Insurance Coverage and Exclusions: Understanding Personal and Commercial Policies, Exams of Insurance law

Download Insurance Coverage and Exclusions: Understanding Personal and Commercial Policies and more Exams Insurance law in PDF only on Docsity! Highflier Scoremore LOUISIANA PROPERTY AND CASUALTY INSURANCE EXAM 2024 (QUESTIONS WITH CORRECT ANSWERS) GUARANTEED PASS Driver A has a personal auto policy with Part C: UM/UIM limits of 100/300. He is injured by Driver B who has Part A: Bodily Injury Liability limits of 50/100. It is determined that Driver B is at fault for the accident. Driver A has $125,000 in medical expenses. How much will his Part C: UM/UIM coverage pay? $50,000 Underinsured motorist coverage acts as excess over the at-fault motorist's coverage. It will pay the difference between the insured's UIM limits and the at-fault driver's bodily injury limits (in this scenario, $100,000 of the insured's coverage minus $50,000 of the other driver's). Because of the per person limits of Driver A's underinsured motorist coverage, the policy will pay the amount necessary to bring payment up to the per person limit. The policy will not pay more than the limits of liability. 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? Coverage C limits will no longer apply to the jewelry insured by the endorsement. When items are scheduled, they are excluded from Coverage C as insured items, and are covered only under the scheduled personal property endorsement. Highflier Scoremore Which of the following terms refers to a person's ability to do some work or the need to do alternative work? Temporary partial disability The insuring agreement is the part of the policy structure that describes the insured perils and the method of indemnification. Which of the following statements is NOT true regarding a personal umbrella liability policy? It provides errors and omissions coverage for an agency. Personal umbrella policies cover the personal exposure of the insured. Errors and omissions coverage is provided only in a professional liability policy. A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true? . The loss is payable to the insured and the mortgagee. Loss is payable to the insured and mortgagee to protect the mortgage company's interest. This prevents the insured from cashing the check and not completing repairs. 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? Contractual liability policy Highflier Scoremore Charla wants to serve as a producer for Commissions Galore Insurance Company. In addition to obtaining her producer's license, what else must happen before she can officially transact insurance for CGIC? She must be appointed specifically by CGIC. Before a producer can serve as an agent for a given insurance company, the producer must first be appointed by the company. The main difference between an HO-4 and an HO-6 is HO-6 provides limited dwelling coverage as well as contents coverage. HO-4 provides no dwelling coverage because a tenant does not own the dwelling; the condo owner does own the condo and is provided with coverage for improvements. Both HO-4 and HO-6 cover theft and additional living expenses. 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 The additional coverage portion of a policy provides an additional amount of coverage for specific loss expense, at no additional premium. Which of the following would not be a violation of Louisiana insurance regulations? Producer C uses her license to write uncontrolled business only. The purpose of a license is to primarily write non-controlled business. Highflier Scoremore A claim is considered to have been made When notice is received and recorded by any insured or the insurer, whichever comes first. This is a standard claims-made condition. When Commercial Crime Coverage Form M - Safe Depository Liability is written, what must be attached to the policy? The Safe Depository General Provisions When this coverage is written, the Safe Depository General Provisions must be attached to the policy instead of the general provisions. Which of the following is NOT a goal of risk retention? To minimize the insured's level of liability in the event of loss Retention usually results from three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured. 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 Second injury funds programs. Highflier Scoremore Second injury funds are a method by which employers manage the risks associated with the hiring of previously injured potential employees. What is a definition of a unilateral contract? One-sided: only one party makes an enforceable promise. An insurance contract is unilateral in that only one of the parties to the contract is legally bound to do anything. If a guest's property is lost or damaged while on the insured's premises or in their control, Crime Coverage Form L - Liability for Guests' Property - Premises covers the insured's Legal liability. This coverage is similar to Coverage K, except that it covers the insured's legal liability for loss or damage to guest's property while on the insured's premises or in their control. Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? The Fair Credit Reporting Act The purpose of the Fair Credit Reporting Act is to protect consumers against the circulation of inaccurate or obsolete information and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers. In which type of commercial crime policy coverage is triggered by a loss that happens during the policy period but is not necessarily discovered during the policy period? Highflier Scoremore The insured's camera if it is stolen while the insured is on vacation. Coverage C is provided on a worldwide basis. Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within what maximum time period? 3 years A coverage requirement in the policy states that medical expenses must be incurred within three years of the accident. The services also must be rendered within that time period. The Residential Condominium Building Association Policy (RCBAP) is used for residential condominium building associations to cover the entire building under one policy. Which of the following statements about RCBAP is true? It does not protect the individual owner from loss to personal property owned exclusively by the unit owner. The Residential Condominium Building Association Policy (RCBAP) is used for residential condominium building associations to cover the entire building under one policy, all units, improvements within the units and personal property owned in common is covered with a contents policy. The RCBAP does not protect the individual owner from loss to personal property owned exclusively by the unit owner. With respect to commercial auto policies, the garage coverage form provides liability protection for all of