Commercial Insurance - Mike Russ Financial Training Centers

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2014 Property & Casualty
Crash Course
1
GENERAL INFO
2
What is the definition of
insurance?
A. It is an oral contract
B. It is a written contract whereby one seeks to
indemnify another against loss, damage, or
liability arising from a contingent or unknown
event
C. It is a bilateral contract
D. All of the above
3
A written contract that indemnifies
another party against loss, damage, or
liability arising out of a contingent or
unknown event describes which of the
A. A written provision
B. Adhesion
C. Insurance
D. Incontestability
4
Which of the following is the restoring of
a party after a loss to the same financial
position that the party held before the
loss?
A. Recovery
B. Indemnification
C. Loss Control
D. Loss Settlement
5
The insured should be compensated for his
loss, returning him to the condition that existed
prior to the loss. This is the principle of
indemnity. Which of the following is correct?
A. It is based on the law of small numbers
B. It is a basic principle of insurance
C. It is based on the law of supply and demand
D. It involves the principle of adhesion
6
The process whereby an insured suffers a
loss and is paid to return him to his prior
financial condition is:
A. Insurable risk
B. Pure risk
C. indemnity
D. Ceding
7
What is the definition of risk?
A. A peril
B. A certainty of loss
C. Proximate cause
D. An uncertainty or chance of loss
8
A pure risk involves a chance of:
A. Gain
B. Loss (or no loss)
C. Both A&B
D. Neither A or B
9
A situation in which there is only the
possibility of loss or no loss is considered
a:
A. Pure risk
B. Particular risk
C. Fundamental risk
D. Speculative risk
10
An example of a pure risk would be:
A. Ed plays the slot machines and loses money
B. John invests in the stock market and the
prices go down
C. A corporation invests in overseas investments
and suffers a loss due to devaluation of the
dollar
D. Mary has a financial loss due to an auto
accident (medical bills)
11
Which of the following best characterizes
a speculative risk?
A. A person who is careless and/or irresponsible
B. Insuring a life with a policy that provides
double indemnity for accidental death
C. A situation that offers the possibility of a loss
or a gain
D. Transferring the risk of loss to another party
12
The purpose of insurance is:
A. To retain risk
B. To avoid risk
C. To transfer risk
D. To reduce risk
13
What is true about insurance?
A. It is a form of gambling
B. It is a form of reducing risk
C. It is the principle of adhesion
D. It is a form of transferring risk
14
The purchase of an insurance
contract by an applicant is the
process of risk:
A. Sharing
B. Transfer
C. Avoidance
D. Retention
15
An insurance policy may not
provide which of the following?
A. Transfer of risk
B. Elimination of risk
C. Give the insured a piece of mind
D. None of the above
16
Which of the following is not an example
of what an insurance policy can provide?
A. Replace a large possible loss with that of a
small certain loss
B. Reduce uncertainty of financial loss
C. Help protect from a loss
D. Eliminate the risk of sickness
17
All of the following would be needed to
determine if a risk was insurable except:
A. The loss must be calculable
B. The loss must be definite
C. The loss must be catastrophic in nature
D. The loss must not apply to a large number of
insureds at the same time
18
What does the acronym STARR
stand for?
Share
Transfer
Avoid
Retain
Reduce
19
A risk management technique that
eliminates a loss exposure and reduces
the chance of loss to zero is:
A. Loss prevention
B. Retention
C. Loss reduction
D. Avoidance
20
Which of the following is an example of
loss retention?
A. Buying health insurance
B. Not purchasing collision insurance on your
auto
C. Placing a watercraft endorsement on your
homeowner’s policy
D. Removing dried brush from your house’s
premises
21
Loss retention is an effective risk
management technique when all of the
following conditions exist except:
A. The probability of loss is unknown
B. The losses are highly predictable
C. The insured chooses to assume the losses
incurred
D. The worst possible loss is not serious
22
Contracts of insurance are between how
many parties or persons?
A. 1
B. 4
C. 3
D. 2
23
Who is considered the first party in an
insurance contract?
A. The agent
B. The insured
C. The claimant
D. The insurer
24
What is required for a life insurance contract to
be a legal contract?
1. Mutual assent
2. Parties with legal capacity
3. Valuable consideration
4. Valid legal purpose
A. 1&3
B. 2, 3, & 4
C. none of the above
D. all of the above
25
What is true about an aleatory contract?
A. There is always an equal exchange of money
B. The insurer always pays more into the
contract than the insured
C. The insured always pays more into the
contract than the insurer
D. There may be an unequal exchange of money
26
The term aleatory means:
A. The outcome depends on an uncertain future
event
B. An insurance policy is a one sided contract
C. Each party should be able to rely on the
representations of the other party
D. Mandatory
27
When entering a contract, any doubt or
ambiguity found in the document by the
person to whom it is offered will be construed
against the party who drew up the contract.
This is because an insurance policy is a contract
of:
A. Aleatory
B. Adhesion
C. Excessive
D. Peril
28
One of the basic principles of an insurance
contract is adhesion. If any ambiguous
language is found in the contract, it will
indicate which party to be at fault?
A. Insurance Company
B. The insured
C. The agent
D. MGA
29
Which of the following describes the concept of
utmost good faith?
A. A judge usually would resolve a dispute over
unclear language in an insurance contract in
favor of the insured
B. Only the insurer is bound by the terms of the
insurance contract
C. Each party to a contract should be able to rely
on the representations of the other party
D. There is an unclear outcome of who will end
up paying the most for the insurance coverage
30
Utmost good faith must exist between
all of the following except:
A. Applicant
B. Agent
C. State
D. Insurer
31
In an insurance contract, DICE refers to:
A. Declarations, insurable interest, conditions,
and exclusions
B. declarations, insurable interest, conditions
and endorsements
C. declarations, insuring clause, conditions, and
endorsements
D. declarations, insuring clause, conditions, and
exclusions
32
Which part of the insurance contract
summarizes the major promises of the insurer?
A. Definitions
B. Conditions
C. Insuring agreement
D. Declarations
33
The policy provision that denies coverage for
certain perils is:
A. Exclusions
B. Endorsements
C. Declarations
D. Conditions
34
What is not part of DICE?
A. Declarations
B. Insuring Agreement
C. Exclusions
D. Endorsements
35
A document which is attached to a policy and
changes the original policy is called:
A. Exclusion
B. Endorsement
C. Binder
D. condition
36
Lapse in a policy refers to:
A. The insured voluntarily cancels their coverage
B. The insurer decides not to continue insuring a
customer
C. Termination due to non payment
D. A policy that is cancelled upon its effective
dates
37
When an insurer cancels a policy
and only retains earned premium,
this is a:
A. Flat cancellation
B. Short rate cancellation
C. pro-rata cancellation
D. Continuous cancellation
38
A policy is cancelled. The policy is
exactly halfway through its term. The
insurer keeps 50% of the premium and
returns the other 50% to the insured.
Cancellation is said to be:
A. Short rate
B. pro-rata
C. Flat cancellation
D. Continuous cancellation
39
When an insurance policy is cancelled
by the insured and the company retains
premium for the protection provided
plus expenses, cancellation is said to be
on a:
A. Flat basis
B. Short rate basis
C. pro-rata basis
D. Fixed basis
40
An insurer cancels a policy and
returns the entire premium. This
is:
A. Short rate
B. pro-rata
C. Flat cancellation
D. No fault
41
When an insurer endorses, rejects,
declines, cancels or surrenders a policy,
unearned premium must be returned to
the insured or person entitled within:
A. 10 days
B. 15 days
C. 25 days
D. 30 days
Company has 10 days to return unearned premium to agent; Agent has 15
days to return unearned premium to the insured
42
If the insurance company returns
unearned premium to the agent, how the
agent have to return the unearned
premium back to the insured?
A. 10 days
B. 30 days
C. 25 days
D. 15 days
43
How long does an insurance company
have to return unearned premium to the
agent?
A. 10 days
B. 25 days
C. 30 days
D. 15 days
44
Bob pays $900 in annual premium for a
policy. If the insurer cancels a policy for
cause after 9 months, what is the amount of
earned premium?
A. None, because the policy was cancelled
B. $225
C. $675
D. $900
45
With whom are policy forms filed?
A. Insurance Services Office (ISO)
B. Department of Insurance (DOI)
C. National Council on Compensation
D. Internal Revenue Service (IRS)
46
Which advisory organization develops
insurance policies for the standard market?
A. Alliance of American Insurers (AAI)
B. National Association of Insurance
Commissioners (NAIC)
C. Insurance Services Office (ISO)
D. National Association of Insurance
Commissioners (NAIC) and the Insurance
Services office (ISO)
47
Which of the following is the total amount
an insurance company is liable to pay out:
A. Limit of insurance
B. Policy total
C. Indemnity
D. Aggregate limit
48
What is Actual Cash Value (ACV)?
A. ACV= Replacement Cost + Depreciation
B. ACV= Market Value-Depreciation
C. ACV= Replacement Cost - Depreciation
D. ACV= Stated Value- Depreciation
49
An item’s replacement cost is defined as
the:
A. Amount agreed between the insured and the
insurer at policy inception
B. Amount equal to the value of damaged
property on the market
C. Amount to replace the damaged property
D. Amount to replace the damaged property
without a deduction for depreciation
50
An insured purchased new furniture for
$6,000. At the time of the fire loss it had
depreciated $2000. At current rates, the
same furniture will cost $7000 to be
replaced. The Actual Cash Value of the
destroyed furniture is:
A. $7000
B. $8000
C. $6000
D. $5000
51
When the insured makes a claim
against the insurer for a direct loss it
is known as:
A. Third party claims
B. First party claims
C. Second party claims
D. Subrogation
52
If an insured voluntarily relinquishes his rights,
this is an example of:
A. Estoppel
B. Coercion
C. Waiver
D. Warranty
53
A policy may not be transferred to another
without:
A. Oral consent of the insured
B. Oral consent of the insurer
C. Written consent of the insured
D. Written consent of the insurer
54
What is one of the main reasons for the
existence of federal government
programs?
A. The large amount of resources needed to cover
some catastrophic losses
B. Strict federal regulations discourage private
insurers from writing certain types of business
C. Too much competition in some markets
discourages new insurers from writing some
types of policies
D. Companies lack authorization to write business
in all states
55
The liberalization clause in property
means:
A. The insurance company can interpret the policy
more liberally
B. If an insurer changes a policy form or
endorsement to broaden coverage, then all
existing similar policies or endorsements will be
construed to have the broadened coverage
without additional premium payment
C. Policies in effect will have the broadened
coverage as long as the policy owner pays an
additional premium
D. The democrats have passed a lot of new bills
56
What is a peril?
A. Anything that increases the chance of a loss
B. A cause of loss
C. Indifference to loss
D. Either morale or moral
57
A policy that insures property against loss
by fire, lightning, and extended coverage
is known as:
A. All risk
B. Named peril
C. Specified peril
D. Valued form
58
What type of policy protects against loss
from any type of peril except those that
are specifically excluded?
A. Specified peril
B. All risk or open peril
C. Named peril
D. Stated value
59
Open peril policies would provide
coverage for:
A. All risks, except those specifically excluded
B. Only risk with open values
C. All risk with no exclusions
D. Policies that provide broad form coverage
only
60
What is a hazard?
A. Anything that increases the chance of a loss
B. A broken promise
C. Any possibility of financial loss
D. A peril or loss of property
61
Which of the following is a hazard?
A. A large number of similar exposure units
B. A peril
C. A condition that might increase the likelihood
of a loss occurring
D. A speculative risk
62
Which of the following best describes a
moral hazard?
A. Running a red light
B. Lying on an application
C. Speeding
D. Not purchasing insurance
63
Which of the following best describes a
morale hazard?
A. Driving fast and reckless
B. Lying on an application
C. Stealing from an employer
D. An applicant’s house is located next to a
manufacturer of explosives
64
If a house is located next door to a
manufacturer of explosives, what type of
hazard is this?
A. Moral
B. Morale
C. Physical
D. Legal
65
Liability insurance:
A. Is a compensation policy
B. Is written to protect a third party
C. Is written to protect the lien hold
D. Covers a third party
66
Liability losses are referred to as:
A. First party losses
B. Second party losses
C. Third party losses
D. None of the above
Note: the third party is covered under the
contract but not a party to it.
