Insurance Policy Coverages, Exclusions, and Provisions Explained, Exams of Property Law

Download Insurance Policy Coverages, Exclusions, and Provisions Explained and more Exams Property Law in PDF only on Docsity! 1 1 Fx property and casualty Exam 2024 1. In dwelling policies, automatic increase in insurance is (Choose from the following options) 1. Coverage for newly acquired property. 2. Coverage by endorsement. 3. Automatic coverage. 4. Coverage without additional premium. - ANS>> 2. Coverage by endorsement. 2. Personal business property out in the open is covered under Commercial Property Policy only while (Choose from the following options) 1. Within 150 feet of the described premises. 2. Within 100 feet of the described premises. 3. Located on the described premises. 4. Specifically described on the declarations. - ANS>> 2. Within 100 feet of the described premises. 3. Under a Commercial Crime Coverage Part, following a covered loss, the insured must submit a written proof of loss within (Choose from the following options) 1. 60 days. 2. 90 days. 3. 120 days. 4. One year. - ANS>> 3. 120 days. 4. Which of the following provisions requires an insurer to document all correspondence with an insured? (Choose from the following options) 1. Claims settlement 2. Entire contract 3. Errors and omissions 4. Unfair trade practices - ANS>> 3. Errors and omissions 5. Which statement is true regarding Workers Compensation law in California? 2 2 (Choose from the following options) 1. Injured workers may sue an employer for negligence only when fault is clearly established against the employer. 2. Injured workers may always sue an employer for negligence regardless of the degree of fault against the employer. 3. Injured workers cannot sue an employer for negligence. 4. Injured workers may sue an employer for negligence when any degree of fault is established against the employer. - ANS>> 3. Injured workers cannot sue an employer for negligence. 6. In order to determine whether to test a life insurance applicant for HIV or AIDS, the insurer may do which of the following: I. Base its decision to test on the incidence of AIDS in the person's ZIP code; II. Test only persons who are single and under age 30; III. Establish minimum uniform standards for testing all applicants for insurance; or IV. Not test anyone for HIV or AIDS, because it is discriminatory. (Choose from the following options) 1. III only. 2. I and II. 3. IV only. 4. I, II, III and IV. - ANS>> 1. III only. 7. A provision found in most claims-made liability policy forms that provide a specified period of time following the policy expiration, during which claims arising out of occurrences during the policy period may be made against the policy at no extra cost, is called (Choose from the following options) 1. Extension of coverage. 2. Supplemental extended reporting period. 3. Grace period. 4. Basic extended reporting period. - ANS>> 4. Basic extended reporting period. 8. The personal injury liability endorsement to an HO policy applies to all the following EXCEPT (Choose from the following options) 1. False arrest. 2. A third party breaks a leg when the insured knocks him down. 3. Slander. 4. Invasion of privacy. - ANS>> 2. A third party breaks a leg when the insured knocks him down. 5 5 18. Which of the following defenses attests that if a person recognizes and understands that there is danger involved in an activity and voluntarily chooses to encounter it, he or she may be barred from seeking recovery for injuries due to negligence? (Choose from the following options) 1. Assumption of risk 2. Proximate cause 3. Comparative negligence 4. Intervening clause - ANS>> 1. Assumption of risk 19. The homeowners policy covers collapse caused by all of the following EXCEPT (Choose from the following options) 1. Weight of snow. 2. Hidden insect or vermin damage. 3. Weight of too many people attending en event hosted in the house. 4. Foundation cracks. - ANS>> 4. Foundation cracks. 20. Which of the following best describes liberalization clause in a policy? (Choose from the following options) 1. Changes adopted by the insurer that broaden coverage automatically apply to the policy at no additional premium. 2. The insurer is relieved of its contractual obligations to the insured. 3. The insured may assign the policy to any person without their written consent. 4. The policy cannot be cancelled. - ANS>> 1. Changes adopted by the insurer that broaden coverage automatically apply to the policy at no additional premium. 21. The other insurances clause of an ocean marine policy allows coverage for which reasons? (Choose from the following options) 1. To obtain coverage for war, strikes, and related risks not covered by the policy 2. To replace an existing policy 3. To add endorsements 4. To expand existing coverages such as earthquake, fire, and hail - ANS>> 1. To obtain coverage for war, strikes, and related risks not covered by the policy 22. There are over 200 different crops that may be insured under crop insurance policies; however, the eligibility list varies 6 6 (Choose from the following options) 1. According to weather patterns. 2. Annually. 3. Geographically. 4. Seasonally. - ANS>> 1. According to weather patterns. 23. The purpose of the California residential property disclosure statement includes all of the following EXCEPT (Choose from the following options) 1. Becomes a part of your residential property insurance policy. 2. Describes the principal forms of insurance coverage in California for residential dwellings. 3. Identifies the form of dwelling coverage you have purchased or selected. 4. Contains only a general description of coverages. - ANS>> 4. Contains only a general description of coverages. 24. What is the maximum number of roomers or boarders for properties insured under the dwelling policy? (Choose from the following options) 1. 2 2. 3 3. 5 4. 6 - ANS>> 4. 6 25. Which of the following statements is true regarding Workers Compensation law in California? (Choose from the following options) 1. If the employee was partially responsible for causing his/her own injury, there is no coverage. 2. If the employee was partially responsible for causing his/her own injury, damages awarded will be lowered. 3. In cases where pain and suffering is involved and fault is clearly established against the employer, the employer may also be held liable for additional damages. 4. None of the above are true. - ANS>> 4. None of the above are true. 26. Under which of the following conditions can broad theft coverage be added to a dwelling policy? (Choose from the following options) 7 7 1. If permission is granted by the department of insurance 2. Broad theft coverage cannot be added to a dwelling policy. 3. If the policy has been in effect for 60 days 4. If the insured is owner-occupant of the dwelling - ANS>> 4. If the insured is owner- occupant of the dwelling 27. All of the following are supplemental payments found in liability policies EXCEPT (Choose from the following options) 1. Costs the insured incurred in hiring an attorney. 2. All expenses and defense costs incurred by the insurer. 3. Reasonable expenses incurred by the insured. 4. Limited amounts for bail bonds and other bonds related to a claim. - ANS>> 1. Costs the insured incurred in hiring an attorney. 28. Which of the following organizations has the primary responsibility forms for the standard market? (Choose from the following options) 1. Insurance Services Office 2. Office of Financial Services 3. National Association of Insurance Commissioners 4. Governor's Office - ANS>> 1. Insurance Services Office 29. Which of the following is a statutory defense? (Choose from the following options) 1. Intervening cause 2. Contributory negligence 3. Comparative negligence 4. Assumption of risk - ANS>> 30. Monica had a spotless medical record until she was rushed to the emergency room for a gallbladder attack in December. Her major medical provider allowed her to apply her gallbladder-related expenses to the next year so that she could apply them to the new year's deductible. What provision allowed her to do this? (Choose from the following options) 1. Carryover 2. Deductible Transfer 3. Deductible Extension 4. Common accident - ANS>> 1. Carryover 10 10 4. Farm liability coverage applies. - ANS>> 1. Business auto coverage form may apply. 40. An insurance company receives an application with some information missing and issues the policy anyway. What is this called? (Choose from the following options) 1. Subrogation 2. Aleatory 3. Waiver 4. Estoppel - ANS>> 3. Waiver 41. In a Commercial Property, Business Income policy, which section would explain which losses are covered? (Choose from the following options) 1. Provisions 2. Insuring Agreement 3. Declarations 4. Exclusions - ANS>> 3. Declarations 42. What is the limit for the forgery or alteration coverage in the businessowners policy? (Choose from the following options) 1. $1,000 2. $2,500 3. $500 4. $5,000 - ANS>> 43. The additional living expense coverage on homeowners policies (Choose from the following options) 1. Automatically paid after any loss to the covered house. 2. Does not begin to pay until the family has been out of the house for at least 7 days. 3. Is intended to allow the family to stay in the least expensive accommodations available. 4. Is intended to allow the family to maintain its normal standard of living. - ANS>> 4. Is intended to allow the family to maintain its normal standard of living. 44. All of the following are parts of a personal auto policy EXCEPT 11 11 (Choose from the following options) 1. Physical damage coverage 2. Medical payments coverage 3. Duties after an accident or loss 4. Liability coverage - ANS>> 1. Physical damage coverage 45. Who are the parties to a bond? (Choose from the following options) 1. Principal - obligor 2. Principal - obligee - surety - obligation 3. Principal - obligee - surety 4. Obligee - surety - obligation - ANS>> 46. All of the following statements regarding a Boatowners policy are true EXCEPT (Choose from the following options) 1. Automatic coverage is provided on replacements for the boat listed in the declarations provided the insured notifies the insurer within 60 days of purchase and pays any additional premium required. 2. Watercraft liability coverage provides protection up to specified limits, for claims against a "covered person" for damages because of bodily injury caused by a watercraft occurrence. 3. Physical damage coverage is provided on an actual cash value (ACV) basis. 4. The perils insured against is on an open-peril basis, providing that the insurer will pay for direct and accidental loss to the property insured. - ANS>> 1. Automatic coverage is provided on replacements for the boat listed in the declarations provided the insured notifies the insurer within 60 days of purchase and pays any additional premium required. 47. What is the primary difference between a surety and a guaranty? (Choose from the following options) 1. A guarantee pays only after the obligee tries to obtain restitution from the principal. 2. A surety bond is issued by an insurance company. 3. A guaranty bond is issued on behalf of the obligee to cover the performance of the principal. 4. A surety pays only if the principal's performance fails to comply contractually. - ANS>> 1. A guarantee pays only after the obligee tries to obtain restitution from the principal. 48. Which of the following is NOT a requirement for purchasing a Good Driver Discount policy? 12 12 (Choose from the following options) 1. A person has no more than one dismissal of charges in the last 3 years that would have resulted in the imposition of more than one violation point count. 2. A person must have been licensed to drive a motor vehicle for the previous 5 years. 3. A person has no more than one violation point count of the Vehicle Code in the last 3 years. 4. A person has not been in an accident in which he or she was principally at fault, and that resulted in bodily injury or in the death of any person. - ANS>> 2. A person must have been licensed to drive a motor vehicle for the previous 5 years. 49. An apartment occupant's personal property would be insured under which homeowners form? (Choose from the following options) 1. Unit-owners form (HO-6) 2. Tenant broad form (HO-4) 3. Comprehensive form (HO-5) 4. Broad form (HO-2) - ANS>> 50. Which of the following would be covered under the physical damage coverage of a Personal Auto Policy? (Choose from the following options) 1. A cellular phone located in a locked vehicle 2. Custom furnishings or equipment in a pick up or van 3. Sound reproduction equipment permanently installed in the covered auto 4. A covered auto which is seized and destroyed by a government authority - ANS>> 3. Sound reproduction equipment permanently installed in the covered auto 51. Another person has alleged that you are responsible for damage to their property. You notify your homeowners insurer. The insurer will (Choose from the following options) 1. Defend with the hopes of not paying damages. 2. Either pay or defend as it decides. 3. Pay the alleged damages. 4. Proceed according to your request. - ANS>> 52. All are true if a contractor defaults on a performance contract EXCEPT 15 15 (Choose from the following options) 1. Comprehensive form perils. 2. Broad form perils. 3. Basic form perils. 4. Special form perils. - ANS>> 62. In property and casualty insurance, insurable interest is defined as the right of a person or entity to property in that such a loss to that property would cause a direct monetary loss to the person or entity. Which of the following statements is TRUE regarding insurable interest in property and casualty insurance? (Choose from the following options) 1. Only the owner of the property has insurable interest. 2. Insurable interest also includes indirect monetary loss to the person or entity. 