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431 Cards in this Set
- Front
- Back
Insurance is a means of? |
Transferring risk |
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This describes an insurance company doing business in a state other than the one where it is incorporated |
Foreign |
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The tendency for people with greater than average exposure to loss to purchase insurance is called? |
Adverse selection |
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A mutual insurance company is owned by its? |
Policyholders |
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If a homeowner insured carries an amount of insurance on his home equal to at least 80% of the replacement cost of the dwelling, then what is the rule of indemnification that applies if the home is destroyed? |
The insured may be indemnified for the replacement value of the property, up to the policy limits |
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This principle states that in forming an insurance contract, both parties have a responsibility to the other. |
Doctrine of utmost good faith |
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A morale hazard refers to? |
a persons behavior, or a persons morale. An increase in the possibility of loss through an individual's carelessness or irresponsible actions. |
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This Agent represents more than one insurance company. |
A nonexclusive agent |
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When applying for homeowners ins. Mr. Applebee tells his agent that the home is used strictly as a residence. Actually , he manufactures fireworks in the basement at the home. What will happen if the insurance company discovers Mr. Applebee's misrepresentation after the policy is issued? |
It will void the policy because Mr. Applebee misrepresented a material fact. |
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Which rating method is established by the underwriter? |
Judgment rating |
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Ohio casualty is doing regular business in Indiana. Within the state of Indiana, Ohio Casualty would be considered a(an)? |
Foreign company |
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Two parties enter into an insurance agreement, the applicant does not provide honest disclosure of the information required in the application or the insurer does not describe the terms of the contract fully, what doctrine applies? |
Utmost Good Faith |
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The Fair Credit Reporting Act applies to applicants who are rejected for insurance coverage on the basis of? |
A credit report |
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In a particular state, an insurance company must file policy forms and rates with the state insurance department and wait for official approval before using the new forms and rates. This is an example of a(an)? |
Prior approval state |
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An insurance policy is considered a unilateral contract because? |
The insurance company is the only party that is legally obligated to perform under the insurance contract |
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The insurance contract is considered a contract of indemnity because? |
An insured may collect no more than the amount required to restore him or her to the same financial condition that existed prior to the loss. |
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Knowingly withholding material information on an application is? |
Concealment |
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What is the purpose of the Fair Credit Reporting Act? |
To give the consumer recourse if the insurance is denied on the basis of a credit report |
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The type of insurance company in which the policyholder is considered an owner, with the right to vote and share in profit, is a? |
Mutual company |
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What constitutes an agreement to enter into a valid contract? |
A specific offer by one party and acceptance by the other. |
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When an insurance company uses another company to cover part of the risk it is called? |
Reinsurance |
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An insurance policy is prepared by the insurance company, with little or no input from the insured. This means that the insurance policy is a(an)? |
Adhesion contract |
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True or false: If a Credit Report had corrections made, the insurer is required to issue the application? |
False |
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Insurable risks must include? |
1. Law of numbers- predictable 2. Loss must be calculable 3. Loss must be measurable 4. Premiums must be affordable 5. Loss must be accidental in nature 6. Catastrophic perils are not covered |
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Insurance covers which type of risk? Pure or Speculative? |
Pure risk |
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Stock market losses are considered which type of risk? |
Speculative risks |
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A peril is |
The cause of a loss |
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A company established in England doing business in Alabama would be considered by Alabama residents to be a(an)? |
Alien company |
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The authority specifically given to an agent, either orally or in writing, by the principal is called? |
Express authority |
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If an insured purchased an insurance policy and suffered a claim and then found that the policy would not pay the claim as the insured thought it would, which doctrine would apply? |
Reasonable expectations |
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What is a hazard |
An increase in the possibility that a loss might occur |
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What rating method involves modifying the premium based on the insured's loss experience over a specified period of time? |
Experience rating |
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The principle that states that an insured should be restored to approximately the same financial position after a loss as before is known as? |
Principle of Indemnity |
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In which of the following would you have an insurable interest? 1. The car on which you are still paying. 2. The house you own but have rented to a tenant. |
Both |
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Agent Ma'Chelle is under contract with the XYZ Insurance Company to represent and sell insurance only for XYZ. This is an example of what type of agency system? |
Exclusive/captive agency system |
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The purpose of insurance is to? |
Transfer risk from a person, business, or organization to an insurance company that agrees to pay for losses in exchange for a premium |
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Which of the following is NOT an element of insurability? 1. Loss must be calculable 2. Risk of loss must represent a financial hardship 3. Cost of insurance must be affordable 4. Risk of loss must be catastrophic |
4. Risk of loss must be catastrophic Elements of insurability excludes catastrophic perils |
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Statements on insurance applications that must represent the absolute truth are |
Warranties |
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Property policies provide coverage only if there is insurable interest at the? |
Time of loss |
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Which of the following is NOT one of the required elements of a legal contract? 1. offer and acceptance 2. Declarations 3. Legal purpose 4. Competent parties |
2. Declarations The declarations are part of the policy structure. |
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What are the elements of a legal contract? |
Agreement(offer and acceptance), considerations, competent parties, and legal purpose |
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Which of the elements of a legal contract does an insurance premium payment represent? |
Consideration |
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Ohio Casualty is doing regular business in Indiana. Within the state of Indiana, Ohio Casualty would be considered an |
Admitted Company |
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All of the following are Elements of Insurable Risk, except? 1. Loss is predictable 2. Loss is accidental 3. Loss is indeterminable 4. Loss is calculable |
3. Loss is indeterminable |
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What are the elements that determine if a risk is an insurable? |
Accidental, Measurable, Calculable, Must cause financial hardship, Exclude Catastrophic perils, Affordable and predictable |
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If an insurer has paid for a loss and the item is recovered after the claim settlement, what procedure is followed? |
Insured can choose to keep the item and return the money |
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If your bbq pit begins to rust and fall apart or maybe a historic document turns yellow and fades away, these are both losses that would be excluded from coverage because they are considered to be predictable losses that are commonly called a(an) |
Inherent vice |
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All of the following are parts of an insurance contract, except? 1. Exclusions 2. Conditions 3. Indirect loss 4. Insuring Agreement |
3. Indirect loss |
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Who has the ability to cancel a policy? |
Both insured and insurer |
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Which of the following would NOT be found in the policy declarations page? 1. Insurers promise of protection 2. Limits of insurance, deductibles, amount of premium 3. A legal representative int he event of the insured's death 4. A description of the property to be insured |
1. Insurers promise of protection, this would be found in the policy's insuring clause |
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What type of policy would you purchase to provide coverage for everything that is not excluded? |
Special Form |
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When submitting proof of loss, what would the insured be required to provide? |
Time and Cause of loss, indicate any other insurance that covers the loss, and submit receipts, evidence, or affidavits supporting the loss. |
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What is the term used to describe an insurance company terminating an insurance relationship at the end of the policy period? |
Nonrenewal |
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It will cost Gary $5000 to put a new roof on his home to replace a roof destroyed in a windstorm. Assume that the original roof, which Gary paid $3500 for 10 years ago, depreciated $300 per year. What was the actual cash value of the roof that was destroyed? |
$2000 Replacement cost ($5000) - Depreciation ($300 X 10) = Actual Cash Value ($2000) |
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Carl's home sustains $50k damage in an electrical fire. The home is insured under a Homeowners policy for $75k. At the time of the loss, the home's replacement cost is $125k. How much will Carl's Homeowners policy pay for this loss? |
