Insurance Contracts and Coverages: Explanation and Examples, Exams of Insurance law

Download Insurance Contracts and Coverages: Explanation and Examples and more Exams Insurance law in PDF only on Docsity! Insurance adjuster exam questions Test bank with correct answers. During a storm, heavy winds cause a tree limb to break and fall onto Paul's house, causing $6,500 in damage. Paul's insurance company now considers his house: - Correct Answers A Loss Which of the following best describes a "risk," according to the insurance definition? - Correct Answers A potential for financial loss A lion at a zoo escaped when a zoo employee failed to follow protocol. The lion injured a zoo patron. In court, the injured patron's lawyer could invoke the doctrine of: - Correct Answers Res Ipsa Loquitur. Which of the following best defines the doctrine of Res Ipsa Loquitur? - Correct Answers The circumstances of the injury make it obvious that the defendant is negligent; no proof is needed. Nina's home is located in a high crime neighborhood. One day, she comes home from work to find that her garage door had been spray-painted with graffiti. Nina's insurer would consider the act of vandalism to Nina's garage a: - Correct Answers Peril An economic device used to protect against the risk of realizing unforeseen and extraordinary financial loss is called: - Correct Answers A Peril Anytown Pediatrics has been having a hard time finding medical malpractice insurance. The premiums are extraordinarily high, and they get higher every year. Finally, fed up with the cost of insurance, the directors decide to form their own insurance company, which will serve only Anytown Pediatrics. This way, any profits generated by the insurer will come back to Anytown Pediatrics. What kind of insurance company would this be? - Correct Answers Captive insurer In an insurance contract, exclusions serve all of the following purposes, except: - Correct Answers add coverages that need special treatment. Sam was tired of the neighbor's trees along the fence line poking through the fence and dropping leaves in his yard, so he reached across the fence with his pole saw and cut down the neighbor's tree. Sam's neighbor was upset and sued him for the damages. Sam is ordered to pay $500 for the tree. Under which category of damage would this fall? - Correct Answers Compensory Damage Jackie recently inherited a life-sized marble statue of her great-grandfather. It is an irreplaceable antique, and it is nearly impossible to determine the ACV. Which type of policy would best indemnify Jackie in the event that the statue was ever damaged? - Correct Answers Agreed Value Policy ABC Consulting has a CGL policy and an Umbrella policy, but the CGL runs from January 1 to December 31 and the Umbrella policy runs from June 1 to May 31. This difference in inception and expiration dates creates confusion when settling claims. This condition is known as: - Correct Answers Nonconcurency A power surge sparks a small electrical fire in an office building. The electrical fire triggers the automatic sprinkler system. The water from the sprinklers soaks the carpets and shorts-out all the computers, causing thousands of dollars in damage. The office must close for two months during repairs. The sprinklers soaking the office would be considered: - Correct Answers An occurrence Sara's vehicle was stolen and her insurer paid her theft claim for the total value of the car. A week later, the police found Sara's car and returned it to her. Which of the following statements is true? - Correct Answers The Recovered Property provision states that Sara must notify the insurer and either return the settlement payment or surrender the vehicle to the insurer. As Seth is driving along a country road, a deer jumps out in front of him. This causes Seth to veer off the road and crash into Cassie's wood fence and a brick mailbox. As a result of the crash, Seth suffers $3,700 in damage to his sedan and causes $1,800 in damage to Cassie's property. How much of the damage will be covered by Seth's liability insurance? - Correct Answers $1800 Which of the following is NOT a way to determine an insurer's liability in a claim? - Correct Answers Check if the current month's premium had been paid at the time of loss. When a storm rolled through town a month ago, John's home suffered substantial damage. He filed a claim, but his insurer has offered a settlement much lower than John feels is fair. Each party selects an appraiser, who in turn agree on an umpire, to help settle the claim. If two of the three parties agree, their decision