Insurance Claims and Policies: Key Concepts and Scenarios, Exams of Insurance law

Download Insurance Claims and Policies: Key Concepts and Scenarios and more Exams Insurance law in PDF only on Docsity! Florida Adjuster licensing (450 Questions and Answers). While driving, Ben was struck by another driver, Roxanne. Ben then filed a claim with Roxanne's insurer. In essence, what was Ben doing when he filed this claim? Alerting Roxanne's insurer of his intent to take the case to court Submitting a formal request to settle the damages with Roxanne's insurer Ordering Roxanne's insurer to pay for his damages within 15 days Admitting he was actually "at fault" - Correct Answers Submitting a formal request to settle the damages with Roxanne's insurer Mark incurred $8,000 damage to his car in an accident. He received $8,000 from his insurance company and $4,000 from the other driver. By receiving a profit from the loss, Mark could be in violation of: the principle of financial status. the principle of financial restoration. the principle of profit and loss. the principle of indemnity. - Correct Answers the principle of indemnity What is a reserve, in insurance terms? The amount of revenue that the insurer sets aside to pay employee salaries A group of policyholders who pay into the same pool of premiums A pool of collected premiums that the insurer sets aside to pay claims A set of rules governing how the insurance industry should work - Correct Answers A pool of collected premiums that the insurer sets aside to pay claims The purpose of the principle of indemnity is: to prevent an insured from making a profit on a loss. to transfer the risk of financial loss from one party to another. to transfer the right to collect a debt from one party to another. to prevent an insurer from making a profit on a loss. - Correct Answers to prevent an insured from making a profit on a loss. Greg plays trombone in his school band during football games. During a rally song in the stands one day, Greg annoys one of the opposing team's fans, who grabs his $400 trombone and hurls it down the bleachers, completely destroying it. Greg's insurance pays him $400 to replace the trombone, but then the opposing team's coach also offers to replace the instrument, at whatever the cost. So Greg orders a new $3,200 trombone and has the opposing team's athletic department absorb the cost. Which principle has Greg violated? The principle of consideration The principle of legal purpose The principal of the opposing team The principle of indemnity - Correct Answers The principle of indemnity Which of the following refers to being restored to the financial condition you were in before a loss? Indemnification Restoration Estoppel Subrogation - Correct Answers Indemnification Bobby just purchased an insurance policy for his home from XYZ Insurance. Which of the following would be a reason this policy may not be legally binding? Bobby has an outstanding warrant for selling marijuana. Bobby has been diagnosed with schizophrenia. Bobby paid his first premium when he and his agent agreed on a policy, but he is waiting for the policy documents to be prepared so he can sign them Bobby is only 19 years old. - Correct Answers Bobby has been diagnosed with schizophrenia. Indemnification may include all of the following except: reimbursement for hotel costs. reimbursement for rental car costs. payment for pain and suffering. anything the insured must do for coverage to remain in effect. the insured's duties after a loss. - Correct Answers causes of loss that are not covered. Which of the following statements is true about an insurance policy? The insured is obligated to the terms of the contract for the entire policy period. It relies on the utmost good faith of both the insured and the insurer. It is transferable if the property is sold to another party. The insured sets the terms of the policy. - Correct Answers It relies on the utmost good faith of both the insured and the insurer. In an insurance policy, the summary of what the insurer will do in the event of a covered loss is called: the insuring agreement. the dec page. the conditions section. the definitions section. - Correct Answers the insuring agreement. In a __________, only one party is legally obligated to perform. unilateral contract conditional contract contract of adhesion contract of utmost good faith unilateral contract - Correct Answers unilateral contract Insurance policies are unilateral contracts. This means: only one party has an obligation to perform. ambiguities are settled in favor of the insured. they depend on an unknown future event. they rely on the honesty of both parties. - Correct Answers only one party has an obligation to perform. Which of the following is NOT a characteristic of insurance contracts? Universal Conditional Unilateral Aleatory - Correct Answers Universal If an adjuster needs to find clarification about what actually constitutes a collision, in which section of an insurance policy would she find that information? Declarations Exclusions Conditions Definitions - Correct Answers Definitions Which of the following best describes a Fraternal Benefit Society? A fraternal benefit society is a for-profit provider of insurance. A fraternal benefit society uses investors' money to pay claims. A fraternal benefit society is a social organization based around common interests and beliefs. A fraternal benefit society pays dividends to its stockholders. - Correct Answers A fraternal benefit society is a social organization based around common interests and beliefs. Which of the following is NOT a characteristic of social insurance programs? Social insurance programs are for-profit programs. Social insurance programs are designed to meet the needs of the general public as a whole. The benefits of a social insurance program may be prescribed by federal law. Social insurance programs involve mandatory participation. - Correct Answers Social insurance programs are for-profit programs. When an insurer buys insurance to reduce its exposure to loss, this is called: mitigation. loss reduction. co-insurance. re-insurance. - Correct Answers re-insurance. Frank purchases an automobile policy from publicly-traded XYZ Insurance. He pays regular monthly premiums, and also purchases stock in XYZ and receives dividends when the company turns a profit. From which type of company has Frank purchased insurance? Re-Insurer Reciprocal insurer Mutual insurer Stock insurer - Correct Answers Stock insurer Xavier owns a small insurance company. Recently the company won a bid to insure a new housing development in Omaha, NE. His company can handle any claims that arise, but if a series of tornados were to tear through the area and destroy the entire development, Xavier's company would suffer financially. Which type of insurer could help Xavier's company protect itself the most from this potential loss? A re-insurer A fraternal benefits society A stock insurer A reciprocal insurance group - Correct Answers A re-insurer Cindy holds an insurance policy from Sine Nomine Insurance. This is not a publicly traded company, and Cindy can participate in the election of the board, receiving dividends if the company does well. Sine Nomine Insurance could be best described as a: a risk retention group. fraternal benefits society. stock insurance company. mutual insurance company. - Correct Answers mutual insurance company. Edward is a member of the Knights of Columbus, a religious group dedicated to voluntary service to the benefit of society. He also recently purchased a $100,000 life insurance policy from the organization. This was possible because the Knights of Columbus is: a risk retention group. Which of the following is an example of a hazard? Sandra buys a lottery ticket every day. Sandra's home is destroyed when a massive earthquake hits. Sandra owns an exotic car that is extremely valuable. Sandra's home is in an area of Los Angeles that is often hit by earthquakes. - Correct Answers Sandra's home is in an area of Los Angeles that is often hit by earthquakes. Steve has just purchased a wedding ring for his new bride. If something were to happen to the ring, he'd be out a lot of money, so he purchases an insurance policy. He is able to do this because: the ring is a safe risk. the ring is a sure risk. the ring is a speculative risk. the ring is a pure risk. - Correct Answers the ring is a pure risk. Which of the following would be considered an insurable risk? A partnership A suburb A mountain range A football stadium - Correct Answers A football stadium A "hazard" is defined as: the likelihood of experiencing a loss. something that increases the chance of a loss. an unexpected event that causes loss. an insured item. - Correct Answers something that increases the chance of a loss. Which of the following situations does NOT involve an instance of "pure risk?" Loss of money invested in the stock market Loss of a house due to a hurricane Loss of crops due to an infestation of parasites Loss of a company car in an unfortunate accident - Correct Answers Loss of money invested in the stock market When an insurer issues an insurance policy, the actual item, person, or organization that is being insured is called the: hazard. loss. peril. risk. - Correct Answers Risk Each of the following would classify as an insurable risk, except: a brick patio. a rocket. a marriage. a barn. - Correct Answers a marriage. Six Stars Development Company has just been offered a great deal on ten large properties in Las Vegas. The economy in Las Vegas has been declining recently, but the CEO of Six Stars expects it to recover soon. This could be an exceptional opportunity for Six Stars, but it's also pretty risky. Ultimately, the Six Stars executive team decides not to purchase the properties. This is an example of: risk transference. risk reduction. risk retention. risk avoidance. - Correct Answers risk avoidance. Jared hopes to purchase a new insurance policy for his car, but he has an extremely poor driving record. The insurance company decides to issue Jared an insurance policy, but charges him a premium much higher than the average driver. The insurance company is practicing: risk reduction. risk avoidance. risk retention. risk transference. - Correct Answers risk reduction. Six Stars Development Company has just been offered a great deal on a bulk purchase of dishwashers from a new company called Clean Machines. They've never purchased appliances from Clean Machines, so they're hesitant to make such a large purchase. Finally, Clean Machines offers to provide 10-year warranties for each of the dishwashers. This is an example of: risk avoidance. risk reduction. risk retention. risk transference. - Correct Answers risk transference. Which of the following is NOT a risk management