$37,500 Formula $125k X .80 =$100k (amount of ins required) 75k/100k = .75 .75 X 50k = $37,500 |
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What are the insureds duties in the event of a loss? |
Prompt written notice to the insurer (how, when and where), Notify police if theft occurred, cooperating with the insurer in the investigation, Protecting property from further damage, Preparing an inventory of the damaged property, allowing the insurer to inspect any damaged property, submitting proof of loss to the insurer. |
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The action, which in a natural and continuous sequence, produces a loss is known as the? |
Proximate Cause |
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The condition that provides a means to settle the amount of a loss when the insured and the insurance company cannot agree is the? |
Appraisal condition |
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What is the definition of coinsurance |
A requirement that the insured carry insurance equal to a specified percentage of the property's value to qualify for replacement cost coverage under the policy |
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The insured has two separate Dwelling policies that cover the same property. Policy A for $30k and Policy B for $60k. The insured has a $12k loss. If both policies use the pro rata method to handle other insurance, how much will policy B pay for this loss? |
$8000 Formula 30k (policy A) + 60k (policy B) = 90k 60k/90k= 2/3 2/3 X 12k = $8000 |
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What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? |
Open peril policy |
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Once an insurance company has restored the insured following a covered loss, which of the following has the right of salvage of the destroyed property? |
Insurer |
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What is another name for indirect loss? |
Consequential loss |
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What part of the policy would you find the insurance company's promise to pay? |
Insuring agreement (describes insurer's promise to pay, and the description of covered perils) |
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What describes the process where disputed claims between insured's and insurer's are decided by a neutral third party without a jury trial? |
Arbitration |
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Michael has taken his shoes to a shoe repair center. Michael has taken his shoes to a? |
Bailee |
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When grease pops out and catches a kitchen on fire, it is considered to be a? |
Hostile fire |
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An additional loss that results from a direct loss to property is called a(an) |
Indirect/consequential loss |
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A building owner purchases a property policy in the amount of $60k on his $100k building. The contract contains an 80% coinsurance clause. If he suffers a covered loss of $10k, how much will he receive in a settlement disregarding any deductible? |
$7500 Formula 100k X .80 (amt of ins required)= 80k 60k/80k = 3/4 3/4 X $10k = $7500 |
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Insurance binders are? |
Temporary or interim insurance agreements |
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An insured purchases new furniture for $6k. At the time of fire loss, it has depreciated $2k. The same furniture will cost $7k to replace. What is the actual cash value of the destroyed furniture |
$5000 Formula R/C - depriciation $7k - $2k = $5k |
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Under the "loss payment condition," once the insured has provided the proof of loss required after a loss, the insurance company must pay for the loss within? |
60 days for personal lines, and 30 days for commercial lines |
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When the insurance company chooses to broaden coverage with no increase in premium, the broadened coverage automatically applies to all existing policies without the need for an endorsement. The company is exercising what clause? |
Liberalization Clause |
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What formula describes Actual Cash Value? |
Replacement cost - depreciation |
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Which of the following is NOT negligence? 1. A deliberate act 2. Carelessness 3. Ignorance 4. Inaction |
1. A deliberate act |
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What are the required elements for establishing a charge of negligence? |
Legal duty owed, breach of legal duty owed, proximate cause, and damages |
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Which of the following is a third party contract? Property or casualty? |
Casualty |
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What is it called when a manufacturer of a product is held responsible for any injuries or damages sustained by their products, regardless of whether the product was defective and where duty or guilt is not a factor? |
Strict liability |
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Legal duty owed, breach of legal duty owed, proximate cause Damages are all elements in determining what? |
Tort of negligence |
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Which Dwelling forms include the Glass or Safety Glazing Material other coverage? |
DP-2 and DP-3 |
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Which of the following coverages are included in the Dwelling policy? Assume there are no endorsements attached to the policy? 1. Property coverage for homes, other structures and personal property. 2.Fair rental value coverage |
Both |
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Which Dwelling forms provides Basic Form / Named peril coverage for personal property only, for people that rent their home? |
DP-4 |
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A Dwelling policy is considered to be which of the following? 1. A limited policy 2. An Omniline policy 3. A Monoline policy 4. A Multiline package policy |
3. A Monoline policy |
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Additional Living Expense coverage that is included under the Broad and Special Dwelling forms protects the insured against? |
Extra living costs incurred when the home becomes uninhabitable due to damage by a peril insured against. |
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The Dwelling Special form provides? |
Open peril coverage on the building and named peril coverage on personal property |
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To be eligible for coverage under a Dwelling policy, an incidental business operating in the dwelling must be? |
Conducted by the insured, it must be a service type business rather than retail sales. A photography studio, beauty shop and professional office providing service to clients are service type businesses. |
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If your carpet is damaged in your home it would be covered under which coverage? |
Dwelling |
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Coverage E - Additional Living Expense is what type of coverage? |
Indirect loss coverage |
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A basic Dwelling policy automatically provides coverage against fire, lightning, and ? |
Internal explosion |
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The extended coverage endorsement includes: |
wind, hail, aircraft, riot, vehicles, volcanic eruption, explosion, and smoke. |
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On what basis are losses to dwellings and other structures paid under the DP-2 and DP-3? |
Replacement cost |
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Which of the following losses would you have coverage under a DP-3? 1. A neighbor is injured in your yard 2. Ice blocks your gutters and water seeps into your home 3. Your bicycle is stolen from your garage 4. A UPS driver trips over a toy on your porch steps and injures himself |
2. Ice blocks your gutters and water seeps into your home. (Dwelling policies cover property only, and provides no theft coverage. In order for the others to be covered a Personal Liability Supplement, or Broad Theft Coverage Endorsement would be required.) |
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An insured's home is covered by the DP-3 form. The policy provides $20k in coverage on a $50k home. When high winds destroy the roof, it is determined it will cost the insured $2k to replace it. Assuming the actual cash value of the roof is $750, how much would the insured collect? |
$1000 Formula 50k X .80 = 40k 20k/40k = 1/2 1/2 x $2000 = $1000 |
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What is another name for the DP-4? |
Tenants or Renters Form |
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While vacationing oversees, which of the following would be covered under the contents coverage of the Coverage C limit of insurance on a Dwelling policy? 1. A Camera lost and owned by the insured 2. A camera lost and owned by a guest in your home. 3. A rowboat damaged while overseas 4. A canoe stolen while oversees |
1. A camera lost and owned by the insured (the insured may use up to 10% of Coverage C for loss caused by a covered peril anywhere in the world. EXCEPT: Rowboats, Canoes or property of a guest or servant.) |
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What is the difference in the way a DP-1 settles a claim on Coverage A as compared to DP-2 and DP-3? |
DP-1 pays ACV and the DP-2 and DP-3 pays replacement cost if the 80% coinsurance requirement is met at the time of loss. |
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Who of the following would be covered for theft of contents with a Broad Theft Coverage Endorsement added to a DP-2? 1. A renter occupied dwelling that lost valuables as a result of a burglary theft 2. An owner occupied dwelling that ran a business out of the home 3. both answers 4. Neither answer |
2. An owner occupied dwelling that ran a business out of the home |
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All of the following are Extended Coverage perils, except? 1. Riot 2. Lightning 3. Hail 4. Aircraft |
2. Lightning (Lightning is one of the perils that are automatically including in the Basic Form DP-1) |
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The insurer will pay the insured's necessary costs to clean up following a property loss. These costs are automatically included int he policy's "other Coverages" section of the policy. What coverage would cover this clean up cost? |
Debris Removal |
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The Dwelling special form provides? |
Open peril coverage on the building and named peril coverage on personal property |
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Which of the following coverages are included in the Dwelling policy? Assume there are no endorsements attached to the policy? 1. Fair rental value coverage 2. Property coverage for homes, other structures and personal property 3. Neither answer 4. Both answers |
Both answers |
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Each of the following business occupancies would be permitted in a dwelling insured under a Dwelling form, EXCEPT? 1. A photographic studio 2. A small store selling musical instruments to the general public at retail 3. A professional office providing services to clients 4. A beauty shop run by the insured and her daughter |