is: - Correct Answers binding Greg works for XYZ Insurance. Part of his daily tasks involve visiting sites, investigating liability, and determining the time and cost of repairs. On occasion, Greg will have to negotiate with claimants as part of his job. Which type of agent is Greg? - Correct Answers Claims Adjuster Whose responsibility is it to maintain an open line of communication during the settlement process? - Correct Answers The Adjuster Which of the following people are in the process of submitting a formal request to settle the damage? - Correct Answers Grace is filing a claim with her insurer for hail damage to her roof. What does a declaratory judgment action seek? - Correct Answers Legal Clarification of policy coverage Which of the following statements about litigation is FALSE? - Correct Answers In liability claims, the defendant is usually a third party. Why might a Reservation of Rights letter be sent? - Correct Answers The Clamant took too long to file the claim After a fire destroys Gale's kitchen, she files a claim with her insurer and hires a contractor. The contractor estimates it will take $42,250 to repair the damage, but the adjuster estimates it will only take $38,340. Which of the following is the best option for the adjuster's response to Gale's claim? - Correct Answers Negotiate a settlement amount with Gail. An independent adjuster: - Correct Answers is self-employed and may be contracted by one or more companies at a time. After Jerry pulled the fire alarm, the indoor sprinkler system came on and flooded the offices at Elliot Designs, which caused thousands of dollars in damage. Elliot Designs filed a claim with KLM Insurance, who dispatched Chrystal to investigate and process the claim. Who is the principal in this scenario? - Correct Answers KLM Insurance James rents a home to Jill and maintains a DP-3 policy on the dwelling. One day, Jill accidently leaves the oven on all day while she is out, and James' house burns to the ground, along with all the contents. Which items could be covered under Coverage C in James' DP-3? - Correct Answers James Appliances The primary purpose of the Insuring Agreement is to specify the ____________ of an insurance policy. - Correct Answers Coverages The Standard Fire policy has 4 main parts. They are: - Correct Answers Declarations, Insuring Agreement, Conditions, and Exclusions Coverage L in a Personal Liability Supplement provides: - Correct Answers coverage for both bodily injury and property damage to a third party for which the insured is legally liable. In which section of the Standard Fire Policy would one find the following subsection titled: "Duties of the Insured after an Occurrence"? - Correct Answers Conditions An unendorsed Dwelling Policy is intended to cover all of the following except: - Correct Answers liability damages In which section of the Standard Fire Policy would you find an explanation of the losses covered under the policy and what the insurer has agreed to provide in exchange for premiums? - Correct Answers Insuring agreement Which of these homeowners policy coverages does NOT usually have a deductible? - Correct Answers Fire department Service Charge In South Carolina, how much notice must an insurer give when cancelling a dwelling policy for non-payment of premiums? - Correct Answers 10 days In order to be considered "fully insured" at 80% or more, Richard must carry at least $240,000 in insurance coverage on his home. What is the value of Richard's home? - Correct Answers 300,000 Jeremy is purchasing a homeowners policy for his house in the country. He is a beer enthusiast and is especially concerned with protecting his home brewing equipment from the black bears commonly seen in the area. Which of the following is the least expensive option that meets Jeremy's special need? - Correct Answers Homeowners 5 Which of the following is eligible for coverage under the Personal Property Replacement Cost endorsement in a homeowners policy? - Correct Answers Photographers equipment Homeowners policies don't provide coverage for: - Correct Answers Flood damage In a Personal Watercraft policy, Part C would cover: - Correct Answers damage to the covered craft caused by an uninsured operator of another watercraft. Simon just bought his first home-a cheap fixer-upper in a town where average snowfall exceeds 80 inches per year. It may be an old house in a run-down neighborhood, but he still wants to protect his initial investment. What is the cheapest policy option that would protect Simon's financial interest in his home, even in the brutal winters? - Correct