3. If the insured has no insurable interest, the contract is void. 4. The insurable interest must exist only at the time of application of insurance. - ANS>> 3. If the insured has no insurable interest, the contract is void. 63. Which of the following kinds of property would be covered under a dwelling policy? (Choose from the following options) 1. Pontoon boats 2. Rowboats 3. Motor vehicles 4. Aircraft - ANS>> 64. The key factor of representation that allows the injured party to rescind the contract is (Choose from the following options) 1. If the representation is false in an immaterial point. 2. Representations are statement's believed to be true and hold no legal consequences. 3. The promise or assurance of the representation. 4. If the representation is false in a material point. - ANS>> 3. The promise or assurance of the representation. 65. Roger owned a grocery store and had a Reporting Form Policy with a $100,000 limit for the store's inventory. The last report Roger submitted was during a slow period and showed a value of $50,000. The value increased to $75,000, and Roger failed to submit his next report when due. What is the maximum amount of coverage Roger has? 16 16 (Choose from the following options) 1. $50,000 2. $75,000 3. $100,000 4. $25,000 - ANS>> 1. $50,000 66. The rate charged for a Good Driver Discount policy should be at least what percent below the rate the insured would otherwise have been charged for the same coverage? (Choose from the following options) 1. 15% 2. 20% 3. 30% 4. 10% - ANS>> 67. All of the following are examples of insurable interest in property insurance EXCEPT (Choose from the following options) 1. Harry who is waiting for his distant cousin's beach-front property as part of his inheritance. 2. Fred and Ethel's personally owned vacation home. 3. Sally's own personal automobile. 4. Joe who is a partner in a thriving business - ANS>> 1. Harry who is waiting for his distant cousin's beach-front property as part of his inheritance. 68. With respect to commercial auto policies, the Garage Coverage Form provides liability protection for all of the following EXCEPT (Choose from the following options) 1. The insured's business autos. 2. The insured's business products and work performed. 3. The insured's business income losses due to personal injury. 4. The insured's business premises. - ANS>> 3. The insured's business income losses due to personal injury. 69. The Individual Named Insured endorsement under a Commercial Auto Policy provides coverage for which of the following? (Choose from the following options) 1. The sole proprietor of the business and his/her spouse, only 2. The sole proprietor of the business and his/her family members 17 17 3. The sole proprietor of the business, only 4. The sole proprietor of the business and his/her employees - ANS>> 70. The maximum penalty for failure to print an individual agent's license number on printed documents is (Choose from the following options) 1. $5,000. 2. $500. 3. $200. 4. $1,000. - ANS>> 71. When an umbrella policy is broader than underlying insurance and it pays a loss that is not covered by the underlying policy, it usually only pays (Choose from the following options) 1. The excess over the self-insured retention. 2. The amount specified in the policy under the additional coverage provisions. 3. The amount in excess of the underlying policy deductible. 4. A percentage of the loss as described on the declarations. - ANS>> 1. The excess over the self-insured retention. 72. Under Additional Coverages for homeowners policies, what is the maximum amount that can be charged to the insured for fire department services? (Choose from the following options) 1. $500 2. $1,000 3. $5,000 4. Fire department service charges are not allowed. - ANS>> 1. $500 73. A $100,000 house insured on a policy with an 80% coinsurance requirement has a fire that caused $40,000 of damage; the owner has a policy with $60,000 coverage. How much can the owner collect for his loss? (Choose from the following options) 1. $20,000 2. $30,000 3. $40,000 4. $60,000 - ANS>> 2. $30,000 20 20 (Choose from the following options) 1. The policyholder using a borrowed, covered auto with permission 2. An employee using his own car for another business 3. The policyholder in a covered auto 4. An employee using a covered auto with permission - ANS>> 84. If a person wants to include a newly-acquired auto in a policy that is already established for another vehicle, the insurer must be notified within (Choose from the following options) 1. 35 days. 2. 14 days. 3. 21 days. 4. 28 days. - ANS>> 2. 14 days. 85. Events or conditions that increase the chances of an insured loss occurring are referred to as (Choose from the following options) 1. Exposures. 2. Risks. 3. Perils. 4. Hazards. - ANS>> 86. Leo, an employee of the local "Shop A Lot" grocery store, suspects Betty of shoplifting. Leo escorts Betty through the crowded store to the back office and calls the local police. It is later determined that the Betty has not stolen any merchandise. Leo is guilty of (Choose from the following options) 1. Assault. 2. Battery. 3. False Arrest. 4. Invasion of Privacy. - ANS>> 87. Which situation would NOT be covered by the Basic Causes of Loss Form under a Commercial Property Policy? (Choose from the following options) 1. Gordon's Motorcycle Heaven is damaged by the sudden sinking of land created by the action of water on limestone 21 21 2. The Surf Side Club Waterfront Restaurant is damaged when flood waters rise and seep into the restaurant 3. Vandals throw rocks through the plate glass window of Piccolo Pete's Cafe 4. The automatic fire protective sprinkler system inside New Realities Book Shop leaks, causing damage to the store - ANS>> 88. A business using its own trucks to move its own cargo would insure the cargo using (Choose from the following options) 1. Motor carrier form. 2. Trip transit coverage. 3. Motor truck cargo - owners form. 4. Motor truck cargo - truckers form. - ANS>> 89. Which of the following would be included in the farm liability coverage forms? (Choose from the following options) 1. Bodily injury to an employed farmhand 2. Bodily injury to a residence employee 3. Any obligation of the insured under a workers compensation law 4. Bodily injury to any person who is an insured - ANS>> 2. Bodily injury to a residence employee 90. Which loss listed below would NOT be covered by a farm policy with a broad cause of loss form? (Choose from the following options) 1. 14-day old pigs fell in the pond and drowned 2. A fallen power line electrocuted a cow 3. A hunter who shot the prize bull, thinking it was a white-tail deer 4. Wild dogs attacked a mule - ANS>> 1. 14-day old pigs fell in the pond and drowned 91. Which of the following best describes gross negligence? (Choose from the following options) 1. Unjustified physical restraint of another person's freedom 2. Engaging in hazardous activities 3. Disregard for the safety of others 4. Failure to use reasonable care - ANS>> 3. Disregard for the safety of others 92. The type of insurance that guarantees the behavior of persons and the performance of contracts other than insurance policies is known as 22 22 (Choose from the following options) 1. Performance Guaranteed insurance. 2. Behavioral Contract insurance. 3. Surety insurance. 4. Contract insurance. - ANS>> 3. Surety insurance. 93. An insured's home is mortgaged by the local bank. The insured is required to carry insurance on the home, showing the bank as the mortgagee. If the home is damaged by a covered peril, which of the following is true? (Choose from the following options) 1. The mortgagee must settle with the mortgagor in the event of a loss. 2. The additional premium required for the mortgage endorsement must be paid by the mortgagee. 3. Losses will be paid to the mortgagee and mortgagor as their interest appears. 4. Coverage is suspended if the building is mortgaged and the insurer is not told of this indebtedness. - ANS>> 94. Removal coverage under a standard fire policy remains in effect for (Choose from the following options) 1. 5 days. 2. 10 days. 3. 15 days. 4. 30 days. - ANS>> 1. 5 days. 95. Norm has a Personal Auto Policy with both comprehensive (other than collision) and collision coverage. His car is stolen and recovered five days later. If Norm claims transportation expenses of $20 per day, how much will his policy pay? (Choose from the following options) 1. $75 2. $100 3. $45 4. $60 - ANS>> 4. $60 96. In insurance, an offer is usually made when (Choose from the following options) 1. The insurer approves the application and receives the initial premium. 25 25 explained that the insured was recovering from a surgery and might have been under the influence of medication at the time of application. Which of the following is true? (Choose from the following options) 1. The policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application. 2. The policy will remain in force as long as there are no material misrepresentations on the application. 3. The policy is legal since the applicant was able to give all required information. 4. The policy is not legal; agents cannot sell insurance over the phone. - ANS>> 1. The policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application. 106. In a personal auto policy, Coverage C: Uninsured Motorist defines an insured person as any of the following persons EXCEPT (Choose from the following options) 1. Occupying a covered auto. 2. Injured in an auto accident. 3. Member of the named insured. 4. Member of the insured being struck as a pedestrian. - ANS>> 107. According to the appraisal condition of a homeowners policy, what procedure may be followed if the insurer and insured do not agree as to the size of a loss? (Choose from the following options) 1. The policyholder is allowed to hire an appraiser, and the insurer will pay the amount etermined. 2. Each side selects its own appraiser, and the appraisers select an umpire to settle any differences between the appraisers. 3. The insured is required to accept what the insurer is willing to pay. 4. The parties must pursue a lawsuit. - ANS>> 108. Which of the following statements is true regarding a mobile equipment endorsement in commercial auto policies? (Choose from the following options) 1. Mobile equipment is covered for property insurance. 2. The endorsement is available for additional premium. 3. The endorsement is automatic. 4. Liability coverage is not provided on equipment that is being towed. - ANS>> 26 26 109. Even though the Standard Fire Policy is a named peril contract, under which of the following circumstances would the policy provide "all risk of loss" coverage on insured property? (Choose from the following options) 1. Always 2. Never 3. When the loss is caused by an "act of God" 4. When the loss is to insured property that has be removed because of endangerment by a peril insured against under the policy - ANS>> 110. In a boiler and machinery policy, the items insured under the policy are defined in the (Choose from the following options) 1. Policy definitions as "covered equipment." 2. Boiler and machinery coverage form. 3. Declarations. 4. Conditions. - ANS>> 1. Policy definitions as "covered equipment." 111. The 1980 Act requires FCIC to offer one price election that is not less than what percent of the projected market price for the commodity? (Choose from the following options) 1. 50% 2. 90% 3. 25% 4. 100% - ANS>> 112. A situation in which a person can only lose or have no change represents (Choose from the following options) 1. Pure risk. 2. Speculative risk. 3. Adverse selection. 4. Hazard. - ANS>> 113. In order for the California Insurance Code to be changed in any way, what is required? (Choose from the following options) 27 27 1. The governor's signature is required on the bill. 2. The state senators vote on any bills and if they are approved, they become law. 3. A bill must be approved by both houses of the California legislature. 4. A bill must be presented to the residents of California who decide by popular vote. - ANS>> 3. A bill must be approved by both houses of the California legislature. 114. If a policyholder contacts an insurance company about a claim and expects a response to the inquiry, within what span of time must the agent respond? (Choose from the following options) 1. 15 days 2. 21 days 3. 31 days 4. 90 days - ANS>> 1. 15 days 115. With regards to the personal auto policy, in the event of a claim or loss, the insured is required to do all of the following EXCEPT (Choose from the following options) 1. Immediately report to an emergency room for medical examination. 2. Notify the insurer as soon as possible with a description of the accident. 3. Protect the insured auto from further damage. 4. Promptly contact the police if the accident was a hit-and-run. - ANS>> 1. Immediately report to an emergency room for medical examination. 116. The difference in the contents coverage on an HO-3 and HO-5 is which of the following? (Choose from the following options) 1. Contents are covered for replacement cost on HO-5, and ACV on HO-3. 2. Contents are covered for replacement cost on HO-3, and ACV on HO-5. 3. Contents are covered open peril on HO-5, and named peril on HO-3. 4. Contents are covered open peril on HO-3, and named peril on HO-5. - ANS>> 3. Contents are covered open peril on HO-5, and named peril on HO-3. 117. Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within (Choose from the following options) 1. 90 days. 2. 1 year. 3. 3 years. 30 30 1. Actual cash value 2. Interest of the insured 3. Repair cost 4. Pro rata percentage - ANS>> 1. Actual cash value 127. If an insurer wants to recommend an auto repair facility to a claimant whose car has been involved in an accident, which of the following is true? (Choose from the following options) 1. The insured must be informed of his or her right to choose any repair center, and the insurer must cause the car to be restored to its pre-damaged state. 2. It is illegal for the insurer to make this recommendation unless it is requested by the policyowner. 