2. A small store selling musical instruments to the general public at retail.
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Coverage E- Additional living expense is what type of coverage? |
Indirect loss coverage |
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Additional living expense coverage that is included under the broad and special dwelling forms protects the insured against? |
Extra living costs incurred when the home becomes uninhabitable due to damage by a peril insured against |
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Which of the following coverages IS included in the Homeowners policy, but is NOT included in an unendorsed Dwelling policy? 1. Liability 2 Dwelling 3. Additional living expense 4. Fair rental value |
1. Liability (to include liability in a Dwelling policy a Personal Liability Supplement is required) |
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Of the four coverages provided under Section 1 of the Homeowners policy, which one provides coverage against an indirect loss? |
Coverage D- loss of use |
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What coverage in the Homeowner's policy covers Materials and supplies used to repair, alter, or construct the dwelling located within 100 feet of the dwelling? |
Coverage A- Dwelling |
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Would theft from a dwelling under construction before the dwelling is occupied be covered under Coverage A of a Homeowners policy? |
No. Theft from a dwelling under construction would be the contractors liability |
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Both the structure and the contents of a mobile home can be insured by purchasing? |
Either a Mobile Home package policy or an HO-2 or HO-3 with the Mobile homeowners endorsement |
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Why would damage to property owned by the insured be excluded under a Homeowners Liability coverage? |
Liability provides coverage for damage or injury to others or their property |
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With respect to 'Damage to Property of others' in a homeowners liability policy, the insureds duties after a loss requires that the insured submit a sworn statement of loss to the insurance company within how many days after the loss? |
60 |
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If your neighbor is injured in your yard by your dog and sustains injuries amounting to $1000 and your H.O. Med Pay covers the medical expenses. The neighbor then decides to sue you and the court awards a settlement of $20k. How would your H.O. coverage pay? |
Med pay covers up to $1000 and BI/PD covers $19k |
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What type of homeowners policy provides coverage for an older home that has a high replacement cost, but is located in a neighborhood with low market values? |
HO-8
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If a homeowner wants maximum protection for home and contents, which form should be purchased? |
HO-5, provides open peril coverage on everything |
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In a Homeowners policy, wall-to-wall carpeting would be covered under which section of the policy? |
Coverage A- Dwelling |
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Which of the following IS true concerning defense costs in a liability contract? 1. They pay in addition to the limits of liability 2. They are subject to the liability limits of the policy 3. They are provided int he Med Pay section of the policy only 4. They are only available by endorsement |
1. They pay in addition to the limits of liability |
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If an HO-3 has a coverage limit of $100k on a dwelling, how much coverage would automatically apply to cover the insured's personal property in Coverage C? |
$50k (Coverage C of a H.O. policy provides up to 50% of the Coverage A limit) |
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All of the following are true about the Personal Liability coverage of a homeowners contract, except? 1. The insured is required to pay all defense costs 2. The basic limit of coverage is $100k 3. It is generally written as a single, occurrence limit 4. It covers an insured's legal liability arising from non-business activities |
1. The insured is required to pay all defense costs |
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All of the following are true regarding an Earthquake Endorsement to a homeowners policy, EXCEPT? 1. Provides an indirect loss coverage 2. Covers all shocks that occur within a 72 hour period 3. Covers a loss caused by volcanic eruption 4. The total deductible will not be less than $250 |
1. Provides an indirect loss coverage (Earthquake endorsements provide 'direct loss' coverages to property under Coverages A, Coverage B, and Coverage C. No 'indirect coverage under Coverage D is provided under this endorsement |
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Which additional coverage is found in the Homeowners broad form HO-2? |
Collapse |
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Which of the following homeowners forms provides the least amount of coverage? 1. HO-2 2. HO-3 3. HO-5 4. HO-8 |
4. HO-8 (HO-8 has the least perils covered of all H.O. Forms) |
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Which of the following would NOT generally be included in the Supplementary Payments portion of a Liability policy? 1. First aid to others at the time of an accident 2. Expenses the insured incurs at the company's request as part of an investigation or defense 3. Bodily injury caused by the insured 4. Loss of earnings |
3. Bodily injury caused by the insured (bodily injury is a primary coverage type) |
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What is the maximum horsepower allowed for a boat that you own to be covered under the Personal Liability section of a Homeowners policy? |
25 |
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What are the special sublimits of liability for the following items? 1. Firearms 2. Jewelry, watches, furs 3. Silverware, pewterware, 4. Property used for a business while on the residence premises |
1. Firearms = $2,500 2. Jewelry, Watches, Furs = $1,500 3. Silverware, pewterware = $2,500 4. Property used for a business while on the residence premises = $2,500 |
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Lightning damages several valuable trees on the insured's property. This loss is: |
Covered for up to 5% of the Coverage A limit in the HO-2, HO-3, HO-5, and HO-8 and up to 10% of Coverage C limit in the HO-4 and HO-6, with a maximum of $500 per tree |
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What coverage of a Homeowner's policy would cover a Ham Radio Station Tower located on the insureds property and not attached to the house? |
Coverage B- other structures |
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Which of the following coverages can be found in the homeowners forms, but would not be found in an unendorsed Dwelling policy? 1. Aircraft 2. Hail 3. Theft 4. Wind |
3. Theft |
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Which of the following would provide Earthquake coverage for your home? 1. HO-5 2. HO-2 3. An Earthquake Endorsement 4. HO-3 |
3. An Earthquake Endorsement |
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An individual who owns and lives in a condominium can obtain broad coverage for personal property in the condo under which homeowners form? |
HO-6 |
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The homeowners form that provides open peril coverage on dwelling and broad form coverage on personal property is the? |
HO-3 |
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Which one of these homeowners endorsements is used to schedule separate coverage for one or more of nine categories of personal property? 1. Fine Arts 2. Personal Jewelry 3. Scheduled personal property 4. Personal liability |
3. Scheduled personal property |
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If your $5000 gold watch is stolen, how would your homeowners policy respond? |
The loss is limited to $1500 and subject to a deductible |
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Theft of Jewelry, watches, furs, and precious and semi precious stones are all limited to? |
$1500 and a deductible (a scheduled personal property endorsement is an excellent method of covering these items and pays as primary coverage without deductibles) |
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The H.O. Scheduled personal property endorsement provides open peril coverage on all of the following, EXCEPT: 1. Row Boats, canoes, and jet ski's 2. Musical instruments, silverware, golfers equipment, and fine arts 3. jewelry, furs, and cameras 4. postage stamps, rare and current coins |
1. Row Boats, canoes, and jet ski's (row boats and canoes do not require an endorsement, and jet ski would be covered under a boatowners policy) |
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Which of the following would provide Replacement cost coverage for contents under Coverage C in a homeowners policy? 1. HO-5 Comprehensive form 2. Replacement cost endorsement 3. HO-3 Special form 4. HO-2 Broad form |
2. Replacement cost endorsement |
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Open peril coverage for both the dwelling and personal property is provided by the? |
HO-5 Comprehensive form |
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Which statement is false concerning a homeowners policy? 1. HO-4 is sometimes called a tenants form 2. HO-4 covers the dwelling for the broad form perils 3. HO-3 covers dwelling on an open peril basis 4. HO-3 covers contents for the broad form perils |
2. HO-4 covers dwelling for the broad form perils |
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Which statement is false of Homeowners policies? 1. HO-2 covers the dwelling and contents for the broad form perils 2. HO-2 does not cover loss of fence, driveway, or walk caused by vehicle owned by insured 3. HO-2 pays for losses to the contents on an ACV basis 4. HO-2 will pay for a broken pipe that has caused water damage |
4. HO-2 will pay for a broken pipe that has caused water damage |
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Which statement is true concerning homeowners policies? 1. coverage is not provided to a garage rented for private garage purposes 2. coverage is provided to property of boarders not related to the insured 3. property that has been borrowed meets the definition of contents 4. Dwellings under construction are covered for theft |
3. Property that has been borrowed meets the definition of contents |
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Which statement is false? 1. Coverage C provides coverage for machinery used in maintenance of the premises 2. Coverage C provides a $1500 limit on trailers not used with watercraft 3. The homeowners policy provides coverage for property of roomers and boarders 4. Coverage C provides an amount equal to 50% of coverage A |
3. The homeowners policy provides coverage for property of roomer and boarders (the H.O. policy specifically excludes property of roomer and boarders) |
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True or false? Coverage D of a Homeowners policy includes loss of income from incidental business. |
False |
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True of false? Coverage D of a Homeowners policy covers additional living expenses, |
True |
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True or false? A private school would be permitted under a homeowners policy. |
True |
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True or false? A homeowners policy will not cover theft of a boat away from the premises. |
True |
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True or false? Under an HO-2, the insured may rent his/her garage to the neighbor for a woodworking shop. |
False (The policy excludes coverage for other structures that are used in whole or in part for business) |
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All of the following are true of a H.O. policy, except? 1. Earth movement is covered in all H.O. policies 2. Theft of a dwelling under construction is not included 3. trees, shrubs, and plants are covered up to $500 each 4. Coverage C allows coverage for loss due to theft of jewelry up to $1500 |
1. Earth movement is covered in all H.O. policies (earth movement is excluded from ALL homeowners policies) |
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True or false? Section 1 deductible does not apply to property covered under the Scheduled personal property endorsement. |
True |
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When property is removed because it is endangered by a covered peril, the coverage is open peril for how many days? |
30 days |