technique? Risk retention Risk equality Risk avoidance Risk reduction - Correct Answers Risk equality Six Stars Development Company has just purchased several large properties in Las Vegas. As a result of this large purchase, they are a little short on money and decide to save money by not purchasing insurance on their new properties. Six Stars is practicing: risk retention. risk avoidance. risk reduction. risk transference. - Correct Answers risk retention. Risk avoidance is a risk management technique that: counterbalances risk. increases risk. reduces risk. eliminates risk. - Correct Answers eliminates risk. warranty. misrepresentation. - Correct Answers misrepresentation. An oral or written statement providing temporary insurance coverage until an insurance policy can be issued is called a: contract. agreement. consideration. binder. - Correct Answers binder. Rachel is filling out an application for a homeowners policy. She is truthfully answering the questions regarding her home's location, size, age, etc. Which of the following is a true statement? Rachel is providing representations. Rachel is providing factual misrepresentations. Rachel is providing binders. Rachel is providing warranties. - Correct Answers Rachel is providing representations. When Sally applies for an auto policy, her agent issues her a ________ so that she can benefit from insurance protection while he underwrites the policy. waiver representation warranty binder - Correct Answers binder What is a binder? A legal principle that binds the insurer to its guarantees A voluntary surrender of a privilege Temporary coverage for an insurance applicant until the policy is issued A promise or guarantee that certain conditions will be met - Correct Answers Temporary coverage for an insurance applicant until the policy is issued Adam has a treacherous drive to work every day. Not only does he have to drive down the pothole-strewn access road to the highway, but he also must traverse several icy bridges on the way to work. Why does the insurance company call these hazards "physical hazards"? Adam doesn't consciously choose to take this route. They take a toll on Adam physically, increasing the chance of a loss. The roads present a physical condition that increases the chance of a loss. Adam is indifferent to any losses he may suffer. - Correct Answers The roads present a physical condition that increases the chance of a loss. John owes a lot more on his car than it is worth. He figures he would be better off if he burned the car and collected an insurance settlement. He has someone set fire to his garage to destroy the car. John's behavior would be considered a: hazard. physical hazard. morale hazard. moral hazard. - Correct Answers moral hazard. Lucy has insurance on an expensive necklace she likes to wear to work every day. After work, she takes it off and leaves it in her car's cupholder so she can put it back on in the morning on her way to work. Lucy's behavior would be considered a: morale hazard. physical hazard. moral hazard. hazard. - Correct Answers morale hazard. Which of the following statements about a moral hazard is FALSE? A moral hazard increases risk. It is reckless behavior because of security offered by insurance. It is a hazard caused by human behavior. It is the result of an unconscious behavior. - Correct Answers It is the result of an unconscious behavior. Arlene's house suffered structural damage in an earthquake last year, but her policy does not cover earthquake damage, so Arlene never got it fixed. When a tornado rips through her neighborhood, it causes some roof damage totalling $2,000, and Arlene sees an opportunity in the situation. She files a claim for the roof damage, but also claims that the tornado caused the structural damage to her house that was actually caused by the earthquake last year. Which of the following statements is true? Arlene has just created a physical hazard. Arlene has just committed soft fraud. Arlene has just created a morale hazard. Arlene has just committed hard fraud. - Correct Answers Arlene has just committed soft fraud. Lewis owns a computer store, and he spends many hours a day on the sales floor demonstrating his products to customers. He often gets very animated when showing the electronics and, although he does not intend for anything bad to happen, he doesn't worry too much about handling them carefully, since he knows that his insurance policy will cover any damages. This behavior would be called a: physical hazard. fraud. moral hazard. morale hazard. - Correct Answers morale hazard. Which of the following is an example of a moral hazard? Kim is jamming out to her music while driving to work and accidentally runs a red light. The road that leads to Mike's house is steep and narrow an occurrence. a direct loss. an indirect loss. - Correct Answers a direct loss. As Jonathan was driving through an intersection, another driver ran a red light and crashed into the side of Jonathan's car, which caused significant physical damage to both vehicles. Jonathan must now rent a car while his is being repaired. The rental car expense would be considered a: physical hazard. proximate cause. indirect loss. direct loss. - Correct Answers indirect loss Adam is shopping for a car in a local automobile dealership. While visiting the showroom, he trips over a rug that has folded over and breaks his arm in the fall. Which of the following is true? The automobile dealership may file a first party claim with its own insurance company. Adam may file a first party claim with the dealership's insurance company. The automobile dealership may file a third party claim with its own insurance company. Adam may file a third party claim with the dealership's insurance company. - Correct Answers Adam may file a third party claim with the dealership's insurance company. Which of the following is most likely a third party claim? A woman files an insurance claim when she is injured by an employee at a local bar. A woman files an insurance claim after she backs her car into a guardrail. A man files a claim against his health insurer for a surgery to remove his appendix. A man files a homeowners claim when his house is struck by lightning. - Correct Answers A woman files an insurance claim when she is injured by an employee at a local bar. Flora is driving in the rain when she skids off the road and slams into Cam's billboard, totaling her car and causing $2,000 in damage to the billboard. Flora has an auto policy with ABC Insurance, and both Cam and Flora submit claims against this policy for their damages. Which of the following is TRUE? Flora will file a first-party claim for the damage to Cam's billboard and a third-party claim for the damage to her car. Flora will file a third-party claim for the damage to Cam's billboard and a first-party claim for the damage to her car. Flora will file a first-party claim for the damage to her car, and Cam will file a third-party claim for the damage to his billboard. Flora will file a third-party claim for the damage to her car, and Cam will file a first-party claim for the damage to his billboard. - Correct Answers Flora will file a first-party claim for the damage to her car, and Cam will file a third-party claim for the damage to his billboard. An insurance adjuster will do all of the following regarding a claim EXCEPT: protect the insurer from the claim. determine if the claim falls under the coverage of the insurance policy. decide whether the claim has any merit. investigate the claim. - Correct Answers protect the insurer from the claim. Sam suffers $6,000 in injuries when Nicole runs a red light and crashes her uninsured car into Sam's. Sam's own insurance company, ABC Insurance, immediately pays him $5,000 for his injuries. Sam then ponders whether to file a $6,000 lawsuit against Nicole. Why can't Sam sue Nicole for the full amount of his injuries? Once ABC Insurance indemnifies Sam for $5,000, Sam is blocked from any further legal action. Sam first needs to wait to see how much Nicole pays to ABC Insurance. Nicole has already subrogated her rights to Sam's insurance company. By accepting payment from ABC Insurance, Sam subrogated a portion of his rights against Nicole to ABC Insurance. - Correct Answers By accepting payment from ABC Insurance, Sam subrogated a portion of his rights against Nicole to ABC Insurance. Sally throws a cigarette butt into Neal's dumpster, starting a fire on Neal's property that costs him $10,000. Neal files a claim with his insurer. The insurer pays Neal and then demands $10,000 from Sally to pay for the loss she caused. What gives the insurer the right to collect payment from Sally? Vicarious liability Right of recovery Estoppel Subrogation - Correct Answers Subro Which of the following statements about insurable interest is FALSE? When a renter leases your house, your insurable interest in the home remains. Maintaining property values allows your neighbor to have an insurable interest in your house Insurable interest reduces the incentive for someone to cause damages intentionally to insured property. Purchasing an insurance policy on your home helps protect your insurable interest in a home. . - Correct Answers Maintaining property values allows your neighbor to have an insurable interest in your house James is walking down the street when Andrea, an uninsured motorist, strikes him with her car. James suffers $12,000 in injuries from the accident. He has personal injury protection of $10,000 from his own automobile insurance policy, which immediately pays him the full amount. By accepting $10,000 from his own insurance company, James has waived the right to sue Andrea for more than _____ for personal injury. Jesse's home is worth $199,000 and he has a homeowners policy with a $150,000 limit. After burglars broke in, stole several items of his personal property, and broke his glass patio door, Jesse is left with a total of $5,300 in damages. Assuming the insurer decides to invoke the standard coinsurance penalty, approximately how much can Jesse hope to receive in indemnification? $3,923 $5,300 $4,240 $4,992 - Correct Answers $4,992 To meet the 80% level of co-insurance required by his lender, Tom discovers he must insure his home for at least $320,000. What is the value of Tom's home? $320,000 $256,000 $400,000 $440,000 - Correct Answers $400,000 Clara plays the harp in an orchestra. Her harp cost $12,000, and she had it for 5 years before it was stolen from her locker at a symphony hall. She recently found out a new harp will cost $15,000. Assuming her harp depreciated at $1,000 a year, how much will an actual cash value policy indemnify Clara? $7,000- ACV pays the original amount paid minus depreciation $10,000 - ACV pays at current market value minus depreciation $12,000- ACV