3. Insurers are entitled to make such recommendations orally or in writing under any circumstance. 4. Insurers are only allowed to do this when the car lacks comprehensive and collision coverage - ANS>> 1. The insured must be informed of his or her right to choose any repair center, and the insurer must cause the car to be restored to its pre-damaged state. 128. A date stipulated on the declaration page of a claims-made liability form as the first date on which an incident may occur and be covered by the policy is called (Choose from the following options) 1. Retroactive date. 2. Retrocedent date. 3. Effective date. 4. Retention date. - ANS>> 1. Retroactive date. 129. Which of the following is true regarding renewability of a low cost auto insurance policy in California? (Choose from the following options) 1. It cannot be renewed. 2. It must be renewed annually. 3. It must be renewed every 2 years. 4. It is issued permanently; no renewal is required. - ANS>> 2. It must be renewed annually. 130. All of the following are additional liability coverages automatically provided in a homeowners policy, EXCEPT 31 31 (Choose from the following options) 1. Claims expenses. 2. Damage to the property of others. 3. Loss assessment coverage. 4. Personal injury protection. - ANS>> 4. Personal injury protection. 131. With regards to a homeowners policy, which coverage provides for indirect or consequential losses? (Choose from the following options) 1. Coverage C 2. Coverage D 3. Coverage A 4. Coverage B - ANS>> 2. Coverage D 132. Which of the following would NOT be covered by medical pay in Section II of your HO policy? (Choose from the following options) 1. You are walking your neighbor's dog and it bites someone. 2. You allow the neighborhood kids to play flag football in your yard; one is injured. 3. You cut your leg while whacking weeds in your backyard with your neighbor's weed whacker. 4. Your child's nanny falls while walking down your steps. - ANS>> 133. Surety bonds are written for a definite limit called (Choose from the following options) 1. Loss costs. 2. The bond penalty. 3. Indemnity limit. 4. The limit of liability. - ANS>> 2. 134. All of the following are characteristics of the dwelling policy EXCEPT (Choose from the following options) 1. Coverage includes the dwelling only, contents only, or both. 2. Incidental occupancy of limited service-type exposure is permitted. 3. Dwellings up to four family units are eligible. 4. The dwelling must be owner-occupied. - ANS>> 4. The dwelling must be owner- occupied. 32 32 135. What type of property does a Personal Floaters policy cover? (Choose from the following options) 1. Movable personal property located in the insured's home, only 2. Movable personal property, wherever it may be located 3. Permanently attached property located on the insured's premises 4. None of these - ANS>> 136. Under dwelling policy, if an insurer chooses to repair or replace damaged or lost property, it must inform the insured within how many days of receiving proof of loss? (Choose from the following options) 1. 10 days 2. 30 days 3. 45 days 4. 60 days - ANS>> 2. 30 days 137. Which of the following is NOT true of National Flood Insurance? (Choose from the following options) 1. Participating communities must agree to implement certain land use regulations. 2. National Flood Insurance provides coverage that is excluded from property insurance policies. 3. Insurance provided by the flood program also is available in standard property policies. 4. Emergency program limits are available to communities immediately. - ANS>> 138. In a dwelling policy, which of the following provides coverage for additional living expenses incurred by an owner-occupant in the event a covered peril makes the premises uninhabitable due to a covered loss? (Choose from the following options) 1. Coverage E 2. Coverage A 3. Coverage B 4. Coverage C - ANS>> 1. Coverage E 139. Which of the following will most likely be the same in a PAP and a motorcycle endorsement? (Choose from the following options) 35 35 1. The mortgagee should submit a claim to its insurer, and the insured should submit a claim to the HO policy. 2. The entire loss is payable to the mortgagee. 3. The entire loss is payable to the insured. 4. The loss is payable to the insured and the mortgagee. - ANS>> 4. The loss is payable to the insured and the mortgagee. 148. Because an insured owns a lot of expensive jewelry, her insurance agent has advised her to purchase a scheduled personal property endorsement. If the insured adds this endorsement to her homeowners policy, which of the following statements would be correct? (Choose from the following options) 1. Coverage C limits will no longer apply to the jewelry insured by the endorsement. 2. The amount of coverage will be doubled. 3. The endorsement becomes excess coverage. 4. The endorsement becomes primary coverage, and the HO contract is secondary. - ANS>> 1. Coverage C limits will no longer apply to the jewelry insured by the endorsement. 149. A professional liability policy will provide coverage for loss in all of the following cases, except, when the insured doctor was shown to be (Choose from the following options) 1. Incompetent. 2. Negligent. 3. Improperly trained. 4. Criminally negligent. - ANS>> 4. Criminally negligent. 150. The insured's mother-in-law broke her leg falling down the front steps of the insured's premises. The insured's homeowners medical payments coverage will (Choose from the following options) 1. Share equally in the cost with the mother-in-law's health insurance. 2. Apply to injuries of any guests or visitors. 3. Pay as excess over the mother-in-law's health insurance. 4. Pay only if the mother-in-law has no health insurance of her own. - ANS>> 2. Apply to injuries of any guests or visitors. A municipality can protect itself against the construction or repair of properties that do not conform to the building codes established by ordinance by requiring the contractors to obtain - ANS>> License and permit bonds. 36 36 Surety bonds are written for a definite limit called - ANS>> The bond penalty. The U.S. Government requirement that public construction be completed in accordance with certain laws and regulations was mandated by the Heard Act. The requirement that a contractor doing this construction be bonded would be classified as a: - ANS>> Federal bond Which bond is required by a court before allowing one to take the assets of another to satisfy a legal obligation? - ANS>> Attachment bond The primary purpose of a surety bond is to - ANS>> Make sure obligations are fulfilled. A business owner needs to purchase additional inventory in order to meet a customer's order. He contracts with a competitor, obtains the additional inventory, and satisfies his customer. Unfortunately, he does not have the money to repay his competitor. What type of guaranty should he have purchased? - ANS>> Financial Which bonds are required by courts whenever someone seeks a court order stating that another person must or must not do something? - ANS>> Injunction bonds Securities or other valuable papers in the care of a principal have been lost or destroyed. Would any type bond reimburse the owner of the securities or other valuable papers? - ANS>> Yes, a lost instrument bond A public official bond guarantees which of the following? - ANS>> Elected officials will perform their duties honestly. Jim has started a construction business and plans to specialize in remodeling and rewiring residential properties. Because the city where Jim is located and where he plans to operate his business has building codes, Jim will need to obtain a - ANS>> License and permit bond. Which bonds may be required when a person appeals to a higher court after a judgment already has been entered to guarantee that a judgment will be paid? - ANS>> Appeal bonds What type of bond guarantees that a construction contractor will enter into a contract at a set price? - ANS>> Bid bond Which surety bond guarantees that bills for labor and materials will be paid by the contractor as they are due? - ANS>> Payment bond Who are the parties to a bond? - ANS>> Principal - obligee - surety 37 37 The form of payment bond that protects an owner contracting for work against liens from subcontractors, suppliers, or laborers who are not paid for their services and materials by the general contractor is called - ANS>> Labor and material bond. Which bonds are issued to secure the release of a person from jail pending a courtroom appearance? - ANS>> Bail bonds For what term is a public officials bond normally written? - ANS>> For the term the principal is elected to serve All are true if a contractor defaults on a performance contract EXCEPT - ANS>> The surety may cancel the bond so as to avoid having to pay losses and expenses. A person who is responsible for the administration of a decedent's estate would have a need for a(n) - ANS>> Fiduciary bond. How are surety bonds different from insurance? - ANS>> Surety bonds guarantee specific duties or obligations will be fulfilled; insurance pays for losses. A bond is written for a set limit, and the surety will be liable only for this amount of the limit. This limit is known as the - ANS>> Penalty. Bob's neighbor will not stop parking his motorcycle in Bob's rose garden no matter how many times he has been asked to quit parking there. Bob finally gets a court order requiring the neighbor to refrain from parking there. It turns out it was his neighbor's property all along. What bond was Bob required to post guaranteeing his neighbor's damages in this wrongful action will be paid? - ANS>> Injunction Which of the following statements is true concerning a bonded contractor who defaults on a construction performance contract? - ANS>> The obligee may engage another contractor and then seek reimbursement from the surety. If you are called upon to handle the estate of a deceased, the court will require you to post which bond? - ANS>> Fiduciary When Mary decided to sue her neighbor for damages to her yard, she was told to get a bond that would guarantee she would be able to pay court costs and resulting damages if she loses the case. What kind of bond is this? - ANS>> A cost bond The requirement that managers and/or trustees of employee benefit plans that come under the Employee Retirement Income Act must be covered by a fiduciary bond. Because this requirement is mandated by the U.S. Government, the bond would be classified as a - ANS>> Federal bond. Which bonds guarantee that the recipients of permits will comply with the ordinances associated with the use of such permits? - ANS>> License and permit bonds 40 40 Which of the following is INCORRECT in regard to the conditions found in a workers compensation policy? - ANS>> The insurer may inspect the workplace after giving the insured 5 days' notice. Which of the following is a true statement regarding who is responsible for paying the premium for Workers Compensation coverage? - ANS>> The employer is responsible for paying the entire premium. In a participation plan, the insured may be eligible for which of the following? - ANS>> A partial premium refund If the premium charged for a particular insured is increased or decreased for a future period based on that insured's loss experience for a period in the recent past, the policy uses a(n) - ANS>> Experience rating plan. The voluntary compensation endorsement provides statutory coverage for which types of employees? - ANS>> Farmworkers According to the standard workers compensation and employer liability policy form, a state should be listed in Part Three - other states' insurance of the workers compensation and employers liability policy when - ANS>> The insured expects to extend operations to that state. According to the conditions of a workers compensation policy, the insurer has the right to inspect the insured workplace - ANS>> At any time. Workers compensation statutes require employers to meet capital reserves requirements sufficient to pay any claims that might arise. Employers can meet such obligations through all of the following EXCEPT - ANS>> Second injury funds programs. What method of premium computation relates an employer's losses, payroll, and premiums to the rating bureau's classifications of operations? - ANS>> Experience modification factor Which of the following statements is true regarding Workers Compensation law in California? - ANS>> None of the above are true. All of the following are true in regards to 24 Hour Coverage EXCEPT - ANS>> It can be distributed through a life insurance policy. Which of the following statements is true regarding the premium computation for workers compensation insurance? - ANS>> A premium auditor has the right to examine the insured's compensation records at the end of the policy period to determine the actual premium basis. 