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Determines the probability of loss and sets the premium rates for the insurer. |
Actuary |
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A person's age at any point or time. |
Attained age |
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The designated recipient of benefits or proceeds upon the death of the insured. |
Beneficiary |
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Something of value (usually a premium) that the policyowner must pay in exchange for the insurer's promise to pay benifit. |
Consideration |
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Processing a license solely to write business on one's own self, immediate family, relatives, employer, and employees. |
Controlled business |
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A written amendment attached to a policy to broaden or restrict coverage or to further define certain policy provisions. |
Endorsement (a policy may have more than one endorsement, and an endorsement may modify the policy or a prior endorsement) |
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An agent or broker who handles the insurer's funds in a trust capacity. |
Fiduciary |
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A time period after the premium due date and before a policy lapses. |
Grace period |
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Failing to obtain the proper type or amount of coverage for a client. |
Inadequacy |
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The ability of an individual to meet an insurer's underwriting requirements. |
Insurability |
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The individual's actual or closest age on the policy issue date. |
Issue Age |
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Termination of a policy because the premium has not been paid by the end of the grace period. |
Lapse |
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Quoting inflated price information or misrepresenting a plan of coverage without regard to the effect that the information might have on the client at a later date. |
Negligence |
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The individual who has the ownership rights in the policy |
Policyowner |
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A payment or periodic payments made by the policyowner to keep an insurance policy in effect. |
Premiums |
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The portion of a premium for which protection has already been given. |
Earned premiums |
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The portion of a premium for which policy protection has not yet been given. |
Unearned premiums |
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Keeps a policy in force when in a lapsed mode. |
Reinstatement |
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An endorsement to an insurance policy that modifies the contract's provisions. Property and Casualty lines call this "endorsement." Life and Health refer to this as? |
Rider |
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The process of analyzing exposures that create risk and designing programs to minimize the possibility of a loss. |
Risk management |
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A civil wrong other than a crime or a breach of contract. |
Tort |
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The process of evaluating a rick to issue insurance coverage. |
Underwritting |
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A contract that pays a stated amount int he event of a loss. |
Valued Contract |
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For a contract to be valid, what four elements must it contain? |
1. Offer and Acceptance 2. Consideration 3. competent parties 4. Legal purpose |
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A receipt for goods that sets forth the insurance agreement between the insurer and the shipper. |
Bill of Lading |
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When a loss results from two causes, one of which is excluded and the other is not excluded, the loss is covered. |
Concurrent causation |
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A clause that requires a certain percentage of commercial property covered under a policy to be insured. |
Coinsurance clause
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An uncontrollable fire or one that spreads from where it was intended to be. |
Hostile fire |
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A loss that arises out of any act committed by, or at the direction of, an insured with the intent to cause loss, not covered under any policy. |
Intentional loss |
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When two or more policies cover the same property, each pays in proportion to the amount that policy's limit represents of the total of all insurance covering the property. |
Nonconcurrency |
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An event that results in an insured loss. The term includes accidents and continued and repeated exposure. |
Occurance |
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The immediate cause that sets the other causes in operation. |
Proximate cause |
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The right of the insurer to take possession of damaged property after a loss is paid. |
Salvage (right) |
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A property that has contents but no occupants |
Unoccupancy |
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A property that has neither occupants nor contents. For commercial insurance, a building when 70% is not rented or not used to conduct customary operations. |
Vacancy |
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Properties that attract children. Ex: pools, trampolines, etc. |
Attractive nuisance |
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The three types of liability protection for businesses are? |
1. Automatic Replacement 2. Broad coverage 3. Excess coverage |
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Bodily harm, sickness, or disease, including resulting death. |
Bodily injury |
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Insurer's promise to defend any suit brought against the insured for damages caused by an occurrence to which coverage applies. |
Duty to Defend |
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Anything that increases the likelihood of a loss occurring. |
Hazard |
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Person invited on premises |
Invitee |
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An increase in coverage without an increase in premium. |
Liberalization |
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Person on premises with the owner's knowledge and tolerance. |
Licensee |
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Parties to a bond include? |
1. Obligee 2. Principal (Obligor) 3. Surety (guarantor) |
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Physical injury to, destruction of, or loss of use of tangible property. |
Property damage |
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Risk involving a possibility of loss or no loss. |
Pure Risk (Insurance protects against pure risk) |
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Risk involving possibility of loss, no loss, or possibility of gain. |
Speculative risk (Insurance does NOT protect against Speculative risk) |
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Insurer's attempt to recover against a third party that has caused them to pay a claim to its insured. |
Subrogation |
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Coinsurance formula |
(Amount of insurance carried/amount of insurance required) X Amount of loss = Amount insurer pays. |
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The insured owns a commercial building with a current value of $1,000,000. The building is insured for $750,000, and the insured has agreed to 80% coinsurance. The building sustains a $100,000 fire loss. How much will the insurer pay of the loss? |
$93,750
(750,000/800,000) X 100,000 = $93,750 |
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This states, The larger the number of exposures considered, the more closely the losses reported will equal the underlying probability of loss. (does not apply to individual risks) |
Law of Large Numbers |
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This states, you will be paid for your loss but you will not be allowed to profit from your loss. |
Principle of Indemnity |
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This law requires the insurer to pay the full amount of insurance on an insured structure in the event of a total loss. |
Valued policy law |
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This Act protects the right to privacy of the individual, and was passed in response to overly intrusive information collection practices. |
FCRA (Fair Credit Reporting Act of 1971) |
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Provides mandatory reinsurance from the federal government for property insurers suffering loss caused by a certified act of terrorism. |
TRIA (Terrorism Risk Insurance Act) |
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Protects insureds and the insurance industry from insurer insolvency by preventing insurer insolvency and by covering losses under policies issued by an insurer for a limited period of time after the insurer becomes insolvent. |
Guaranty Associations |
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Provides a means for individuals to buy basic property insurance when it cannot be obtained through standard markets. |
FAIR Plan (Fair Access to Insurance Requirements) |
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Protects insurance consumers, ensure the solvency of the insurance industry, and assist state regulation of the industry by recommending uniform legislation. |
NAIC (National Association of Insurance Commissioners) |
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All of the following are considered to be covered auto in an insured's personal auto policy EXCEPT: 1. A trailer owned by the insured 2. A newly purchased replacement auto 3. An auto named in the declarations 4. A borrowed auto |
4. A borrowed auto (With a borrowed auto, insurance follows the car, therefore insurance belonging to the owner of the car would provide coverage) |
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Property damage for uninsured motorists coverage is? |
Optional (uninsured motorists provides Bodily injury only.) |
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An insured under a Liability policy is defined as: |
The named insured, any family member, or any person using the covered auto with permission. |
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What is the equivalent single limit of liability to split limits of 50/100/50? |
$150,000 (total bodily injury-second number + Total Property damage- last number = Equivalent Single limit) |
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Hal borrows Ben's car and has an at fault accident injuring Carl. Both Hal and Ben have a personal auto policy. How is the claim paid? |
Ben's policy is primary and Hal's policy is excess |
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Personal Auto Policy's Liability coverage covers when? |
The insured is legally liable for damage or injury caused to a third party. |
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In Part-B Med pay of a personal auto policy, all of the following are considered insureds, EXCEPT: 1. Your resident relatives 2. Persons occupying the other car 3. Pedestrians hit by a vehicle designed to be used on public roads 4. You |
2. Persons occupying the other car (Med pay is for other people, EXCEPT with Boats and auto) |
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Which of the following is NOT a characteristic of the Transportation Expense coverage of the Personal Auto Policy? 1. Provides coverage if the insureds vehicle is being serviced at a garage 2. Provides coverage after 48 hours in the event of a loss caused by theft of the auto 3. Provides coverage due to a collision or comprehensive 'OTC' loss 4. Requires no deducible and covers $20 a day up to $600 for a rental vehicle |
1. Provides coverage if the insureds vehicle is being serviced at a garage |
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Which of the following would be paid under Part D of the Personal Auto Policy? 1. The insured was involved in an accident while using the vehicle as a public or livery conveyance 2. A radar detector was stolen from the vehicle 3. The insured's vehicle experiences a tire blowout while traveling on vacation 4. A permanently installed tape player was damaged when thieves attempted to remove it from the car |