67
Liability imposed by law on those
participating in certain activities
that are known to be especially
hazardous is:
A. Vicarious liability
B. Contingent liability
C. Proximate liability
D. Absolute liability
68
The liability that an employer has
for the acts of his employees is
referred to as:
A. Absolute liability
B. Assumed liability
C. Vicarious liability
D. Gross liability
69
To subrogate is to:
A. Participate
B. Litigate
C. Identify
D. Substitute
70
When a person transfers his “third
party” money rights, this is an
example of:
A. Subordination
B. Subrogation
C. Transferring of interest
D. Passing the buck
71
A wrongful act other than a crime
or a breach of contract is a:
A. Tort
B. Proximate cause
C. Liability
D. Hazard
72
What is the main purpose of tort
law?
A. To minimize the amount of insurance claims
made
B. To determine responsibility for damages
C. To prosecute the responsible party
D. To assign punitive damages to the
responsible party
73
If it is proven that another person’s
negligence contributed to an injury,
what gives the injured party the right to
seek compensation??
A. Case law
B. Contract law
C. Criminal law
D. Tort law
74
What is not an intentional tort?
A. Owning a wild animal
B. Libel
C. slander
D. Invasion of privacy
75
Under tort law, a person can face
a claim for legal liability on the
basis of all of the following except:
A. Absolute liability
B. Intentional tort
C. Negligence
D. Breach of contract
76
Under tort law, the person
committing the tort is known as:
A. Absolute person
B. Tortceasor
C. Principal
D. Tortfeasor
77
For negligence to exist, all of the
following must occur except:
A. Duty Owed
B. Breach of duty
C. Resulting damages
D. Concurrent causation
**proximate cause must also exist
78
Under breach of contract, what
can be covered?
A. Damages, attorney’s fees and court costs
B. Damages resulting from the breach
C. Nothing unless the breach is substantial
D. Legal fees and cost of damages
79
An individual who fails to show even
the minimum degree of care that could
be expected of a prudent person,
showing a total disregard for the safety
of others, is guilty of:
A. Vicarious negligence
B. Gross negligence
C. Comparative negligence
D. Imputed negligence
80
A rule whereby the damages a person
is awarded are reduced to the extent
of that person’s own negligence is:
A. Contributory negligence
B. Comparative negligence
C. Gross negligence
D. Vicarious negligence
81
When a person cannot file for
negligence because he is also found
to be negligent, this is referred to as:
A. Comparative negligence
B. Contributory negligence
C. Vicarious negligence
D. Strict negligence
82
The system of allocating damages between
two or more people in which the damages
collectible are diminished in proportion to
the person’s degree of negligence is called:
A. Non-contributory theory
B. Contributory negligence
C. Comparative negligence
D. Participation
83
Driver A runs into Driver B’s car in an
intersection. Driver A sustains damages of
$5,000. It was determined that Driver A was
40% at fault and Driver B was 60% at fault.
Under comparative negligence, how much
can Driver A receive from Driver B’s insurer?
A. $2,000
B. $4,000
C. $3,000
D. $0
84
Driver A runs into Driver B’s car in an
intersection. Driver A sustains damages of
$5,000. It was determined that Driver A was
40% at fault and Driver B was 60% at fault.
Under contributory negligence, how much can
Driver A receive from Driver B’s insurer?
A. $6,000
B. $4,000
C. $3,000
D. $0
85
Which of the following is
considered special damage?
A. Compensation for a person’s emotional
suffering
B. Compensation for time away from work
C. Compensation for a loss of a foot
D. Compensation for scarring
86
What is true about punitive
damages?
A. They are determined by the insurance
company
B. If the insured is partially at fault in the
accident, he will receive no punitive damages
from the responsible party
C. They are a form of punishment to dissuade
the at fault party (defendant) from entering
those situations again
D. All of the above
87
A judgment or verdict of guilty
following a plea of nolocontendere is considered to be the
same as:
A. conviction
B. Conviction according to law, but not to the
insurance code
C. Left to the commissioner’s opinion
D. innocent
88
Which of the following is not part
of the cost of insurance?
A. Increased losses
B. Premiums paid by the insured
C. Decrease in lawsuits
D. Opportunity costs
89
A system of rating in which the
experience of the individual risk is
a factor in determining the rate is:
A. Manual Rating
B. Merit rating
C. Judgment rating
D. Post-selection rating
90
Coinsurance
91
Which of the following is a correct
definition of coinsurance?
A. Two or more property policies that apply to the
same property
B. A requirement that the insured carry insurance
equal to at least 80% of the property value at
the time of the loss to be fully paid for the loss
without any penalty
C. Two or more buildings which are covered under
a single policy
D. A clause which allows the insurer to take action
against a third party for reimbursement of
settlements made with the insured
92
Which statement is correct regarding
coinsurance?
A. The insured retains 20% of the potential loss
B. All payment will be denied by the insurer if
the 80% coinsurance is not maintained
C. If the insured carried the amount required in
the coinsurance clause, the insured will be paid
for the full loss
D. None of the above
93
If the insured does not carry the required
amount specified in the coinsurance
clause:
A. The insurer will pay a reduced amount on the
loss, the insured becomes a coinsurer by the
amount of the penalty and must pay that
amount himself.
B. The insurer is not obligated to pay on the claim.
C. The insured would receive full coverage for the
loss.
D. The insurer would reduce the payment for loss
by 50%
94
Property is valued at $500,000. It is insured for
$300,000 with an 80% coinsurance clause. If
there is a $200,000 loss, how much will the
insurer pay?
A. $100,000
B. $150,000
C. $200,000
D. $500,000
95
A property is insured for $75,000. It is valued
at $125,000. The policy has an 80%
coinsurance clause. What will be paid on a
$50,000 loss?
A. $32,000
B. $37,500
C. $40,000
D. $50,000
96
A property is insured for $160,000. It is
valued at $100,000. If the property suffers a
$50,000 loss and the insured has a $1,000
deductible how much will the insurer pay?
A. $49,000
B. $50,000
C. $100,000
D. $160,000
97
AUTO INSURANCE
98
Liability & Physical Damage
LIABILITY (Pays Others)
PHYSICAL DAMAGE (The
Car)
California Minimum Limits: 15/30/5
OTC: $100 deductible
$15,000 BI per person
Collision: $500 deductible
$30,000 BI per occurrence
$5,000 PD per occurrence
Medical Payments: $1000/person (per
occurrence)
Uninsured Motorist (UM): BI
Underinsured Motorist
99
Under a personal auto policy, where
would the insured have coverage?
A. Tokyo, Japan
B. London, England
C. Montreal, Canada
D. Mexico City, Mexico
100
The policy territory under a
personal auto policy is limited to:
A. North America and United States’ possessions
B. United States, its territories and possessions,
and Canada
C. United States, its territories and possessions
and Mexico
D. United States, its territories and possessions
and Puerto Rico
101
The Mexico coverage endorsement may
be attached to personal auto policies and:
A. Provides excess liability coverage for accidents in
Mexico within 25 miles of the US border
B. Must be attached to US policies for citizens of
Mexico
C. Will provide primary liability coverage for
insureds while driving anywhere in Mexico
D. Must be added to the policy of an insured who
lives within 25 miles of the Mexico border
102
A personal automobile policy with a
Mexican Liability Endorsement will cover:
A. A driver anywhere in Mexico
B. A person living within 25 miles of the Mexican
border
C. A Mexican national while driving in the US
D. An American while driving up to 25 miles into
Mexico
103
The limited Mexican Liability
Endorsement only applies to trips into
Mexico of how many days duration?
A. 2 days
B. 10 days
C. 14 days
D. 30 days
104
Automobile liability insurance is:
A. A compensation policy
B. Written to protect a third party
C. Written to protect the lienholder
D. Written to protect the insured
105
Which of the following expresses the meaning of an
automobile policy limit of liability specified as
100/300/100?
A. B.I. per person/P.D. per occurrence/P.D. per
person
B. P.D. per person/P.D. per occurrence/B.I. per
person
C. B.I. per person/P.D. per person/B.I. per
occurrence
D. B.I. per person/B.I. per occurrence/P.D. per
occurrence
106
The insured has a personal auto policy with
bodily injury limits of 25/50. There were three
injured parties in the other car with medical
bills of (1) $30,000 (2) $9,000 (3) $8,000. How
much will the liability policy pay?
A. $47,000
B. $42,000
C. $50,000
D. Nothing
107
An insured has a personal auto policy with a liability
coverage limit of $300,000 per occurrence. The insured
causes an auto accident that results in $150,000 bodily
injury to the other driver, $200,000 to a passenger, and
$8,000 property damage to their car. To what extent
would the insurer’s liability for these losses be
covered?
A. $300,000
B. $353,000
C. $308,000
D. $8,000
**note: This policy is a combined single limit policy
108
In liability policies, supplementary
payments:
A. Are subject to the overall policy limit of
liability
B. Have a separate limit of liability
C. Are payable in addition to the policy limit of
liability
D. Are subject to a flat limit of 10% of the overall
policy limit
109
In a personal auto policy, supplemental
payments include:
A. Cost of defense in excess of liability
B. Up to $250 for the cost of bail bonds
C. Costs incurred because of the attendance at
hearings or trials at the company’s request
(up to $200 per day for loss of earnings)
D. All of the above
110
Which of the following is not a
supplementary payment of a personal auto
policy but is covered under Part A of
liability?
A. Cost of bail bonds relating to a covered
accident
B. Premiums on appeal bonds
C. Pre-judgment interest
D. Loss of earnings to attend trial at the
company’s request
111
The insured is carrying the minimum limits of
auto liability insurance (15/30/5). If the insured
is in an accident in a state which has higher
limits, what will the insured’s company do?
A. Refuse to pay the claim
B. Pay the claim, but only after the insured pays
retroactive premium
C. Pay up to the limits of the insured’s policy
D. Will meet the minimum requirements of any
other state with no additional premium due
112
The insured has a personal auto policy with
medical payments of $1000. Which of the
following is an incorrect statement?
A. The insured drives a neighbor’s child to school and is in
an accident. Both are covered for a total of $1000 of
medical payments
B. The insured’s son is hit by a car while walking to school
and is covered for $1000 of medical expenses
C. The insured is hurt while driving with a neighbor who
does not have medical payments. The insured’s medical
payments will cover him
D. The insured slams his daughter’s hand in the car door
and the injury is covered
113
Automobile liability policies issued in
California include coverage to protect against
uninsured motorist. This coverage:
A. May not be declined by the insured
B. Is included in the policy, but is not effective
unless the policy is so endorsed and an additional
premium is paid
C. Must be included in the policy, but can be waived
by supplemental agreement
D. Is optional and automatically included when the
limit of liability for bodily injury is increased.
114
All of the following are uninsured
motorists except:
A. A hit and run driver who cannot be identified
B. A car insured by a bonding company or
insurance company that is insolvent
C. A vehicle self-insured by a state agency
D. A vehicle that is not covered by an insurance
policy
115
If the insured is involved in a hit and run
accident and has bodily injuries, how may
those injuries be covered?
A. Medical Payments
B. OTC
C. Collision
D. Any of the above
116
A hit and run driver injures someone who
has a personal auto policy. What would
cover the insured’s injuries?
A. Bodily Injury
B. Collision
C. Other than collision
D. Medical payments or uninsured motorist
Note: a better answer if it was there: uninsured motorist
117
The insured has $100,000 worth of auto
liability insurance and underinsured motorist
protection. Another operator of a vehicle who
carries $50,000 in liability strikes the insured
causing $100,000 in injuries. How will the claim
be paid?
A. $50,000 only
B. $50,000 by the other party and $50,000 by
the insured’s company
C. $100,000 by the insured’s company
D. None of the above
118
The minimum amount for a good driver
discount in California is what percent
below the rate the insured would
otherwise be charged?
A. 5%
B. 10%
C. 15%
D. 20%
119
Which of the following events within the
last 3 years would disqualify an individual
from receiving a good driver discount?
A. Moving violation while driving a company car during
business hours
B. An at-fault accident involving only property damage
C. An at-fault accident involving minor bodily injury
D. A not-at-fault accident resulting in the death of a
passenger
120
Which of the following is not a rating
factor under a personal auto policy?