41 41 In order to be covered by the U.S. Longshore and Harbor Workers Compensation Act, a worker must meet the requirements of the - ANS>> Situs and status test Which of the following selections is true regarding the Workers Compensation medical care benefit? - ANS>> Injured workers are entitled to receive all medical care reasonably required to cure or relieve the effects of the injury, with no deductible or coinsurance. The voluntary compensation endorsement in a workers compensation policy provides that the insurer will pay statutory benefits to the insured person in exchange for what? - ANS>> The insured person must release the employer and the insurer from further liability. Under the Workers Compensation Reform Act, the Commissioner sets recommended, nonmandatory premium rates and then allows individual companies to add administrative overhead and expense costs which result in a final rate plan. This type of rating method is known as - ANS>> Open rating plan. What is the dollar limitation for workers compensation benefits in the state of California? - ANS>> 2/3 of a worker's weekly wage or a state-specified maximum payment. Employers liability insurance, Part Two of a standard WC&EL policy form, excludes - ANS>> An intentional act that is caused by the insured. Shipbuilders and repairers are covered by - ANS>> U.S. Longshore and Harbor Workers Compensation Act. Under the claims-made CGL the supplemental extended reporting period - ANS>> Provides an unlimited extension for making claims for losses that occurred during the policy period, but the insured must pay an additional premium A provision found in most claims-made liability policy forms that provide a specified period of time following the policy expiration, during which claims arising out of occurrences during the policy period may be made against the policy at no extra cost, is called - ANS>> Basic extended reporting period A passenger in a friend's car is injured while getting into the car. Which of the following statements would apply if both the passenger and the driver had medical payments coverage under a personal auto policy? - ANS>> The driver's policy will pay The party to a surety or fidelity bond who promises to fulfill the obligation is the - ANS>> Principal How are surety bonds different from insurance? - ANS>> Surety bonds guarantee specific duties or obligations will be fulfilled: insurance pays for losses 42 42 A professional liability policy will provide coverage for loss in all of the following cases, except, when the insured doctor was shown to be - ANS>> Criminally negligent Employment practices liability insurance (EPLI) would NOT cover claims arising from - ANS>> Deliberate law violation Which of the following statements is true regarding the premium computation for workers compensation insurance? - ANS>> A premium auditor has the right to examine the insured's compensation records at the end of the policy period to determine the actual premium basis An insurance producer fails to obtain automobile insurance for client after agreeing to do so. The client is involved in an automobile accident after running a red light and is found to be at fault. The damage to the other vehicle totals $5,000. Which statement regarding the producer's errors and omissions liability policy is true? - ANS>> It will provide coverage because the damage to the client resulted from the producer's negligence What is the deductible of a personal liability umbrella policy called? - ANS>> The SIR Which professional liability form provides form coverage for liability arising out of malpractice, error, or mistakes made in rendering professional services? - ANS>> Physicians, surgeons and dentists malpractice Which of the following statements is NOT true regarding a personal umbrella liability policy? - ANS>> It provides errors and omissions coverage for an agency With respect to commercial auto policies, the Garage Coverage Form provides liability for all of the following EXCEPT - ANS>> The insured's business income losses due to personal injury Prior to state-directed workers compensation statutes being enacted, employees had - ANS>> To sue an employer for the "loss" and prove that the employer was at fault Which of the following liability policies is usually written on a "claims-made" form? - ANS>> Professional liability insurance Which of the following liability exposures is most likely for a small specialty clothing retail boutique? - ANS>> Premises liability exposure A plasterer has finished a job. What kind of liability coverage would protect him if the plaster falls and hurts someone because he did not do the job correctly? - ANS>> Completed operations 45 45 In the personal auto policy, owned trailers being towed by an insured auto are automatically covered for - ANS>> Uninsured motorists coverage Under the limits of insurance provision found in the Physical Damage Coverage Form in a Commercial Auto policy, how much will an insurer pay to repair or replace a covered auto? - ANS>> The lesser of the actual cash value or the cost to repair or replace a covered auto An insured is driving his or her automobile and strikes a large pothole, causing a flat tire. Which coverage of the insured's personal auto policy will pay for the repair? - ANS>> Loss is not covered An auto dealer reported $500,000 worth of automobiles on its lot at the end of May to its insurer. On June 10, it received $200,000 worth of cars. By June 20, the dealership sold $100,000 worth of cars. A hail storm on June 21 caused $50,000 worth of damage to the inventory. Without considering any deductibles, how much will the insurer pa for damages? (Dollar amounts are rounded to the nearest hundred) - ANS>> $41,700 According to the standard workers compensation and employer liability policy form, a state should be listed in Part Three - other states' insurance of the workers compensation and employers liability policy when - ANS>> The insured expects to extend operations to that state A premium discount is the term that describes when an insured owes a total standard premium greater than - ANS>> $5,000 All of the following are factors in rating workers compensation insurance EXCEPT - ANS>> Sales If an employer in a state with elective workers compensation laws chooses not to be to subject to the state's workers compensation laws, what does the employer lose? - ANS>> Its common law defenses against liability suits Workers compensation benefits are provided for an employee injury or death that arises out of the course of normal employment in all of the following situations EXCEPT - ANS>> On his evening stroll, and employee of an advertising company is injured while watching a competitor's billboard sign being removed from an advertising site In a participation plan, the insured may be eligible for which of the following? - ANS>> A partial premium refund Which of the following would be covered under the crime coverage inside the premises - theft of money and securities? - ANS>> Loss or damage to a locked safe, vault, or cash register 46 46 Which would NOT be covered by the inside the premises - robbery or safe burglary of other property coverage? - ANS>> An employee is caught stealing cash from the register Under the commercial crime coverage inside the premises - robbery or safe burglary of other property, what is the special per occurrence limit that applies to loss or damage to precious metals, precious and semiprecious stone, pearls, furs, manuscripts, drawing, or records? - ANS>> $5,000 Which of the following Employee Fidelity Bonds would cover all employees? - ANS>> A blanket position bond If an insured desires protection on property other than money and securities inside the premises from losses caused by breaking and entering after business hours, which of the following Crime Coverage forms should be purchased? - ANS>> Inside Premises - Robbery or Burglary of Other Property A bond is written for a set limit, and the surety will be liable only for this amount of the limit. This limit is known as the - ANS>> Penalty All of the following situations would be covered under a professional liability policy, EXCEPT - ANS>> The failure of an attorney to properly defend a client due to his personal dislike of the client What method of premium computation relates an employer's losses, payroll, and premiums to the rating bureau's classifications of operations? - ANS>> Experience modification factor Employee fidelity may be written in all the following ways EXCEPT - ANS>> Location schedule In a personal umbrella, the amount paid by the insured for certain losses not covered under the primary coverage is called - ANS>> Self-insured retention The Occurrence form trigger is based on which of the following? - ANS>> The date when injury or damage occurs Which of the following statements would be an example of a product liability claim? - ANS>> Faulty packaging of a cereal caused spoilage that resulted in someone getting sick When an umbrella policy is broader than underlying insurance and it pays a loss that is not covered by the underlying policy, it usually only pays - ANS>> The excess over the self-insured retention 47 47 The Claims-Made Trigger is based on which of the following? - ANS>> The date the claim is first made in writing against an insured for injury or damage that occurred on or after the policy's retroactive date All of the following conditions must exist for injury or damage to be included in the products and completed operations hazard of a commercial general liability policy EXCEPT - ANS>> The injury or damage must occur within 90 days after the insured's work is completed A customer was injured in a supermarket parking lot when a grocery card collided with the customer's leg. Coverage for this claim would be provided under - ANS>> Premises and operations A date stipulated in the claims-made liability form declarations section as the first date on which an incident may occur and be covered by the policy is known as the - ANS>> Retroactive date B&B Market was sued when an employee detained a person he believed to be a shoplifter, but the person turned out to be the meter reader. Which coverage would apply to this suit? - ANS>> Personal and advertising injury liability When ABC Appliance's marketing stated that its mowing machine was the only safe mower available for purchase in town, ABC was sued by XYZ Lawn and Garden. ABC's coverage would come from which part of its general liability coverage? - ANS>> Personal and advertising injury liability Which of the following statements is true regarding the commercial general liability policy's Coverage C - Medical Payments? - ANS>> The coverage is considered "good will" because payments are made without regard to fault Erroneous Publishing copied all the material from Angels Inc.'s book. The only changes made by Erroneous were to rename the title and chapters, put a different cover on it, and distribute it as its own. Angels Inc. files a claim against Erroneous and seeks damages. Will a commercial general liability policy cover the claim? - ANS>> No, because the claim results from copyright infringement and is not in an advertisement Which of these is defined as the maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims that may be made or the number of accidents that may occur? - ANS>> Aggregate limit of liability A meteorite hits the insured's car, causing damage. Under which of the following coverages in a personal auto policy would this loss be paid - ANS>> Other-than- collision An insured owns and operates a ranch. The insured has several vehicles that are used in the ranching operation and for personal use. Which of the following could NOT be 50 50 Prior to state-directed workers compensation statutes being enacted, employees had - ANS>> To sue an employer for the "loss" and prove that the employer was at fault Workers compensation statutes provide coverage for diseases that occur as a result of working in the employer's working environment. Which of the following is an example of a disease that would NOT be covered by such provisions? - ANS>> An employee of a medical facility who suffers from a common cold A plant worker for a chemicals manufacturer was recently diagnosed with a rare blood disease. She told her doctor that her job required her to handle industrial waste chemicals. Which of the following types of injuries is covered under the workers compensation policy? - ANS>> Occupational disease caused or aggravated by a condition of employment Workers compensation will pay under which of the following situations? - ANS>> Paid without consideration of fault or negligence on the part of either employee or employer Which of the following IS considered a work-related injury/occupational disease under Workers Compensation law? - ANS>> Tom works as a painter in an auto body shop. The chemicals from the paint aggravated Tom's asthma to the point that he must be hospitalized Connor, an employee for Marble Tile, Inc., is injured outside of his home state. How will the workers compensation benefits be determined? - ANS>> Benefits will be provided if the state was listed on the policy information page Workers compensation rating is developed by applying a rating bureau job classification rate to each - ANS>> $100 of payroll Who are the parties to a bond? - ANS>> Principal - obligee - surety The employee theft crime policy includes a coverage extension that applies to employees temporarily outside the coverage territory for up to - ANS>> 90 days Which employee fidelity bond pays no more than its limit of liability for each separate occurrence to matter that several separately identifiable employees were involved in a single loss? - ANS>> Commercial blanket position Employee theft coverage may be written as - ANS>> Blanket, Name schedule, Position schedule coverage The primary purpose of a surety bond is to - ANS>> Make sure obligations are fulfilled The type of professional liability coverage a medical doctor needs is - ANS>> Malpractice coverage 51 51 Most fidelity bonds have a period of time in which losses which occurred while the bond was in force are covered even though not found until after the coverage has terminated. This is known as - ANS>> A discovery period Which professional liability form provides form coverage for liability arising out of malpractice, errors, or mistakes made in rendering professional services? - ANS>> Physicians, surgeons and dentists malpractice A professional who wants coverage for all liability exposures should purchase what form of liability insurance? - ANS>> Commercial general and professional An insurance agency could purchase an errors and omission insurance policy, which would provide protection in the event of an of the following events EXCEPT - ANS>> The agency loses commission income from policies that were not issued by the insurer What's the difference between a fidelity bond and a surety bond? - ANS>> A surety bond guarantees something will happen; a fidelity bond guarantees something will not happen Which of the following forms