pays the original amount paid for the item $15,000 - ACV pays the current market value - Correct Answers $10,000 - ACV pays at current market value minus depreciation Jane's has a $150,000 homeowners policy with a 3% percentage deductible. One night, an oven fire destroys her kitchen, causing $50,000 in damage. How much of the damage falls under Jane's responsibility? $15,000 $4,500 $1,500 $3,600 - Correct Answers 4500 While making a right-hand turn from the right lane, Ben is sideswiped by Roxanne, totaling the car he bought new 12 years ago for $15,000. Roxanne is judged to be at fault. She has an auto policy with limits of 50/100/25 and a $500 deductible on her collision coverage. Assuming Ben's car depreciates at a rate of $1,100 a year, how much will Roxanne have to pay out of pocket when Ben files a claim against her insurer for the damages? $1,100 $500 $1,800 $0 - Correct Answers 0 Kevin plays in a brass band using two rare antique Alexander tubas. Since they are no longer produced, the value of the tubas is difficult to determine. Which type of policy would best indemnify Kevin in the event that his tubas were ever damaged, lost, or stolen? Franchise deductible policy Replacement cost policy Actual cash value policy Agreed value policy - Correct Answers Agreed value policy Which of the following statements applies to replacement cost valuation? Replacement cost valuations take into account the depreciated value of an item. Under replacement cost valuation, insurers may safeguard the principle of indemnity by requiring policyholders to replace insured items before making full reparations. Replacement cost valuations provide cheaper premiums for the policyholder than an actual cash value insurance policy. An actual cash value policy will pay out more than a replacement cost value policy. - Correct Answers Under replacement cost valuation, insurers may safeguard the principle of indemnity by requiring policyholders to replace insured items before making full reparations. Which of the following statements applies to liability insurance? A liability policy indemnifies the policyholder. Product liability insurance would cover a ""slip and fall"" accident. Liability must be decided by a court of law before an insurer will pay a liability claim. A liability insurance policy always indemnifies a third party. - Correct Answers A liability insurance policy always indemnifies a third party. Which of the following incidents would a liability insurance policy cover? The company van is stolen from your warehouse. A fire damages the back bedroom of your house. A man crashes his car into his own fence. A man slips inside a grocery store and injures himself. - Correct Answers A man slips inside a grocery store and injures himself. Alex owns a manufacturing business creating toys for young children. Some of the toys have small parts which, if used inappropriately, could cause harm to small children. He has a warning label printed on his packaging, cautioning parents of the potential risks, but needs insurance to handle any potential claims against his product. Which type of insurance would best cover Alex's insurance needs? Product liability insurance Workers' compensation insurance Employer liability insurance Public liability insurance - Correct Answers Product liability insurance One December morning, Alex arrives at his business to find freshly fallen snow on his property. Before he has a chance to shovel the snow, a customer slips and falls on the sidewalk, breaking her hip. What type of construction site leads to $150,000 in damage to public property. Assuming the cause of loss is covered under ABC Masonry's liability policy, how will this claim be paid? The insurer pays $150,000 and the aggregate limit is still $300,000. The insurer pays $100,000; the aggregate limit is still $300,000; and ABC Masonry must pay $50,000. The insurer pays $150,000 and the aggregate limit is now $200,000. The insurer pays $100,000; the aggregate limit is now $200,000; and ABC Masonry must pay $50,000. - Correct Answers The insurer pays $100,000; the aggregate limit is now $200,000; and ABC Masonry must pay $50,000. Robert is delivery driver for Acme Surplus. On his last stop of the day, he runs a stop sign and broadsides Daryl's car, causing $14,000 in damage to Daryl's car, as well as $21,000 in damage to his company truck. Which type of coverage would help protect Acme Surplus from these losses? Employer liability insurance Daryl's auto liability insurance. Personal auto liability insurance Personal liability insurance - Correct Answers Employer liability insurance ___________ is a law set forth by a governing body such as a state or city. common law complaint law liability law statutory law - Correct Answers statutory law Once a claimant files a complaint to the court, the claimant will become the: plaintiff. answering party. negligent party. defendant. - Correct Answers plaintiff. Tim is the plaintiff in a case involving an auto accident. To recover monies he feels are due him, Tim produces documents to prove he had to pay over $55,000 in medical bills. If the court were to award Tim $55,000, the damages would be classified as: general damages. imperative damages. special damages. tort damages. - Correct Answers special damages. James and Eric want to play a prank on Bob for Halloween. They dress up like headless horsemen and throw ignited Jack O'Lanterns at his house. Unfortunately, one of the inflamed pumpkins catches the porch on fire, causing $3,500 in damages. Bob doesn't find this tomfoolery very entertaining and sues both James and Eric for the cost of the repairs. In court, James and Eric would be: intentional tort. the plaintiffs. a tortfeasor. a joint tortfeasor. - Correct Answers joint tortfeasor A few weeks ago Christopher's garage was destroyed by an out-of-control motorist. Fortunately, the motorist had sufficient liability insurance to cover the damages. However, the insurer insists that Christopher's garage is worth far less than the appraisals he has received from contractors. Christopher and the insurer have gone back and forth in negotiations for weeks, making little headway. Christopher decides it's time to: issue a complaint against the policyholder. issue a judgment. issue a reservation of rights. issue an answer for the policyholder. - Correct Answers issue a complaint against the policyholder. Joan files a lawsuit against Andy because his dog escaped and caused her to fall on an icy sidewalk. Which of the following statements is FALSE? Andy must submit an answer. Andy must notify his insurer that he is being taken to court. Andy's insurer is obliged to defend him in court until it proves that there is no coverage under the policy in question, or until the suit is settled. Andy's insurer will send Joan a reservation of rights. - Correct Answers Andy's insurer will send Joan a reservation of rights. Mental anguish would be an example of: general damages. tangible damages. punitive damages. special damages. - Correct Answers general damages. Ricky was watching a baseball game at XYZ Stadium, when the railing on which he was leaning gave way and he fell two stories. As a result of his fall, Ricky broke his back and is now paralyzed from the waist down. Ricky sued the owners of XYZ Stadium and was awarded $150,000 to cover his medical bills and $2.5 million in __________ because of the permanent nature of his injury. tort damages general damages punitive damages special damages - Correct Answers general damages When would a default judgment occur? In cases that involve an intentional tort When a defendant does not answer a complaint When an insurer sends a reservation of rights Policy X will pay $75,000 and Policy Y will pay nothing - Correct Answers Policy X will pay $60,000 and Policy Y will pay $15,000 Frank purchased a $150,000 insurance policy for his home, which is valued at $125,000, with the hopes of making a $25,000 profit in the event his home is destroyed. After Frank burns his house down, he files a claim against his homeowners policy. Assuming that Frank's policy includes an overinsurance provision, how much will his insurer indemnify Frank for his loss? $0 $25,000 $150,000 $125,000 - Correct Answers $0 Which of these is NOT typically excluded from coverage in a property insurance policy? Off-premises power failure Civil confiscation Nuclear events Lightning - Correct Answers Lightning Which of the following is TRUE of the vacancy condition in a typical insurance policy? It establishes the parameters for considering a building vacant for the purpose of coverage. It states that the insurance policy will terminate if the insured building is vacated. In commercial policies, it states that a building is vacant if more than 31% of the building is unoccupied. It states that a dwelling vacant for more than 15 days is not insurable. - Correct Answers It establishes the parameters for considering a building vacant for the purpose of coverage. Melanie's $300,000 home suffers $90,000 in damage from a fire. The adjuster finds the home's value since 2008 has depreciated 25%, making the ACV loss $67,500. Although Melanie's policy covers repairs at their replacement cost, she receives $67,500 at the time of loss. Repairs to her home end up totaling $79,500. How much, if any, further indemnification may Melanie receive from the loss? $0 $10,500 $22,500 $12,000 - Correct Answers $12K The Severability of Interests condition states that: coverage applies to each insured separately, as if no other insured existed. when an insurer pays a total loss settlement, policy coverage may terminate and any unearned premiums will be refunded to the insured. an insurer has the right to cancel an insurance policy at any time. an insured has the right to cancel an insurance policy at any time. - Correct Answers coverage applies to each insured separately, as if no other insured existed. According to the Mortgagee Clause, what is NOT one of the rights of the mortgagee? The mortgagee may be indemnified, even in the event of fraud by the insured. The mortgagee will be notified if the insurer intends to cancel the policy. The mortgagee may receive a portion of claim payments. The mortgagee may change the coverage amount. - Correct Answers The mortgagee may change the coverage amount. Which of the following is NOT true of the Company's Options provision in the standard fire policy? It requires the insurer to settle the claim, in whichever manner it chooses, within 30 days of receiving notice of the claim. It mandates that the insurer notify the claimant of its choices within 30 days of receiving required proof of loss. It allows the insurer the choice of whether to repair, rebuild, or replace damaged property. It states that the insurer may choose whether to take all, or