4. A permanently installed tape player was damaged when thieves attempted to remove it from the car.
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The physical damage section of the personal auto policy excludes:
1. Mechanical breakdown 2. Theft or larceny 3. Explosion or earthquake 4. Hail, water, flood or flash flood |
1. Mechanical breakdown (the other perils would be covered under the 'OTC' part of the Personal Auto policy) |
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You have underinsured limits of 100/300/50 when an underinsured motorist runs a stop sign causing you bodily injury of $75000. His limits are 25/50/10. How much will you be paid by the two companies? |
$75000 (25k from his company, and 50k from your company) |
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Which of the following is NOT considered a temporary substitute auto? 1. A leased vehicle being used after the theft of your vehicle 2. A borrowed vehicle from your sister to be used while on vacation 3. A rented vehicle being used while your vehicle is being repaired 4. A vehicle being used while your vehicle is being serviced |
2. A borrowed vehicle from your sister to be used while on vacation |
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Under a pure no-fault plan, each party to an auto accident? |
is reimbursed by his or her own insurance company |
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Personal auto Med pay coverage will pay medical expenses for up to how long? |
3 years from the date of the accident |
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If the required minimum auto liability limits are 25/50/25, a driver with limits of 15/30/10 is considered to be? |
An uninsured motorist |
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You are driving your car with your son and the neighbor's kid to soccer practice when you run a red light and hit Calvin and his family in their car. What part of your PAP would cover Calvin's car? |
Part A - Liability BI/PD |
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You ran a stop sign, hitting Calvin and Clara's car. Cal's injuries are in the amount of $30,000 and Clara's total $12,000. Their car is damaged in the amount of $11,000. Your liability limits are 25/50/10. How much will your company pay for Calvin's and Clara's bodily injury and property damage? |
$47,000 Formula: Cal- $25,000 BI + Clara- $12,000 BI + $10,000 PD = $47,000 |
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All of the following are considered 'Other Than Collision' OTC coverage, except: 1. Bird hitting a windshield 2. Theft of the Auto 3. Flood 4. Upset |
4. Upset (This is considered Collision) |
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A newly acquired vehicle under a Personal Auto policy will have which of the following type of coverage? |
The broadest coverage that the insurer provides on any existing vehicle shown in the declarations |
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All of the following are considered to be common exclusions throughout a Personal Auto policy, EXCEPT: 1. Vehicle being used as a public livery or Taxi 2. Road damage to tires, wear and tear, and mechanical or electrical breakdown 3. Intentional loss, nuclear hazard, or war 4. Vehicle used with permission |
4. Vehicle used with permission
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The personal auto policy's Medical payments coverage would NOT provide protection for which of the following: 1. Passengers in the insured's car 2. The insured using the vehicle as a residence 3. The insured 4. The insured's family members |
2. The insured using the vehicle as a residence |
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You are driving your car with your son and the neighbor's kid to soccer practice when you run a red light and hit Calvin and his family in their car. Under what part of your Personal Auto Policy would Calvin's injuries be covered? |
Part A - Liability BI/PD |
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In ALL states, an UNENDORSED Personal Auto Policy's Uninsured Motorists coverage applies to what type of loss caused by an uninsured motorist? |
Bodily injury |
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Which Personal Auto coverage reimburses the insured without regard to fault, regardless of whether or not the state is subject to no-fault laws? |
Medical Payments coverage |
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The Personal Auto policy's Comprehensive Physical Damage coverage covers which of the following? 1. Damage caused by hitting an animal 2. Flood 3. All of the answers listed 4. Theft |
3. All of the answers listed
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The insured has a Personal Auto policy with all cars insured by one company. He sells one of the cars and buys a new one to replace it. Must the insured take any action for the Liability portion of his current policy to apply to the replacement vehicle? |
No, the insured does not have to do anything; liability coverage for a replacement vehicle is automatic. |
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If you are driving a friends car and get in an accident, you find that your friend had 20/40/10 insurance on the car. The accident resulted in damages to the other vehicle totaling $25,000 PD and the driver sustained injuries totaling $60,000. How would this claim be settled? |
Your friends insurance would pay $20k BI and $10 PD, your insurance coverage would pay the balance. |
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Flood insurance: 1. Is reinsured by the state government emergency management agencies 2. All of the answers listed 3. Is available from the federal government or private companies who are reimbursed for losses by the government 4. Is a state funded and state administered program |
Is available from the federal government or private companies who are reimbursed for losses by the government |
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Which of the following does the watercraft policy cover? 1. Closed and open cockpit vessels 26 feet or less in length 2. Open cockpit vessels 26 feet or less in length 3. Open cockpit vessels 52 feet or less in length 4. Closed and open cockpit vessels 52 feet or less in length |
2. Open cockpit vessels 26 feet or less in length |
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Which of the following losses would be a flood policy? |
Heavy rains cause a lake to overflow and flood the basement and first floor of a house |
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Most flood insurance coverage is provided by? |
A federal government program |
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What Personal Inland Marine form is used to provide open peril coverage on a blanket basis for personal property? |
Personal property form |
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Under the NFIP's Regular Program, how much coverage is provided to a residential homeowner int he event of flood damage? |
$250,000 dwelling / $100,000 contents |
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The insured has a $1,000,000 personal umbrella policy with a retention limit of $1000. The insured suffers a $15,000 loss that is excluded by the underlying policy, but not the umbrella. How much of this loss would be paid under the umbrella? |
$14,000 |
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A boatowner policy is usually written on what basis? |
Replacement cost |
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Which of the following describes the Peak Season Limit of insurance endorsement? 1. The company and the insured must agree on the value before a loss occurs and must be recalculated on a seasonal basis. 2. Coverage limits can fluctuate for businesses that are seasonal 3. All the answers listed 4. Coverage limits keep pace with inflation |
2. Coverage limits can fluctuate for businesses that are seasonal |
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Under the Building and personal property coverage form, what obligation, if any, does an insurer have to a mortgagee in the event the company wishes to cancel the policy? |
The company must give the mortgagee a 10 day written notice of cancellation due to nonpayment of premium and 30 day notice if cancellation is for any other reason. |
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The Business income coverage form applies to: |
Loss of revenue while operations are suspended due to property damage |
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A hardware store is insured under a Business income coverage form with the special causes of loss form. Which of the following losses would be covered? 1. Income lost while the store owner goes on vacation for two weeks 2. Income lost due to unemployment 3. Income lost when the store closes for a week while damage from a burst water pipe is repaired 4. All of the answers listed |
3. Income lost when the store closes for a week while damage from a burst water pipe is repaired |
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The most that a Commercial policy will pay for loss or damage to outdoor signs attached to the building under the Commercial building or structure coverage is? |
$1000 |
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According to the cancellation condition in the Common Policy Conditions form, if the insurance company is canceling a Commercial Package policy for nonpayment of premium, the insured must be given at least ___ days' notice of cancellation. |
10 |
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How many coverage parts must be included in a CPP to make it a package policy? |
2 |
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If a building insured under the Building and Personal Property coverage form was vacant for 3 months, would a vandalism loss and fire loss be covered? |
A vandalism loss would not be covered; a fire loss would be covered, subject to a 15% penalty |
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Under the Commercial Package policy, who may cancel the policy in writing and make changes to the policy with the consent of the insurer? |
First named insured |
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Widget Enterprises wants property insurance for a new warehouse it is building. Widget also wants the policy's limit of insurance to gradually increase as the value of the building under construction increases. Which Commercial Property coverage form would best fit Widget's needs? |
Builders risk reporting form |
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When a dry cleaners accepts a customer's suit for cleaning, the dry cleaner becomes a(an) |
Bailee |
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The Causes of loss- Special form of the Commercial Property coverage part insures against? |
All risks of direct physical loss unless specifically excluded |
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Which of the following is a coverage extension that is available in the Building and Personal Property coverage form? 1. Legal liability coverage form 2. Time element coverage 3. Property off-premises 4. Earthquake form |
3. Property off-premises |
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Which commercial property coverage form covers damage to the property of others in the insured's care, custody, or control for which the insured is legally liable? |
Legal liability coverage form |
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All of the following are time element coverages, except: 1. Accounts receivable coverage form 2. Business income coverage form 3. Business income from dependent properties form 4. Extra Expense coverage form |
1. Accounts receivable coverage form
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All of the following reduce the general aggregate limit in the CGL, EXCEPT: 1. The medical expense limit 2. The products-completed operations limit 3. The personal and advertising injury limit 4. The per occurrence limit |
2. The products-completed operations limit |
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The Commercial General Liability claims-made coverage form may contain a retroactive date. This is the date: |
Before which the claims-made form will not cover a claim |
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Under the CGL, the products-completed operations hazard limit is subject to: 1. Neither answer 2. A products-completed operations aggregate limit 3. Both answers 4. A per occurrence limit |
3. Both answers |
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When replacing a Commercial General Liability Claims made policy with a new policy, when should you set the retroactive date so that there is no loss in coverage? |
The same as the prior policy retroactive date |
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Each of the following is a primary coverage provided under the Commercial General Liability policy, EXCEPT: 1. Bodily injury and Property Damage liability 2. Liquor liability 3. Personal and Advertising injury 4. Medical Payments |
2. Liquor liability |
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The named insured on a Commercial General Liability policy is Sassy Dept. Store. Which of the following losses would be paid under the policy's Medical Payments coverage: 1. None of the answers listed 2. A mannequin tips over and injures a customer 3. An employee is injured while unloading inventory that has been delivered by a truck 4. The store owner injures himself while climbing a ladder to set up a store display |
2. A mannequin tips over and injures a customer (The store owner and the employee would be covered by Workers' compensation) |