provides the broadest coverage under an employee theft coverage form? - ANS>> Blanket position Professional liability coverage protects against legal liability resulting from - ANS>> Errors and omissions Under the coverage of which of the following liability policies may an insured require the insurer to defend a claim - ANS>> Professional liability What type of coverage do umbrella policies provide? - ANS>> Excess coverage over an underlying or primary policy Under the commercial crime coverage inside a premises-robbery or safe burglary of other property, what is the special occurrences limits that applies to loss or damage to precious metals, precious and semi precious stones, pearls and furs, manuscripts, drawing or records. - ANS>> $5,000 Which of the following is NOT an essential element of an insurance contract? - ANS>> counteroffer Who are parties to a bond? - ANS>> principal-oblige-surety Negligence can be defined as? - ANS>> the failure to use reasonable and prudent care An insure intentionally did not disclose a material fact on the application of insurance. This would be considered? - ANS>> concealment 52 52 All of the following are true regarding flood insurance EXCEPT? - ANS>> coverage may be provided by growing crops and livestock An insured's roof cost $4,000 when installed 5 years ago. It has been damaged by hail and needs to be replaced. The new roof will cost $6,000 at todays prices. If the roof has been depreciating $200 per year and his policy is ACV, how much will it pay the insures new roof? - ANS>> $5,000 Workers compensation benefits are provided for an employee injury or death that arises out of the course of normal employment in all of the following? - ANS>> on his evening stroll and employee of an advertising company is injured whilew watching a competitors billboard sign being removed from an advertising site Which of the following personal auto coverage pay for damages to be covered auto due to contact with a deer? - ANS>> other then collision (comprehensive coverage) Under a business owners policy, an insured can cancel the policy? - ANS>> at the time by mailing a written notice of cancellation An insure neglects to pay a legitimate claim that is covered under the terms of the policy? which of the following term best describes what the insure has violated? - ANS>> consideration Theft coverage under an ho-8 is restricted to? - ANS>> the actual cash value of what was stolen with limits for certain classes of property which of the following liability exposures is most likely for a small specialty retail clothing boutique? - ANS>> premises liability exposure Most fidelity bonds have a period of time in which occurred whine the bond was in force are covered even though not found until after the coverage has terminated. this is know as? - ANS>> a discovery period Which of the following is NOT true of National Flood Insurance? - ANS>> insurance provided by the flood program also is available in standard property policies Which of the following is a common exclusion found in Part D: coverage for damage to your auto of a PAP? - ANS>> mechanical breakdown CGL coverage B (personal injury and advertising injury) will cover? - ANS>> inadvertent injury to others caused in the occur of advertising the insured product Frank steaks furnishes meat to steakhouses. An accident on the premises cause the building to lose refrigeration for 32 hours. The state inspectors will not allow the meat in the refrigerator units to be sold for human consumption and frank loses $18,500 in 55 55 Which of the following definitions best defines the term accident? - ANS>> a sudden, unplanned and unexpected event not under the control of the insured resulting in injury or damage neither expected nor intended Payments for medical expenses, loss of wages, funeral expenses or the cost to repair or replace damaged property are known as what type of compensatory damages? - ANS>> an employee of a medical facility who suffers from a common cold In insurance an offer is usually made when? - ANS>> the application is submitted What is the purpose of the NFIP? - ANS>> to fill the gap left by the private insurers in flood coverage Which of the following is covered by the camera and musical instruments dealers floater? - ANS>> a customers camera left at a camera shop for repair For the purpose of insurance risk is defined as - ANS>> the uncertainty or chance of loss Motor truck cargo policy - truckers form - ANS>> Which of the following covers a carrier for liability for loss to cargo while it is being transported in a truck? Motor truck cargo policy - owners form Trip transit policy Truckers coverage form Motor truck cargo policy - truckers form Condominiums - ANS>> Which of the following risks is eligible for coverage under a businessowners policy? Banks Automobile dealers Bars or taverns Condominiums d) All of the above could be considered flood sources - ANS>> Which of the following would be considered causes for flood conditions covered by the National Flood Insurance Program? a) Overflow of inland or tidal waters b) Unusual and rapid accumulation or runoff of surface waters from any source c) A mudflow d) All of the above could be considered flood sources $1,000 - ANS>> A producer didn't realize that he had committed an act in violation of the Insurance Code. How much would he probably be penalized? 56 56 $0 $500 $1,000 $25,000 Within 30 days - ANS>> If a resident producer or solicitor has a change of residential or business address, how soon must the licensee notify the Commissioner? As soon as possible Within 15 days Within 30 days At license renewal The policyholder can sue the insurer whether or not all conditions and provisions of the policy have been met. - ANS>> All of the following statements concerning liability coverage are true EXCEPT a) Liability policies normally include supplementary payment provisions. b) Liability policies defend the insured against claims, real or alleged. c) The policyholder can sue the insurer whether or not all conditions and provisions of the policy have been met. d) The insurer cannot refuse to pay a claim even if the insured is bankrupt. Within 45 days. - ANS>> The insured with a claims-made commercial general liability (CGL) policy may request in writing claim and occurrence information from the insurer at any time up to 60 days after the policy period ends. The insurer must provide the information Within 60 days. As soon as practical. Within 45 days. Within 30 days. Physical damage coverage - ANS>> All of the following are parts of a personal auto policy EXCEPT Liability coverage. Physical damage coverage. Medical payments coverage. Duties after an accident or loss. 5 days - ANS>> If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? 57 57 5 days 7 days 10 days 3 days $30,000 - ANS>> An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay? $0 $30,000 $32,000 $40,000 Limited to covering a servant's property while at the insured location. - ANS>> Under the dwelling policy, Coverage C - Personal Property is A prohibited coverage in the dwelling form. Limited to 50% of the amount of insurance that is written as Coverage A. Limited to covering a servant's property while at the insured location. Automatically provided as 50% of Coverage A. .Physical damage - ANS>> If a person is using an auto with the belief that he is entitled to do so, subrogation rights under a personal auto policy would apply to all coverages EXCEPT Uninsured motorist. No-fault medical payments. Liability. Physical damage. False advertising - ANS>> An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of? False advertising Unfair claims Twisting Defamation U.S. Longshore and Harbor Workers Compensation Act - ANS>> Shipbuilders and repairers are covered by the U.S. Longshore and Harbor Workers Compensation Act. Jones Act. States' workers compensation laws 60 60 Damage to the dwelling caused by lava or dust from a volcanic eruption Damage to the dwelling caused by the insured when moving furniture Accidental scorching caused when a hot iron is placed upon a built-in counter top Interior damage caused by water seeping under the shingles on the roof 30 days - ANS>> The removal coverage that is included in the broad form dwelling policy will cover property temporarily removed from the premises to protect it from damage for how long? 5 days 15 days 30 days 60 days Computer fraud - ANS>> The transfer of money from inside a banking premises to a person other than a messenger outside those premises or to a place outside those premises is covered under which commercial crime coverage? Computer fraud Money orders and counterfeit paper currency Other crime coverage Outside premises Fraud - ANS>> An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act? Defamation Unfair discrimination Errors and omissions Fraud Additional coverage - ANS>> Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses? Additional coverage Exclusions Declarations Insuring agreement Provide a method of insuring licensed drivers who are unable to purchase auto liability insurance in the voluntary market - ANS>> The Louisiana Automobile Insurance Plan was established to 61 61 Subsidize losses of insured who are insured under the Plan. Approve rates to be charged of high risk auto insureds. Provide a method of insuring licensed drivers who are unable to purchase auto liability insurance in the voluntary market. All of the above. .Motor truck cargo - owners form - ANS>> A business using its own trucks to move its own cargo would insure the cargo using Motor truck cargo - owners form. Motor truck cargo - truckers form. Motor carrier form. Trip transit coverage. Losses due to the insured's negligence - ANS>> Coverage A - Bodily Injury and Property Damage in the commercial general liability policy will cover Contractual liability. Damage to the insured's product. Losses due to the insured's negligence. Liquor liability. It is an additional coverage. - ANS>> Which of the following is true regarding the fire department service charge under the builders risk form? It is an automatic coverage for $500. It is not available in this form. It is a high-deductible endorsement. It is an additional coverage. Stated amount - ANS>> When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written as Specific insurance. Stated amount. Replacement cost. Actual cash value. Garagekeepers - ANS>> Which of the following coverages would provide protection for the liability of an auto repair garage to owners of vehicles destroyed in the garage by fire? Motor carrier General liability premises and operations 62 62 Garagekeepers Product liability Federal Motor Carrier Safety Administration - ANS>> Which of the following is the federal body that regulates truckers who travel across state lines? Federal Motor Carrier Safety Administration Motor Carriers Commerce Agency Truckers and Trade Commission Federal Trade Commission Extortion - Commercial Entities - ANS>> Rita drops off her wedding gown at Vicky's Dry Cleaners for a final pressing. The store's press breaks, so Vicky takes Rita's dress to her other store across town. On the way to the other store, Vicky is held at gunpoint until she gives the man the wedding dress. What crime coverage form would pay for the loss of the gown in this situation? Funds Transfer Fraud Extortion - Commercial Entities Miscellaneous Crime None of these Hill & Morton Funeral Home - ANS>> Which of the following businesses would be eligible for a businessowners policy? Hill & Morton Funeral Home Family Fun Time Amusement Park Joe's Bar And Grill Hometown Bank & Trust HO-4 - ANS>> Which of the following homeowners forms is designed to provide named peril coverage for personal property to individuals who rent an apartment? HO-4 HO-6 HO-2 HO-3 False financial statement - ANS>> When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement? Defamation Twisting 65 65 The date the claim is first made in writing against an insurer for injury or damage that occurred after the policy's retroactive date The date the claim is first made orally against an insurer for injury or damage that occurred after the policy's retroactive date The date the claim is first made orally against an insured for injury or damage that occurred after the policy's retroactive date The date the claim is first made in writing against an insured for injury or damage that occurred on or after the policy's retroactive date $1,000 - ANS>> An insured has a homeowners policy and is required to be a member of the homeowners association in her neighborhood. The association's community house has burned down, and the insured has been assessed $1200 for her share of the rebuilding cost. How much of the assessment will her homeowners policy pay? None $500 $1,000 $1,200 Notify the insured in the event of financial difficulty. - ANS>> Duties of the insurer found in property policy conditions include all of the following EXCEPT Return any premiums to the insured. Notify the insured in the event of financial difficulty. Pay covered losses. Provide advance notice of cancellation. Damage to the dwelling caused by ash or dust from a volcanic eruption - ANS>> Which of the following examples of losses paid under an HO-3 also would be paid under an HO-2 homeowners policy? Interior damage caused by water seeping under the shingles on the roof Damage to the dwelling caused by ash or dust from a volcanic eruption Damage to the dwelling caused by the insured when moving furniture Accidental scorching caused when a hot iron is placed upon a built-in counter top Covered Auto - ANS>> The designation symbols used in commercial auto policies can be found in which policy section? Covered Auto Liability Coverage Definitions Conditions The surety may cancel the bond so as to avoid having to pay losses and expenses - ANS>> All are true if a contractor defaults on a performance contract EXCEPT 66 66 The surety will attempt to seek reimbursement from the contractor for any amounts it pays. The surety may cancel the bond so as to avoid having to pay losses and expenses. The obligee may hire another contractor to complete the job and have the surety repay the obligee. The principal's obligations end. Outside the premises - ANS>> Which of the following commercial crime coverages would cover a loss resulting from theft of the company's money and securities from the armored vehicle making a delivery? Outside the premises Forgery or alteration Robbery and safe burglary Inside the premises Turkeys - ANS>> Which of the following is NOT covered under Coverage E - Scheduled Farm Personal Property? Fish Turkeys Portable structures Livestock Never more than 75% of the loss is paid - ANS>> A loss has occurred before the first report has been filed on a value reporting coverage form. Which is NOT true? Full amount of loss up to the policy limit is paid if the loss occurs before the first report due date. 75% of the loss is paid if the loss occurred after the first report due date. Never more than 75% of the loss is paid. Provisional premium is based on 75% of the full amount of coverage. Any loans required to offset uncollectible amounts - ANS>> Which of the following is NOT covered under accounts receivable coverage form? Expenses to reestablish the records, if possible, and collection expenses that are in excess of normal costs Any loans required to offset uncollectible amounts Interest on loans required to offset uncollectible amounts pending payment of the insurance proceeds Sums due the insured that are uncollectible due to a covered loss The date when injury or damage occurs - ANS>> The occurrence form trigger is based on which of the following? 