A. Annual mileage
B. Driving experience
C. Driving record
D. Multiple drivers per vehicle
121
Bob purchased auto insurance. He never has been
in an accident. He told the insurance company that
he had a ticket 36 months ago. It was actually 34
months ago, but Bob believed it to be 36 months
ago. Shortly afterward, Bob’s car was stolen. The
company will pay the claim and continue Bob’s
insurance in force because:
A. The concealment was not material
B. The concealment was unintentional
C. The concealment would have to be discovered by the
company before the loss occurred
D. The loss would have to be paid by the insurer as it is a
covered loss
122
On which of these may cancellation of an
automobile policy by the insurer be based?
A. The age of the insured, such as turning 75 years
old
B. Failure of the insured to give written notice to
the insurer of an accident in which he was at
fault within 15 days
C. Suspension of the driver’s license of a person
who is insured under the policy and who usually
drives the insured automobile
D. All of the above
123
Which of the following is true in regard to
auto insurance?
A. If an insurer is not going to renew a policy, it
would have to give 30 days notice to the
insured
B. An insurer must give 10 days notice to the
insured to cancel an auto policy for nonpayment of premiums
C. If a company wants to cancel a policy, it must
give 20 days notice
D. All of the above
124
A woman purchases another car and adds it to
her policy. She does not pay the additional
premium and the insurer cancels the policy for
non-payment. How many days notice is the
insurer required to give her?
A. 10
B. 15
C. 20
D. 30
125
How many days advance notice is
required for a personal auto policy to be
cancelled for reasons other than
nonpayment of premium?
A. 5
B. 10
C. 20
D. 30
126
What is an automobile physical damage
policy?
A. A contract whereby the company agrees to pay the
insured for direct loss or damage to the automobile
B. A contract whereby the insurer pays on the behalf
of the insured, all sums the insured is liable for
because of damage to the property of others
C. A contract whereby the insurer pays on the behalf of
the insured, all sums the insured is liable for because
of bodily injury
D. A contract whereby the insurer pays the insured for
bodily injury caused by an uninsured driver
127
The best definition of collision is:
A. Two cars collide on a public highway
B. A car collides with any object
C. A car collides with an object or upset of a car
D. A car collides with a moving object
128
In automobile insurance, what is meant
by other than collision coverage?
A. As the name implies, it is all inclusive. It
combines property damage, bodily injury
liability, property damage liability, medical
payments, and collision
B. It covers any direct or accidental loss of, or
damage to, the insured’s automobile, except
collision
C. It covers all aspects of physical damage to the
insured automobile, such as fire, theft, collision,
or flood
D. It insures against direct and accidental losses
129
The insured has collision coverage. In
which of the following cases would he
be covered?
A. The vehicle is washed away in a flood
B. A tree fell in the street two hours earlier due
to a storm. The insured hit it and caused
damage to the car
C. The insured hit a pothole
D. A rock flew off a truck and broke the
insured’s windshield
130
Which of the following would be
covered under collision?
A. The car windshield is broken by a rock kicked
up by a passing truck
B. Veterinary bills for a stray dog that the
Insured accidentally hit
C. The insured locks his keys in his car and
breaks a window to get inside
D. None of the above
131
What is covered under physical damage
of a personal auto policy under OTC?
A. Earthquake
B. Flood
C. Violent windstorm blows a sign off a building
and hits the car causing damage
D. All of the above
132
Which of the following would be covered
under OTC (other than collision) of a
personal auto policy?
A. Insured hits an icy patch on the road and rolls
his car
B. Rear window blown out by a gunshot while
the car was parked on the street at night
C. Insured locks his keys in the car and breaks a
window to get inside
D. Insured accidentally runs into a parked car
133
All of the following would be considered
other than collision losses under the
personal auto policy except:
A. Collision with another object
B. Contact with a bird or animal
C. Loss caused by a falling object
D. Vandalism
134
The insured has physical damage coverage on his
PAP with a $1000 deductible on collision and a
$500 deductible on OTC. The insured hits a deer
causing $2000 worth of damage to his car. How
much will the insured receive from the insurer?
A.$500
B $1,500
C. $1,000
D.$2.000
135
The insured has physical damage coverage on
his PAP with a $1000 deductible on collision
and a $500 deductible on OTC. The insured hits
a pole causing $2000 worth of damage to his
car. How much will the insured receive from
the insurer?
A. $500
B. $1,500
C. $1,000
D. $2,000
136
In a Personal Auto Policy in the physical
damage section, coverage is provided for:
A. Insured’s clothes stolen from the covered
auto
B. Vandalism
C. Mechanical breakdown
D. None of the above
137
An insured has a PAP and his
engine seizes, causing $2,000
worth of damage. How much will
the policy pay?
A. $1,500
B. $2,000
C. Nothing
D. $1,000
138
What is not covered under OTC of a
personal auto policy?
A. Hood Ornament
B. Theft of necktie and briefcase from the car
left at the airport
C. Radio installed in the dash
D. Spare tire
139
In a PAP with Optional Physical Damage
Coverage (audio, visual, data electronic
equipment and tapes, records, disks, and
other media), what is the limit of
coverage?
A. $200
B. $1000
C. $1500
D. $2000
140
An insured has a Homeowner’s policy and a
personal auto policy. He just bought a 40”TV from
Electronic City and while driving home he is in an
accident and the TV is destroyed. How may the TV
be covered?
A. Auto Policy
B. Homeowner’s policy
C. Liability
D. Not covered
141
The insured’s car is stolen. The thief totaled the car.
What would provide coverage for the insured?
A. Other than collision
B. Collision
C. Property damage
D. None of the above
142
Under OTC, what is the limit for transportation expense
incurred by the insured in the event of the total theft of
the insured’s covered auto?
A. Coverage pays up to $20 a day to a maximum of
$600
B. Coverage pays up to $30 day to a maximum of
$450
C. Coverage pays up to $18 a day to a maximum of
$1000
D. Policy will pay nothing
143
An insured with OTC coverage on his car has his
car stolen. This happened 12 days ago. What
amount would he receive in transportation
expense from his insurer?
A. $150
B. $200
C. $240
D. Nothing
Note: to receive transportation expense, the insured must carry OTC. It
does not pay for the first 48 hours after the car is stolen and will pay $20
per day up to a maximum of $600
144
When is an insured required to notify the
police under a personal auto policy?
A. For all accidents and thefts
B. For thefts only
C. For hit and run accidents and thefts
D. There is no requirement to notify the police
145
Under a PAP, which of the following is a
duty of an insured following a loss?
A. Have the car towed to a repair show
immediately following the loss
B. Allow the insurer to inspect & appraise
damages before repairs are made
C. The insured has no obligation to the insurer
D. All of the above
146
The insured’s auto is damaged. The
insurer:
A. May offer a cash settlement
B. Pay to have the damage repaired
C. Replace the damage with like kind and quality
D. All of the above
147
The personal auto policy “coverage for damage to
your own automobile” states that the limit of
liability is the lesser of the amount necessary to
repair or replace the property or the
A. Guaranteed replacement cost
B. Actual cash value of the stolen or damaged
property
C. Replacement cost of the stolen or damaged
property
D. Replacement cost of the stolen or damaged
property if the insured has purchased an amount
of coverage that is at least 80% of the
replacement cost
148
What is an option of an insurer when
making a loss settlement with an insured on
a personal auto policy?
A. Return stolen property to the address shown
on the policy
B. Instruct an insured to have the vehicle
repaired at a designated shop
C. Tell the insured to try to settle the claim with
the responsible party
D. Have the insured sell the damaged auto at an
auto action
149
What is gap coverage?
A. It is excess liability protection
B. It is insurance that protects the insured if he
were to be hit by an uninsured driver
C. It is insurance that pays the difference between
the amount an insurer will pay for a totaled car
and the amount the insured owes on the lease
or loan
D. It is an additional insurance coverage that can be
purchased by someone who has auto insurance
through CAARP.
150
Under a personal auto policy, towing and
labor expenses:
A. Are never paid
B. Paid if endorsed onto the policy for an
additional premium
C. Automatically included in all policies
D. Automatically endorsed on to the policy for
an additional premium
151
Under a personal auto policy, what does
towing and labor cover?
A. Pays for two hours of labor at a garage
B. Pays a maximum of $1000 per labor year
C. Pays to have car towed to a garage or a repair
shop nearest to the insured’s home
D. Pays for labor at the place of disablement
152
An insured owned a 9,500 lb. pick-up truck
and has it insured on his personal auto
policy. What occupation is an allowable use
under the personal auto policy?
A. Landscaping
B. Farming
C. Hauling
D. Pick-up trucks cannot be insured on a
personal auto policy
153
If the insured has auto insurance and he
borrows a car on which there is auto
insurance and he is in an accident, what is
true?
A. Both policies apply but the insured’s
insurance is primary
B. Both policies apply but the owner of the car’s
insurance is primary
C. The insured’s policy will pay the claim
D. The owner of the car’s policy will pay the
claim
154
An insured woman has collision, OTC and liability
protection on her auto policy. She borrows an
auto on which the owner carries only liability
coverage. She is in an at-fault accident. How will
the claim be settled?
A. The auto owner’s liability is primary; no collision
coverage applies
B. The insured woman’s liability is primary; no collision
coverage applies
C. The auto owner’s liability is primary; the insured
woman’s collision coverage will cover the borrowed
car
D. The insured woman’s liability coverage is primary and
her collision coverage will cover the borrowed car.
155
A person who is insured borrows a car from
a friend who is uninsured and gets in an
accident. How will the claim be settled?
A. By the insured’s company
B. By the assigned risk plan
C. Uninsured motorist fund
D. None of the above
156
Art has a homeowner’s policy. He does not
own a car. He is planning on taking a trip and
renting a car. Sometimes he borrows friends
cars. What would you suggest be added to a
personal auto policy to cover his needs?
A. Named non-owner
B. Extended non-owner
C. Miscellaneous vehicle endorsement
D. Special vehicle endorsement
157
If an insured rents a vehicle while on a
two-week vacation in the U.S. what
coverage is provided under the personal
auto policy?
A. Liability coverage only
B. No coverage available because the vehicle is not
a “covered auto”
C. All coverages are in force in the personal auto
policy
D. Liability, medical payments, and uninsured
motorist coverage only
158
Damage to a rental car used on a temporary basis
under a personal auto policy would be covered
under:
A. Liability section
B. Miscellaneous vehicle endorsement
C. Not covered
D. Physical Damage
Rental cars are temporary substitute autos and are covered the same as non
owned autos. Damage to the car-PD; damage to others=liability
159
If an insured rents a car, what coverage would
he have for physical damage?
A. The same as the car on his policy that has the
most coverage
B. The state’s minimum requirements
C. The same as the last car listen on his
declaration page
D. The least amount of coverage that applies to
any of the cars on his policy
160
Which of the following would NOT be covered
under a personal auto policy?
A. Half-ton pick-up truck
B. Van
C. Leased auto
D. Auto used for business
161
Under the liability portion of an unendorsed
personal auto policy, what coverage is
available if the named insured is operating a
company car?
A. The financial responsibility limits
B. The broadest coverage of any autos listed in
the declarations
C. The coverage on the auto primarily operated
by the named insured
D. The policy excludes this usage
162
If an insured has an unendorsed personal
auto policy and he is driving a company
car, what liability limits would apply?
A. There would be no coverage
B. The limits would be the same as on his own
policy
C. The state limits
D. The company’s auto policy limits
163
If an insured under a personal auto policy leaves a
covered auto at an auto dealer for repairs, and the
auto is involved in an accident while being test driven
by an employee of the dealer, how will the personal
auto policy respond to liability claims?
A. The personal auto policy is primary
B. There is no coverage under the personal auto policy
C. The personal auto policy will share with the dealer’s
policy on a pro-rata basis
D. The personal auto policy is excess
164
If an insured timely requests coverage for a
newly acquired auto under an existing
personal auto policy, what coverage is
provided before the request is made?
A. Broadest coverage for any vehicle shown on the
declarations
B. Statutory minimum required coverages
C. Average coverage for all vehicles shown on the
declarations
D. Lowest coverage for any vehicle shown on the
declarations
165
In a personal auto policy, a newly acquired
auto is to replace a covered auto that has
liability coverage only. How long does the
insured have to request collision coverage
on the new car?
A. Immediately
B. 4 days
C. 14 days
D. 30 days.
note: 4 days coverage 14 days to give notice
166
The insured purchased a motorcycle and
needs to insure it. How may the insurance
cover the motorcycle on a personal auto
policy?
