Business Quiz: Miscellaneous Commercial Insurance
For those who are not business owners, the term “commercial insurance” may be lost on you a little bit. Simply put, however, much like any insurance for your home, car, pet, and even your health, commercial insurance is used for your business and for keeping it financially secure. What do you know about it?
- 1.
Which of the following may be covered under a Farm coverage part?
- A.
Farm buildings, equipment, and livestock
- B.
Liability arising out of farm operations
- C.
Growing crops
- D.
Farm dwelling and its personal property
Correct Answer(s)
A. Farm buildings, equipment, and livestock
B. Liability arising out of farm operations
D. Farm dwelling and its personal propertyExplanation
A, B, and D are correct. Growing crops are not covered under a Farm coverage part.Rate this question:
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- 2.
A breakdown of equipment covered under the Equipment Breakdown Protection coverage form results in the simultaneous breakdown of three other pieces of covered equipment. According to the form, how many "breakdowns" occurred in this loss?
- A.
One
- B.
Two
- C.
Three
- D.
Four
Correct Answer
A. OneExplanation
A is correct. One breakdown means that if an initial breakdown causes other breakdowns, all are considered a single breakdown. All breakdowns at any one premises that manifest themselves at the same time and are the direct result of the same cause are considered "one breakdown."Rate this question:
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- 3.
The insured knows that it might take several months for his damaged turbine to be fully repaired, so he authorizes $500 for temporary repairs so that production can resume. This expenditure would be covered under which coverage in the Equipment Breakdown Protection coverage form?
- A.
Spoilage
- B.
Errors or omissions
- C.
Expediting expense
- D.
Contingent business income
Correct Answer
C. Expediting expenseExplanation
C is correct. This coverage extension covers the reasonable cost of temporary repairs and expedition (speeding up) of permanent repairs.Rate this question:
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- 4.
Under the Equipment Breakdown Protection coverage form, which of the following causes of damage to covered equipment would not be a covered "breakdown"?
- A.
Electrical failure, including arcing
- B.
Leakage at any valve, fitting, shaft seal, gland packing, joint, or connection
- C.
Failure of pressure or vacuum equipment
- D.
Mechanical failure, including rupture or bursting caused by centrifugal force
Correct Answer
B. Leakage at any valve, fitting, shaft seal, gland packing, joint, or connectionExplanation
B is correct. Under the Equipment Breakdown Protection coverage form, breakdown means the following types of direct physical loss that cause damage to covered equipment and necessitates its repair or replacement: failure of pressure or vacuum equipment, mechanical failure, including rupture or bursting caused by centrifugal force, and electrical failure, including arcing. Choice B is specifically excluded under this definition.Rate this question:
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- 5.
Which of the following statements apply to Professional Liability policies?
- A.
They cover the insured's liability arising out of rendering or failing to render services of a professional nature.
- B.
They duplicate the coverage provided by the CGL policy.
- C.
They are tailored to fit specific occupational needs.
- D.
They cover most general liability and automobile liability losses.
Correct Answer(s)
A. They cover the insured's liability arising out of rendering or failing to render services of a professional nature.
C. They are tailored to fit specific occupational needs.Explanation
A and C are correct. Liability arising out of rendering or failing to render services of a professional nature is excluded under CGL policies. Special Professional Liability policies have been developed for many professionals, such as physicians, lawyers, and insurance agents. Each policy is tailored to fit a specific occupational need.Rate this question:
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- 6.
A business that wants coverage for its liability for employment-related acts can obtain it by purchasing which of the following?
- A.
CGL insurance
- B.
Workers Compensation and Employers Liability insurance
- C.
Employment Practices Liability insurance
- D.
Any of the above
Correct Answer
C. Employment Practices Liability insuranceExplanation
C is correct. This coverage is provided by Employment Practices Liability insurance. The other policies listed specifically exclude losses arising out of employment-related practices.Rate this question:
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- 7.