the following EXCEPT The insured's business income losses due to personal injury. Highflier Scoremore The garage coverage form does NOT cover personal injury and loss of wages from those injuries. Such coverage would be provided by a commercial general liability (CGL) policy. All of the following are unfair claims settlement practices EXCEPT Suggesting negotiations in settling the claim. When settling claims, negotiation can come into play. Which of the following statements is true concerning underinsured motorist coverage under a personal auto policy? . Coverage applies only to the extent that the underinsured motorist limits exceed the bodily injury limits carried by the operator of the other vehicle. Underinsured motorist coverage will act as excess over the at fault motorist's bodily injury coverage. Bob's home is insured for $100,000 under a dwelling policy. Yesterday his home suffered $20,000 damage from a fire. Today the home was struck by lightning, starting another fire that completely destroyed the structure. Bob's policy will pay $100,000. Bob's policy will pay $100,000. If the repairs had been made ($20,000) and then the home destroyed, the policy would have paid $120,000 as two separate losses. Due to the unrepaired damage, the total amount of coverage is only the face amount of the policy. How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card? Highflier Scoremore $500 $500 is provided automatically, and may be increased by endorsement. Under Coverage C of a homeowners policy, the amount of insurance provided to cover personal property of the insured is 50% of the amount provided as Coverage A Who is not considered an employee in a CGL? Temporary worker By definition in a CGL, a temporary worker is not considered an employee. Which of the following types of agent authority is also called "perceived authority"? C. Apparent Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created. 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? A. Material misrepresentation Highflier Scoremore Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? A. Reduction The insured's change in lifestyle and habits would likely reduce the chances of health problems. Which of the following does the term proximate cause refer to? C. Negligence that leads to an injury Proximate cause is the reasonably foreseeable act or event that results in an injury or damage. Negligence may often be the proximate cause of the damage; without it, the accident would not have happened. This is also called direct liability. The policy conditions define B. How parties to the contract must act following a loss. Conditions is an essential part of a policy structure. Conditions define what each party to the policy is required to do contractually in the event of a loss. All of the following are considered parts of the policy structure EXCEPT B. Provisions. Highflier Scoremore Provisions is a broad term used to refer to the sections or clauses of an insurance policy that communicate the policy's benefits, conditions, etc. The essential parts of the policy are declarations, insuring clause, conditions and exclusions. What are the two types of compensatory damages? A. Special and general Compensatory damages are intended to compensate someone for both tangible and intangible elements of a loss. Special damages are for the actual measurable losses, such as value of property or medical bills. General damages cannot be specifically measured in dollars, such as pain and suffering. An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this? B. Consequential Consequential loss, also known as indirect loss, is a second financial loss caused by a covered direct loss. Insurable interest in the property covered in a policy must be proven . D. At time of loss. Between the time a policy is issued and a loss occurs, ownership may have changed, mortgages may have been put into place, etc. Therefore, in property and casualty insurance, insurable interest must exist at the time of loss. Funding for the operation and administration of the Louisiana Insurance Guaranty Association comes from Highflier Scoremore B. Annual assessments paid by member insurers. The Association receives no public funding. The Association has the authority to annually assess insurers member insurers based upon written premiums of all property and casualty insurance policies written in the state the previous year. A Standard Fire Policy may be written to cover all of the following EXCEPT A. Reinsurance. The Standard Fire Policy will not be used for reinsurance between insurers. Which of the following is representative of the minimum liability requirement for auto policies issued in this state? 15/30/25 Which workers compensation conditions states that the first named insured will act on behalf of all insureds under the policy? Sole representative Which of the following statements regarding coverage for the flood and earthquake perils is true? Both flood and earthquake are excluded perils in all property policies. Highflier Scoremore Suspension or revocation of license. A couple bought tickets to a college hockey tournament. At the game, a stray puck flies into the stands and hits the wife in the face, breaking her nose. Which legal defense may bar her from recovering damages for the injury she received at the hockey game? Assumption of risk 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? Any vehicle not owned by the insured, but furnished for use while the covered auto is out of normal use because of repair An insured has a personal auto policy with both comprehensive (other-than-collision) and collision coverage. His car is stolen and recovered five days later. If the insured claims transportation expenses of $20 per day, how much will his policy pay? $60 When is liability coverage included in a homeowners policy? Highflier Scoremore It is included automatically An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company? Fair Credit Reporting Act Property insurance policies. Casualty insurance policies. Workers Compensation policies. What provision in a property policy applies when the insurer broadens coverage but does not increase the premium? Liberalization clause The liberalization clause extends broader coverages to current policies if they do not affect the premium. A modifying endorsement is not required to add such coverage Highflier Scoremore What type of coverage is Coverage E in homeowners policies? Personal liability Coverage E is a personal liability coverage. Which policy consists of the declarations and conditions, endorsements, and other attachments applicable to a single line of insurance? Monoline Which of the following statements is NOT true regarding mobile agricultural machinery and equipment coverage? . This coverage must be written as part of farm