part, of the damaged property at the agreed or appraised value. - Correct Answers It requires the insurer to settle the claim, in whichever manner it chooses, within 30 days of receiving notice of the claim. Agnes purchased a home ten years ago in an upcoming neighborhood for $75,000. The home's value has since tripled to $225,000! Agnes still has $25,000 left on her mortgage, but has increased her dwelling coverage to $225,000 to keep up with the home's appreciation. When it burns to the ground in a fire, her mortgage company wants to be indemnified $75,000 because the value of the home has tripled. Which policy condition protects against this claim? Liberalization Clause Recoverable Depreciation Insurable Interest Severability of Interests - Correct Answers Insurable Interest When Emma is found guilty of arson for burning down her $175,000 home, her insurance policy is voided and she receives no indemnification for the loss. Emma still had $155,000 left on her mortgage at the time of the fire. Under the mortgagee clause, Emma's mortgage lender can recoup: HALF the total amount left on the loan - $77,500. the total amount left on the loan - $155,000. HALF the total amount of the loss - $87,500. the total amount of the loss - $175,000. - Correct Answers the total amount left on the loan - $155,000. In Florida, an insurer has ___ days to pay or deny a claim. devastated by a hurricane. Jerry receives the claims from ABC Insurance, completes the inspections, and settles claims on behalf of ABC Insurance according to his contract. What type of authority has ABC Insurance given Jerry? Agency authority Express authority Apparent authority Implied authority - Correct Answers Express authority This agent is self-employed and able to offer insurance products from more than one company at a time. Independent Sales Agent Direct Writer General Agent Independent Adjuster - Correct Answers Independent Sales Agent This agent works for only one insurer, and supervises and trains other agents. Captive Agent Direct Writer General Agent Exclusive Agent - Correct Answers General Agent This agent is a salaried employee who sells insurance products for only one insurer. Captive Agent General Agent Direct Writer Exclusive Agent - Correct Answers Direct Writer Allen works as an adjuster for Insurer B. Which of the following is FALSE? Insurer B has given Allen express authority to perform on its behalf. Allen is an agent of Insurer B. Insurer B is bound by Allen's words or decisions that he makes while on the job. Allen is a salaried employee who only sells Insurer B's products. - Correct Answers Allen is a salaried employee who only sells Insurer B's products. Who must sign a non-waiver agreement? The claimant, the insurer, and the adjuster The adjuster The insurer and the adjuster The claimant - Correct Answers The claimant After her water heater leaked and damaged her hardwood floors, Clarice filed a claim with her insurer, KLM Insurance, who sent their adjuster, Bob, to inspect the loss. Clarice also hired a public adjuster, Jose, to represent her in her claim. Bob has the responsibility to report to which principal? KLM Insurance This information is not provided in the scenario. Jose Clarice - Correct Answers KLM Insurance As a staff adjuster, one of Abigail's most important responsibilities is reporting to the principal. This would include all of the following except: sending the insurer a report with the final adjusted losses. keeping the claimant up-to-date on the progress and status of the claim informing the principal of the investigation results. letting the insurer know about any liability or expediency issues with the claim. - Correct Answers keeping the claimant up-to-date on the progress and status of the claim As an adjuster for KLM Insurance, Chrystal has the important role of fiduciary agent. While acting in this capacity, Chrystal's primary responsibility is to: investigate the financial health of those insured through KLM Insurance. increase profits for KLM Insurance through ethical sales practices. act for, and on the behalf of, those insured through KLM Insurance. protect the financial and property interests of KLM Insurance. - Correct Answers protect the financial and property interests of KLM Insurance Which item would NOT belong in an adjuster's initial report on a claim? A list of all known circumstances surrounding the claim The final settlement amount A detailed list of the damages being claimed The date that the adjuster first contacts the claimant - Correct Answers The final settlement amount An insurance adjuster acts as a fiduciary agent for her employer. Which of the following statements is FALSE about the adjuster's role as fiduciary agent? The adjuster may not give the claimant materials showing how he came up with a settlement amount. The adjuster may not act with any notion of self-interest. The adjuster may not profit whatsoever from the relationship with a claimant or contractor without the express consent of the principal. The adjuster cannot perform adequately while maintaining a conflict of interest. - Correct Answers The adjuster may not give the claimant materials showing how he came up with a settlement amount. A fiduciary agent must regularly report to the principal. Which of the following is the BEST example of a principal in the context of insurance? A public adjuster who is employed by a claimant to examine her damaged property. An adjuster who signs a form on behalf of his employing insurance company. An insurer that employs an insurance adjuster to investigate damage claims. at regular set intervals, which lists any new or important information about the claim. every 15 days, which explains why the claim is still open and when the adjuster expects to close it. every week for the purpose of documenting the adjuster's claim-related expenses. every day, which lists the amount of time spent working the claim. - Correct Answers at regular set intervals, which lists any new or important information about the claim. As an insurance adjuster, Heather is responsible for updating and maintaining an accurate record of all the information pertinent to an individual's insurance claim, including copies of all written documentation, photos and property sketches, witness statements, and copies of medical bills. What is this record called? Evaluation report Investigative file Field report Claim file - Correct Answers Claim file While driving, Ben was struck by another driver, Roxanne. Ben then filed a claim with Roxanne's insurer. In essence, what was Ben doing when he filed this claim? Submitting a formal request to settle the damages with Roxanne's insurer Alerting Roxanne's insurer of his intent to take the case to court Ordering Roxanne's insurer to pay for his damages within 15 days Admitting he was actually "at fault" - Correct Answers Submitting a formal request to settle the damages with Roxanne's insurer Jim is an insurance adjuster working a theft claim. As part of his investigation, Jim might want to do all of the following, EXCEPT: thoroughly inspect all damages related to the theft. take statements from all witnesses. look for ways to lower the settlement for the claimant. review any available police reports. - Correct Answers look for ways to lower the settlement for the claimant. Adjuster Alice is trying to determine the final settlement amount for Ted's claim. Ted's house was damaged in a covered loss, and Alice has estimated that it will cost $25,000 to make the necessary repairs. Ted's homeowners policy has a $100,000 limit and a $2,000 deductible. Typically, how much would Adjuster Alice calculate Ted's final settlement amount to be? 100,000 $98,000 $25,000 $23,000 - Correct Answers $23K Adjuster Andy is trying to determine a final settlement amount for Stacy's claim. Stacy's house was destroyed in a fire and it will cost $185,000 to rebuild it. Stacy's homeowners policy has a limit of $178,000 and a $1,800 deductible. Typically, how much would Adjuster Andy calculate Stacy's final settlement amount to be? $178,000 $183,200 $185,000 $176,200 - Correct Answers $178,000 The first step in the claim process is to: research the claim. begin negotiations. acknowledge the claim within the required time frame. determine the insurer's liability. - Correct Answers acknowledge the claim within the required time frame. Which of the following is NOT an adjuster's duty in the claim process? Filing a claim Determining coverage on a claim Evaluating a claim Investigating a claim - Correct Answers Filing a claim Which of the following factors holds the LEAST relevance when an adjuster is evaluating an insurance claim? The policy limits The coinsurance penalty The deductible The premium - Correct Answers The premium Stephanie is in the process of adjusting George's auto claim. Currently, she is interviewing Shana, who witnessed George's accident and stopped to help. In what stage of the claim process is Stephanie currently working? Acknowledgement Investigation Negotiation Evaluation - Correct Answers Investigation Which of the following steps would occur LAST in the processing of a claim? Determine the cost of repairs Negotiate a settlement with the claimant Investigate the claim Submit the proper paperwork to the claimant after acknowledging the claim - Correct Answers Negotiate a settlement with the claimant An adjuster has a duty to provide which of the following to the claimant? A recommendation of a reputable claims lawyer in the local area A settlement sufficient to offset the out-of-pocket burden of the deductible Periodic reports detailing the status of the claim An open line of communication - Correct Answers An open line of communication What is the last step in the claim settlement process? Preparing the final adjustment reports Applying all policy coverage and provisions Determining insurer's liability in the claim open-minded driven by emotion expensive - Correct Answers knowledgeable Which of the following statements best describes a part of the appraisal process? All parties must agree to the final amount in order for it to be binding. The opposing parties submit their evidence to the appraiser, who makes a final and binding decision. A neutral third party, called the appraiser, plays an advisory role to help the disputing parties come to a settlement. The claimant and the insurer each select an appraiser, and those two select an umpire. - Correct Answers The claimant and the insurer each select an appraiser, and those two select an umpire. Cindy and her insurer cannot reach an agreement for her property claim, and have gone back and forth for weeks without coming within $10,000 of each other. At this point, since both believe they are offering a fair settlement, a third party is needed to help facilitate the negotiation. Both