Commercial insureds who need more Liability coverage than provided by a certain policy or want coverage for losses excluded by a certain policy should purchase which of the following?
- A.
Difference in Conditions policy
- B.
Commercial Umbrella policy
- C.
Surety bond
- D.
Fidelity bond
Correct Answer
B. Commercial Umbrella policyExplanation
B is correct. Commercial Umbrella policies provide catastrophic Liability coverage for business risks. Because the Umbrella is not designed to handle usual or everyday exposures, the insured must have underlying Liability coverage before an Umbrella will be issued. The Umbrella can cover certain losses that are excluded by the underlying insurance.Rate this question:
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- 8.
Which of these statements regarding Difference in Conditions insurance are correct?
- A.
It excludes coverage for basic perils such as fire, lightning, and windstorm.
- B.
It is written in conjunction with policies that cover basic perils.
- C.
It does not have a deductible requirement.
- D.
It covers property and liability exposures.
Correct Answer(s)
A. It excludes coverage for basic perils such as fire, lightning, and windstorm.
B. It is written in conjunction with policies that cover basic perils.Explanation
A and B are correct. Difference in Conditions insurance is written to exclude the basic fire and extended coverage perils, but to include most other insurable perils that are not covered under Commercial Property coverage. Consequently, it is written in conjunction with policies providing the basic coverage excluded by the DIC policy. DIC policies are usually written on large risks with a high deductible.Rate this question:
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- 9.
Which one of the following answer choices lists all of the parties to a Surety bond?
- A.
Principal and obligee
- B.
Principal, obligee, surety
- C.
Surety and obligee
- D.
Principal and surety
Correct Answer
B. Principal, obligee, suretyExplanation
B is correct. There are three parties to a Surety bond: the principal, the obligee, and the surety.Rate this question:
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- 10.
All of the following types of losses may be covered by the Equipment Breakdown Protection coverage form except which of the following?
- A.
Business income losses and/or extra expenses
- B.
Expediting expenses
- C.
Losses because of spoilage damage
- D.
Damage caused by fire or combustion explosion
Correct Answer
D. Damage caused by fire or combustion explosionExplanation
D is correct. Business income and/or extra expense losses, expediting expenses, and spoilage damage are all coverage options in the Equipment Breakdown Protection coverage form. Damage caused by fire or combustion explosion is excluded because it is covered under Commercial Property insurance.Rate this question:
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- 11.
How do deductibles apply in the Equipment Breakdown Protection coverage form?
- A.
Deductibles apply separately for each applicable coverage unless the deductibles are shown as "combined" for any two or more coverages.
- B.
A single deductible applies to all applicable coverages.
- C.
Deductibles are always stated as a specific dollar amount.
- D.
There are no deductibles under this coverage.
Correct Answer
A. Deductibles apply separately for each applicable coverage unless the deductibles are shown as "combined" for any two or more coverages.Explanation
A is correct. Deductibles apply separately for each applicable coverage unless the deductibles are shown as "combined" for any two or more coverages. Depending on the coverage, the deductible might be expressed as a dollar amount, a time limit, a percentage of loss, or a multiple of daily value.Rate this question:
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- 12.
Under the terms of the Suspension provision in the Equipment Breakdown Protection coverage form, coverage on dangerous equipment can be suspended when?
- A.
On 30 days' advance notice to the insured
- B.
At the end of the policy period
- C.
Immediately on delivery of written notice to the insured
- D.
On 15 days' advance notice when sent by certified mail
Correct Answer
C. Immediately on delivery of written notice to the insuredExplanation
C is correct. The insurer can immediately suspend coverage whenever covered equipment is found to be in or exposed to a dangerous condition. Suspension applies only to that particular object and takes effect as soon as written notice is delivered to the insured.Rate this question:
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Sep 10, 2024Quiz Edited by
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Feb 25, 2009Quiz Created by
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