the following best defines the unfair trade practice of rebating? A. Making false statements that are maliciously critical and intended to injury another person in the business of insurance. B. Offering an inducement of something of value not specified in the policy C. Making statements that misrepresent an insurance policy in order to induce an insured to replace the policy D. Charging premium amounts in excess of the amount stated in the policy

Offering an inducement of something of value not specified in the policy

What sublimit in a liability policy sets the maximum amount that will be paid for all claims arising from a single accident?

Per occurrence

An insurer may cancel a homeowners insurance policy that has been in effect for more than 60 days for any of the following reasons EXCEPT A. Increase in the hazard that is within the control of the insured that would require an increase in the premium rate B. The named insured does not pay the premium when due. C. The insured submits a fraudulent claim. D. The insured submits a claim against the policy.

The insured submits a fraudulent claim.

Which of the following information does NOT need to be included in the Texas liability insurance card? a) The insurer's name b) The insured's Social Security number c) The make and model of the vehicle d) The policy number

The insured's Social Security number

If the premiums collected by an insurer participating in the WYO flood program are insufficient to cover losses, which of the following would be true? A. Federal Insurance Administration will remove the insurer from the NFIP. B. The insurer will be reimbursed for the excess costs by the NEIP C. The insurer must cover the loss out of its surplus. D. The insurer must apply for disaster relief funds.

The insurer will be reimbursed for the excess costs by the NFIP.

An insured was judged at fault in an automobile accident. He has the 100/300 bodily injury liability coverage. Three other individuals were injured in the vehicle hit by the insured. They were awarded damages of $150,000, $75,000 and $75,000. What amount, if any, was not covered by his insurance policy?

$50,000

NFIP flood insurance policies have a term period of

1 year.

According to the Motor Vehicle Safety Responsibility Law in Texas, which of the following coverage amounts would satisfy proof of financial responsibility? A. 15/50/15 B. 30/60/25 C. 20/40/20 D. 25/50/10

30/60/25

When insurance is written on a dwelling form, which of the following types of property would be insured under Coverage B (Other Structures)? A. Materials and supplies used for construction or repair of the dwelling B. A laundry room attached to the dwelling C. Building equipment and outdoor equipment D. A garage separated from the dwelling

A garage separated from the dwelling

An insurer must be fair in underwriting and must pay all covered losses of any insured. For the faithful execution of these duties, an insurer has the right to

Accept the payment of premiums for all policies currently in force.

All of the following statements about mutual insurance companies are correct EXCEPT A. Mutual companies issue policies referred to as participating. B. Policy dividends issued by mutual companies are guaranteed and not taxable. C. Dividends allow policyholders to share in a mutual company's divisible surplus. D. Dividends are a return of unused premiums.

Policy dividends issued by mutual companies are guaranteed and not taxable.

Which of the following best depicts the law of large numbers? A. Large groups offer less opportunity for loss. B. The larger the group is, the more likely it will be to get a good choice. C. The larger the pool of risks under study, the more accurate the predictions will be D. Larger groups produce healthier applicants.

The larger the pool of risks under study, the more accurate the predictions will be

An automobile policy has limits of 100/300/50. The number 100 means

The maximum limit for bodily injury claims that can be paid for one person.

When an insured's gardener was spraying weeds in his lawn, he failed to notice that the wind was drifting the spray into the neighbor's yard where he damazed their flower bed. The insured was found to be legally liable for this damage. This is an example of

Vicarious liability.

The declarations section in a homeowners policy provides all of the following information EXCEPT A. Insured locations B. Policy exclusions C. Basic underwriting information. D. Amount of deductible applied to a loss.

policy exclusions

What is a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected nor intended called?

Accident

Which of the following would be added for coverage under a property policy by an endorsement?

Additional Insureds

A personal umbrella policy may act as excess over any of the following insurance coverage policies EXCEPT A. Homeowners Section Il coverage. B. Auto liability coverage. C. Comprehensive personal liability. D. Auto collision coverage

Auto collision coverage

Which of the following provisions is usually found in homeowners policies and provides a replacement cost settlement to policyholders who carry adequate insurance? A. Coinsurance B. Actual cash value C. Pro rata D. Insurance to value

Insurance to value

An insured just purchased an auto policy for his new car. He wants to understand what perils are not insured against. Which section of his policy should the insured check? a. definitions b. exclusions c. insuring agreement d. declarations

b. exclusions *the exclusions section of an insurance policy details what perils are not insured against and what persons are not insured