Answers HO-2 Clark lost power to his home when a windstorm blew the roof off of his house. As a result, he lost several hundred dollars worth of meat that he was keeping in a freezer in his basement. Which homeowners coverage might indemnify Clark for the loss of his meat? - Correct Answers Personal Property Coverage The Water Backup and Sump Discharge or Overflow endorsement: - Correct Answers covers water damage if it results from a mechanical breakdown of sump pump equipment. Andrew's house is struck by lightning. The power surge fries two of the family's laptop computers, and starts a fire that damages his roof, two living room walls, and a leather sofa. Which of these damages would fall under In a personal auto policy, the Miscellaneous Vehicle Coverage endorsement: - Correct Answers allows coverage to be added for motorcycles and motor homes. Which of the following people would NOT qualify as an "insured" under a BAP? - Correct Answers The policyholder's spouse, who is not named on the policy but habitually drives the company's SUV without permission. Rebecca has Collision coverage in her Personal Auto Policy. After a collision, the adjuster determines that Rebecca's car is totaled. How much is Rebecca likely to receive from her insurer (ignoring the deductible)? - Correct Answers The actual cash value of her vehicle In a personal auto policy, Collision coverage: - Correct Answers pays for physical damage to the vehicle caused by a rollover. Deana has Personal Injury Protection coverage in her PAP. Which of these injuries would NOT be covered by Deana's PIP? - Correct Answers Tom suffers neck injuries when Deana rear-ends him at a stop sign. On January 27, 2008, Ryan is using an exercise bike purchased from NusquamCycle when the chain breaks, causing him to fall and severely bruise his knee. It seems to heal just fine, but three years later, on January 29, 2011, Ryan's knee gives out while jogging. His doctor informs him that he'll need surgery and that this deterioration was most likely caused by his earlier accident with the exercise bike. Assuming NusquamCycle is no longer in business, which Commercial General Liability policy would cover Ryan's claim filed January 29, 2011? - Correct Answers An occurrence policy from Jan 31 2006-Jan 31 2009 Julie owns the local shopping mall. One day, Julie sees Greg walking through the mall and doesn't like the way he looks, so she forces him to leave the premises. Greg then sues Julie for her actions. This is an example of what type of personal injury covered under Julie's Commercial General Liability policy? - Correct Answers Wrongful eviction Mindy filed a claim against XYZ Consulting on March 5, 2016 for an accident that happened on September 15, 2015. XYZ Consulting was previously covered by a claims-made CGL policy, but changed to an occurrence policy in January 2016, when the policy came up for annual renewal. How will XYZ Consulting's insurer respond to Mindy's claim? - Correct Answers The claim will not be covered because the accident did not occur during the current policy period. Which of the following would be covered under Coverage B of the Business Owners Policy? - Correct Answers The copy machine in a restaurant's back office Which of the following would be covered under Coverage B of a typical Business Owners Policy? - Correct Answers Inventory Which of the following coverages is typically included in a BOP? - Correct Answers Coverage for slander and copyright Lena is moving to Japan for two years in order to take advantage of a promotion at her job. She won't bring her 4-seater propeller plane with her. What kind of aviation insurance should Lena purchase for her plane while it's in storage and she is away? - Correct Answers All risks- Not in motion Which of the following statements about flood insurance is FALSE? - Correct Answers Flood insurance rates are determined by private insurers Blue Lines Shipping sustains hundreds of thousands of dollars in losses when one of their ships full of cargo catches fire and sinks in the Pacific Ocean. Which of the following situations would NOT be cause for the insurer to refuse to indemnify Blue Lines Shipping for its losses? - Correct Answers A storm knocks out the navigation system, causing an electrical fire. African Spice Exporters Inc. brings two shipments of cloves from Zanzibar, Tanzania to the United States each year. When their second shipment of the year is stopped by the Coast Guard off the coast of Florida, 10 pounds of contraband is found hidden among the bins of cloves. All of the ship's cargo is seized and the ship's crew