67 67 The place where the injury or damage occurs The amount of the insured's deductible The amount of claims made during the policy period The date when injury or damage occurs Discrimination - ANS>> Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called? Misrepresentation Adverse selection Discrimination Law of large numbers Any of the above. - ANS>> With regards to Uninsured/Underinsured Motorist Coverage, the named insured may Reject the coverage. Select a lower limit of coverage. Select economic-only coverage. Any of the above. Material misrepresentation - ANS>> An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? Waiver Utmost Good Faith Estoppel Material misrepresentation Liability coverage - ANS>> Which of the following personal auto coverages would pay for the insured's travel expenses and loss of earnings while involved in the settlement process of a covered loss? Medical payments Comprehensive coverage Collision coverage Liability coverage A joint ownership coverage endorsement is added - ANS>> An automobile that is owned by a nontraditional household, not consisting of a husband and wife, may be insured under a personal auto policy if 70 70 Discrimination. Twisting. Controlled business. Adverse selection. A residence employee who is injured on the job - ANS>> Coverage F (medical payments) under a homeowners policy would cover A residence employee who is injured on the job. A tenant who is injured while on the premises. A family member who is injured while residing in the insured premises. The insured for injuries sustained while working at home.. .After the execution of the contract - ANS>> The commercial general liability coverage form excludes bodily injury or property damage that the insured has assumed under any contract or agreement. However, the exclusion does not apply to certain types of contracts, as long as the injury or damage occurs After the execution of the contract. After the contract expires. Before the execution of the contract. Before the contract expires. DP-1 - ANS>> Which of the following dwelling policy forms primarily insures a structure on an actual cash value basis? DP-1 DP-2 DP-3 All DP forms Implied - ANS>> Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? Apparent Assumed Express Implied The injury or damage must occur within 90 days after the insured's work is completed. - ANS>> All of the following conditions must exist for injury or damage to be included in the products and completed operations hazard of a commercial general liability policy EXCEPT The injury or damage must arise out of the insured's product or work. 71 71 The injury or damage must occur after the insured has released physical possession of the product to another. The injury or damage must occur within 90 days after the insured's work is completed. The injury or damage must occur away from the insured premises. Certificate of Authority - ANS>> A France-based insurer would like to do business in Louisiana. What document must it first receive? International Certificate of Incorporation Certificate of Authority Transcontinental Commerce Clearance Alien Insurer License All of these are covered - ANS>> Which of the following may be covered by electronic data processing coverage form under an inland marine policy? Computer hardware that is specifically scheduled. Extra expense the insured incurs to continue the business following a loss. Data processing media, including magnetic tapes or paper tapes, punch cards and discs All of these are covered. General - ANS>> What type of compensatory damages will pay for pain and suffering and disfigurement? Normal General Special (specific) Tort Common carrier cargo liability. - ANS>> All of the following are classes of inland marine risks EXCEPT Bridges, tunnels, and other instrumentalities of transportation and communication. Common carrier cargo liability. Commercial property floater risks. Domestic shipments and transportation risks. An intentional act that is caused by the insured - ANS>> Employers liability insurance, Part Two of a standard workers compensation and employers liability (WC&EL) policy form, excludes An intentional act that is caused by the insured. Liability to a third party for claims arising out of injury to an employee. Bodily injury caused by accident when the injury occurs during the policy period. Bodily injury caused by or aggravated by disease during the policy period. 72 72 When other insurance is written on the same basis as a commercial property policy, the obligation of the insurer is to cover - ANS>> A share of the loss. The coinsurance requirement on a Builder's Risk Form is what percentage of the completed value? - ANS>> 100% Under the provisions of the business income coverage form, all of the following are true, EXCEPT - ANS>> The insured is reimbursed for the loss from the date of loss to date of restoration or policy expiration date, whichever comes first. The standard property deductible per occurrence on a CPP is - ANS>> $500. One policy type that allows the insured to select the coverage forms that best fits the individual needs of the client is called the - ANS>> Modular commercial lines policy. Which situation would NOT be covered by the Basic Causes of Loss Form under a Commercial Property Policy? - ANS>> The Surf Side Club Waterfront Restaurant is damaged when flood waters rise and seep into the restaurant The extra expense coverage form provides - ANS>> Coverage that will permit the insured to continue in business without interruption following a property damage loss. Besides the peril of earthquake, which other peril is covered by the Earthquake Cause of Loss Form under a Commercial Property Policy? - ANS>> Volcanic eruption A business owner whose inventory changes significantly throughout the year should consider having coverage written on what type of form? - ANS>> Reporting form Builder's risk is most often written on which form? - ANS>> Completed value form All of the following statements concerning coinsurance are true, EXCEPT - ANS>> The coinsurance formula also will be applied to total losses. The insured with reporting value coverage has had a covered loss. It is discovered he underreported on the last report filed. Which is true? - ANS>> No more than the amount reported divided by the actual value on the date the report was due will be covered. Mary Smith is the loving wife of John Smith, owner of John Smith Tool Company. One day as Mary was walking through the tool shop to John's office for lunch, Mary inadvertently spilled an oil container onto the floor. One employee slipped on the oil spill and broke her hip which required surgery. Mary is NOT an employee of the company; therefore, - ANS>> The commercial general liability policy will cover Mary for her negligence since she is the spouse of the insured. 75 75 What are the two causes of loss covered under the Glass Coverage Form? - ANS>> Breakage and accidentally or maliciously applied chemicals Roger owned a grocery store and had a Reporting Form Policy with a $100,000 limit for the store's inventory. The last report Roger submitted was during a slow period and showed a value of $50,000. The value increased to $75,000, and Roger failed to submit his next report when due. What is the maximum amount of coverage Roger has? - ANS>> $50,000 A policy that insures all property at multiple locations for a single amount is referred to as - ANS>> Blanket. Zachary is the proud owner of a 1998 sports car to which he has added a high performance engine costing several thousand dollars. Zachary has added an endorsement to his auto policy which will provide coverage against loss or damage to the engine. This type of endorsement is known as - ANS>> Damage to your auto (customized equipment In the Personal Auto Policy, owned trailers being towed by an insured auto are automatically covered for - ANS>> Uninsured Motorists Coverage. Under the Personal Auto Policy, liability for bodily injury resulting from the insured's use of a non-owned automobile is - ANS>> Provided by the insured's policy on an excess basis. An automobile that is owned by a nontraditional household, not consisting of a husband and wife, may be insured under a personal auto policy if - ANS>> A joint ownership coverage endorsement is added. All of the following are eligibility criteria for applicants in the CAARP EXCEPT - ANS>> Anyone who does not owe money on any automobile insurance policy within the last 18 months. What is the name for the type of property damage coverage that protects the insured or the covered auto in an accident with someone who does not have coverage? - ANS>> Uninsured motorist An insured has $5,000 of medical coverage on a personal auto policy at the time of a covered accident. The insured and two passengers are injured. Medical treatment costs $7,000 for the insured, $4,000 for the first passenger, and $8,000 for the third passenger. How much will the policy pay under medical payments coverage? - ANS>> $14,000 The bankruptcy provision found in the personal auto policy states that bankruptcy of the insured - ANS>> Will not relieve the insurer of its policy obligations. 76 76 Which of the following is true regarding renewability of a low cost auto insurance policy in California? - ANS>> It must be renewed annually. Which of the following would be eligible for the California low-cost auto insurance? - ANS>> An individual with a good driving record whose income is at 100% of the federal poverty level Which of the following would NOT qualify as a hired auto? - ANS>> An auto borrowed from an employee Which of the following is NOT a limitation under Mexico Coverage? - ANS>> Suits may be brought by either U.S or Mexican citizens. California's Compulsory Financial Responsibility Law requires every driver and every owner of a motor vehicle to maintain financial responsibility (liability coverage) at all times. All of the following are acceptable forms of financial responsibility EXCEPT - ANS>> A surety bond for $50,000 obtained from a company licensed to do business in California. Which of the following Personal Auto Coverages would pay for damage to a covered auto due to colliding with a deer? - ANS>> Other than Collision (Comprehensive coverage) The rate charged for a Good Driver Discount policy should be at least what percent below the rate the insured would otherwise have been charged for the same coverage? - ANS>> 20% California's Compulsory Financial Responsibility Law requires every driver and every owner of a motor vehicle to maintain financial responsibility (liability coverage) at all times. If you don't have acceptable financial responsibility and have an accident, you may lose your driver's license for up to - ANS>> Four years All of the following are TRUE regarding the Commercial Automobile Insurance procedure (CAIP) EXCEPT - ANS>> Risks requiring higher limits of $50,000 are ineligible for coverage. Which of the following will have the broadest coverage provided for a vehicle in the Declarations? - ANS>> A newly acquired auto Jane has an auto liability policy with limits of 25/50/15. If Jane is involved in an accident caused by her negligence and is held legally liable for bodily injuries of three persons in the other auto as follows: "A" $15,000, "B" $30,000, and "C" $35,000. How much will her insurer pay in total for all injuries? - ANS>> $50,000 77 77 All of the following are true statements regarding coverage limits of low-cost automobile insurance EXCEPT - ANS>> The policy would provide coverage for physical damage. All of the following are TRUE regarding the California Automobile Assigned Risk Plan (CAARP) EXCEPT - ANS>> The Federal government has regulatory oversight over the program due to the pilot California Low Cost Auto Insurance Program. With regards to the personal auto policy, in the event of a claim or loss, the insured is required to do all of the following EXCEPT - ANS>> Immediately report to an emergency room for medical examination. In California, the liability for damage to property is limited to - ANS>> $5,000. In California, the liability for bodily injury or death to all people is a cumulative liability limit of - ANS>> $30,000. Which of the following losses would be covered under the property damage liability coverage of a Personal Auto Policy? - ANS>> The insured