1.
Medical payments under a homeowners policy are available for expenses resulting from an injury to which of the following?
Correct Answer
B. A residence employee
Explanation
Medical payments under a homeowners policy are available for expenses resulting from an injury to a residence employee. This means that if a residence employee, such as a nanny or a housekeeper, gets injured while working at the insured's home, the homeowners policy will cover their medical expenses.
2.
Some property insurance policies provide for payment of the full policy limit in the event of a total loss by a covered peril, regardless of the actual value of the property. These policies are known as which of the following?
Correct Answer
C. Valued or agreed amount policies
Explanation
Valued or agreed amount policies provide for payment of the full policy limit in the event of a total loss by a covered peril, regardless of the actual value of the property. These policies are different from ACV (actual cash value) policies, which only pay for the depreciated value of the property at the time of the loss. Indemnity policies, on the other hand, reimburse the policyholder for the actual amount of the loss up to the policy limit. Market value policies pay out based on the current market value of the property.
3.
When an uninterrupted chain of events resulting from a negligent act causes a loss, that act is considered to be which of the following?
Correct Answer
C. The proximate cause of loss
Explanation
The proximate cause of loss refers to a negligent act that directly leads to a loss through an uninterrupted chain of events. It is the primary cause that sets in motion a sequence of events, ultimately resulting in the loss. This concept is important in determining liability and causation in legal cases. It is different from an assumption of risk, which involves voluntarily accepting the potential risks associated with an activity, an intervening cause, which is an unforeseeable event that breaks the chain of causation, and strict liability, which holds a party liable regardless of fault.
4.
Policies issued under the National Flood Insurance Program provide removal coverage for property removed to protect it from the flood. This coverage applies at another location for up to how many days?
Correct Answer
B. 45 days
Explanation
Policies issued under the National Flood Insurance Program provide coverage for property that is removed to protect it from a flood. This coverage applies at another location for up to 45 days. This means that if a property needs to be temporarily relocated to a safer area due to the risk of flooding, the insurance policy will cover the property for up to 45 days at the new location.
5.
In legal terms, the actions of one party might have the effect of giving up a known right. When this occurs, the party has created which of the following?
Correct Answer
D. Waiver
Explanation
In legal terms, when one party voluntarily and intentionally gives up a known right, it is referred to as a waiver. This means that the party has chosen not to enforce or exercise a specific right, even though they have the option to do so. A waiver can be explicit or implied and is a common concept in contract law and other legal contexts.
6.
When the special causes of loss form are attached to a commercial property coverage part, coverage for theft of furs and fur garments is limited to how much?
Correct Answer
A. $2,500
Explanation
When the special causes of loss form are attached to a commercial property coverage part, coverage for theft of furs and fur garments is limited to $2,500. This means that if furs or fur garments are stolen, the insurance policy will cover up to $2,500 for the loss.
7.
An insurer's loss ratio is determined by dividing what?
Correct Answer
D. Underwriting losses by total premiums
Explanation
The loss ratio is used to compare the company's loss experience from year to year. It is calculated by dividing the amount of incurred underwriting losses by the earned premium. It can be calculated separately for individual lines of insurance or the company's entire operations.
8.
Under most property insurance policies, the policy territory includes which of
the following?
Correct Answer
B. The United States, its territories and possessions, and Canada
Explanation
Under most property insurance policies, the policy territory typically includes the United States, its territories and possessions, and Canada. This means that coverage extends to properties located within the United States, its territories (such as Puerto Rico, Guam, etc.), possessions (such as American Samoa), and Canada. Including these areas in the policy territory ensures that properties situated within these regions are covered by the insurance policy, providing broader protection for policyholders.
9.
Claims-made general liability coverage does not
apply to bodily injury or property damage that occurs when?
Correct Answer
B. Before the policy's retroactive date
Explanation
Claims-made general liability coverage only applies to bodily injury or property damage that occurs after the policy's retroactive date. This means that any claims arising from incidents that happened before the retroactive date are not covered by the policy.
10.
Under liability insurance policies, what does an "aggregate limit" mean?
Correct Answer
B. It is the most the insurer will pay for all losses during any one policy period.
Explanation
An "aggregate limit" under liability insurance policies refers to the maximum amount that the insurer will pay for all losses that occur during a specific policy period. This means that regardless of the number of claims or accidents that take place within that period, the insurer will only pay up to the aggregate limit. Once that limit is reached, the insurer will not provide any further coverage for losses.
11.
In the event of a physical damage loss that makes a covered auto unavailable for
a period of time, a personal auto policy will provide coverage for
transportation expenses at the rate of $20 per day up to how much?
Correct Answer
C. A maximum payment of $600
Explanation
In addition to collision and other than collision coverage, if a covered loss makes an insured auto unavailable, a personal auto policy will provide coverage for transportation expenses up to $20 per day, subject to a maximum payment of $600.
12.
Under the business auto coverage part, each of the following is true about the
classifications of covered autos, which are designated by numerical symbols
shown in the declarations, except for which of
the following?
Correct Answer
A. All classes of newly acquired autos are automatically covered.
Explanation
Under the business auto coverage part, all classes of newly acquired autos are automatically covered. This means that when a business acquires a new vehicle, it is automatically covered under the policy without the need for any additional action or endorsement. This is different from the other statements, which discuss the ability to select different classifications for various coverages, the broadest coverage classification being "any auto," and the inclusion of leased, hired, rented, or borrowed autos under the classification of "hired autos."