arrested. When African Spice Exporters Inc. files a claim with its insurer for the seized cargo, the claim comes back denied. Why might this claim have been denied? - Correct Answers African Spice Exporters Inc. violated the "legality" implied warranty of ocean marine insurance. Most states require businesses to purchase workers' compensation insurance to cover their employees. Workers' comp in those states is: - Correct Answers Compulsory Who is responsible for paying the premiums on a workers' compensation policy? - Correct Answers The Employer Kerry's advertising business employs Meg to clean offices at night, and recently Meg slipped and fell at work, hurting her back. Kerry can be assured that workers' compensation insurance will provide Meg with: - Correct Answers Medical Payments and lost wages Which of the following is FALSE regarding terrorism insurance coverage under the Terrorism Risk Insurance Act (TRIA)? - Correct Answers TRIA coverage is available for both personal and commercial lines of insurance. If an insurance professional who has been convicted of fraud wishes to return to work in the insurance industry, in most cases he must: - Correct Answers apply for a 1033 Waiver and have an offer of employment. Every time Maria adjusts an auto claim, she refers the claimant to Bud's Body Shop for repairs. In turn, Bud's Body Shop pays Maria $50 dollars for every vehicle brought to their shop based on Maria's recommendation. By taking this money, Maria is accepting: - Correct Answers kickbacks If a building is completely destroyed by a fire, the Valued Policy Law states that the insurer should pay: - Correct Answers The full amount listed in the policy The Director has just received a complaint stating that an adjuster has violated insurance law. Which of the following actions may the Director take? - Correct Answers Commence an investigation of the adjuster's actions What information does NOT need to be included in the notice given to the insured any time the insurer issues or renews an insurance policy? - Correct Answers Information about how to obtain coverage through the SCWHUA The use of which doctrine would result in David receiving no damages for his loss, if he were found 25% responsible for his own loss? - Correct Answers Contributory negligence Paul and his wife have three separate insurance policies covering their home: Policy X with a limit of $100,000, Policy Y with $50,000, and Policy Z with $25,000. These policies are set up to pay covered claims by contribution of equal shares. After a fire causes $125,000 in damage to their home, how much will each policy pay (ignoring any deductibles)? - Correct Answers Policy X: 50,000 Policy Y: 50,000 Policy Z: 25,000 In a third-party claim, the injured person has a duty to: - Correct Answers Authorize the insurer to look at her medical records Jim is completely "upside down" financially on his car. He owes the finance company $8,000. If he sells the car, he knows he'll only get about $4,000 for it. But Jim knows that if the car was somehow stolen, his insurance company would pay him somewhere in the neighborhood of $7,000. Jim decides to have a friend steal the car and "make it disappear." Jim then files a claim with his insurance company to report his car stolen. Which best represents Jim's actions? - Correct Answers Hard Fraud All of the following statements are true of liability insurance, EXCEPT: - Correct Answers liability coverage indemnifies the insured This type of trim is typically placed around windows and doors to give them a finished look. - Correct Answers Casement Darnell is applying for auto insurance with his agent. Currently, he only wants to get a minimal amount of coverage to keep his premiums as low as possible, so he decides not to include uninsured motorist coverage on his policy. His agent has him sign a document giving up his right to this coverage. What is this called? - Correct Answers An express waiver Linda's home is worth $525,000. She has a homeowners policy with a $500,000 limit and a 1.5% deductible. When Linda's husband sets their kitchen on fire while frying a turkey, he accidentally causes $36,000 in damages. How much can Linda and her husband expect to receive in their settlement? - Correct Answers 28125 During a storm, heavy winds blow a tree over in Norman's back yard, causing it to fall on his house and damage his roof. The wind blowing over the tree would be considered: - Correct Answers An occurrence Which of the following adjusters is acting appropriately as a fiduciary agent? - Correct Answers Ernest knows the claimant can't possibly