damages a rented garage when he failed to stop in time. While an insured's covered auto is in the repair shop following damage caused by a collision, the insured would have coverage for which of the following vehicles under a personal auto policy? - ANS>> Any vehicle not owned by the insured, but furnished for use while the covered auto is out of normal use because of repair What type of coverage protects the insured in an accident caused by a driver with insufficient coverage? - ANS>> Underinsured motorist Extended nonowned coverage endorsement in a PAP broadens which of the following coverages? - ANS>> Liability and medical payments Transportation expenses are covered under a Personal Auto Policy for - ANS>> $20 per day, for a maximum of $600. If a person wants to include a newly-acquired auto in a policy that is already established for another vehicle, the insurer must be notified within - ANS>> 14 days. John has an automobile policy with limits of $50,000 per person and $100,000 per occurrence. An accident occurs and two people are injured, one with $25,000 in injuries and the other with $75,000 in injuries. If John is found responsible, what is the maximum amount his policy will pay for the injuries? - ANS>> $75,000 With respect to the personal auto policy, which of the following vehicles could be classified as a nonowned auto? - ANS>> A vehicle that is titled to another person, but is being used with permission by an insured 80 80 Lily is driving her car through a residential area. She loses control of the car, and crashes into Max's front porch. Max, who was sitting on the porch, is injured. Lily's liability insurance policy has a limit set at $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does Lily have? - ANS>> Combined single Which of the following would NOT be covered under the liability section of a personal auto policy? - ANS>> Bodily injury is caused by the insured's negligence while driving a three-wheel all-terrain vehicle. When would UM coverage apply? - ANS>> Only when the other party is legally liable but has no insurance A common exclusion found under physical damage to your auto includes - ANS>> Mechanical breakdown. Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within - ANS>> 3 years. All of the following are excluded from coverage under a standard fire policy EXCEPT - ANS>> Manuscripts and bullion. Johanna purchased a National Flood Insurance policy 10 days after her community entered an emergency program. When would her coverage be effective? - ANS>> 12:01 am the day after the application and premium payment are mailed How long is the waiting period after the application has been accepted before flood coverage goes into effect? - ANS>> 30 days All of the following are classes of inland marine risks EXCEPT - ANS>> Common Carrier Cargo Liability Jack and Jill each own a 50% interest in a dwelling that is insured under a standard fire policy issued to Jill to cover her interest in the structure. The amount of insurance is $40,000. Following a $10,000 fire loss to the structure, Jill will receive - ANS>> $5,000. Which amount is figured by subtracting depreciation from the replacement cost of a covered item? - ANS>> Actual cash value Removal coverage under a standard fire policy remains in effect for - ANS>> 5 days. The standard fire policy only covers those perils specified in the policy for that reason it is known as a(n): - ANS>> Named peril policy. 81 81 The standard fire policy specifically excludes losses which occur when a building is vacant or unoccupied for - ANS>> 60 days or more. Larry invites his neighbors out for a day on the water in his boat powered with a 150hp outboard. While attempting to tie the boat to dock, his neighbor's hand is broken when caught between the boat and dock. What coverage would apply to the broken hand? - ANS>> Larry's Boatowners policy What type of coverage do umbrella policies provide? - ANS>> Excess coverage over an underlying or primary policy Which of the following is NOT true of National Flood Insurance? - ANS>> Insurance provided by the flood program also is available in standard property policies. A state-established program that requires insurers who write property insurance to accept risks in economically depressed areas in the same proportion as their other business bears to the total property insurance market is called - ANS>> A fair access to insurance (FAIR) plan. Joe lit a fire in his fireplace and left it unattended. He had failed to check to see if the flue was open, so the smoke entered the house and, in addition to discoloring the walls, ceiling, and drapes, Joe had to hire a company to remove the smoke odor. The total expense of cleaning and repainting was $6,000. How much would Joe's Standard Fire policy pay? - ANS>> NOthing The regular National Flood Insurance Program would insure an eligible single-family dwelling for up to - ANS>> $250,000. All of the following are TRUE statements regarding the requirements of an insurer to offer earth movement coverage in California EXCEPT - ANS>> Only authorized agents which hold an "earth movement certificate" through the department of insurance are able to market residential property insurance which provides coverage for earth movement. In a personal umbrella, the amount paid by the insured for certain losses not covered under the primary coverage is called - ANS>> Self-insured retention. According to the Nationwide Marine Definitions, risks that may be the subject of inland marine insurance include all of the following EXCEPT - ANS>> Large pleasure boats. An outboard boat and motor policy covers - ANS>> Physical damage. Even though the Standard Fire Policy is a named peril contract, under which of the following circumstances would the policy provide "all risk of loss" coverage on insured property? - ANS>> When the loss is to insured property that has be removed because of endangerment by a peril insured against under the policy 82 82 Annual transit policies are written on what kind of basis? - ANS>> Named peril Which of the following would NOT be considered a flood? - ANS>> Sewer backup A Boatowners policy covers - ANS>> All of these. What is the deductible of a personal liability umbrella policy called? - ANS>> The SIR What is the purpose of the NFIP? - ANS>> To fill the gap left by the private insurers in flood coverage An insured couple owns a pontoon boat. Which situation would NOT be covered by their watercraft endorsement under their homeowners policy? - ANS>> A friend rents their boat and runs it into a neighbor's dock. The New York Standard Fire Policy is classified as "Standard" because - ANS>> The policy conditions are identical in every state. Which of the following is true regarding single dwellings that are insured to at least 80% of the replacement value? - ANS>> They are automatically provided with replacement cost coverage. During a house fire, an insured moves an antique chair listed on the policy to a storage unit. In the Standard Fire Policy, how many days will the antique chair be covered at the new location? - ANS>> 5 days A property with which of the following deficiencies would be eligible for the California FAIR Plan? - ANS>> Located in a designated hazardous brush area Annual transit policies are written on a(n) - ANS>> Named peril basis. All of the following statements regarding a Boatowners policy are true EXCEPT - ANS>> Automatic coverage is provided on replacements for the boat listed in the declarations provided the insured notifies the insurer within 60 days of purchase and pays any additional premium required. Who would participate in a WYO program? - ANS>> Private insurers that wish to write and service National Flood Insurance policies on a no risk-bearing basis Which of the following statements would be correct if an insured failed to maintain the underlying limits as required by a personal umbrella policy? - ANS>> The insured would be responsible for the amount required as underlying limits in the event of a claim. 85 85 A date stipulated on the declaration page of a claims-made liability form as the first date on which an incident may occur and be covered by the policy is called - ANS>> Retroactive date. The common policy condition is a modular part combined with other parts to create the contract. The "common policy condition" section contains provisions that are applicable to all lines of coverage that may be included in the policy. Which of the following provisions would be found in the common policy conditions section of the policy? - ANS>> The first named insured may cancel the policy at any time by giving written notice to the insurer. B&B Market was sued when an employee detained a person he believed to be a shoplifter, but the person turned out to be the meter reader. Which coverage would apply to this suit? - ANS>> Personal and advertising injury liability In liability insurance policies, supplementary payments are made - ANS>> In addition to the limit of liability. A professional liability policy will provide coverage for loss in all of the following cases, except, when the insured doctor was shown to be - ANS>> Criminally negligent. All of the following conditions must exist for injury or damage to be included in the products and completed operations hazard of a commercial general liability policy EXCEPT - ANS>> The injury or damage must occur within 90 days after the insured's work is completed. A plasterer has finished a job. What kind of liability coverage would protect him if the plaster falls and hurts someone because he did not do the job correctly? - ANS>> Completed operations CGL Coverage B (Personal Injury and Advertising Injury) will cover - ANS>> Inadvertent injury to others caused in the course of advertising the insured's product. Which of the following statements is true regarding the commercial general liability policy's Coverage C - Medical Payments? - ANS>> The coverage is considered "good will" because payments are made without regard to fault. A specific coverage part is listed on the commercial package policy declarations page, but there is no premium shown. What does that mean? - ANS>> There is no coverage. Retroactive dates in claims made CGL policies apply to - ANS>> Both BI and PD and PIL and Advertising Liability. All of the following are essential elements of a commercial package policy (CPP) EXCEPT - ANS>> Valuations and/or settlement provisions 86 86 Druggist Liability insurance automatically provides professional liability coverage for a pharmacist when the pharmacist is - ANS>> The owner of the business. Under the coverage of which of the following liability policies may an insured require the insurer to defend a claim? - ANS>> Professional liability Which of the following statements would be an example of a product liability claim? - ANS>> Faulty packaging of a cereal caused spoilage that resulted in someone getting sick. A claim is considered to have been "made" - ANS>> When notice is received and recorded by any insured or the insurer, whichever comes first. Under which type of coverage does the insurer agree to pay for bodily injury or property damage liability which the insured has agreed to assume under a written contractual agreement? - ANS>> Contractual liability policy A date stipulated in the claims-made liability form declarations section as the first date on which an incident may occur and be covered by the policy is known as the - ANS>> Retroactive date. Under the claims-made CGL the supplemental extended reporting period - ANS>> Provides an unlimited extension for making claims for losses that occurred during the policy period, but the insured must pay an additional premium. What must a retail drug store, insured under a Druggist Liability policy, that hires pharmacists as employees of the business, do in order to have protection for possible claims arising out of the acts of the hired pharmacists? - ANS>> Add the employed pharmacists to the policy Which of the following is NOT found in a commercial package policy? - ANS>> Certificate of authority All of the following statements concerning liability coverage are true EXCEPT - ANS>> The policyholder can sue the insurer whether or not all conditions and provisions of the policy have been met. All of the following are supplemental payments found in liability policies EXCEPT - ANS>> Costs the insured incurred in hiring an attorney. An insured that plans to cancel his/her claim-made insurance policy can protect themselves against potential claims that may arise from an occurrence that happened during the policy period, but is reported after the cancellation by purchasing - ANS>> Supplemental Extended Reporting Period. 