parties still want to retain their ability to "walk-away" if they cannot reach an agreement. What is the next best step for Cindy and her insurer? Litigation Appraisal Mediation Arbitration - Correct Answers Mediation Bob's home was severely damaged by a thunderstorm and he claims it will cost $74,000 to repair. His insurer has investigated the claim, found the repairs could be done for $49,000, and has offered Bob this amount of indemnification. Negotiation between Bob and his insurer seems to be failing. Due to the unpredictability of the result, which of the following options should be avoided by the insurer if possible? Litigation Mediation Appraisal Arbitration - Correct Answers Litigation Nick's home suffered major damage during a tornado. His contractor says it will cost $85,000 to complete repairs, but the adjuster's estimate gives a total of $63,000. Nick and his insurer have tried to reach an agreement, but have failed to do so. Both parties are now wanting a third party to facilitate their negotiations, but only in an advisory role. Which of the following is the best option in this case? Litigation Declaratory judgment action Arbitration Mediation - Correct Answers Mediation Cindy, a drunk driver, accidentally crashes into Nancy's house, causing $22,000 in damage. On top of that, Nancy tries to get the adjuster to add an additional $20,000 for punitive damages to punish Cindy for driving while intoxicated. However, Nancy fails in her attempts at negotiation. This is because: the difference between the two dollar amounts is too small. the difference between the two dollar amounts is too great. the adjuster does not have authority to negotiate for punitive damages the adjuster knows that the insurer will not pay more than $25,000 for this claim. . - Correct Answers the adjuster does not have authority to negotiate for punitive damages An adjuster might deny a claim for all of the following reasons, except: the loss occurred outside of the policy period. the claimant can't prove the damages. the claim is fraudulent. the adjuster has a conflict of interest. - Correct Answers the adjuster has a conflict of interest. When an adjuster has decided to deny a claim, it is necessary to: inform the claimant in person. inform the claimant in writing, with a full explanation. inform the claimant by registered mail. inform the claimant in writing. - Correct Answers inform the claimant in writing, with a full explanation. If an insurer is unwilling to pay what the claimant is asking, the adjuster must: absorb the difference out of his own fee. accept the claimant's figure. negotiate a settlement. deny the claim. - Correct Answers negotiate a settlement. What is one thing that an adjuster is not able to negotiate about? Punitive damages Hit and run accidents Catastrophic storm damage Bodily injury - Correct Answers Punitive damages When the dollar amount difference between an adjuster and a claimant is very large, the adjuster should: consult a more experienced adjuster. negotiate to decrease the difference between the two. begin the investigation over to see what has been missed. move to dispute resolution. - Correct Answers move to dispute resolution. Why should litigation be considered a last resort option? It can be costly and unpredictable. The court system is backed up. The court will likely side with the claimant. It is the last thing to try. - Correct Answers It can be costly and unpredictable. All of the following are true about mediation, except: settlement is only legally binding if both parties agree to it. Failing to address minor clerical issues can stall the negotiations. If an adjuster can rectify minor issues with the claimant right away, the negotiation process may quickly take care of itself. In negotiations, a seemingly trivial matter can prevent a successful outcome. Apologizing for minor mistakes can weaken the adjuster's power in the negotiations. - Correct Answers Apologizing for minor mistakes can weaken the adjuster's power in the negotiations Having a positive attitude can help an adjuster during negotiations. Which of the following aspects of an adjuster's attitude can hinder negotiations? Over-confident or arrogant Open to new facts Willing to listen Humble and understanding - Correct Answers Over-confident or arrogant Which of the following is NOT useful in moving the negotiation process forward toward a successful resolution? Being open to new perspectives Maintaining professionalism at all times Using sarcasm in response to the claimant's anger Keeping criticisms out of the discussion - Correct Answers Using sarcasm in response to the claimant's anger Alice is an adjuster and is currently negotiating a settlement with Gale. Which of the following actions that Alice could take would be disrespectful towards Gale, and thus hinder the negotiation process? Seeking to understand Gale's perspective Looking Gale in the eye Not interrupting or correcting Gale Assuming to know what Gale wants - Correct Answers Assuming to know what Gale wants Barbara has been negotiating a property claim with a claimant for a few hours now. She has displayed her assessments, gone over the policy, and offered a fair settlement amount within the policy limits. However, the claimant has dismissed it completely without any counter-offer. The most appropriate next step is for Barbara to: submit her backup offer. enter into arbitration. tell a joke to lighten the mood. remain silent. - Correct Answers submit her backup offer. Which of the following activities could be a useful negotiation technique? Asking trivial questions in order to distract the claimant Matching an aggressive tone of voice with claimant's in order to demonstrate dominance Telling a dirty joke in an effort to lighten the mood Reviewing video footage with the claimant that contradicts the claimant's position - Correct Answers Reviewing video footage with the claimant that contradicts the claimant's position Which of the following statements is TRUE of a claim dispute litigated in a state that follows the doctrine of Contributory Negligence? If the plaintiff if found to be at all negligent, she will receive no settlement. The settlement amount will be reduced by the percentage of the plaintiff's negligence. The settlement amount will be reduced by the percentage of the defendant's negligence. If the defendant is found to be at all negligent, she will receive no settlement. - Correct Answers If the plaintiff if found to be at all negligent, she will receive no settlement. Which of the following is NOT a form of insurance fraud? Lighting a candle and leaving it next to your window curtains before leaving for work. Increasing your insurance coverage when you think a loss is likely. Faking a death. Staging an accident. - Correct Answers Increasing your insurance coverage when you think a loss is likely. When Emma's house was burglarized, the thieves stole several pieces from her art collection. Although the pieces were only prints, Emma files a claim stating that they were originals, and therefore worth a good deal more than they really are. What has Emma committed? Soft fraud Tortfeasor Concealment Hard fraud - Correct Answers Soft fraud Haley takes a bottle of water into a store, pours some of it on the floor when no one is looking, and then pretends to slip and fall. She cries out for help in apparent pain until someone comes to her aid. She then sues the store for her fake injury in an effort to collect an insurance settlement. What has Haley committed? Misrepresentation Tortfeasor Soft fraud Hard fraud - Correct Answers Hard Fraud Which of the following people committed soft fraud? Ian, who works as a claims processor for ABC Insurance, regularly creates fake claims and has the settlement checks sent to his brother. Farah doused her sofa with gasoline, started a fire, and burned down her house so she could collect money from her insurer. Taariq slammed on the brakes in order to make the person behind him run into the back of his truck, so he could collect a settlement from their insurance. Rafael accidentally slipped on a wet floor at the supermarket. Although his only injury was a sprained ankle, he claimed he had back and neck pain It is a named peril policy. It pays actual cash value. - Correct Answers It automatically covers wind and vandalism. There are several terms that are often interchangeable with "endorsements." Which of the following is NOT one of these terms? Riders Attachments Binders Addendums - Correct Answers Binders Stan built a porch for his home three years ago at a cost of $10,000. The value of the porch has depreciated by $6,000, and it would cost $12,000 to replace it today. After Stan's porch burnt down during a BBQ today, how much would a Standard Fire Policy indemnify Stan for his porch? $6,000 $12,000 $4,000 $10,000 - Correct Answers $6,000 In the Standard Fire Policy, "intentional losses" and "extreme perils that cause catastrophic damage to a large number of policyholders" would be considered examples of: insurable risks. conditions. hazards. exclusions. - Correct Answers exclusions. In which section of a Standard Fire Policy would you find information on rules of conduct and obligations the policyholder must follow in order for insurance coverage to apply? Exclusions Insuring Agreement Conditions Declarations - Correct Answers Conditions Which of the following statements about the original Standard Fire Policy is FALSE? It was the first multi-line policy, combining both Physical Damage and Liability coverages. Valuation was usually done on an actual cash value basis. The only perils covered under the policy were fire and lightning. It was a named peril policy. - Correct Answers It was the first multi-line policy, combining both Physical Damage and Liability coverages. The Standard Fire Policy is also known by a nickname: The "___ " Policy. 