A. Miscellaneous vehicle endorsement
B. Special motorcycle endorsement
C. Cannot be endorsed on a personal auto policy
D. Either A or B
167
A personal auto insured wants to add his
motorcycle to his personal auto policy by
endorsement. Why is the endorsement needed?
A. The PAP does not cover vehicles with two wheels
B. The insured cannot add his motorcycle by
endorsement
C. Motorcycles need an endorsement as they are
dangerous to drive
D. The insured has only been driving for two years
168
Which of the following will not be acceptable
by CAARP?
A. A person who had 3 accidents in 3 years
B. A person who had 2 tickets in 2 years
C. A person who failed to pay auto premiums in
the year before applying to CAARP
D. A person who had a policy cancelled due to
misrepresentation
169
Cranston received 3 points on his license,
and as a result his license was suspended.
He is not eligible for CAARP because he does
not have a:
A. Valid license
B. New car
C. A high school diploma
D. US citizenship
170
CAARP can cover the minimum liability
limits of:
A. 5/30/15
B. 15/30/5
C. 45/15/10
D. 10/25/30
171
What are the coverages provided by
CAARP?
A. Liability only
B. Liability and medical payments
C. Liability, medical payments, and uninsured
motorists
D. Medical payments only
172
What is not provided by CAARP?
A. Collision
B. Medical Payments
C. Liability
D. Uninsured motorist
173
What are the limits of liability on low cost
insurance?
A. 15/30/5
B. 10/25/5
C. 10/20/5
D. 10/20/3
174
HOMEOWNER’S INSURANCE
175
176
Section II: Liability (all forms are
identical)
Primary Coverages
Coverage E: Personal
Liability
Coverage F” Medical
Payments to others
Additional Coverages:
Insurance-related Claim
Expenses
First Aid to Others
Damage to Property of
Others- $500 per
occurrence
Loss Assessment
Coverage: $1000 per
occurrence
$100,000 (personal
liability) per
occurrence
$1000 guest on
premises
177
The Standard Fire Policy, which is referred
to as the California Standard Form Fire
Insurance Policy:
A. Must be included in property policies and
must use the exact wording of the Standard Fire
Policy
B. Is of historical interest only; it is not used to
today
C. Must be included in content and, if worded
differently, must be more favorable to the
insured
D. Is included in the California Insurance Code
178
In a homeowner’s policy,
coverages A, B and C refer to:
A. Dwelling, medical payments, and liability
B. Dwelling, other structures, and personal
property
C. Dwelling, other structures, and loss of use
D. Dwelling, personal property, and loss of use
179
Under homeowners’ section 1, which of
the following is correct?
A. Coverage A covers liability and medical
B. Coverage B covers medical
C. Coverage A covers the dwelling, Coverage B
covers personal property, Coverage C covers
loss of use
D. Coverage A covers the dwelling, Coverage B
covers other structures, Coverage C covers
personal property, Coverage D covers loss of
use
180
Which of the following would be covered
under coverage A of an HO-3?
A. A detached fence
B. Paint for the interior of a building
C. A decorative portable fountain
D. A lawnmower
181
Which of the following would be covered
under a homeowners’ policy?
A. Flood damage
B. Earthquake damage
C. Bodily injury to the insured’s son
D. An article falls off an airplane flying overhead
and crashes into the insured’s home
182
What would be covered under Coverage B
in a homeowners’ policy?
A. Swimming pool
B. Deck attached to house
C. Patio attached to house
D. Garage attached to house
183
All of the following are covered
property under a homeowner’s policy
except:
A. Passport
B. Bullion
C. Hovercraft
D. Laptop
NOTE: The question said “covered propety”
184
An insured has an HO-3 and his family has
to move to a hotel due to fire damage to
their house. How much would be paid
under coverage D?
A. 30 days
B. 50% of A
C. 30% of A (Coverage D)
D. 25 days
185
An insured has an HO-3 and his family has
to move to a hotel due to fire damage to
their house. How much would be covered
under Coverage D?
A. 10 days
B. 30 days
C. Up to the full limit of Coverage D
D. 25 days
186
All of the following would be
covered under Coverage D of an
HO-3 except:
A. The homeowner is forced to evacuate due to
an impending fire
B. The homeowner is forced to evacuate due to
an impending flood
C. The home is uninhabitable
D. None of the above
187
Which of the following would be correct
about the minimum limits in Section 2 of
the homeowner’s policy?
A. Medical payments $1000; personal liability
$100,000
B. Medical payments $2000; personal liability
$200,000
C. Medical payments $3000; personal liability
$300,000
D. Medical payments $4000; personal liability
$400,000
188
Medical payments under a homeowner’s
policy Section 2 would cover:
A. Insured
B. Insured, spouse, and all family residing in the
home
C. Insured, family, and guests
D. Guests on the premises
189
A person having a homeowner’s policy
might wish to add an additional residence
premises endorsement to cover a twofamily home which she rents in order:
A. To have protection for $50,000 of furnishings
that she provides in her rental
B. To protect her from possible liability if a tenant is
hurt on her premises
C. In case someone coming to repair a broken
window in the rental unit is hurt while working
there
D. None of the above
190
Who would not be considered an insured
for liability protection under a
homeowner’s policy?
A. The insured’s resident son
B. The insured’s resident spouse
C. The insured’s 25-year old resident nephew
D. The insured’s non resident spouse
191
Who would not be considered an insured
under a homeowner’s policy?
A. 75 year old grandfather residing in an adult
care facility
B. 90 year old uncle living in the home
C. 20 year old student away at college
D. 16 year old foster child living in the home
192
Coverage under Section 2 of a
Homeowner's policy would extend to:
A. The premises described and all personal and
business activities of the insureds on or off the
described premises.
B. The premises described and to the personal
activities of the insureds on or off the described
premises
C. Only the personal activities of the insureds
D. Only the premises described in the policy
193
Which of the following would be covered
under the personal liability section of a
homeowner’s policy?
A. Personal liability away from the premises
B. The insured’s three year old child
intentionally hits another child with a bat
C. The insured accidentally drops a neighbor’s
camera and damages it
D. All of the above
194
Which of the following situations would not
be covered under the liability section of a
homeowner’s policy?
A. A vehicle (owned and registered) only driven on the
insured’s property which includes ten acres of
undeveloped land
B. A 1923 ford (with no engine) that the insured is
restoring in his garage
C. A golf cart which the insured drives on the golf
course
D. A power mower the insured rides to mow his own
land
195
An HO-8 is similar to:
A. HO-1
B. HO-2
C. HO-3
D. HO-4
An HO-8 is most commonly used for older homes (typically 40+ years)
196
A homeowner’s policy will cover an older
structure under what form?
A. HO1
B. HO15
C. HO3
D. HO5
197
What type of homeowner’s policy would
be purchased to protect a tenant?
A. HO-4
B. HO-6
C. HO-8
D. HO-3
198
An HO-4 is sometimes referred to as:
A. The condominium form
B. The renter’s form
C. Special risk insurance
D. All risk personal insurance
199
Jack owns a condominium and he wishes to
insure his personal property, have liability
coverage, and loss assessment coverage.
What policy would meet Jack’s needs?
A. HO-2
B. HO-4
C. HO-6
D. DP-1
200
Jack owns a condominium and he wishes to
rent it out. What type of policy would the
tenants need to cover their personal
property?
A. HO-2
B. HO-4
C. HO-6
D. DP-1
201
What coverage does an HO-4 provide?
A. Broad form personal property
B. All risk personal property
C. All risk on structure, broad form on personal
property
D. All risk on personal property; all risk on
structure
Note: personal property coverage is always broad
form except HO-5 or HO-3/HO-15
202
What coverage does an HO-6 provide?
A. Broad form coverage on personal property of
a condo owner
B. All risk coverage on personal property of a
condominium owner
C. All risk on the structure, broad form on
personal property
D. Perils under coverage C
203
What is the difference between an
HO-2 and an HO-6?
A. Coverage A
B. Coverage B
C. Coverage C
D. There is no difference
204
How are the HO-2, HO-4, and HO6 similar?
A. Perils under coverage C
B. Perils under coverage B
C. Perils under coverage A
D. All of the above
205
Which of the following homeowner’s
policies have both dwelling and
personal property coverage on a broad
peril form?
A. HO-2, HO-4, HO-5
B. HO-4, HO-5, HO-6
C. HO-2 and HO-6
D. HO-3 and HO-5
206
What is the difference between an
HO-2 and an HO-3?
A. Coverage B
B. Both Coverage A and Coverage B
C. Coverage C
D. Coverage A
207
The homeowners form which provides all
risk coverage on the dwelling and broad
coverage on personal property is:
A. HO-3
B. HO-4
C. HO-6
D. HO-8
208
Which of the following provides all risk
coverage on the structure?
A. HO-2
B. HO-6
C. HO-8
D. HO-3
209
What provides all risk coverage on both
personal and real property?
A. HO-5
B. HO-6
C. HO-4
D. HO-8
Note: HO-3 endorsed with HO-15 provides all
risk on personal and real property
210
Which provides the most coverage?
A. HO-2
B. HO-4
C. HO-6
D. HO-5
211
What policy provides coverage for a
mobile home which is similar to that of an
HO-2?
A. Homeowners’ form 4
B. Mobile home policy
C. Mobile home owners broad form
D. Homeowners’ form 2 is the policy used for
mobile homes
212
A mobile home policy is closest to which
of the following?
A. HO-1
B. HO-2
C. HO-4
D. HO-6
213
If jewelry is stolen and the owner had a
homeowner’s policy, what (if anything)
would the company pay?
A. Nothing
B. Pay up to the special limits in the policy
C. Pay unlimited amounts
D. None of the above
214
On a homeowner’s policy, personal
property away from the premises will
be covered up to what percent of
personal property?
A. 10%
B. 20%
C. 50%
D. Full limit of personal property
215
A homeowner’s policy has certain
limitations for some things such as jewelry,
furs, and cameras. A personal article
floater covers these items:
A. Only while traveling
B. On a scheduled basis with monetary amounts
assigned to the items on an open peril basis
C. On a scheduled basis
D. Only while on an insured’s premises
216
Scheduled personal property would
include:
A. The building scheduled under the policy
B. Jewelry, furs, firearms, cameras, etc.
C. Personal possessions such as furniture and
cooking utensils
D. Autos and trailers
217
How much would be covered in a
homeowner’s policy with a scheduled
personal article floater for the theft of a
fur coat?
A.10%
B. 20%
C. 100%
D. Nothing
218
An antique covered by a personal article
floater attached to a homeowner’s policy
normally would be covered for:
A. Blanket Basis
B. ACV
C. Stated value (replacement value)
D. Market value
219
The personal property replacement cost
loss settlement endorsement will cover all
of the following except:
A. Awnings
B. Antiques
C. Sports memorabilia
D. Fine Arts
220
A homeowner’s policy with an
endorsed personal article floater
covering stamps would not cover the
stamps in which of the following cases:
A. Stamps are sent by registered mail
B. Stamps are on a freight truck
C. Stamps are in the insured’s suitcase while
travelling in Japan
D. In Canada
221
All of the following are covered
under a homeowner’s policy
except:
A. Stamps
B. Golf Clubs
C. Bank Notes
D. Manuscripts
222
Which of the following does an insured
not have to do following a loss?
A. Submit a list of property with quantity and
ACV
B. Make a statement with no other insured
present
C. Report a theft to the police
D. Protect property from further damage with
the insured bearing such costs
Note: The insured will not have to pay for costs to protect property
223
Under a standard unendorsed homeowners’
policy what would not be covered?
A. Fire damage
B. Other structures on the property
C. Personal Liability
D. Loss due to changes in construction code
(ordinance or law regarding construction)
224
Ordinance and Law coverage in a
homeowners’ policy applies to which of
the following?
A. City law required dogs to be leashed. Your dog is
unleashed and bites someone in the park
B. City ordinance requires swimming pools to be fenced
and have self closing gates. Your gate is not self-closing
and a neighbor’s child falls in the pool and is seriously
injured
C. Your house burns down and you incur more costs as
you must rebuild your house up to code
D. None of the above
225
Under Ordinance and Law (building code
upgrade coverage) in a homeowner’s
policy, a limit is already provided as an
additional ordinance and law coverage.