87 87 Which policy consists of the declarations and conditions, endorsements, and other attachments applicable to a single line of insurance? - ANS>> Monoline Which of the following lines of insurance is NOT included in the commercial package policy? - ANS>> Ocean marine In the event of a claim under a commercial general liability policy, the insured has all the following duties to the insurer EXCEPT - ANS>> Submitting to a medical exam when requested. Supplementary payments on a CGL provide all the following EXCEPT - ANS>> Up to $500 a day for lost earnings and $2,000 for the cost of bail bonds. Employment practices liability insurance (EPLI) would NOT cover claims arising from - ANS>> Deliberate law violation. When an employee benefit plan pays the premium for a fiduciary liability policy, what provision must be included in that policy? - ANS>> Subrogation A provision found in most claims-made liability policy forms that provide a specified period of time following the policy expiration, during which claims arising out of occurrences during the policy period may be made against the policy at no extra cost, is called - ANS>> Basic extended reporting period. Which of the following liability policies is usually written on a "claims-made" form? - ANS>> Professional liability insurance Which of the following is NOT considered an insured contract under the Commercial General Liability Policy? - ANS>> An written agreement which indemnifies a person for fire damage to the premises rented to the insured A specialized type of insurance that guarantees the faithful performance of a trustee of employee benefit plans is called - ANS>> Fiduciary liability insurance. When does a business need to purchase a liquor liability policy? - ANS>> When it is in the business of manufacturing, distributing, serving, or furnishing alcoholic beverages The Commercial General Liability Coverage form excludes bodily injury or property damage that the insured has assumed under any contract or agreement. However, the exclusion does not apply to certain types of contracts, as long as the injury or damage occurs - ANS>> After the execution of the contract. Who is not considered an employee in a CGL? - ANS>> Temporary worker Pollution Liability coverage under a General Liability Policy provides which types of coverage? - ANS>> Both A and B 90 90 With regard to the Commercial Auto Policy, all of the following autos would be classified as "owned autos", EXCEPT - ANS>> A vehicle furnished for use to an insured by an auto repair shop, as a temporary substitute, while the insured's covered auto is being serviced. A trucking business swaps trailers with other carriers. What coverage is necessary to cover loss to the other's trailer while in the borrower's possession? - ANS>> Trailer interchange coverage The designation symbols used in commercial auto policies can be found in which policy section? - ANS>> Covered Auto The individual Named Insured endorsement under a Commercial Auto Policy provides coverage for which of the following? - ANS>> The sole proprietor of the business and his/her family members All of the following are optional coverages that may be attached to a Garage Policy EXCEPT - ANS>> Owned Watercraft liability Which of the following would NOT be an insured under the Business Auto Coverage Form? - ANS>> An employee using his own car for another business Under the business auto coverage form, mobile equipment is covered for liability insurance - ANS>> When being carried or towed by a covered auto. Which of the following is the federal body that regulates truckers who travel across state lines? - ANS>> Federal Motor Carrier Safety Administration Tom's Truck Service's vehicle is stolen, the policyholder may obtain coverage for transportation expenses subject to which of the following limits? - ANS>> $20 per day; $600 maximum What is the determining factor in classifying commercial autos as either owned, hired, or nonowned autos? - ANS>> Ownership of the vehicle. Who is not an insured for liability on a BAP? - ANS>> The owner of a car the insured borrows An insured is at fault in an auto accident in a state other than the state registered and insured in. The insured's business auto policy will - ANS>> Adjust to at least that state's required minimums. Which of the following endorsements is used by individual business owners who use company vehicles for personal use rather than purchasing a personal vehicle? - ANS>> Individual Named Insured 91 91 To comply with requirements for insurance for public liability under the Motor Carrier Act of 1980, which endorsement is added to motor carrier coverage form? - ANS>> MCS-90 Which of the following would NOT be considered an "insured" under a business auto coverage form? - ANS>> The owner from whom the named insured hires or borrows a covered auto Business Auto Coverage applies only to those autos which are identified as "covered autos" in the declarations of the policy. Covered autos are identified by - ANS>> A symbol. The garage coverage form is used to insure - ANS>> Auto businesses, such as auto dealers, service stations, and auto repair shops. Which of the following statements is true regarding physical damage coverage in a garage form? - ANS>> No coverage is provided for autos stored for more than 45 days at a location not shown in the declarations. Employee Jane drives a company auto, but does not own a vehicle herself. What endorsement could be added to the insurance policy covering the company auto that would provide coverage to Jane when she drives someone else's car for her personal use? - ANS>> Drive other car coverage Which of the following symbols used in business auto coverage is correctly described? - ANS>> Symbol 9 - Nonowned Autos Only Which of the following would be covered by the physical damage coverage of your Business Auto Policy? - ANS>> Your car's factory installed disc player was stolen. Why don't commercial auto coverage forms automatically include medical payment coverage? - ANS>> Often any person occupying a commercial vehicle would be covered under a workers compensation policy. Which of the following statements is true regarding a mobile equipment endorsement in commercial auto policies? - ANS>> The endorsement is available for additional premium. All of the following property is insured under Coverage A of a farm policy EXCEPT - ANS>> Personal lawnmower of a tenant used to service the described location. Which of the following events causing financial loss to an insured would not be covered under Federal Crop Insurance? - ANS>> Market price decline 92 92 Under Federal Crop Insurance policies, an insured may select a coverage level that indemnifies the insured should the yield fall below one of the following percentage of the historic yield, EXCEPT - ANS>> 100%. The 1980 Act requires FCIC to offer one price election that is not less than what percent of the projected market price for the commodity? - ANS>> 90% John is applying for crop-hail insurance. He has completed the application and signed it. His producer signed it as well and accepted the first premium from John. Assuming all this was done correctly, the application now serves as what? - ANS>> A binder What losses are considered when computing individual FMHA emergency loan eligibility? - ANS>> Losses on crops which the farmer chose to insure will be considered Which of the following statements is correct with regard to Federal Crop Insurance? - ANS>> Policies are written on an annual basis and may be continued providing production reports are submitted in a timely manner and renewal premium is paid. Coverage F - Unscheduled Farm Personal Property is subject to a coinsurance clause of - ANS>> 80%. In a farm policy, which of the following coverages would reimburse the insured for loss of rental income following damage to the insured dwelling by an insured peril? - ANS>> Coverage D Loss of yield cause by any of the following events would be covered under a Federal Crop Insurance policy, except: - ANS>> All are exceptions to coverage Which of the following persons may be covered under farm Coverage J? - ANS>> Resident employees Under Coverage C of a farm policy, what is the limit payable on business property located away from the premises? - ANS>> $500 Pete wants to have separate insurance coverage for separate acreages. What kind of insurance should Pete get? - ANS>> Unit Insurance When must application for coverage be made for Federal Crop Insurance? - ANS>> At or before a date established by the Federal Crop Insurance Corporation Under farm liability, Coverage H includes - ANS>> Bodily injury. Which of the following exposures is insured under Coverage I - Personal and Advertising Injury Liability? - ANS>> Unintentional acts arising from the operation of a farming business 95 95 The businessowners policy liability coverage will pay for necessary medical expenses of others incurred within what maximum time period? - ANS>> 1 year In business income additional coverage in a BOP, the waiting period that must occur before the period of restoration may begin is - ANS>> 72 hours. Under a businessowners policy, an insured can cancel the policy - ANS>> At any time by mailing a written notice of cancellation. Which of the following is NOT an optional coverage available in a BOP? - ANS>> Workers compensation Which of the following watercraft will NOT be covered by business liability insurance? - ANS>> Owned watercraft 53 feet long Which common policy condition prohibits the insured from changing the rights or duties as defined under the policy to any other person or entity without the written consent of the insurance company? - ANS>> Transfer of rights and duties under the policy The inspections and surveys condition in a businessowners policy - ANS>> Allows the insurer the right to inspect the insured's premises. Which of the following is defined as a covered cause of loss in businessowners property coverage? - ANS>> Leakage from fire-extinguishing equipment A businessowners policy is - ANS>> A self-contained prepackaged policy. Which of the following is NOT settled on an actual cash value basis while covered under the business property coverage form? - ANS>> Valuable papers and records A company has a businessowners policy on a building with an estimated replacement cost of $300,000. The company carries $150,000 of insurance. If a loss occurs, how much will the insured company be paid? - ANS>> The coinsurance formula would apply Expenses that an organization would not have incurred if business interruption had not existed are known as - ANS>> Extra expenses. All of the following statements are true regarding fire department service charge additional coverage under the businessowners policy EXCEPT - ANS>> This coverage limit pays in place of the limit of insurance shown in the declarations. Coverage territory of the businessowners policy (BOP) includes all of the following EXCEPT - ANS>> Mexico. 96 96 Following a property loss that is covered under a Businessowners policy, if the insurer and insured cannot agree on the amount of the loss, what method is used to resolve the issue? - ANS>> Appraisal Which of the following best describes business income? - ANS>> Net profit or loss that would have incurred, plus normal operating expenses, including payroll, that continues during the suspension In addition to the common policy conditions, all the following apply to liability coverage EXCEPT - ANS>> Employers liability. If the actual values exceed the limit of insurance, the businessowners policy (BOP) contains a seasonal increase provision that automatically increases the limit of insurance for business personal property by - ANS>> 25% The most the insurer will pay for a loss under a businessowners policy is - ANS>> The limit of insurance after the deductible is paid. The cancellation provision in a businessowners policy specifies all of the following EXCEPT - ANS>> The method of transferring the owner's rights. Under the additional coverages of a BOP, property removed to protect it from loss will be covered at another location for up to - ANS>> 30 days. A business income coverage form would cover all of the following situations EXCEPT - ANS>> A union strike of construction workers causes the repair of the insured's building to be delayed for a period of time. Which of the following risks are eligible for coverage under a businessowners policy (BOP)? - ANS>> Condominiums A BOP (businessowners policy) is most similar to - ANS>> Homeowners. Under businessowners policy Section I, if an insurer wants to cancel a policy for any reason except nonpayment of premium, how many days before the effective cancellation date must the insurer notify the mortgageholder? - ANS>> 30 days An advertising company has its annual holiday party for employees and customers, after which a customer who had too much to drink is involved in an automobile accident. Occupants of the other car involved in the accident sue the company for serving the customer too much alcohol. Will the company's businessowners policy provide coverage? - ANS>> Yes, none of the exclusions will apply. Which of the following clauses under an Open Cargo Policy is the MOST restrictive? - ANS>> Free of Particular Average Clause 97 97 Ocean marine policies commonly refer to the person covered by the policy as the - ANS>> Assured. Increased value and excess liability clauses work like which of the following policies? - ANS>> Umbrella Which of the following is NOT true if ownership changes, voluntary or otherwise? - ANS>> If the vessel already has sailed from her loading port, automatic termination may be deferred until 15 days after arrival at final port of discharge. Cargo has been insured warehouse to warehouse. Which of the following is true? - ANS>> The cargo is covered from origin to destination or 60 days after discharge, whichever is first. In Ocean Marine insurance, who pays all reasonable expenses if sue and labor is required to lessen a loss? - ANS>> The insurer Who has the rights to veto the repair facility for a vessel? - ANS>> The underwriter A company wants its cargo policy to provide coverage for losses caused by crew members. Which of the following is a clause that would NOT provide this type of coverage? - ANS>> Seaworthiness admitted Which of the following is NOT a P&I exclusion? - ANS>> Excess coverage In order for a Protection and Indemnity policy to cover a loss which of the following must be TRUE? - ANS>> The insured must be legally liable for the loss. In ocean marine insurance, what does the term "average" mean? - ANS>> Loss or damage An ocean marine hull policy will not pay any of the following EXCEPT - ANS>> Legal liability for damage to another's ship the insured has run down Cargo is damaged short of its destination. An agent of the insurer at an immediate port sells the damaged cargo at the best price. Settlement is based on the difference between insured value and the net sales proceeds. This is considered - ANS>> A salvage loss. An ocean marine insurer has paid a total loss. Which of the following is true concerning salvage? - ANS>> The insurer has all rights to salvage. Institute Cargo Clause (A) covers which of the following losses? - ANS>> Windstorm, lightning, hail An ocean marine adventure is - ANS>> Any voyage.