13.
Something that might increase the likelihood that a loss will occur is called what?
Correct Answer
B. Hazard
Explanation
A hazard refers to something that can increase the likelihood of a loss occurring. It represents a potential source of danger or harm that can lead to negative consequences. Hazards can be physical, chemical, biological, or environmental in nature. They can include factors such as fire, toxic substances, natural disasters, or unsafe working conditions. Identifying and managing hazards is important in risk assessment and mitigation to prevent or minimize potential losses or damages.
14.
Tom Baxter has an automobile insured by a personal auto policy. He trades in his car and purchases a new private passenger auto as a replacement vehicle. If he does not notify the insurance company, the liability coverage for his replacement vehicle will apply automatically for how long?
Correct Answer
D. Until the end of the policy period
Explanation
Under a personal auto policy, if a newly acquired auto replaces another auto, the new vehicle automatically has the broadest coverage for liability, medical payments, and uninsured motorists coverage for any auto shown in the declarations until the end of the policy period.
15.
A device that is used to minimize small nuisance claims and that helps to keep insurance premiums down is called what?
Correct Answer
B. Deductible
Explanation
A deductible is an amount of money that an insured person must pay out of pocket before their insurance coverage kicks in. It is used to minimize small nuisance claims by discouraging policyholders from filing claims for minor damages or losses. By requiring policyholders to bear a portion of the cost, insurance companies are able to keep insurance premiums down. Therefore, a deductible is a device used to minimize small nuisance claims and help keep insurance premiums low.
16.
Which type of insurance professional does not actually sell insurance coverage but sells advice about insurance coverage?
Correct Answer
C. Consultant
Explanation
The type of insurance professional who does not actually sell insurance coverage but sells advice about insurance coverage is a Consultant. Unlike producers or agents who directly sell insurance policies, consultants provide guidance and expertise to clients regarding their insurance needs, coverage options, risk management strategies, and other related matters.
17.
Under the NCCI worker's compensation and employers liability policy form, the
basic, or minimum, limit for employer's liability coverage is how much per
accident?
Correct Answer
B. $100,000 per accident
Explanation
Employer liability insurance provides coverage for sums the insured becomes legally obligated to pay under common law because of work-related injuries or occupational diseases. A minimum limit of $100,000 per accident applies.
18.
Which dwelling policy forms are named peril forms?
Correct Answer
B. The basic and broad forms
Explanation
The named peril forms in dwelling policy are the basic and broad forms. These forms specify the exact perils that are covered by the policy, as opposed to the special form, which operates on an all-risk basis, covering all perils except those specifically excluded.
19.
If general liability "claims-made" coverage is renewed by "occurrence" coverage
and the insured purchases a supplemental extended reporting period (ERP), the
period for reporting claims under the policy will be extended for how long?
Correct Answer
A. Indefinitely
Explanation
A supplemental extending reporting period provides an unlimited extension of the time for reporting covered claims. However, in order for a claim to be covered, it must not have occurred before the retroactive date and not after the policy expiration date.
20.
Under liability insurance policies, what does the term "personal injury" usually
mean?
Correct Answer
A. Injury for such things as libel, slander, false arrest, or invasion of privacy.
Explanation
The term "personal injury" under liability insurance policies usually refers to injury for things such as libel, slander, false arrest, or invasion of privacy. This means that if someone is harmed due to any of these actions, they may be covered under the liability insurance policy. It does not solely refer to bodily injuries, but includes other forms of injury that affect a person, such as damage to reputation or financial injury.
21.
Under a personal auto policy, if an insured already has physical damage coverage
for at least one vehicle, a new vehicle will be automatically covered from the
date it is acquired as long as the insured notifies the insurer and requests the
coverage within how many days?
Correct Answer
B. 14 days
Explanation
If an insured already has physical damage coverage for at least one vehicle under their personal auto policy, a new vehicle will be automatically covered from the date it is acquired as long as the insured notifies the insurer and requests the coverage within 14 days.
22.
Which of the following is not true about difference in conditions (DIC)
insurance?
Correct Answer
A. DIC policies provide property and liability coverages.
Explanation
DIC policies do provide broad property coverage intended to supplement other coverages and fill insurance gaps. For this reason, DIC policies typically exclude coverage for traditional perils such as fire, lightning, and extended coverage perils. DIC policies do not provide any liability coverage.
23.
If coverage for personal liability and medical payments is attached to a
dwelling policy, what basic limit of coverage applies to medical payments unless
a higher amount is purchased?
Correct Answer
B. $1,000 per person
Explanation
Under a dwelling policy, if the endorsement is included, the basic limit of coverage is $1,000 per person for medical payments to others. However, this is a minimum limit, and higher limits can be purchased.
24.
Under which type of marketing system do agents or agencies operate as
independent businesses but agree to represent only one insurance company?
Correct Answer
B. Exclusive of the captive agency system
Explanation
In the exclusive captive agency system, the insurance company contracts with agencies, which are independent businesses, to represent and sell insurance only for that insurance company.
25.
A commercial property coverage part with the basic causes of loss form attached
covers all of the following perils except which one?
Correct Answer
C. Volcanic eruption
Explanation
The commercial property coverage part with the basic causes of loss form attached covers all perils except for volcanic eruption. This means that if there is damage or loss to the commercial property due to windstorm, explosion, or sprinkler leakage, it will be covered by the insurance policy. However, if the damage or loss is caused by a volcanic eruption, it will not be covered.