afford to pay for their extensive damages, but he denies the claim anyway because the cause of loss was not covered by the policy. Which of the following is NOT a valid reason for an insurance company to reject a claim? - Correct Answers The claimant lists damages that exceed the limits of his insurance policy. After Cindy crashes into Nancy's mailbox while driving drunk, she gets out of her car, trips over Nancy's sidewalk, falls and breaks her arm. She then sues Nancy for the medical bills related to her broken arm. They are in a state that follows the doctrine of comparative negligence. What is the likely outcome of Cindy's lawsuit against Nancy? - Correct Answers The amount awarded to Cindy will be reduced by the percentage of her own negligence. Bill's home was destroyed by a tornado, and Nick is adjusting the claim. Bill's home will cost $235,000 to rebuild. His homeowners policy has a $225,000 limit and a $1,700 deductible. How much would Nick typically calculate the final settlement amount to be? - Correct Answers 225000, the deductible is absorbed into the amount of damage exceeding the policy limit. What does it mean when we say that an adjuster has the "power to bind"? - Correct Answers The principal is bound to the decisions the adjuster makes. When the settlement difference between an insurer and a claimant is minor: - Correct Answers it should be settled in favor of the claimant. An adjuster must make several important decisions during the adjusting process. All of these are examples of such decisions, EXCEPT: - Correct Answers Stacy must determine how much of a limit for Coverage A would best fit John's needs in his new homeowners policy. In a full release settlement: - Correct Answers all damages are paid immediately in one lump sum. If a claim includes lost wages, an adjuster should: - Correct Answers Verify the losses with the employer What kind of adjuster is hired by the claimant and is paid by commission? - Correct Answers Public Adjuster Peter, an insurance adjuster, is going over a claim. He's examining the deductible, the total claimed damages, the policy limits, other policies that might also cover the claim, whether the property is adequately insured, and whether or not a coinsurance penalty applies. Which function of an adjuster is Peter performing? - Correct Answers Evaluating a claim An adjuster's preliminary claim report should: - Correct Answers Establish a claim reserve Which of the following is NOT one of the primary functions of an insurance adjuster? - Correct Answers Defending the insurer Which of the following is NOT an endorsement commonly added to a Dwelling Policy? - Correct Answers Annual depreciation James holds a DP-1 policy on his house for $150,000. His wife, Jane, feels that they should really have closer to $200,000 in total coverage, so she takes out an additional $50,000 DP-1 policy on the same dwelling. Both policies pay settlements on a pro rata basis. After a fire causes $32,000 in damage to the home, how much of the damages will be covered by Jane's DP-1 policy? - Correct Answers 8,000 While reviewing his DP-3 policy, Jim notices that some additional coverages are included in his Coverage A limit, while others are paid in addition to that limit. Which TWO additional coverages are included within Jim's Coverage A limit? - Correct Answers Debris Removal and Reasonable Repairs Graham has an auto liability policy with limits of 30/60/25. While heading to the grocery store, Graham turns onto 2nd street and slams into a stopped vehicle. The driver of the car, Jeremy, is not hurt, but Graham has totaled Jeremy's $30,000 SUV. How much, if any, of the damages will Graham have to pay out of pocket? - Correct Answers 5,000 You are riding in Sarah's car when she fails to yield and causes an accident. Which of the following coverages would NOT pay for your injuries? - Correct Answers Sarah's Collision coverage In a Commercial Auto Policy, Symbol #8 represents: - Correct Answers Hired Autos Molly borrows her friend Dom's car to run to the grocery store. On the way home, she rear-ends a van, injuring the driver and 3 other passengers. Each of the passengers suffers $45,000 in injuries, while the driver suffers $40,000. Assuming Dom has a liability policy with limits of 50/100/50, while Molly has 25/50/25 coverage, how much will the primary policy cover? - Correct Answers 100,000 Which Commercial Auto endorsement can provide liability, medical payments, physical damage, and UM/UIM coverages for a specific named individual who does not own his own car? - Correct Answers Drive other car Under Jacqueline's