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Which of the following IS true regarding a premium audit in a Commercial General Liability policy: 1. The final premium is known as the actual earned premium 2. Both answers 3. The advanced premium is known as a premium deposit 4. Neither answer |
2. Both answers |
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Who of the following would have coverage for liquor liability losses under the commercial general liability policy? Assume there are no endorsements attached to the policy. 1. A grocery store that stocks and sells beer and wine 2. All of the answers listed 3. A liquor lounge that serves alcoholic beverages 4. An advertising agency that serves liquor at a holiday party |
4. An advertising agency that serves liquor at a holiday party |
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Under the claims-made Commercial General Liability coverage form, the first date that a loss may occur and still be covered under the policy is? |
The retroactive date |
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Coverage for products and completed operations is provided under which contract(s) |
Claims-Made CGL and Occurrence CGL |
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The maximum that a CGL policy will pay in any one policy period is known as the? |
Aggregate limit |
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The Commercial General Liability coverage part can be used to insure against all the following exposures, except: 1. Completed Operations Liability 2. Liquor Liability 3. Products Liability 4. Premises Liability |
2. Liquor Liability |
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Liquor liability is for? |
Those who sell liquor and is always excluded from the CGL policy unless added by endorsement |
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Under the Commercial General Liability policy, a separate Aggregate limit applies to? |
Products and Completed operations hazard |
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Which of the following is NOT true regarding Medical Expense or Med Pay benefits under a CGL policy? 1. Coverage pays on a per person basis 2. Pays for accidents that have occurred and reported withing 1 yr of the date of the accident 3. Pays for injuries sustained by the insured or their employees 4. Pays regardless of fault |
3. Pays for injuries sustained by the insured or their employees
(Employees would be covered under Workers' compensation) |
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Which of the following would be covered under the CGL policy: 1. Employee injuries 2. Host liquor liability 3. All of the answers listed 4. Pollution spill |
2. Host liquor liability (pollution spill, and Employee injuries are both excluded from CGL coverage) |
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The Owners and Contractors Protective form covers the insured for liability |
Arising out of the operations of independent contractors or subcontractors |
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What is the main difference between the Occurrence form and the Claims-made form under a CGL policy? |
The Coverage Trigger |
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A man becomes ill after eating a meal in a restaurant. The cost of treatment at a local hospital is $1,700. Which coverage section of the restaurant's CGL policy will respond to the claim? |
Product Liability |
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Which of the following is NOT considered to be an insured under the CGL coverage form? 1. an individual, partnership including spouse, joint venture not named in the declarations 2. An individual, partnership including spouse, joint venture named in the declarations 3. Person acting as the insured's real estate manager 4. Volunteer workers, employees, operators of mobile equipment |
1. An individual, partnership including spouse, joint venture not named in the declarations |
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If a restaurant serves a customer a bowl of clam chowder and later becomes ill, the customers illness would be covered by which coverage section? |
Products exposure |
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Under the Claims- made CGL, the supplemental extended reporting period provides? |
an unlimited extension for making claims for losses that occurred during the policy period, but the insured must pay an additional premium |
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The "Each Occurrence" limit applies to which coverages under the Commercial General Liability policy? |
Coverage A and C only (Coverage B pays "per person or organization" and is ONLY subject to "Aggregate Limit") |
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Do Supplementary Payments add tot he general aggregate limits of a Commercial General Liability policy? |
No, They pay in addition to the limits of liability and do not effect the aggregate limits at all |
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A contractor installs an air compressor system a a customers business. After the contractor leaves the premises the unit blows up causing injuries to their customers. The contractors liability would be covered under which of the following coverages? 1. Products liability 2. Completed operations 3. Contractual liability 4. Premises and operations |
2. Completed operations ("Operations" covers contractor while on site, "Products liability" covers manufacturers of products, and "Premises" covers Business liability) |
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A _____________ insurance company is owned by its policy holders. |
Mutual |
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If an insurance company wants to transfer all or part of the risk it has accepted, it would buy which type of insurance? |
Reinsurance |
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Which insurance company department accepts the insurance risk? |
Underwriting |
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Which of the following represents the insurance company when selling an insurance policy? 1. Producer 2. Broker 3. Adjuster 4. Insurer |
1. Producer |
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What type of authority does the public assume an agent has when quoting insurance? |
Implied |
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A producer has each of the following responsibilities to the insurer, except: 1. A fiduciary duty 2. Forwarding premiums to the insurer on a timely basis 3. Reporting material facts that may affect underwriting 4. A duty to recommend only high rate policies |
4. A duty to recommend only high rate policies |
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A federal regulation called the __________ protects consumer privacy. |
Fair credit reporting act |
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What are the four main characteristics of Insurance? |
1. Transfers the risk 2. Protects against uncertainty 3. Shares the loss 4. Reduces anxiety |
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What are the five ways of managing risk? |
1. Sharing 2. Transfer 3. Avoidance 4. Reduction 5. Retention |
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Dishonest tendencies that increase the probability of loss are what type of hazard? |
Moral |
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Each of the following is an element of a legal contract, except: 1. Consideration 2. Legal purpose 3. Agreement 4. Indemnity |
4. Indemnity |
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A statement in the application that is guaranteed to be true. |
Warrenty |
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What are the four underwriting factors? |
1. Nature of the risk 2. Hazards that are present 3. Claims history 4. Other factors that depend upon the type of risk being insured |
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A rate charged to a group of policyholders who have similar exposures and experience. |
Class Rating |
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A rate used for a policyholder because a large enough pool of similar risks is not available to any other type of rate. |
Individual rating |
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In all rating methods, except one, Actuaries determine the rates. What method are rates determined by the Underwriter? |
"A" rating or Judgment rating |
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Premium Calculation formula |
Multiply the units of exposure times the rate. (Example: If the rate is $2.25 per square foot, then the annual premium for a 10,000 square foot building would be $22,500) |
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Loss ratio formula |
(Paid losses + Loss reserves) / Total earned premium |
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Insures a single item of property for a single limit of insurance. |
Specific limit |
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Insures one or more items of property on a single policy and the amount of insurance applying to each item is shown on a schedule. |
Scheduled limit |
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Insures property located at more than one location or more than one type of property at the same location or both. |
Blanket limit |
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The parts of a policy include? |
1. Declarations 2. Insuring agreement 3. Conditions 4. Exclusions |
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The declarations page describes basic information about the policy including: |
Who, what, when, where, and how much |
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The insuring agreement states: |
The insurance company's promise to pay the insured, and what perils are covered |
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Which of the following has the broadest coverage under the insurance policy? 1. Named insured 2. Insured 3. First named insured 4. Additional insured |
1. Named insured |
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The duties and obligations of the insured are found under what part of the insurance policy |
Conditions |
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A ______ is a civil wrong committed by one person against another. |
Tort |
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Which of the following damages is awarded to the injured party for the actual medical expenses incurred: 1. General 2. Punitive 3. Special 4. Consortium |
3. Special |
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Which of the following is a formal statement made by the insured and provided to the insurer that provides necessary details for the insurer to determine its liability under a policy? 1. Certificate of insurance 2. Proof of loss 3. Police report 4. Occurrence report |
2. Proof of loss |
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Each of the following is an element of negligence, except: 1. A duty is owed 2. The duty is violated 3. There is a foreseeable consequence 4. There is an intervening cause |
4. There is an intervening cause |
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Which of the following is a common law defense used by the plaintiff when the injured party is partially responsible for his own injuries? 1. Proximate cause 2. Contributory negligence 3. Absolute liability 4. Comparative negligence |
2. Contributory negligence |
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What is designed to prevent the insured from collecting more than the actual extent of a loss? |
Pro Rata liability |
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The ______ is the most the policy will pay for the sum of all the losses occurring within a policy period. |
Aggregate |
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The _________ of liability applies to bodily injury, property damages, or both. |
Combined single limit |
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Garagekeepers coverage insures against? |
Liability for damage to autos of others that are in the care, custody or control of the insured |
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Under the Motor Carrier Act of 1980, what is the minimum limit of liability required when transporting oil or other hazardous materials? |
$1,000,000 |
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Which of the following provide coverage for vehicles leased or rented by a company for employees to use for personal use? |
Drive other car coverage endorsement |
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How many vehicles would a business be required to have to qualify for Commercial Auto Fleet rates? |
5 or more |
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All of the following are automatically included in an unendorsed Commercial Business Auto coverage form, EXCEPT: 1. Certain trailers and mobile equipment of limited size and weight 2. Borrowed private passenger autos 3. Owned or leased trucks and trailers 4. Public buses, taxis, and limousines |
4. Public buses, taxis, and limousines
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Which of the following would have a need for the Garage Coverage form: 1. Valet Parking 2. Car Wash 3. Car Dealership 4. Parking Lot |
3. Car Dealership |
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In the Business Auto coverage form, employers that want to cover employees' use of their own cars in the employer's business should opt to have liability coverage apply to which of the following groups of autos? 1. Rented 2. Non-owned 3. Garagekeepers 4. Any auto |
2. Non-owned |
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Which commercial auto form would you use as bailee coverage for autos in your care? |
Garagekeepers coverage form |
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The Business Auto coverage form provides all of the following Physical Damage coverages, EXCEPT: 1. Collision 2. Specified Causes of Loss 3. Comprehensive 4. Basic Perils coverage |