1918 Original Monoline 165 Line - Correct Answers 165 line Which of the following statements is NOT true of endorsements? An endorsed policy has been changed from the original version. An endorsed policy will always provide more coverage than an unendorsed policy. Endorsements may be added to a policy at any time during the policy period. Endorsements may be added to a policy at the time of purchase and at renewal. - Correct Answers An endorsed policy will always provide more coverage than an unendorsed policy. Which of the following statements about the Standard Fire Policy is TRUE? It is no longer used in its original format. It still provides the basic foundation for liability insurance policies today. It provided replacement cost valuation. It only provided coverage for fire. - Correct Answers It is no longer used in its original format. Strong winds have torn a hole in Janet's roof. On top of that, heavy rain is expected in her area in the next few days. Figuring it would simply be too much effort to put a tarp over the hole in her roof, Janet elects to do nothing. The rains come and destroy several of her possessions inside her home. Janet files a claim with her insurer for the losses, but it comes back denied. This is because: Homeowner's insurance covers personal property at an actual cash value, and her personal items were worth nothing after they were destroyed. Janet failed to make a reasonable effort to protect the property from further damages. Storm damage is not covered under a standard homeowner's policy. Janet's policy has coverage for wind damage, but not flood damage. - Correct Answers Janet failed to make a reasonable effort to protect the property from further damages. Phil heads over to visit his friend Josh, who is sick with the flu. While at the house, Josh fails to cover his mouth when he coughs and Phil ends up contacting the flu. Phil files a claim with Josh's insurer for medical expenses and lost income while Phil is out sick from work. The insurer denies the claim because: Disease transmitted from the insured to a third party is excluded. Phil was comparatively negligent, since he failed to get a flu shot. Phil was contributorily negligent, since he failed to get a flu shot. Phil came over to Josh's house of his own accord. - Correct Answers Disease transmitted from the insured to a third party is excluded. Who is NOT eligible for a homeowners policy? An owner of a home under construction A tenant who rents a home or apartment A person who owns and lives in his house An owner of a house in which he does not live, but rents to a tenant - Correct Answers An owner of a house in which he does not live, but rents to a tenant Marlene has been living in her $120,000 home for 31 years. Because she has paid off the mortgage, she decides to save some money on her monthly insurance premiums by reducing her homeowners coverage to $40,000. After a severe hailstorm totals her roof, her adjuster estimates the BEST coverage available. Which policy should Anton choose? HO-2 HO-5 HO-8 HO-3 - Correct Answers HO-5 Coverage C - Personal Property of a homeowners policy typically excludes: fish. furniture. dishes. blanket coverage of personal property. - Correct Answers fish. In the case of condominiums: the unit owner and condo association share responsibility for insuring the property. the unit owner is only responsible for insuring personal property. the condo association is wholly responsible for insuring units. the unit owner is responsible for insuring the whole condo unit, inside and out. - Correct Answers the unit owner and condo association share responsibility for insuring the property. Which of these perils is NOT excluded from coverage in a homeowners policy? Water damage Earth movement Nuclear war Lightning - Correct Answers Lightning For loss settlement purposes, most homeowners policies: pay up to 80% of the value of the damaged item, leaving the remaining 20% to be paid by the insured. pay for damages to personal property at actual cash value, and damages to structures at replacement cost. pay for damages to structures at actual cash value, and damages to personal property at replacement cost. pay for damages to structures and personal property at actual cash value. - Correct Answers pay for damages to personal property at actual cash value, and damages to structures at replacement cost. Which of the following would be covered under the peril of "theft" in an homeowners policy? Theft from an area of the premises rented out to a non-insured Theft from a building under construction Theft by an insured Losses caused by attempted theft - Correct Answers Losses caused by attempted theft In a homeowners policy, Coverage B - Other Structures provides insurance for which of the following? Detached garages Structures held for rental purposes Detached structures used for business Detached structures that are wholly rented out - Correct Answers Detached garages How much of a limit is included for Credit Card Fraud or Forgery, an additional coverage in a homeowners policy? $1,000 $500 $750 $250 - Correct Answers $500 Tim's $2,500 boat trailer was stolen from his driveway. Ignoring any deductibles, how much can Tim receive for his stolen trailer when he files a claim against his homeowners policy? $1,500 $2,000 $1,000 $2,500 - Correct Answers $1,500 John moved out of his house and put it up for sale three months ago. While he was waiting for the house to sell, John's plumbing pipes froze and burst in the icy temperatures, which eventually led to water damaging the cabinetry and hardwood floors. Which of the following statements would most likely be TRUE? Although John's house was still covered under an HO-3, the surface water resulting from the damaged pipes is not a covered peril. Although John's house was still covered under an HO-3, the damage would not be covered because he didn't shut off the water supply. Freezing is not a covered peril in a HO-3, so this loss would not be covered. Because John's house was still covered under an HO-3, the damage would be covered. - Correct Answers Although John's house was still covered under an HO-3, the damage would not be covered because he didn't shut off the water supply. Mark is on vacation in Italy when his luggage is stolen, including a $2,000 laptop, a $500 suitcase, and $400 in clothes. Mark has an HO-3 homeowners policy. Excluding any applicable deductible, which of the following statements is TRUE? Mark's homeowners policy will cover $2,000 of this loss. Mark's homeowners policy will cover $2,400 of this loss Mark's homeowners policy will cover the entire $2,900 loss. Mark's homeowners policy will not cover any of this loss because he was outside the US. - Correct Answers Mark's homeowners policy will cover $2,400 of this loss Craig has an HO-3 policy covering his primary residence with a Coverage A limit of $250,000, Coverage B limit of $25,000, and a Coverage C limit of $150,000. Craig also has a cabin on the lake, which was burglarized. The thieves stole much of the cabin's contents, for a total loss of $18,500. Ignoring any deductibles, how much will Craig's HO-3 policy pay for this claim? insurance company. Will the damage to Sally's home be covered, and why or why not? Yes. The HO-3 is an open-peril policy, without an exclusion for wildlife. Yes. Wildlife is a commonly named-peril found on all homeowner's policies. No. Since Sally did not take reasonable efforts to run the bear off, no damages may be covered. No. "Bear-Entry" is not listed as a named peril in Sally's HO-3 policy. - Correct Answers Yes. The HO-3 is an open-peril policy, without an exclusion for wildlife. Which of the following is NOT eligible for Dwelling coverage? A duplex owned by a corporation A mobile home on a permanent foundation An 8-unit apartment building in which the owner resides A single-family home that is wholly rented out - Correct Answers An 8-unit apartment building in which the owner resides Stephanie owns a house that she rents out for $2,500 a month. A massive kitchen fire forces her tenants to move out while the interior is overhauled. After two months, the repairs are complete, and Stephanie contacts her tenants, only to find that they've found a new place to live. It takes Stephanie another month and a half to find new tenants. Assuming that Stephanie had a $100,000 DP-2 policy, what is the maximum amount she could receive for lost rental income under Coverage D? $8,750 $5,000 $2,500 $7,500 - Correct Answers $5,000 A dryer fire scorches the interior of Bill's home, forcing him to move out while repairs are made. In addition to paying for temporary housing, he also loses the rental income he received from his roommate Frank.Which two Dwelling policy coverages could help Bill with the lost rental income AND his additional living expenses? Coverage D & Coverage E Coverage C & Coverage D Coverage A & Coverage D Coverage A & Coverage E - Correct Answers Coverage D & Coverage E Dwelling policies cover: rental properties only. liability only. property only. property, and liability with an endorsement. - Correct Answers property, and liability with an endorsement. A dwelling policy would NOT be appropriate for: a single-family home wholly rented out. a motorhome owned by an individual. a duplex owned by an individual. a four-plex owned by a corporation. - Correct Answers a motorhome owned by an individual. A large corporation owns a small hunting cabin in the woods, that it uses for occasional weekend getaways. The corporation can insure the cabin against property damage with a: dwelling policy. Standard Fire Policy. homeowners policy. commercial liability policy. - Correct Answers dwelling policy. The DP-3 is known as the: Basic Form. Special Form. Amended Form. Broad Form. - Correct Answers Special Form. In a DP-2 Broad Form, which of the following would be covered under the peril of Theft? A stolen vehicle. Stolen electronics. Stolen cash. Broken windows caused by a burglar breaking in. - Correct Answers Broken windows caused by a burglar breaking in. In dwelling policies, Coverage D pays for: lost rental income. debris removal. personal property. increase in living expenses. - Correct Answers lost rental income. Diana is insured under a DP-2 policy with the following coverage limits: Coverage A - $150,000, Coverage B - $15,000, and Coverage C - $25,000. She and her fiancé have planned a destination wedding, but their hotel catches fire shortly after their arrival. Smoke from the fire damages all of their belongings, including Diana's $4,000 wedding dress. Diana's loss totals $5,200. When she files a claim with her insurance company, how much can she expect to receive for this loss under her DP-2 (ignoring any deductible)? $1,500 $0 $2,500 $5,200 - Correct Answers $2,500 Lightning strikes one of Christy's trees in her backyard and starts a fire that spreads to two other trees before firefighters are able to put it out. The fire department charges her $600 for responding to her call. Christy's DP-2 policy has a Coverage A limit of $95,000. What is the maximum amount of indemnification that Christy can expect to receive for this loss (ignoring any deductible)? $2,000 $500 $4,750 damage, the grain drill was worth $25,000, but it would cost $45,000 to buy a new one today. Missy's farm policy has a replacement cost endorsement, and the grain drill is scheduled on a Mobile Agricultural Machinery and Equipment form with a $36,000 limit. Missy replaces her grain drill with one she found on sale for $40,000. How much total indemnification will she receive? $25,000 $36,000 $45,000 $40,000 - Correct Answers $36,000 When discussing farm insurance, which of the following most accurately describes "scheduled property"? Excluded coverage Blanket