This limit is:
A. 5% of the dwelling
B. 10% of the dwelling
C. 20% of the dwelling
D. No additional coverage is available
226
Coverage provided by the
Personal Injury Endorsement does
NOT apply to:
A. Criminal acts committed at the direction of
the insured
B. Malicious prosecution
C. False imprisonment
D. Wrongful eviction
227
A homeowner’s policy would have
watercraft liability coverage for:
A. All owned watercrafts
B. Watercraft specified in the endorsement
C. Liability and medical payments to others for
scheduled boats
D. Physical damage for scheduled boats
228
The standard mortgage clause is used
to:
A. Protect the borrower
B. Protect the lender
C. Both A&B
D. Neither A&B
229
If the named insured has been charged with
arson reference to a total fire loss of the
insured’s building, what effect will the
insured’s action have on the mortgage
holder’s claim for damages?
A. The mortgage holder is entitled to 50% of its loss
B. The mortgage holder’s claim is excluded
C. The mortgage holder is entitled to receive 80% of
its loss
D. The mortgage holder is entitled to receive 100%
of its loss
230
If the insured sets his house on
fire who has the right to collect?
A. The mortgagee listed on the policy
B. The mortgagee but the loss is reduced by a
15% penalty
C. The claim is denied due to arson
D. None of the above
231
If an insured property owner does not
appropriately handle a covered loss:
A. The insured could lose his right of recovery
B. The mortgage holder could not collect the
amount for the loss
C. The insurer could deny all payment
D. The mortgage holder could collect if the
mortgage class was added to the policy by
endorsement
Note: understand the insured could lose his rights, mortgage
holder could collect
232
What is not an additional coverage in a
homeowner’s policy?
A. Fire Department Service Charge
B. Debris removal expense
C. Additional living expenses (Loss of Use)
D. Lawns, plants, shrubs and trees
**covered under Coverage D
233
What is an additional coverage provided
by an HO-3?
A. Defective planning
B. Lawns, plants, shrubs and trees
C. Money and securities
D. Government action
234
In an HO-3, how much coverage is
provided for a landlords furnishings?
A. $200
B. $1000
C. $2500
D. There is no coverage
235
Under a homeowners policy, how
much coverage is provided for
grave markers?
A. $1500
B. $2500
C. $5000
D. $10,000
236
The Water Damage Exclusion in the cause
of loss special form applies to all of the
following except:
A. Tidal waves
B. Sewer backup
C. Flood
D. Plumbing system leakage
237
What is subsidence in a homeowner’s
policy?
A. Subrogation
B. Substitution
C. Sinking
D. Cessation
Note: another question ans. Not covered
238
What is not covered in a
homeowner’s policy?
A. Fire
B. Theft
C. Subsidence
D. Volcano Eruption
239
What causes subsidence in a
homeowner’s policy?
A. Lightning
B. Falling objects
C. Earth movement
D. All of the above
240
Under a homeowner’s policy, all
of the following are general
exclusions except:
A. Earthquake
B. Loss assessment
C. Flood
D. Subsidence
241
What is not covered by an HO-3?
A. Government action
B. Counterfeit money
C. Volcanic eruption
D. Falling objects
242
DWELLING INSURANCE (DPs)
for LANDLORDS
243
What perils are covered under a basic
dwelling policy?
A. Fire only
B. Fire and lightning
C. Fire, lightning, and smoke damage
D. Fire, lightning, and internal explosion
244
A basic dwelling policy automatically
provides coverage against fire, lightning
and:
A. Internal explosion
B. Windstorm
C. Explosion
D. Riot
245
What is the main difference between
and DP1 and a DP2?
A. Coverages under section A
B. Limits under section C
C. Coverages under section B
D. Perils covered under section A
246
How does a DP-1 differ from a DP-3?
A. There is no difference
B. Coverage D
C. Coverage E
D. All of the above
247
Which scenario best describes
section E of a dwelling policy?
A. Being evacuated due to a prospective flood
B. Smoke in the home due to fire in a neighbor’s
house
C. A vehicle causing damage to your home
D. Being evacuated due to a civil riot
248
An individual owns a duplex. Because of
damage to one of the units, he has loss
of a rental income. His insurance would
be covered under:
A. Basic, broad, and special forms of dwelling
policies
B. Broad and special forms only
C. Not covered as he did not become a member of
the household as required in a homeowner’s policy
D. There is no coverage for duplexes
249
What is covered under a DP-2 that is not
covered by the DP-1?
A. Debris removal
B. Sinkhole collapse
C. Falling objects
D. Fire department service charge
**note: falling objects are not covered by basic forms. B, C,
and D are “other coverages” covered by all
250
What additional coverage is provided in a
DP-3 that is NOT provided in a DP-1?
A. Collapse
B. Worldwide coverage
C. Fire department service charge
D. Other structures
Note: Collapse is never covered in under Basic under any of
the polices always covered with broad and special forms
251
Which of the dwelling forms excludes
damage due to burglary?
A. Basic
B. Broad
C. Special
D. All of the above
252
Which of the following policies does not
include theft or liability, but could have
these coverages added by endorsement?
A. Homeowner’s
B. Dwelling
C. Personal auto
D. All of the above
253
Under a DP-1, how is the building valued?
A. Actual Cash Value
B. Replacement Cost
C. Market Value
D. Selling price
254
All of the following are reasons that a
dwelling policy might be used instead of a
homeowner’s policy except:
A. To cover a rental property
B. The insured does not need liability coverage
C. The home did not qualify for a homeowner’s
policy
D. The insured wanted broader coverage for a
lower premium
255
Under a dwelling policy, personal
property away from the premises would
be covered for what percent of personal
property?
A. 5%
B. 10%
C. 50%
D. 100%
256
The FAIR Plan:
A. Provides insurance to insureds in areas that are
normally considered to be too hazardous for
insurance companies to be able to write
insurance profitably
B. Provides insurance for properties that are not
insurable risks
C. Provides insurance at discount rates for those
who cannot afford insurance
D. Provides insurance for structures with structural
defects
257
The California FAIR plan:
A. Is used to make proper inspections of
property for risk rating
B. Is used to settle claims if there is a dispute
C. Distributes the risk among the companies
equitably
D. All of the above
**note: similar to the DP form- no liability or theft
258
All of the following would qualify a
property for coverage under the FAIR Plan
except:
A. Must be in a designated area
B. Must have been turned down for coverage in
the marked
C. Must be an insurable risk
D. Must have a sprinkler and alarm system
259
Properties that cannot qualify for insurance
in the voluntary market may be able to get
coverage under the FAIR plan. Of the
following, which would be eligible?
A. A house with bad wiring and poor
housekeeping
B. A well maintained house in an area that is
subject to civil unrest (or low income area)
C. Both are eligible
D. Neither are eligible
260
Of the following situations, which could
obtain coverage through the FAIR Plan?
A. A driver who cannot get insurance in the
normal market
B. A house with poor heating and bad wiring
C. A well maintained house in a designated
brush fire area
D. Young driver with only a year of driving
experience
261
The California FAIR plan protects against:
A. Earthquakes
B. Floods
C. Vandalism and malicious mischief
D. All of the above
262
Who can write the FAIR plan?
A. Agents with at least two years experience
B. Any property & casualty agent/broker
C. Government agencies
D. Any licensed agent
263
Companies who sell homeowner’s
policies in California:
A. Must offer earthquake insurance
B. Must include earthquake insurance
C. Must offer earthquake insurance only in
certain areas of California
264
What does CEA stand for?
A. California Earthquake Authority
B. California Emissions Association
C. California Endorsement Agency
D. None of the above
265
CEA is administered under the authority
of the:
A. Legislature
B. Commissioner
C. Public
D. Federal Government
266
Whom would you purchase CEA insurance
from?
A. Property & Casualty agent/broker
B. Life solicitor
C. Life agent
D. Life analyst
267
Deductibles for earthquake coverage as
compared to deductibles on
homeowner’s and dwelling policies are:
A. Slightly lower
B. The same
C. Slightly higher
D. Considerably higher
268
Earthquake coverage is a normal exclusion
in property policies. In which of the
following is earthquake covered?
A. Homeowner’s policies
B. Dwelling policies
C. Personal auto policies
D. None of the above
269
Which of the following homeowners
would be able to purchase flood
insurance through NFIP?
A. Any homeowner
B. Only available on HO-3
C. Not used on homeowner’s policies
D. Property which is on a designated flood map
270
There are two types of flood insurance
programs available through NFIP. Which is
correct?
A. The emergency plan pays more than the regular
plan
B. The regular plan pays more than the emergency
plan
C. The regular plan pays less than the emergency
plan
D. Both plans pay the same amount
271
Which of the following would be covered
by flood insurance?
A. Direct loss from flooding and/or mudflows
over the surface of normally dry land
B. Water spray
C. Sewage back-up
D. None of the above
272
Flood insurance will cover:
A. Water spray
B. Back up of sewers not caused by flood waters
C. Cost incurred to try to protect the property
from flood damage
D. Both A & B
273
Under the Umbrella Insurance Policy, the
policy will cover:
A. The excess amounts beyond the underlying
limits required by the company or after the
retention is paid
B. The umbrella cannot pay any amounts until
the underlying policies participate in the
claim
C. The exclusions on the underlying policies will
dictate what the umbrella will pay
D. Any of the above
274
If an insured has an umbrella policy and
does not maintain the required primary
coverage, what happens if a claim is
submitted?
A. There is no coverage if the primary coverage is
not maintained
B. The insurer will pay only a specified percentage
of the claim
C. The primary limits become the insured’s
deductible
D. None of the above
275
Which of the following does not have a
standard coverage form?
A. Claims made commercial liability
B. Umbrella policy
C. Homeowner’s policy
D. Professional liability
**until a few years ago, there was no standard umbrella
form. ISO recently created a standard umbrella form
276
A boat owners policy typically provides
which of the following coverages?
A. Liability
B. Medical payments
C. Physical damage
D. All of the above
277
Liability coverage under boat owner’s
policy typically excludes:
A. Passenger liability
B. Contractual liability
C. Flotilla liability
D. Operations liability
278
Boat owner’s insurance differs from yacht
insurance. To which of the following is a
boat owner’s policy most similar?
A. Homeowner’s policy
B. Auto Policy
C. Yacht Policy
D. Cargo Policy
279
Medical payments in a boat owner’s policy
would apply to someone engaged in which
of the following situations?
A. Ferrying persons for a fee
B. Use for a business party
C. Permissive use of a boat
D. Carrying cargo for a fee
280
A worker is injured on someone’s
personal yacht. Under which of the
following would the injury be covered?
A. Personal Injury
B. P&I (Protection & Indemnity)
C. Boat owner’s insurance
D. Collision
281
What is covered by P&I (protection &
indemnity) that is not provided by boat
owner’s liability coverage?
A. Property damage
B. Workers Compensation
C. Medical Expense
D. Uninsured boaters coverage
282
Under a yacht policy, Protection &
Indemnity (P&I) provides coverage for:
A. Insured’s vessel if it damaged in a sudden
squall
B. The extra expense to move the vessel out of a
storm watch area
C. Liability if the insured vessel strikes a marina
dock and injures a dockworker
D. The cost to salvage the insured vessel
283
A yacht policy is considered to be:
A. A commercial policy
B. A personal lines policy
C. An ocean marine policy
D. None of the above
284
Waterskiing coverage is typically excluded
on a yacht policy.
A. True
B. False
285
END OF PERSONAL LINES
286
287
COMMON
POLICY
DECLARATIONS
COMMON
POLICY
CONDITIONS
PLUS
(ANY TWO OR MORE)
COMMERICIAL
PROPERTY
COVERAGE
PART
COMMERCIAL
GENERAL
LIABILITY
COVERAGE
PART
COMMERCIAL
INLAND
MARINE
COVERAGE
PART
BOILER
AND
MACHINERY
COVERAGE
PART
COMMERCIAL
CRIME
COVERAGE
PART
EQUAL
COMMERCIAL
PACKAGE
POLICY
FARM PROPERTY
AND
LIABILITY
COVERAGE
PART
COMMERCIAL
AUTOMOBILE
COVERAGE
PART
A monoline policy:
A. Is a policy that is written to cover property
only
B. Is any insurance written as a single line policy
C. Is a policy that covers only lines of insurance
which cannot be part of the package policies
D. There is no such thing
288
Which of the following is considered to be
a modular policy?
A. Business owners
B. Homeowners
C. Commercial package
D. Personal auto
289
What is an advantage to having a
commercial package policy instead of
several monoline policies?