4. Basic Perils coverage |
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Which of the following provides coverage for a semi tractor pulling an empty trailer called 'bobtailing'? 1. Motor Truck Cargo policy 2. Truckers coverage form 3. Inland Marine Form 4. Trip transit coverage form |
2. Truckers coverage form |
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A company that frequently rents autos and trucks for use in the business should include which symbol in the Business Auto policy Declarations? |
Symbol 8 |
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When an employee drives his own vehicle in an employers business, he is covered under which of the following Commercial Auto coverages? |
Employee as additional insured |
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Under the Business Auto coverage form, which of the following is NOT considered to be mobile equipment? 1. Bulldozer 2. Farm machinery 3. Forklift 4. Self propelled power cranes and snow plows |
4. Self propelled power cranes and snow plows |
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Under the Business Auto coverage form, the non-owned auto category represents: |
Autos owned by employees, but driven int he insured's business |
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Which of the following losses would be paid under the Business Auto coverage form's Comprehensive coverage: 1. A covered auto experienced a mechanical breakdown causing a need for repair 2. A covered auto was involved in a collision with another automobile 3. A covered auto was damaged when it accidentally slipped out of park and rolled down a hill and hit a power pole 4. A covered auto was stolen and never recovered |
4. A covered auto was stolen and never recovered |
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What type of claim would be covered by Forgery or Alteration Crime coverage: 1. Vender alters an outgoing check 2. Employee alters an outgoing check 3. Employee alters an incoming check 4. Vender alters an incoming check |
2. Employee alters an outgoing check
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The commercial Crime policy generally pays for losses on what basis? |
ACV |
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Forgery or Alteration covers Commercial crime losses that involve which of the following: 1. Forgery or alteration of incoming checks 2. Forgery or alteration of outgoing checks 3. Neither answer 4. Both answers |
2. Forgery or alteration of outgoing checks |
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The inside the Premises-Robbery or Safe Burglary insuring agreement in the Commercial Crime policy covers: 1. Loss of money and securities from inside the premises from a custodian 2. None of the answers listed 3. Loss of other property from a robbery of a custodian 4. Loss of money and securities from outside the premises from a messenger |
3. Loss of other property from a robbery of a custodian |
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In the Commercial Crime forms, new employees and additional premises obtained through a consolidation or merger are automatically covered for ______ days. |
90 |
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Which commercial crime insuring agreement includes coverage for defense costs? |
Forgery or Alteration |
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Which of the following is covered under Robbery and Safe Burglary of Other Property Crime coverage: 1. Money 2. Flashlight that was shoplifted 3. Safe taken after the business has closed 4. Power tool taken off the shelf after the business closed |
3. Safe taken after the business has closed |
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Which of the following may only be added by endorsement in a Commercial Crime coverage? 1. Computer fraud 2. Extortion 3. Forgery or Alteration 4. Employment theft |
2. Extortion |
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In Crime insurance, the taking of property by stealth is included in the definition of: |
Theft |
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A loss sustained type of crime coverage will pay for losses that occur during the policy period and is discovered no more than how long after the policy period has expired? |
1 year |
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Theft, Disappearance and Destruction Commercial Crime coverage is also known as- inside the premises-theft of money and securities covers all of the following, EXCEPT: 1. Money destroyed as a result of a fire on the premises 2. Money stolen as a result of burglary or robbery 3. Money that mysteriously disappears 4. Money stolen from a vending machine located outside of the building |
4. Money stolen from a vending machine located outside of the building |
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Which commercial crime form provides coverage for securities against loss caused by theft, disappearance, or destruction while inside a custodian's premises or while being transported by a custodian? |
Outside the premises-Money and Securities |
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The Employee Theft insuring agreement in the Commercial Crime Policy covers loss of what type of property? 1. Money 2. All the answers listed 3. Securities 4. Property other than money and securities |
2. All of the answers listed |
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Forgery or Alteration Crime Coverage provides for which of the following? 1. An ABC employee alters a paycheck and cashes it 2. ABC grocery writes a check to XYZ food warehouse and an ABC employee intercepts the check and cashes it 3. ABC grocery writes a check to XYZ food warehouse and XYZ foods alters the check. 4. All of the answers listed |
3. ABC grocery writes a check to XYZ food warehouse and XYZ foods alters the check |
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All of the following are considered burglary, EXCEPT: 1. Theft occurs by stealth 2. A thief hides inside the store until closing and then commits theft and breaks a window to get out 3. Theft occurs and there is evidence of a forced entry 4. Theft occurs and there is evidence of forced exit |
1. Theft occurs by stealth |
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In the equipment breakdown Protection coverage form, coverage for business income, spoilage damage, and utility interruption is provided if? |
the insured has selected these coverages in the Declarations |
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Equipment breakdown coverage losses are settled on what basis? |
Replacement cost |
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Fidelity bonds are used in conjunction with? |
Employee theft |
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Inland Marine policies are frequently used to cover all of the following, EXCEPT: 1. Property held by a bailee 2. Off premises mobile equipment 3. Structures 4. Off premises business personal property |
3. Structures |
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In Ocean Marine Insurance, all of the following would be considered perils of the sea, except: 1. Barratry 2. Piracy 3. Lightning 4. Stranding |
3. Lightning |
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An agent who needs liability coverage for his or her professional liability exposure can obtain it by purchasing? |
Errors and Omissions insurance |
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A business can obtain coverage for liability arising out of discrimination and sexual harassment by purchasing? |
Employment Practices Liability insurance |
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Which of the following bonds would an employer need to cover employee theft? 1. Surety bond 2. Fidelity bond 3. Fiduciary bond 4. Performance bond |
2. Fidelity bond |
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A laundry business offers pick-up and delivery services to its customers. Which of the following inland marine endorsements would the laundry business need to protect against the off-premises damage done to its customers clothing? 1. Annual transit form 2. Trip transit form 3. Bailee's liability 4. Commercial articles floater |
3. Bailee's liability |
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What type of Ocean Marine insurance provides physical damage coverage for the ship while it is in transit? |
Hull |
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Coverages A through D of the Farm Property Coverage form are identical to which of the following: 1. Commercial inland marine policy 2. Coverage parts A thru D of the Personal Auto policy 3. Ocean Marine Policy 4. Section I of a Homeowners policy |
4. Section I of a Homeowners Policy |
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The party to a Surety bond who promises to do or not do a specific thing is the |
Principal |
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Which of the following covers a carrier for liability for loss to cargo while it is being transported in a truck: 1. Garagekeepers coverage form 2. Annual Transit policy 3. Motor truck cargo policy 4. shipper's form |
3. Motor truck Cargo policy |
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An insured who needs coverage for medical instruments while they are on and off premises could obtain it by purchasing the: 1. Errors and Omissions insurance 2. Physicians and Surgeons Equipment coverage form 3. Professional Liability insurance 4. Scheduled Personal Property Endorsement |
2. Physicians and Surgeons Equipment coverage form |
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Which of the following losses to covered equipment would be covered under the equipment breakdown protection coverage form: 1. Damage caused by hail 2. Damage caused by wind 3. Damage caused by nuclear hazard 4. Damage from an explosion caused by the centrifugal force of moving part |
4. Damage from an explosion caused by the centrifugal force of moving part |
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Which of the following are considered to be covered property under an Equipment breakdown protection coverage form? 1. Neither answer 2. Both answers 3. Property that is in the insured's care, custody or control and for which the insured is legally liable 4. Property that the insured owns |
2. Both answers |
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Under Multi-peril crop insurance, all of the following would be considered small grain crops, EXCEPT: 1. Rye 2. Barley 3. Wheat 4. Grain sorghum |
4. Grain sorghum |
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All of the following may be covered under a Motor Truck Cargo policy, EXCEPT: 1. Pre-paid freight charges 2. Trucks you own 3. Trucks you hire 4. Cargo you own |
1. Pre-paid freight charges |
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Which Ocean Marine coverage describes an 'Indirect loss' that provides coverage for the shipper who has to pre pay shipping charges and/or import duties in the event the voyage is not completed or the goods have been damaged in route? |
Freight insurance |
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XYZ Manufacturing's boiler explodes, setting the factory on fire and causing extensive smoke damage. Significant water damage is done by the firemen extinguishing the blaze. all are true about XYZ's coverage, except: 1. The fire damage is covered by XYZ's Equipment Breakdown coverage 2. The boiler is covered by XYZ's equipment breakdown coverage 3. The water damage is covered by XYZ's Commercial property coverage 4. the smoke damage is covered by XYZ's commercial Property coverage |
1. The fire damage is covered by XYZ's Equipment Breakdown coverage |
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The Contractor's Equipment Floater requires that newly acquired equipment must be reported by the insured to the insurance company within |
60 days |
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In Surety bonding, which party seeks and pays for the bond? |
Principal |
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Which is true concerning the terms Cargo and Freight? 1. Neither answer 2. Freight is the property being shipped and Cargo is the cost of the shipment 3. Both answers 4. Cargo is the property being shipped and freight is the cost of the shipment |
4. Cargo is the property being shipped and freight is the cost of the shipment |
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Ocean Marine protection and Indemnity insurance provides |
Marine Liability Coverage |
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Individuals who are appointed by the court to manage the property of another might require what kind of bond |
Fiduciary bond |
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Bid bonds , Payment bonds, and Performance bonds are all examples of |
Contract bonds |
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In Commercial Ocean Marine Insurance, what is another name for liability coverage? |
Protection and Indemnity |
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All of the following are Excluded in a Farm Liability policy, except: 1. Accidental shooting of livestock 2. Strength and speed competition involving mobile equipment 3. Providing animal rides at a county fair charging a fee 4. Crop dusting |
1. Accidental shooting of livestock |
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The Nationwide Marine definition specifically includes all of the following, EXCEPT: 1. Yachts and Cruise ships 2. Domestic shipments 3. Exports 4. Imports |
1. Yachts and Cruise ships |
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Under the BOP, Additional coverages and the Extensions of coverage: 1. Are only included if indicated on the declarations page 2. Are not available with a BOP 3. Must be purchased by endorsment 4. Are provided automatically |