coverage Excluded property Itemized property - Correct Answers Itemized property Farmer Bob would like to sell his recent harvest of lettuce to a local wholesaler. The wholesaler agrees, but only if Bob can prove he has insurance protection in the event that his lettuce causes people to become ill. What type of insurance does Bob need in this situation? Farm Product Liability insurance Medical Payments Farm Pollution Liability insurance Scheduled Farm Personal Property coverage - Correct Answers Farm Product Liability insurance Farmer Steve barely escapes a massive tornado, but the storm does completely destroy one of the barns on his property. Luckily, Steve has an insurance policy on his barn with a replacement cost endorsement, and the barn was fully insured. At the time of the loss, the actual cash value of the barn was $65,000, and its replacement cost is currently $85,000. When will Steve receive full indemnification for his losses on the barn? When he submits a proof of loss to the insurer When he files a claim proving he met the 80% co-insurance requirement When he replaces the barn and submits receipts to the insurer Within 180 days of filing the claim - Correct Answers When he replaces the barn and submits receipts to the insurer In a Farm Insurance policy, which of the following would cover the main dwelling on the insured farm? Coverage C Coverage B A separate homeowners policy Coverage A - Correct Answers Coverage A Which Farm policy would cover animal waste overflow and chemical spills? Farm Product Liability Farm Pollution Liability Farm Waste Management Coverage Custom Farming Liability Coverage - Correct Answers Farm Pollution Liability A farm insurance policy may include all of the following EXCEPT: a commercial package policy. dwelling coverage. farm liability insurance. farm personal property coverage. - Correct Answers a commercial package policy. Medical payments coverage in a Farm policy includes all of the following EXCEPT: funeral costs. hospital benefits. dental benefits. libel or slander. - Correct Answers libel or slander. Farmer Scott owns a farm and raises goats, producing a lot of manure. Occasionally, after a strong rain, some of the waste washes into a nearby river. Which insurance coverage can protect Scott from any liability caused by the goat waste runoff? Farm Livestock-Waste Liability Farm Pollution Liability Custom Farming Liability Farm Product Liability - Correct Answers Farm Pollution Liability Several cases of listeria have been traced back to Aaron's crop of soybeans that he recently sold at market. What type of coverage will pay for the claims filed by those sickened by Aaron's soybeans? Bodily Injury and Property Damage Liability Medical Payments Farm Pollution Liability Farm Product Liability - Correct Answers Farm Product Liability In order to set a yield guarantee for Maren's policy, Maren's agent will need a record of the last four years of her crop yields. This record is called: an Actual Yield History. an Actual Production History. a Transitional Yield Report. an Average Production Report. - Correct Answers an Actual Production History. Which of the following statements about Crop-Hail insurance is FALSE? It is subsidized by the FCIC. It covers for damage due to hail, but also fire, lightning, wind, and others. It is rated on an acreage basis. It is generally available from private insurers. - Correct Answers It is subsidized by the FCIC. Which of the following statements about MPCI insurance is FALSE? Its coverage applies per acre, not per "unit." It is subsidized by the FCIC. It covers damage to crops due to weather-related perils. Bob has a home in Florida with full replacement cost insurance coverage. After a severe hurricane levels his home, the property is declared a total loss. Bob is so discouraged that he takes several months to decide whether it is worth it to rebuild. Which of the following statements is TRUE? Bob's insurer must pay the full replacement cost of the property without waiting for proof that Bob has rebuilt his home. Bob must notify his insurer of his intent to rebuild within 180 days of the loss in order to be indemnified. Bob's insurer must pay the ACV of Bob's property immediately, but can wait until Bob submits proof of his rebuilding expenses before paying the full replacement cost. Bob must submit all receipts for completed work to his insurer within 6 months of the loss in order to be indemnified. - Correct Answers Bob's insurer must pay the full replacement cost of the property without waiting for proof that Bob has rebuilt his home. In Florida, what are the basic limits of liability for Coverage E and Coverage F in a homeowners policy? Coverage E: $100,000 per occurrence; Coverage F: $1,000 per person Coverage E: $100,000 per occurrence; Coverage F: $10,000 per person Coverage E: $50,000 per occurrence; Coverage F: $5,000 per person Coverage E: $300,000 per occurrence; Coverage F: $1,000 per person - Correct Answers Coverage E: $100,000 per occurrence; Coverage F: $1,000 per person If a Florida HO policy has only been in effect for 45 days, the insurer must notify the policyholder at least ____ days before cancelling it for non-payment of premiums, or at least ____ days before cancelling it for any other approved reason. 20; 100 10; 20 10; 45 20; 30 - Correct Answers 10; 20 Knightley Insurance Co. decides not to renew Emma's homeowners policy, which she has had for 6 years. Which of these statements is TRUE? Knightley Insurance may not terminate Emma's policy because it has been in effect for over 5 years. Knightley Insurance must submit an application on Emma's behalf for coverage under the Citizens Property Insurance Corporation. Knightley Insurance must notify Emma of the non-renewal at least 120 days before her policy expires. Emma can keep her policy active by paying the next year's annual premium in advance. - Correct Answers Knightley Insurance must notify Emma of the non-renewal at least 120 days before her policy expires. A fire in Sarah's factory causes her to shut the factory doors for 50 days. To limit her loss of income and keep production going, Sarah spends $125,000 renting equipment and another building. Sarah's commercial property policy doesn't have Business Income Coverage, but it does include Extra Expense Coverage. The limit on her Extra Expense coverage is $100,000 and she has Limits of Loss Payment of 40%/80%/100% during her period of restoration. How much indemnification will Sarah receive for her extra expenses? $80,000 $50,000 $125,000 $100,000 - Correct Answers $80,000 Gail's restaurant is doing more business than ever, so Gail decides to add more dining space. Three weeks into the project, a hurricane blows through town, reducing the new construction to rubble. Gail maintains commercial property insurance coverage valued at 70% of her property's replacement cost, although her policy says she must maintain at least 80% to be fully insured. Which coverage on her policy could pay to rebuild her restaurant at replacement cost? Increased Construction Costs coverage Outdoor Property extension Replacement Cost endorsement None - Correct Answers None Which of the following does NOT apply to commercial property insurance? Because of their complexity, commercial policies only offer named-peril coverage. A commercial policy typically provides some coverage for loss to personal property of employees. Commercial policies are generally not designed to cover farms and 1-4 family dwellings. Commercial property coverages are usually paid on an actual cash value basis. - Correct Answers Because of their complexity, commercial policies only offer named-peril coverage. According to the commercial property policy, a commercial building is considered vacant if less than ____ of the available square footage is occupied for ____ consecutive days. 15%, 30 31%, 60 31%, 30 15%, 60 - Correct Answers 31%, 60 The coverage limit in Bob's commercial property policy goes up 2% every time the policy renews. Which Reasonable Repairs extension - covers all new buildings under construction Outdoor Property extension - covers all new buildings under construction Newly Acquired Property extension - covers all new buildings under construction None - Extensions are only available if the policyholder maintains the minimum level of insurance of 80% to value - Correct Answers None - Extensions are only available if the policyholder maintains the minimum level of insurance of 80% to value After Tony, the owner of XYZ Cleaners, accidentally starts a fire, XYZ Cleaners burns to the ground, taking all the garments with it. Afterwards, Tony has to rent a new building and purchase new equipment and supplies. He is also responsible for all the clothing that was in his care. Which type of coverage in his commercial property policy could help Tony with the cost of paying for his customers' destroyed clothing? Legal Liability Coverage Extra Expense Coverage Dry Cleaners Risk Coverage Leasehold Interest Coverage - Correct Answers Legal Liability Coverage Jimmy owns a pawn shop which brings with it a certain amount of risk. He decides to hire a security guard, and install a surveillance system and an alarm system to reduce his monthly premiums on his commercial property policy through the: Protective Guardian endorsement. Risk Reduction endorsement. Security, Surveillance and Alarm endorsement. Protective Safeguard endorsement. - Correct Answers Protective Safeguard endorsement. Francis owns a small shoe store. Since his business isn't particularly risky, he has a commercial property policy that provides named-peril coverage to his building and personal property, without any additional coverages. Which Causes of Loss form does Francis have attached to his coverage form? Special Form Universal Form Basic Form Broad Form - Correct Answers Basic Form Alan owns a commercial landscaping business and does most of his work during the summer months. One day, he arrives at work to find an enormous hole in the middle of the yard where he stored his lawn mowers. Under which Causes of Loss form(s) would the mowers, which were consumed by the sinkhole, be covered by his commercial property policy? They will only be covered by endorsement Special Form only Basic, Broad, and Special Forms Broad, and Special Forms only - Correct Answers Basic, Broad, and Special Forms Phil runs a locomotive repair business, which is insured under a commercial property policy. One night, some blasting powder is accidentally ignited and blows a crowbar through one of the engines. No one is hurt, but the locomotive is severely damaged. Which coverage option may help cover the cost of repairing the engine from this unfortunate event? Replacement Cost Coverage Legal Liability Coverage Interior Explosion Coverage Mechanical Breakdown Coverage - Correct Answers Legal Liability Coverage Under the Earthquake and Volcanic Eruption endorsement in a commercial property policy, what is the time span within which multiple earthquake or volcanic events are considered a "single occurrence" for coverage purposes? 