1. Package discounts are available
2. Can eliminate gaps in coverage
3. Can eliminate duplication of coverage
4. Ease of having coverage under one policy
A. 1 and 2 only
B. 3 and 4 only
C. 2, 3, and 4
D. All of the above
290
What is an advantage to having a
commercial package policy instead
of several monoline policies?
A. There are savings of 10% on each coverage
form attached
B. It is written on an occurrence basis
C. There are broader coverages
D. Ease of having coverage under one policy
291
Commercial package policies, which are
built on modules, must include:
A. Common declarations
B. Common conditions
C. Two or more coverage forms
D. All of the above
292
Which of the following is not available
under the commercial package policy?
A. Ocean marine
B. Crime
C. Boiler and machinery
D. Inland marine
293
Commercial package policies may have a
number of coverage forms. Which would
not be covered under a commercial
package policy?
A. Commercial property
B. Dwelling policy
C. Commercial crime
D. Boiler and machinery
294
Where is a policy personalized to say who
is covered, what is covered, limit of
insurance, and policy period?
A. Insuring clause
B. Declarations
C. Conditions
D. Endorsements
295
Under the commercial package policy, who may
cancel the policy in writing, is authorized to
make changes to the policy with the consent of
the insurer, and responsible for paying the
premiums?
A. The first named insured
B. The last named insured
C. Any named insured
D. Any insured
296
Mike Pepper and Heather Pepper are
doing business as Doggy Hotel. Who
may cancel the policy in writing?
A. Heather Pepper
B. Mike Pepper
C. Both Heather and Mike Pepper
D. All of the above
297
All of the following are part of the
common conditions in a commercial
package policy except:
A. Inspections and surveys
B. Examination of books and records
C. Cancellation terms
D. Named perils
298
According to the common conditions of a
commercial package policy, the insurer
can do an audit of the insured’s books
and records
A. During the policy period and for three months
after the expiration of the policy
B. Only during the policy period
C. During the policy period and for three years
after the expiration date of the policy
D. Only with the consent of the insured
299
In a commercial property policy, the
company providing the insurance is
referred to as:
A. A surety
B. “You”
C. NIRR
D. “We”
300
Which of the following forms is needed to
make a commercial property policy
complete?
A. Cause of loss form
B. Inventory
C. Obligations
D. Audit
301
Which commercial property form contains
the exclusions that apply to a commercial
property policy?
A. Common policy declarations
B. Cause of loss form
C. Common policy conditions
D. Commercial property conditions
302
In a commercial property policy, unless
otherwise indicated, on what basis are
buildings valued?
A. Replacement value
B. Actual cash value
C. Market value
D. Guaranteed replacement cost
303
Which of the following losses would be
excluded by Ordinance or Law exclusion?
A. Confiscation of property as a result of criminal
activity
B. Special assessments levied by the taxing
authorities
C. Fines levied by OSHA
D. Additional costs necessary to make a restroom
ADA compliant
304
Regarding the Ordinance or Law
Exclusion, which of the following
is incorrect?
A. This coverage can be added by endorsement
B. This coverage is required by state law
C. The coverage applies to upgrades made to a
property required by building code changes
by the city
D. All of the above
305
Builders risk insurance is to cover:
A. Loss of earnings
B. Loss to building under construction,
temporary structures, and building materials
and supplies
C. Injury to an employee on the job
D. Loss of personal possessions from business
business premises
306
A builders risk coverage form can be
written to provide an amount of
insurance:
A. Based on the anticipated completed value of
the building
B. Which increases gradually as the value of the
building under construction increases
C. Based either A or B
D. Equal to 50% of anticipated value during the
entire construction period
307
Under a Builder’s Risk coverage
form, the coinsurance
requirement is:
A. 70%
B. 80%
C. 85%
D. 100%
308
In commercial property in the Building
and Personal Property coverage form,
coverages A, B, and C refer to:
A. Building, business personal property of the
insured, and personal property of others
B. Business personal property of the insured,
building, and personal property of others
C. building, property off premises, and business
personal property of the insured
D. building, newly acquired or constructed
property, property of others
309
On commercial property policies, basic
coverage insures against loss by all of the
following perils except:
A. Falling objects
B. Vandalism
C. Windstorm
D. Sprinkler leakage
note: falling objects are never covered under
any of the forms under basic.
310
Under the commercial property basic
form, what would be covered?
A. Falling objects
B. Flood
C. Earth movement
D. Sprinkler leakage
**falling objects always covered under broad form not
basic
311
In a commercial property policy, if stock is
sold but not yet delivered, how would it
be valued?
A. Wholesale value
B. Replacement cost
C. Actual cash value
D. Selling price
312
In commercial policies, the use of a value
reporting form endorsement:
A. Allows values for commercial property
policies to be modified
B. Allows values on business income policies to
be modified
C. Applies to commercial auto policies
D. States that specified amounts stated in the
policy will be paid for an entire loss
313
Under the value reporting form
endorsement, the first report
required must be reported within:
A. The first 60 days
B. The first 90 days
C. The first 30 days
D. The first 180 days
314
Under the commercial property coverage,
the cause of loss-broad form insures
against:
A. Risks of direct physical loss unless specifically
excluded
B. A list of basic named perils
C. A list of basic and additional covered perils
D . Earthquake only
315
A commercial property special form policy
covers:
A. All risk on building; broad form on personal
property
B. All risk on building; all risk on personal property
C. Broad form on building; all risk on personal
property
D. Broad form on building; broad form on personal
property
316
Which of the following is covered by a
building and personal property (BPP)
form?
A. A patio
B. A bridge
C. A light pole
D. A dock
317
Under a commercial property coverage
form, which of the following could be
covered?
A. Patio
B. Outdoor fixtures/a light pole
C. Foundations of buildings
D. Underground pipes and drains
318
When is pollutant clean up covered?
A. It is never covered by insurance
B. It is covered under a consequential loss
endorsement
C. It is automatically covered in all forms of
property insurance
D. It is an additional coverage in a commercial
property coverage
319
In the commercial property policy
additional coverage for debris removal,
for expenses to be covered the expenses
must be reported within:
A. 6 months (180 days)
B. 1 month
C. 3 months
D. 12 months
320
In a commercial property coverage part,
personal property out in the open is
covered if it is:
A. On the premises
B. Within 50 feet of the premises
C. Within 100 feet of the premises
D. Within 200 feet of the premises
321
Which of the following is a coverage
extension under the building and personal
property coverage form?
A. Debris removal
B. Business personal property
C. Fire department service charge
D. Property off-premises
322
Under a building and personal property
coverage form, how much coverage may
apply to a newly acquired property?
A. Nothing
B. $50,000
C. $100,000
D. $250,000
323
When the term unoccupied is used, it
refers to a situation where:
A. There are no people and no furniture
B. There may be furniture but no people in a
building
C. There are people living in the building but no
furniture
D. The same as vacant
324
In the case of commercial property, a
building is considered to be “vacant” when
what percentage of its square footage is not
rented or not used to conduct customary
operations?
A. 50%
B. 70%
C. 75%
D. 80%
325
Under the Business and Personal Property
Coverage form, vacancy as it applies to
the tenant means:
A. Less than 70% of the entire building is leased
B. The building is being repaired after suffering a
covered loss
C. The building is under construction
D. The portion of the building leased to the tenant
when it does not contain enough business
personal property to conduct customary
operations
326
If a property owner is insured under a
building and personal property insurance
form, when is the property considered
vacant?
A. When the insured operations are halted due to a
strike
B. When the structure is being renovated as a result of a
fire
C. When less than 31% of the building space is rented to
others or in use by the insured
D. When there is insufficient business personal
property present to conduct customary operations
327
A building insured under a commercial
property policy was left vacant for a period
of 90 days. The owner notified the insurer of
this prior to the vacancy. Which of the
following is true?
A. There will be no coverage for any perils
B. Fire, hail, and windstorm will not be covered
C. There will be no coverage for vandalism, theft,
breakage of glass, water damage and sprinkler leakage;
fire, windstorm, and other covered losses will be covered
D. As the insured gave notice, there would be no effect
on the policy
328
A building insured under a commercial
property policy was left vacant for a period
of 90 days. The owner notified the insurer of
this prior to the vacancy. In the event of a
50% loss, how much will the insurer pay?
A. Nothing
B. The entire loss
C. 50%
D. 85% (loss-15%)
329
A Business and Personal property
coverage form with a vacancy permit
endorsement allows for what additional
coverages?
A. Vandalism and sprinkler leakage
B. Sprinkler leakage and attempted theft
C. Vandalism and attempted theft
D. Sprinkler leakage and glass breakage
330
All of the following would be considered
vacant according to the Building and
Personal Property Coverage form except:
A. A building that has only 25% of its square footage
rented to a lessee to conduct customary
operations
B. A building in which the owner uses only 25% of
the total square footage for customary
operations
C. A building that has been unoccupied for 90 days
D. A building that is being renovated
331
A tenant is in the middle of a ten-year lease.
He has spent $50,000 in improvements for
such things as lighting fixtures, shelves, and
carpeting. Which of the following would
best suit his needs in the event of a claim?
A. Improvement or betterment
B. Building ordinance
C. Consequential losses
note: covered under the Real and Personal
Property coverage form under coverage “B”
332
A tenant wishes to insure his
improvements in a leased
property. When would cover his
needs?
A. Builder’s Risk
B. Extra Expense coverage form
C. Building and Personal Property coverage form
D. Leasehold interest coverage form
333
Improvement and Betterment coverage
provides protection for:
A. A newly constructed building
B. The building itself
C. The owner of the building
D. The tenant
334
A plate glass forms sometimes needs to
be added to a commercial property policy.
Which is correct about glass coverage
under a commercial property policy?
A. Glass is not covered under the broad and special
forms
B. Glass has limited coverage under the broad and
special coverages for vandalism
C. Glass is covered under the basic coverage for
vandalism
D. All of the above
335
Business income insurance covers:
A. Net income, continuing expenses, and payroll
B. Gross income
C. Net income, continuing expenses minus
payroll expenses
D. Net income minus taxes
336
Why would someone be in need of adding a
boiler and machinery coverage part to a
commercial package policy?
A. A separate coverage form is needed as most lines
of insurance exclude boiler and machinery risks
B. There is no need to add boiler and machinery as
it is included in all commercial coverage forms
C. Boiler and machinery offers loss protection, but
not loss prevention
D. Boiler and machinery can be written only as a
monoline policy and never part of a commercial
package policy
337
A boiler and machinery policy would
exclude all of the following except:
A. Interruption of business
B. Lack of power, light, steam, or refrigeration
C. Boiler explosion
D. Flood
338
The majority of the premium paid for
boiler and machinery coverage is used for:
A. Anticipated losses
B. inspection
C. Company overhead
D. Underwriting
339
An important loss control feature of the
boiler and machinery insurance program
is:
A. The audit function
B. Inspection
C. A disappearing deductible
D. retention
340
All of the following causes of loss are
covered by equipment breakdown
insurance except:
A. Steam boiler explosion
B. Mechanical failure cased by centrifugal force
C. Electrical breakdown
D. Inherent defect
341
All of the following equipment would be
covered under the equipment breakdown
policy, except:
A. Aircraft
B. Computer equipment
C. Electronic equipment used in transmission of
energy
D. Equipment operating under a vacuum
342
Which of the following would best be
described as using forcible entry to steal
property when a business is closed?
A. Extortion
B. Theft
C. Robbery
D. Burglary
343
One difference between a robbery and a
burglary is that burglary”
A. Requires physical signs of forcible entry or
exit
B. Requires taking property directly from a
person
C. May occur only when the premises are open
for business
D. May involve force or violence
344
Loss Sustained Form/Discovery Form In
Commercial Crime Coverage
Loss Sustained Form: covers losses that occur
during the policy period and discovered either
during the policy or up to one year after the
policy expires
Discovery Form: covers losses that occur and
are discovered either during the policy period or
up to 60 days after the policy expires, even if the
loss occurs prior to the inception date
345
Which crime form would cover a loss that
occurs one month prior to the effective date
of the policy, but is not discovered until after
the policy period?
A. Loss sustained form
B. Discovery form
346
Which crime form would cover a
loss that occurs during the policy
period and is reported 6 months
after the policy expires?
A. Loss sustained form
B. Discovery form
347
If an employee embezzles $10,000 from an
insurance company, which type of insurance
would the employer need to be covered for
this type of loss?