4. Are provided automatically |
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What is the primary difference between a Commercial Package Policy and a Businessowners policy? |
With a CPP, the insured can pick and choose the coverages included in the policy |
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Who of the following would be covered under the Medical Expenses coverage of the Businessowners policy: 1. An employee that is injured in an accident on the job while driving a company vehicle 2. A customer who was injured while shopping in the insured's store and incurs medical expenses 4 years after the date of the accident 3. A person injures himself while participating in a parade that passes by the insured's store 4. A customer who was injured while shopping in the insured's store |
4. A customer who was injured while shopping in the insured's store |
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The Businessowners policy: 1. Provides liability coverage only 2. Is always considered the primary carrier in the event there is other collectible insurance 3. Offers more coverages than that of a Commercial Package policy 4. Provides a prepackaged policy of property and liability coverages for certain types of small businesses |
4. Provides a prepackaged policy of property and liability coverages for certain types of small businesses |
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Which statement is NOT true concerning a BOP? 1. The BOP is written on a Named Peril basis only 2. Buildings insured at least 80% to value would have losses settled on a Replacement Cost basis 3. Business income and Extra coverage is provided for 12 months 4. The BOP does not have a Coinsurance requirement |
1. The BOP is written on a Named Peril basis only |
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Which of the following businesses is NOT eligible for a BOP 1. Condominium association 2. Coffee shop 3. Putt Putt Golf fun center 4. Jewelry repair shop |
3. Putt Putt Golf fun cneter |
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Which business would be eligible for a BOP? 1. Cocktail bar 2. Parking garage 3. Credit union 4. Fast food restaurant |
4. Fast food restaurant |
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Business personal property moved to a new location to protect it from a covered peril is covered by the BOP for up to how many days? |
30 |
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A building insured under a BOP loses vandalism coverage after it has been vacant for how many days? |
60 |
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The BOP generally has a base deductible that ranges from: |
$500-$2500 |
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Which of the following would NOT be eligible for a BOP? 1. Florist shop 2. Gas station 3. Bakery 4. Funeral parler |
2. Gas station |
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Under the BOP, the insurer may examine and audit the books and records at any time during the policy period and up to how long after the policy period |
3 years |
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Which of the following IS true regarding an Earthquake Endorsement: 1. Both answers 2. Coverage continues for up to 72 hours after policy expiration if it began before the policy expired 3. Covers volcanic eruptions 4. Neither answer |
1. Both answers |
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If there is other collectible insurance, the BOP acts as what type of coverage? |
Excess |
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The minimum liability limits under a BOP are |
$300,000 per occurrence |
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In a monopolistic state, an employer purchases Workers' Compensation insurance from: |
A state fund |
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Which of the following has the greatest impact on Workers' compensation rates? 1. type of accident 2. All of the answers listed 3. Severity of claims 4. Frequency of claims |
4. Frequency of claims |
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Which of the following Federal Workers' Compensation laws applies to the crews of ocean vessels: 1. Longshoremen and Harbor Workers Act 2. Jones ACT 3. Federal Employees Compensation act 4. Outer Continental Shelf lands ACT |
2. Jones ACT |
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All of the following are ways of funding Workers' Compensation benefits, except: 1. Private insurance 2. Self insurance 3. A monopolistic or competitive state fund 4. Employee paid premiums |
4. Employee paid premiums |
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In states that have competitive Workers' Compensation funds, the employer may purchase insurance from? |
The state or a private insurer |
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In Workers' Compensation, an experience rating over 1.0 will cause |
A premium increase |
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Prior to the enactment of Workers' Compensation laws, employers regularly used all of the following defenses against negligence suits brought by injured employees, EXCEPT: 1. Fellow servant 2. Assumption of risk 3. Employer Liability 4. contributory Negligence |
3. Employer Liability |
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Under the Workers' Compensation system, who is responsible for the expenses resulting from work-related injuries and occupational diseases? |
The employer, regardless of whether it was at fault for the injury or diseaseP |
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Part two- Employers Liability has which of the following occupational 'Accident Limits'? 1. $200,000 per accident 2. $50,000 per person 3. $200,000 per person 4. $100,000 per accident |
4. $100,000 per accident |
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Which is NOT a source for Workers' Compensation coverage: 1. Risk sharing groups 2. Private insurance companies 3. Monopolistic state funds 4. Competitive state funds |
1. Risk sharing groups |
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Which Federal Workers' compensation law covers postal workers? |
Federal Employee Liability act |
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Which of the following types of benefits is generally not provided by a state's Workers' Compensation law? 1. Rehabilitation 2. Disability 3. Medical 4. Mental Anguish |
4. Mental Anguish |
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In MOST states, Workers' Compensation laws are? 1. voluntary 2. compulsory 3. Elective 4. Competitive |
2. Compulsory |
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Coverage for sums an employer becomes legally obligated to pay under the common law as a result of a work-related injury to an employee is provided by |
Part two- Employers liability section of workers' compensation policy |
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Which part of the Workers' Compensation and Employers liability policy pays all compensation and other benefits required by the state's Workers' Compensation law? |
Part one- Worker's compensation |
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Medical benefits under the Workers' Compensation policy are: 1. Limited per accident 2. Not subject to time or dollar limits unless they are specified in the state law 3. Paid once the employer has been proven legally liable for the injury 4. Limited per policy period |
2. Not subject to time or dollar limits unless they are specified in the state law |
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Which of the following is NOT a level of disability recognized by most state Workers' compensation statutes 1. Temporary partial 2. Partial total 3. Permanent partial 4. Temporary total |
2. Partial total |
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Part Two- Employers Liability has which of the following occupational 'sickness limits' 1. $100,000 per person 2. $100,000 per accident 3. $200,000 per person 4. $200,000 per accident |
$100,000 per person |
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An applicant who fails two examinations for the same line of authority must wait ____ to take another examination for that line of authority |
3 months |
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A licensee must inform the Commissioner of a change of legal name or address within ____ days of the change |
30 |
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An order granting authorization to become a professional surety on bail must be reissued annually by the |
Presiding circuit judge of the county in which the company desires to execute bail or appearance bonds |
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The essence of all undertakings of bail is: 1. The payment of all defense costs 2. The payment of all court costs 3. The appearance of the defendant at court 4. All of the answers listed |
3. The appearance of the defendant at court |
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The Commissioner may do all of the following, except: 1. Manage and supervise the department of insurance 2. Enforce insurance law 3. Examine and investigate insurance matters 4. Change insurance laws for the good of the general public |
4. Change insurance laws for the good of the general public |
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Unless revoked or suspended, an insurance producer license will remain in effect for: |
As long as the renewal fee is paid and the continuing education requirements are met |
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To receive a license as a resident insurance producer, an applicant must be at least: |
18 years old |
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All of the following are reasons that the commissioner may suspend a producers license, except: 1. Failing to pay state income tax 2. Failing to comply with a child support order 3. Lying on your application for license 4. Conviction of a misdemeanor |
4. Conviction of a misdemeanor |
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In Alabama, the commissioner of insurance is appointed by |
The governor |
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Which of the following would NOT be classified as a dependent under Workers' Compensation law: 1. The unemployed 21 year old son of an injured employee 2. The injured employee's spouse 3. The injured employee's 17 year old son 4. The handicapped, unemployable 22 year old son of an injured employee |
1. The unemployed 21 year old son of an injured employee |
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Workers' Compensation benefits for temporary partial disability will be paid for a maximum of: |
300 weeks |
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The Commissioner may do all of the following, except: 1. Manage and supervise the department of insurance 2. Change insurance laws for the good of the general public 3. Examine and investigate insurance matters 4. Enforce insurance law |
2. Change insurance laws for the good of the general public |
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Offering to give a prospect anything of value not specified in the contract to persuade the prospect to purchase the insurance is called |
Rebating |
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An adjuster must keep the usual and customary records pertaining to transactions under the license for at least: |
1 year |
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A producer must keep complete records pertaining to transactions under the producer's license for at least |
3 years |
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Which of the following is responsible for the licensing of insurance agents: 1. FINRA 2. NAIC 3. Individual State Insurance Department 4. An Insurance Company Regional office |
3. Individual State Insurance Department |
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If an employee dies as a result of a work-related accident or occupational disease, the employer must pay burial expenses of up to |
$3000 |
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The Commissioner can extend the time you have to complete your continuing education requirements for up to how long |
90 days |
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Upon written demand by a person aggrieved, the Commissioner must hold a hearing within |
30 days upon receipt of the demand |
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The following are legal grounds for cancellation of Automobile Insurance in Alabama, except 1. Driver suffers from epilepsy or is addicted to drugs and/or alcohol 2. Nonpayment of premium 3. Vehicle is deemed to be unsafe 4. Vehicle has been involved in an accident in the last 12 months |
4. Vehicle has been involved in an accident in the last 12 months |
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Which of the following would most likely be covered by Workers' compensation 1. An employee is injured at work and is found to be under the influence of drugs or alcohol 2. An employee intentionally causes an injury to himself while at work 3. An employee is injured on his way to work in a traffic accident 4. An employee is injured by the negligent act of a co-worker |
4. An employee is injured by the negligent act of a co-worker |
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A temporary insurance producer license may be issued for up to |
6 months |
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The minimum liability limits in Alabama are |
25/50/25 |
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A defendant cannot be admitted to bail if |
He/She is charged with an offense punishable by death and the court believes he/she is guilty |