24 hours (1 day) 72 hours (3 days) 120 hours (5 days) 168 hours (7 days) - Correct Answers 168 hours (7 days) Joe decides to go surfing for three months in Hawaii. Before he leaves, he locks up his surfboard shop and rents a storage unit for most of his equipment and merchandise. When Joe returns, he finds that his shop has been broken into and vandalized. Under what policy condition would Joe's insurer likely refuse to make a full payment? Vacancy Liberalization Concealment Changes in Policy - Correct Answers Vacancy Honey's Bakery is a local coffee shop run by two sisters. In a rush to leave one afternoon, their new employee forgets to turn off the gas stove. The leaking gas causes an explosion, destroying the kitchen. Which condition in their commercial property policy could help the sisters cover the cost of the damage? Control of Property Other Insurance Legal Action Against the Insurer Non-Owner Condition - Correct Answers Control of Property Veronica owns a pottery business and is insured under a commercial property policy. She was in the process of building an extra structure for the sole purpose of kiln firing her pottery, but after 40 days of waiting for it While Andrea was grocery shopping in BB Mart, the large Dairy sign fell off the wall and landed on her. Because of her extensive injuries, Andrea sued BB Mart and was awarded $375,000 in damages. BB Mart's Commercial General Liability policy has a general aggregate limit of $1,000,000 and a per occurrence limit of $300,000. What is BB Mart's general aggregate limit after the claim for Andrea's injuries is paid? $700,000 $375,000 $625,000 $1,000,000 - Correct Answers $700,000 David just opened his own consulting business, and has taken on several new clients. He's having difficulty managing his schedule on top of all the other responsibilities related to owning his own business, so he hires Tina via contract to work as his full-time office manager for $15 per hour. According to the definitions in David's Commercial General Liability policy, which of the following best describes Tina? Leased Worker Volunteer Worker Temporary Worker Employee - Correct Answers Employee A CGL can provide liability insurance coverage for all of the following persons, EXCEPT: volunteers. customers. stockholders. sole proprietors. - Correct Answers customers. On January 27, 2008, Ryan was using an exercise bike purchased from NusquamCycle when the chain broke, causing him to fall and severely bruise his knee. It seemed to heal just fine, but three years later, on January 25, 2011, Ryan's knee gave out while jogging. His doctor told him that he'll need surgery and that this deterioration resulted from the earlier accident with the exercise bike. Which of the following CGL policies may cover Ryan's claim filed January 25, 2011? An occurrence policy from Jan 31 2011-Jan 31 2013 A claims-made policy from Jan 31 2009-Jan 31 2011 An occurrence policy from Feb 28 2008-Feb 28 2010 A claims-made policy from Jan 31 2008-Jan 31 2010 - Correct Answers A claims-made policy from Jan 31 2009-Jan 31 2011 On January 27, 2008, Ryan was using an exercise bike purchased from NusquamCycle when the chain broke, causing him to fall and severely bruise his knee. It seemed to heal just fine, but three years later, on January 25, 2011, Ryan's knee gave out while jogging. His doctor told him that he'll need surgery and that this deterioration most likely resulted from the earlier accident with the exercise bike. Which of the following CGL policies would cover Ryan's claim filed January 25, 2011? A claims-made policy from Jan 31 2011 -Jan 31 2012 with a retroactive date of Jan 1 2005 A claims-made policy from Jan 31 2010 -Jan 31 2011 with a retroactive date of Jan 1 2009 A claims-made policy from Jan 31 2010 -Jan 31 2011 with a retroactive date of Jan 31 2008 A claims-made policy from Jan 31 2010 -Jan 31 2011 with a retroactive date of Jan 1 2008 - Correct Answers A claims-made policy from Jan 31 2010 -Jan 31 2011 with a retroactive date of Jan 1 2008 On January 27, 2004, Ryan was using an exercise bike from NusquamCycle when the chain broke, causing him to fall and bruise his knee. Seven years later, on January 25, 2011, Ryan's knee gave out while jogging. His doctor told him that he'll need surgery and that this deterioration was probably caused by his bruise from the exercise bike. Assuming NusquamCycle is no longer in business, which CGL policy would cover Ryan's claim filed on January 25, 2011? Claims-Made policy from Jan 1 2001-Jan 1 2002 with a basic extended tail Claims-Made policy from Jan 1 2003-Jan 1 2004 with a supplemental extended tail Claims-Made policy from Jan 1 2001-Jan 1 2002 with a supplemental extended tail Claims-Made policy from Jan 1 2003-Jan 1 2004 with a basic extended tail - Correct Answers Claims-Made policy from Jan 1 2003-Jan 1 2004 with a supplemental extended tail Wendy hires Jim to build an addition to her house. Jim takes the job and finishes it in good time. Unfortunately, as Wendy is walking across the threshold of the new addition, a floorboard gives way and Wendy falls into the crawl-space below, injuring her leg and back. Which commercial general liability coverage could help cover the cost of Wendy's injuries? Insured Contracts Liability Premises Liability Product Liability Completed Operations Liability - Correct Answers Completed Operations Liability Herb owns a processing plant outside of town that services all the local farmers. He's been using over-theroad transportation but wants to streamline his business by using the railroads. He contacts ABC Railway Transport and the two come to an agreement: ABC Railway will run a sidetrack onto Herb's business premises, if Herb agrees not to hold ABC Railway responsible for certain liabilities that could result from the sidetrack's use. This agreement would fall under __________ in Herb's Commercial General Liability policy. Grace purchased a recliner from XYZ Furniture. After getting it home, she decided to try out the new chair. While leaning back, the chair breaks and Grace injures her neck. She sues XYZ Furniture and is awarded $70,000. Assuming XYZ Furniture's CGL has a Products-Completed Operations limit of $500,000 with a per occurrence limit of $75,000, how much out-of-pocket expense will XYZ Furniture incur if the court costs total $85,000? $85,000 $70,000 $10,000 $0 - Correct Answers $0 While Andrea was grocery shopping in BB Mart, the large Dairy sign fell off the wall and landed on her. Because of her extensive injuries, Andrea sued BB Mart and was awarded $375,000 in damages. BB Mart's Commercial General Liability policy has a general aggregate limit of $1,000,000 and a per occurrence limit of $300,000. What is the per occurrence limit after this claim is settled? $700,000 $75,000 $300,000 $0 - Correct Answers $300,000 DEC Construction was hired to completely renovate Randall's department store . DEC Construction is in charge of the project, but hires Mac Electric (an independent contractor) to complete the electrical portion, and requires Mac to have Owners & Contractors Protective Liability coverage for the job. Who is responsible for paying the premiums for this policy? Mac Electric and DEC Construction Randall's DEC Construction Mac Electric - Correct Answers Mac Electric Craig is just starting out with his business. He needs an insurance policy to cover his liability against any unknown defects within his products. Of the four types of CGL policies listed below, which offers the best coverage for Craig's business, regardless of when a claim is filed? Occurrence Policy Claims-Made Policy with Supplemental Extended Tail Claims-Made Policy with Basic Extended Tail Claims-Made Policy - Correct Answers Occurrence Policy Dr. Jones' current occurrence malpractice policy is in effect from July 1, 2005 through July 1, 2006. Which lawsuit would trigger this malpractice insurance policy? A woman sues Dr. Jones on January 24, 2006 for an eye surgery he performed on July 1st, 2004. A man sues Dr. Jones on July 26, 2009 for a damaging knee surgery performed on March 3, 2006. A woman sues Dr. Jones on July 17, 2005 for a poor nose job he performed on May 2, 2005. A man sues Dr. Jones on February 26, 2007 for misdiagnosing cancer on December 21, 2006. - Correct Answers A man sues Dr. Jones on July 26, 2009 for a damaging knee surgery performed on March 3, 2006. Dr. Smith has a claims-made malpractice insurance policy with a policy period from June 30, 2006 to June 30, 2007. Which claim would trigger this policy? A claim filed on January 13, 2007 for surgery performed on June 28, 2005. A claim filed on October 24, 2007 for surgery performed on November 15, 2006. A claim filed on December 7, 2007 for surgery performed on June 1, 2006. A claim filed on September 20, 2007 for surgery performed on June 1, 2007. - Correct Answers A claim filed on January 13, 2007 for surgery performed on June 28, 2005. The "Consent to Settle" clause in the Professional Liability policy is best described as: a clause that requires the insured to get the consent of the insurer prior to settlement. a clause that requires the insured's approval before the insurance company discusses settlement options with a claimant. a clause that requires the insurance company to get approval from the insured before settling a claim. a clause that requires the insurance company to settle all claims. - Correct Answers a clause that requires the insurance company to get approval from the insured before settling a claim. During a routine tooth extraction, Dr. Dentem administers too much laughing gas and causes brain damage to his client. The family sues Dr. Dentem for failing to follow procedure. Which kind of insurance would cover the cost of the lawsuit? Malpractice Insurance Personal Injury Protection Insurance Dental Insurance Errors and Omissions Insurance - Correct Answers Malpractice Insurance Cliff receives a letter from the IRS, informing him that he has severely underestimated his Adjusted Gross Income for the past year. Cliff was oblivious to this fact because XYZ Accounting has filed his taxes for him for the past 15 years. Now, Cliff owes $15,000 in back taxes. He sues XYZ Accounting for this mistake. Which of the following would cover the cost of the lawsuit for XYZ Accounting? Commercial Liability Insurance Accounting Insurance Errors and Omissions Insurance Malpractice Insurance - Correct Answers Errors and Omissions Insurance Which of the following would be most likely to purchase an Errors and Omissions policy?