A. General liability insurance
B. Allied lines insurance
C. Business income insurance
D. Crime insurance (employee dishonesty form)
348
Under the commercial crime coverage
part, loss resulting from employee
dishonesty is:
A. Always excluded
B. Always covered, provided the employee has
not been previously responsible for such a
loss
C. Excluded unless an employee dishonesty
coverage form is attached
D. Always covered
349
Under the commercial crime coverage,
employee dishonesty does not cover:
A. Theft of business stock
B. Shortages of inventory
C. Theft of securities
D. Theft of cash
350
An employee dishonesty coverage form
would cover which of the following
losses?
A. Inventory shortage
B. Robbery of an employee
C. Money lost by an employee on the way to the
bank
D. Embezzlement by an employee
351
In the course of a burglary, the premises are
damaged as well as money being stolen
from a safe. What commercial crime
coverage would cover both losses?
A. Theft, disappearance, and destruction
B. Premises burglary
C. Employee dishonesty
D. Computer fraud
352
Which of the following terms has the
broadest meaning?
A. Burglary
B. Theft
C. Robbery
D. Larceny
353
ABC Employer purchased a fidelity bond
to protect against potential losses by
employee dishonesty. In this situation,
each of the employees covered by the
bond is considered:
A. Obligee
B. Principal
C. Agent
D. Guarantor
354
Business Owner’s Policy
A Business Owner’s Policy (BOP) provides a broad package
of coverages for small and medium sized apartment
buildings, offices, and retail stores. Each policy includes
mandatory property and liability coverages and offers
optional coverages. Many standard conditions and
exclusions apply. A BOP is a self contained, complete
package policy.
Size Requirements: Cannot be in a building of more than 6
stories and more than 100,000 sq. ft.
Not covered by BOPs: banks, auto sales/repair, restaurants
& bars, amusement parks
355
All of the following are true statements
regarding a Business Owner’s Policy
(BOP) except:
A. BOP’s contain both property and liability
coverage
B. BOP’s include the Business Income and Extra
Expense form which would need to be
purchased separately in a Commercial Property
Policy
C. Banks are eligible for BOP’s
D. BOP’s typically provide the convenience of one
policy that meets most needs of an insured at a
reduced premium and include several coverages
that might have been overlooked
356
What is true about a BOP?
A. Losses are valued at market value
B. There is typically no coinsurance requirement
C. There is typically no deductible
D. Amusement parks are eligible for BOPs
357
Which of the following would be eligible
for a BOP?
A. Banks
B. Restaurants
C. Office buildings of two stories with 5,000
square feet (office building of three stories with
12 dwelling units)
D. Auto Repair Shop
358
Which of the following would be eligible
for a BOP?
A. Banks
B. Restaurants
C. Hardware stores
D. Amusement Park
359
The coverages under a dwelling form
policy as compared to a homeowner’s
policy is similar to comparing a
commercial property policy to a:
A. Business income policy
B. Business Owner’s Policy
C. Business Personal Property
D. Commercial General Liability
360
In commercial general liability (CGL).
What do coverages A, B, and C represent?
A. (A) bodily injury and property damage (B) personal and
advertising injury (C) medical payments
B. (A) medical payments (B) bodily injury (C) medical
payments
C. (A) personal injury (B) bodily injury (C) medical
payments
D. (A) professional liability (B) property damage (C)
personal property
361
Coverages A, B and C of a Commercial
General Liability policy are: (select the best
answer)
A. Bodily Injury and property damage liability,
medical payments, Personal Injury
B. Bodily injury and property damage liability,
medical payments
C. Bodily injury liability, personal injury liability,
personal and advertising injury
D. Bodily injury and property damage liability,
personal injury
362
Coverages A and/or B of a commercial
general liability policy would cover which
of the following?
A. Professional liability
B. Advertising liability
C. Worker’s Compensation
D. Loss arising out of use of an automobile
363
Under the commercial general liability
coverage form, personal injury is:
A. Bodily injury suffered by the named insured
B. Bodily injury for which the named insured is
liability
C. injury, other than bodily injury, arising out of
such things as slander, libel, and invasion of
privacy
D. Injury arising out the misappropriation of
advertising ideas
364
ABC Computer Company is being sued by Star
Computer Company for an advertising campaign
that Star Computer Company feels is false and
misleading. ABC Computer Company would find
coverage for losses which could result from this
lawsuit under which category of insurance?
A. Allied lines insurance
B. Professional liability
C. Commercial general liability
D. Crime insurance
365
Commercial general liability would cover
an injury to:
A. The insured
B. The insured’s employee
C. A customer on the premises
D. An employee while not working
366
A commercial general liability policy
would cover which of the following
situations?
A. An employee is hurt in the course of working
B. An employee working in a customer’s home
does damage to the customer’s property
(causes an injury to the customer)
C. Injury intended by the insured
D. Liability of someone engaged in the alcoholic
beverage business who serves alcohol to a
minor
367
If a bulldozer falls over and spills oil
causing pollution, what coverage will the
insured need to cover him?
A. Hull Coverage
B. Pollution Coverage
C. Commercial General Liability
D. Professional Liability
368
The medical payments of a commercial
general liability policy will cover:
A. A hired person who is hurt while fixing a
broken window for a tenant
B. An employee while working
C. Injury caused by an employee while working
D. Injury to employee while engaged in the
business’ sports team
369
The liability exposure arising out of a
business location or activities is known as:
A. Premises and operation hazard
B. Completed operations hazard
C. Products completed operations hazard
D. Exposure hazard
370
In a commercial general liability policy, to
what does aggregate limit refer:
A. It is the maximum lifetime benefit an insurer will
pay on behalf of the insured
B. It is the maximum an insurer will pay on any one
claim on behalf of the insured
C. It is the maximum an insurer will pay on all
claims during a policy period on behalf of the
insured
D. Aggregate limit never applies to commercial
general liability
371
Which is true about the CGL general
aggregate limit?
A. It applies to completed operations hazard
B. It is the amount an insurer will pay for one
loss
C. It is the most an insurer will pay for an
occurrence
D. It does not apply to the products completed
operations hazard
372
Under the commercial general liability
policy, a separate aggregate limit applies
to the:
A. Products completed operations hazard
B. Premises and operations hazard
C. Owners and contractors protective hazard
D. Contractual liability hazard
373
A child chewed on a toy with small parts. A
piece came off lodging in the child’s throat
and he choked to death. The parents sued
the manufacturer of the toy. What would
provide protection for the toy company?
A. Crime insurance
B. Professional liability insurance
C. Commercial general liability
D. Group health insurance
**the claim would have been paid by the products liability which was
added to the CGL policy
374
Which of the following would be true
under a commercial general liability policy
if you switched from the claims made
form to the occurrence form?
A. There are no differences in the coverage
B. There may be a gap in coverage
C. There may be additional benefits
D. None of the above
375
Extended Reporting Period on Claims
Made CGL
Two Types—basic and supplemental
Basic: provided automatically without charge and consists of two parts
Mini Tail: provides 60 days after the policy period for
reporting any claims
Midi tail- provides 5 years after the policy period for
reporting claims arising out of an
“occurrence” reported not later than 60 days after
the end of the policy period
Supplemental: an optional extended reporting period of unlimited duration
for which there is an additional coverage. Provides full tail coverage
376
377
Under the claims-made commercial
general liability coverage form, the first
date that an event may occur and still
be covered under the policy is the:
A. Retroactive date
B. Policy expiration date
C. Extended reporting period inception date
D. Policy inception date
**note: also known as effective date
378
In an unendorsed claims-made general
liability policy, how long does an insured
have to report a claim which occurred during
the policy period?
A. indefinitely
B. 60 days
C. 30 days
D. 6 months
379
In a basic extended claims-made general
liability policy, how long will an insurer pay
additional losses on a claim reported during
the policy period?
A. Indefinitely
B. 5 years
C. 30 days
D. 6 months
380
If an insured discovers an occurrence 80
days after the expiration of a claims made
CGL policy, what must the insured have in
order to be covered?
A. Umbrella Policy
B. Supplemental ERP
C. Midi Tail
D. None of the above
381
A CGL policy does not cover:
A. Product liability
B. Professional liability
C. Liquor liability (host liquor)
382
Who would be in need of purchasing a
liquor liability form?
A. A company hosting a cocktail party on its
premises
B. A company that deals in the illegal
manufacturing and distribution of alcohol
C. A company that has a company sponsored
picnic where alcohol will be served
D. A company whose business is the selling and
serving of alcoholic beverages
383
Which of the following would be in need
of purchasing a liquor liability form?
A. A company hosting a cocktail party on its
premises
B. A business that has a company sponsored
picnic where beer will be served
C. A dram shop
D. None of the above
384
A medical doctor would need a professional
liability policy in addition to his general
liability policy because a general liability
policy:
A. Does not cover malpractice
B. Cannot be written on a claims made form
C. Policy limits are not high enough
D. Both A&C
385
A physician is being sued by a patient for
misdiagnosing terminal cancer. What type of
insured would protect the physician against
this type of mistake?
A. Professional liability
B. Health insurance
C. Allied lines insurance
D. Personal liability
386
All of the following are listed on a
commercial liability declaration page
except:
A. Rented to you limit
B. Medical expense limit
C. Personal and advertising injury limit
D. Pollution liability
387
If an underground storage tank on the insured’s
business premises leaks and causes
environmental damage to an adjacent
property, what type of commercial coverage
would the insured need to pay for the cleanup
costs, if the insured is liable to do so?
A. Commercial General Liability
B. Professional Liability
C. Contractual Liability
D. Pollution Liability
388
Your client has a commercial auto policy. He
needs coverage for his liability arising out of his
employee’s using their own cars in his business.
The best way to be sure your client is covered is
to:
A. Require all employees to have your client as an
additional insured on their personal auto policies
B. Include employer’s non-ownership liability
coverage in the employer’s commercial auto policy
C. Instruct all employees not to use their cards in your
insured’s business
D. Include uninsured motorist and also hired care
coverage in your insured’s commercial auto policy
389
All are mobile equipment under a
commercial auto policy except:
A. Bulldozer
B. Forklift
C. Street sweeper which is self propelled
D. Tractor on crawlers
390
General Liability policies and business
auto policies define the word “auto”
and “mobile equipment”:
A. The same, to avoid confusion
B. The same, as the policy riders lack
imagination and have no concern to gaps in
coverage
C. Differently, to avoid gaps in coverage
D. Differently, but it has nothing to do with gaps
in coverage
391
What cannot be covered under a
commercial auto policy?
A. An owner of a parking lot who wishes to
cover cars in her custody
B. A garage that repairs cars
C. Physical damage to mobile equipment
D. The owner of a trucking fleet
392
Commercial Auto:
A. Coverers garage liability
B. Automatically includes uninsured motorist
C. Automatically includes medical payments
D. Allows the insured to tailor the policy by
deciding what coverages should apply to
different vehicles
393
Which of these is not covered under a
commercial auto policy?
A. Passenger vehicle
B. Trailer
C. Truck used to transport goods
D. tractor
394
Business autos are identified by nine
symbols in the declarations. The symbol
#4 refers to:
A. Owned autos only
B. Owned autos other than private passenger
vehicles
C. Owned private passenger autos
D. non-owned autos only
395
Business autos are identified by nine
symbols in the declarations. The symbol
#7 refers to:
A. Owned autos only
B. Hired autos only
C. Specifically described autos only
D. Owned autos other than private passenger
autos
396
The symbol #9 refers to:
A. Hired autos
B. Owned private passenger autos only
C. Owned autos subject to a compulsory
uninsured motorist law
D. non-owned autos
397
In a business auto policy (BAP) under
physical damage, which can be written
together?
A. Comprehensive, specified causes of loss, and
collision
B. comprehensive, specified causes of loss, and
towing and labor
C. comprehensive, collision, towing and labor
D. None of the above
398
The insured’s truck is involved in a collision and
topples over and blocks the entrance to a store
parking lot. The insured driver is liable for the
accident. What would protect the insured from
possible claims for damages by the
storeowner?