Personal Injury Protection, all of the following would be covered for bodily injuries except: - Correct Answers Jacqueline's sister who also has PIP. Steadfast Insurance, Inc wants to cancel Orion's policy after Orion missed a premium payment. Which of the following is true? - Correct Answers Steadfast Insurance must notify Orion at least 15 days before ending the policy. Jim has a PAP with liability limits of 25/50/25 and $5,000 in medical payments coverage. Jim causes an accident which leaves him with $7,500 in medical costs and $50,000 in property damage to a parked BMW. How much will Jim be out of pocket in total for all damages occurring in this accident? - Correct Answers 27,500 Under a garagekeepers policy, which coverage would pay for a covered loss after the vehicle owner's personal insurance has paid up to its policy limits? - Correct Answers Direct Excess Newman Medical has a balcony on the top floor of their headquarters. During a severe rainstorm, lightning strikes the balcony, breaking it into pieces. The company would like to repair the balcony, but the state's new building codes require construction materials that are quite a bit more expensive than what was used originally. What coverage in their commercial property policy pays for this extra expense? - Correct Answers Increased construction cost Which of the following would NOT be considered an "occurrence" according to a CGL policy? - Correct Answers An employee is mopping the floor of a grocery store while numerous people are present. In a condo association's commercial property policy, which of the following items would be covered by the Condominium Coverage Form? - Correct Answers An elevator in the common area In a Business Owners Policy, Business Income coverage: - Correct Answers provides coverage from 72 hours after a loss occurs, up to a maximum of 12 months. In which situation would Utility Service - Time Element coverage apply? - Correct Answers Steve's Software Solutions loses power for two days when a bolt of lightning damages the power station. Steve experiences a significant loss of income during the outage. Which of the following is NOT one of the requirements an adjuster must meet in order to be qualified to handle small commercial NFIP claims? - Correct Answers Submit written recommendations from three insurance company supervisors or claim management personnel. What are the two main types of coverage usually found in an aviation insurance policy? - Correct Answers Hull coverage and Liability coverage Which of the following statements about a PAF's coverage for silverware and goldware is FALSE? - Correct Answers Coverage does not include silver-plate and gold-plate items. Which of these statements about Personal Article Floaters is FALSE? - Correct Answers They have a minimum $100 deductible. What is it called when states require employers to buy coverage from a state-designated workers' compensation program? - Correct Answers Monopolistic Which of the following would qualify as an "injury" for the purposes of workers' compensation insurance? - Correct Answers Jordan falls off a defective ladder while working for a home improvement company, and breaks his leg. Astrid, a public adjuster, agrees to reduce her damage estimates by 5%, in exchange for $500 in cash per claim from LMN Insurance. This is an example of: - Correct Answers Kickback Widespread insurance fraud has led to increases in the cost of goods and higher insurance premiums for the American public. Which of the following is NOT a contributing factor? - Correct Answers Insurance fraud is seen as a low-risk, high-profit crime Liam, an adjuster for KLM Insurance, is inspecting hail damage on Ken's property. Once his investigation is complete, Liam tells Ken that his final settlement amount is $5,500, writes him a check, and closes the claim. In order to save his employer money, Liam did not tell Ken that he has a Replacement Cost endorsement and can recover the depreciation after he completes repairs. Liam has just: - Correct Answers engaged in misrepresentation. Brendan is applying for a new job at Acme Superstore. Which law limits how much information Brendan's bank and mortgage lender can share with Acme Superstore, with regard to Brendan's finances and credit score? - Correct Answers Fair Credit reporting act Alan has just won a bid to overhaul the town park, getting it ready for the Fourth of July fireworks. While the city is impressed by his low bid, they have some concerns that he will be able to complete the job, so the city requires Alan to secure: - Correct Answers a surety bond