coverage A deli owner has a businessowners liability policy. When a customer slipped and hurt herself at the deli, the liability policy paid for medical expenses. The customer, however, is now suing the business owner Highflier Scoremore While an insured was towing a utility trailer with his auto, the trailer came loose and ran into a store front. What part of the insured's auto policy would pay for the damage to the store? Property damage liability Which of the following would NOT be considered part of the insured location under the liability section of a homeowners policy? Vacant farmland owned by the insured If an insured covered under a Mobile Homeowners Policy moves the mobile home to protect it from a covered peril, the policy will pay up to $500 All of the following are parts of a personal auto policy EXCEPT Highflier Scoremore Physical damage coverage. Which of the following best describes the amount of loss assessment coverage included under a homeowners policy liability coverage section? Up to $1,000 per occurrence Section II - Loss Assessment Coverage - applies to assessments against the insured by a condominium association or other cooperative body of property owners. Coverage is limited to $1,000, but an increased limit of coverage is available by endorsement. The difference in the contents coverage on an HO-3 and HO-5 is which of the following? Contents are covered open peril on HO-5, and named peril on HO- ? If a guest's property is lost or damaged while on the insured's premises or in their control, Crime Coverage Form L - Liability for Guests' Property - Premises covers the insured's . Legal liability Highflier Scoremore A home is insured under an HO-2 policy. The homeowner decides to replace the roof on the house. He wasn't able to complete the roof in one day and left a portion of it unfinished overnight. A heavy rainstorm caused $20,000 of damage to the interior of the house and some furniture. In this situation, the policy will pay Nothing. Which of the following endorsements under an Equipment Breakdown policy is used for calculating the amount to be paid on a lost business claim after a direct loss? Business Income - Report of Values Farm fences (except field and pasture fences) are covered by which farm coverage form? Coverage G Fences, except pasture and field fences, are considered other farm structures and are covered by Coverage G - Other Farm Structures Personal business property out in the open is covered under commercial property policy only while . Within 100 feet of the described premises. Highflier Scoremore If more than one person has an insurable interest in a property, the insurer will be liable only for the insured's interest in the loss. Residential structures, including individual condominium units, and their contents are insured by what part of the National Flood Insurance Program? Dwelling policy form The dwelling policy form is used to insure residential structures and their contents including individual condominium units. Property insurance which provides $100,000 coverage for a building and $50,000 coverage for personal property at a single location is called Specific coverage. One location insured for a specific amount of insurance on the structure and on the contents. A producer has been notified by the Commissioner to stop using an unapproved trade name. How many days does the producer have to change the trade name before facing a fine? 10 days A producer who continues to use a unapproved trade name for 10 or more days after being notified will face a fine of up to $5,000. 6. Which of the following covers the interest of a secured lender in personal property? Highflier Scoremore Fair value clause 1 Which of the following statements regarding surety bonds is true? The purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled. 1 Coverage E (Personal Liability) and/or Coverage F (Medical Payments to Others) would respond to a claim arising from all of the following situations EXCEPT While sweeping the floors, an insured's resident maid trips and falls down the stairs, breaking her leg. 2 According to the law of agency, insurance producers represent Insurers 28. All advertisements, regardless of their source of creation, are the responsibility of the Department of Insurance Highflier Scoremore 3 Which provision defines how the policy will respond if there is other valid insurance written on the same risk? Coinsurance 39. Which of the following symbols in a business auto policy indicates that coverage for newly acquired vehicles applies if the insurer already covers all autos owned by the insured? Symbol 1 40. If the premiums collected by an insurer participating in the WYO flood program are insufficient to cover losses, which of the following would be true? The insurer will be reimbursed for the excess costs by the NFIP 48. How is a professional liability policy written? Occurrence 56. Which of the following is NOT part of Section II of the boatowners policy? Highflier Scoremore An insured has a maximum limit of coverage available under her liability policy during a policy year, regardless of the number of claims made or the number of accidents. Her limits are restored at the policy anniversary. What type of limit does this insured have? Aggregate 95. When a named insured files a form with the application selecting a different level or absence of Uninsured Motorist coverage, this selection is valid For the life of that policy 98. Under Coverage E - Scheduled Farm Personal Property, livestock that is not specifically insured is limited to a coverage limit of $1,000 per head Coverage for loss by some perils under a building and personal property form is suspended if The insured building is vacant for over 60 days 107. In contrasting stock insurers with mutual insurers, which statement is true? ( Stock insurers are owned by the shareholders and issue nonparticipating policies 108. An agent suspects that his insurer is committing insurance fraud. Within how many days of that discovery must the agent report the frau to the Department of Insurance? Highflier Scoremore 10 days The exact, direct, uninterrupted cause of loss is the Proximate cause 126. Which of the following losses would be excluded from coverage under the farm property special form? Fire caused by curing tobacco 127. Among people in the same class and life expectancy, which of the following factors can be used to influence premium rates? Occupation 140. An insurer must notify the consumer in writing that an investigative consumer report has been requested, within how many days of the initial request? 5 days 14 How often must organizations consult the National Do Not Call Registry? On the first Monday of every month Highflier Scoremore 14 The defendant being released on a surety bail bond is the Insured