A. Comprehensive
B. Collision
C. Liability
D. No coverages apply, as the owner did not
suffer any loss
399
Livery conveyance is best described as a:
A. Vehicle for hire to transport people
B. Vehicle for hire to transport property
C. Commercial vehicle with more than four
wheels
D. Ride share carpool
400
The owner of a parking lot wants
coverage for his liability for damage to
vehicles left in his custody. He would
need:
A. Business auto coverage
B. Garage liability coverage
C. Garage keeper’s coverage
D. employer’s non-ownership liability
401
The type of insurance that an auto repair
shop should carry is:
A. Garage keeper’s insurance
B. Trucker’s coverage
C. Professional liability
D. None of the above
402
Under a farm property coverage plan,
what would be covered?
A. Liability
B. Property
C. Property but not liability
D. Liability and property
403
What is true about the farm insurance
plan?
A. It is a residential policy only
B. It is a commercial policy only
C. It is a combination of residential and
commercial policies
D. None of the above
404
Ocean Marine
405
An Ocean Marine Policy covers
A. Hull
B. Cargo
C. Freight
D. All of the above
406
An ocean marine policy may deny
coverage for which of the following?
A. Damage or loss of the insured vessel
B. Cargo being transported
C. The charge made for shipping cargo
D. Deviation in the route
407
Ocean marine insurance may be divided
into four categories. Ocean marine Hull
Insurance provides physical damage
coverage for:
A. Ship
B. Cargo
C. Both A&B
D. Neither A or B
408
Which of the following would cover
merchandise being shipped across the
Atlantic Ocean?
A. Transatlantic insurance company
B. Ocean Marine
C. Cargo Insurance
D. Freight
409
Which of the following would cover
collision of ships?
A. Cargo
B. Ocean Marine
C. Hull
D. Navigation Limits
410
In Ocean Marine Insurance, the liability
portion of coverage is known as:
A. Marine Liability
B. Cargo Liability
C. Hull Liability
D. Protection and Indemnity
411
In an Ocean Marine policy, P&I does not
cover:
A. A worker is injured on the ship
B. The ship strikes a dock and injures a
dockworker
C. A ship & engine fire
D. All of the above
412
In Ocean Marine Insurance, Protection &
Indemnity (P&I) covers:
A. Unseaworthiness of vessels
B. Damage to other’s property
C. Damage to another ship due to collision
D. All of the above
413
What law made ship owners liable for
bodily injury to a seaman?
A. Inchmaree Clause
B. Jones Act
C. McCarren-Ferguson Act
D. IPPA
414
The voluntary throwing overboard of
property in order to save the ship is:
A. Barratry
B. Jettison
C. Inherent Vice
D. Inchmaree
415
Where would an insured find insurance
coverage to protect against damage to a
shipment of televisions being shipped for
the business on a semi-truck?
A. Inland Marine (or motor truck cargo)
B. Commercial auto liability
C. Commercial general liability
D. Fire and allied lines
416
A provision commonly found in liability
insurance, thus creating a need for inland
marine would be:
A. A valuation provision
B. Debris removal
C. A care, control, and custody exclusion
D. A coinsurance requirement
**this is covered as BAILEE coverage under inland marine
417
Inland marine insurance commonly
provides what type of coverage?
A. Basic
B. Open peril
C. Broad
D. Standard
418
What does a release bill of lading do for a
common carrier?
A. Provides insurance coverage to the customer
by the shipper
B. Releases the customer from all responsibility
C. Limits the carrier’s liability on the shipment
D. Releases the carrier from all responsibility
419
All of the following are categories of
inland marine insurance except:
A. Domestic shipments
B. Personal property floater risks
C. Furniture and fixtures
D. Instrumentalities of transportation and
communication
420
Which inland marine floater is most similar
to the scheduled personal property
endorsement on a homeowner’s policy?
A. Personal insurance floater
B. Personal property floater
C. Personal effects floater
D. Personal article floater
421
What type of insurance would cover
abstracts, maps and mortgages?
A. Commercial business
B. Valuable papers and record form
C. Employee dishonesty
D. Business income
422
All of the following are exclusions in an
inland marine policy except:
A. Earth Movement
B. Wear and tear
C. Electrical breakdown
D. Insects and vermin
423
What type of commercial inland marine
insurance would cover a dealer’s stock in
trade consisting principally of mobile
agricultural and construction equipment?
A. Floor plan merchandise
B. Commercial articles
C. Equipment dealer’s
D. Accounts receivable
**note: does not cover vehicles for use on public roads
(autos)
424
What type of property is not insured
under the Inland Marine Equipment
Dealer’s Coverage Form?
A. Mobile agricultural equipment
B. Mobile construction equipment
C. Vehicles for use on public roads (autos)
D. None of the above
425
Which of the following is not a type of
property commonly insured by using a
commercial inland marine coverage part?
A. Automobile while kept for the owner in a
commercial parking garage
B. Neon signs
C. Accounts receivable from customers
D. Jewelry and watches
426
Under the commercial inland marine
coverage part, when could postage and
revenue stamps be covered?
A. When the stamps are in the insured’s car
B. When the stamps are part of the cargo on a
ship
C. When the stamps are sent by certified mail
D. When the stamps are in the insured’s
suitcase while on business in Japan
427
Worker’s Comp
428
Which of the following is true about workers
compensation?
A. It is regulated by the state and federal
government
B. It is regulated by the federal government
C. It is regulated by the state government
D. It is regulated by the department of
corporations
429
In a state where employers only can by
workers compensation insurance through
a state run fund, it is referred to as:
A. Pre-determination
B. monopolistic
C. Competitive
D. None of the above
430
Generally, what is required by the workers
compensation law?
A. It is compulsory for employers to secure liability for
worker’s compensation
B. Employers are required to carry a worker’s
compensation policy issued by an insurance company
C. Employers of injured workers are required
demonstrate that they are able to pay damages to the
insured party or his estate
D. A standard form workers compensation policy is
required
431
Benefits under worker’s compensation
would include:
A. Rehabilitation
B. Medical costs
C. Loss of time
D. All of the above
432
A safe place to work, safe equipment,
reasonably competent fellow workers, and
enforcement of safety laws all apply to:
A. Common law obligations
B. Common law defense
C. Tort law
D. Defense against neglegence
433
Under workers compensation medical
payments, which is correct?
A. There is a time limit for medical payments but
no dollar limit
B. There is a dollar limit but no time limit
C. There is both a time limit and a dollar limit
D. There is no time or dollar limit on medical
payments
434
When a person is eligible to receive
worker’s compensation benefits, what
percentage of his salary would he receive?
A. 50%
B. 66 2/3%
C. 75%
D. 80%
435
Under the workers compensation laws,
which of the following defines an
employee?
A. Any person in the service of an employer only under
written contract and only when lawfully employed
B. Any person in the service of any employer under any
appointment, expressed, implied, oral or written, and
lawfully employed
C. Any person in the service of an employer under any
appointment, expressed or implied, oral or written,
whether lawfully or unlawfully employed
D. Any volunteer, except relatives, to the second degree,
under any appointment expressed, or implied, oral or
written
436
A movie company concerned about
injuries to its actors would protect them
with:
A. Surety
B. Worker’s Compensation
C. General Liability
D. Group health insurance
437
Worker’s Compensation laws require the
employer to pay benefits to a worker who is
injured in the course of his employment. The
employee is covered
A. Only if the injury is the result of the
employer’s fault or negligence
B. If the injury is the fault or negligence of the
employer or any other employee
C. Without regard to fault of negligence of the
employer or any other person.
D. None of the above
438
An employee tripped over his shoelace at
work and suffered an injury. This injury
would be covered by:
A. Commercial general liability
B. Disability insurance
C. Worker’s Compensation
D. Premises and operations coverage form
439
Worker’s Compensation will cover:
A. Illnesses that are common for people to get,
such as colds or flu
B. Injury while driving to work
C. Worker who is hit by a car on his lunch break
D. Injury or illness in the course of working
440
Worker’s Compensation does not cover:
A. Illnesses that are common for people to get
such as colds or the flu
B. A work injury off the company premises
C. A diseases picked up as a result of work
D. An injury due to the employee’s negligence
441
Worker’s compensation will not provide
coverage for which of the following?
A. A salesperson travelling to meet with a client
B. Injuries arising from working in a factory
C. A worker getting a common cold
D. All of the above
442
Part 1 of Worker’s Compensation will
cover:
A. Retirement benefits
B. All sums the insurer is legally obligated to pay
under common law
C. All sums the insurer is required to pay by
state law
D. All costs of the employee required by state
fund
443
Worker’s Compensation Part 1
covers:
A. Insurer’s promise to pay all compensation
and other benefits required by state law for a
work related accident
B. The employer’s liability
C. The insured’s obligation to inform the insurer
at once and provide all necessary information
D. Premiums the insured must pay and the
necessary records that must be kept for
premium computation
444
Under Worker’s Compensation, a disability
that is a permanent physical impairment
leaving the individual incapable of performing
the previous regular occupation, but capable of
performing some other type of work is a:
A. Permanent total disability
B. Permanent partial disability
C. Temporary total disability
D. Temporary partial disability
445
A woman has a non-occupational disability
policy. While driving an auto for her employer,
she is in an auto accident and had to be
hospitalized. Her non-occupational policy
refuses to pay as:
A. non-occupational policies do not dover the individual
while in an auto
B. non-occupational policies will not pay benefits if the
individual has to be hospitalized
C. The non-occupational policy does not pay, as this
situation should be covered by Worker’s
Compensation
D. non-occupational policies should cover this situation
446
Which of the following are true about the
state compensation insurance fund?
A. It is a public enterprise that competes with
other carriers
B. It regulates the rates
C. It sets the standards for the insurers
D. None of the above
447
To what does 24-hour coverage refer?
A. It is medical coverage which provides around the
clock protection
B. It is the joint issuance of a worker’s
compensation policy with a disability insurance
policy or other medical coverage for nonoccupational injuries and illnesses
C. It refers to the fact that a person needs 24 hour
nursing care
D. It means that there is a waiting period of 24
hours before coverage begins
448
Twelve months ago a man slipped and fell
down a flight of stairs at his workplace. As a
result he has a paralysis from which he is not
expected to recover. This 46 year old person
will probably be able to collect disability
income benefits from:
A. Medicare
B. Worker’s Compensation
C. Medicaid
D. Social Security
449
If a partially disabled worker returns to work for a
new employer and sustains an injury similar to the
previous injury, which of the following would be
true with respect to the second injury fund?
A. The previous employer would be required to pay
the benefits for the second injury.
B. The current and previous employers would share
in the costs of the benefit
C. The current employer would pay the benefits for
the current injury and the second injury fund
would pay for the difference between the partial
and total disability benefits.
D. None of the above
450
What is a difference between bonds and
insurance policies?
A. Bonds are three party contracts; insurance
policies are two party contracts
B. Bonds are two party contracts; insurance
policies are three party contracts
C. Bonds indemnify; insurance policies are
financial guarantees
D. There is no difference between bonds and
insurance policies
451
All of the following are parties to a surety
bond except:
A. Obligee
B. Bondsman
C. Surety
D. principal
452
In a surety bond, the company providing
the bond is called the:
A. Surety (guarantor)
B. Principal
C. Obligee
D. None of the above
453
Under a bond contract, who has
agreed to perform according to
the contract?
A. Surety
B. Principal
C. Obligee
D. All must perform
454
Under a surety bond, whose
performance does the bond
guarantee?
A. Obligee
B. Guarantor
C. Principal
D. Surety
455
Which of the following would be true of a
surety bond?
A. It is a 2 party contract
B. In theory, the surety should never sustain a
loss
C. It is an indemnity contract
D. The 1st party to the bond is the surety
456
If a surety bond is forfeited, who would have
the right to sue?
A. The principal
B. The obligee
C. The surety
D. All of the above
457
The purpose of a Surety Bond would be:
A. To protect a contractor from losing wages
B. To protect an individual if the contractor fails
to perform according to contract
C. To protect a contractor if one of his
employees is hurt while on the job
D. To protect a contractor from business
interruption
458
What is not true about a surety bond?
A. The obligee is protected by the bond
B. The principal pays for the bond
C. The obligee is obligated to the guarantor
(surety)
D. All of the above
459
What is not true about a fidelity bond?
A. The principal pays for and is protected by the
bond
B. The principal has an obligation to the obligee
C. The guarantor guarantees that the principal
will honor the obligation
D. The obligee is protected by the bond
460
According to the Commissioner, what
hours must a Bail Bond office be open?
A. 8AM-4PM
B. 9AM-5PM
C. 8AM-9PM
D. 7AM-11PM
461
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