Chapter 22: Practice Exam 2

46 Questions | By Fsspc | Updated: Mar 21, 2022 | Attempts: 2058

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Property and Casualty Insurance License Exam Cram™Practice Exam 2 Questions

Questions and Answers

1.

The term "time element coverage" is used when the amount of loss depends on which of the following?
- A.
  
  The time between the date of loss and the policy expiration date
- B.
  
  The time between the policy effective date and date of loss
- C.
  
  The time of year when a seasonal business suffers a loss
- D.
  
  The time it takes to repair, rebuild, or restore damaged property
2.

Which of the following is not one of the common law defenses against an employer's liability?
- A.
  
  Assumption of risk
- B.
  
  Fellow servant rule
- C.
  
  Proximate cause
- D.
  
  Contributory negligence
3.

Vehicles that might be insured by a personal auto policy are described in the eligibility rules and the policy definitions. Each of the following is true about vehicles eligible for PAP coverage except
- A.
  
  Vehicles with fewer than four wheels are not eligible.
- B.
  
  Vehicles owned by an individual or married couple may be insured.
- C.
  
  Private passenger autos, pickup trucks, and vans used for personal transportation may be insured.
- D.
  
  Vans used in a delivery business are eligible for coverage.
4.

Businessowners policies provide an additional coverage for preservation of property when it is removed from the premises to protect it from loss by a covered peril. The coverage will apply at other locations for up to
- A.
  
  60 days
- B.
  
  30 days
- C.
  
  20 days
- D.
  
  15 days
5.

Which of the following losses is not excluded under the physical damage coverage of a personal auto policy?
- A.
  
  Loss of custom furnishings in a customized van
- B.
  
  Loss caused by freezing of the cooling system
- C.
  
  Damage to equipment designed for the detection of radar
- D.
  
  Damage to a covered auto while being used as part of a car pool
6.

Under the business auto coverage part, liability insurance applies to mobile equipment while which of the following occurs?
- A.
  
  It is being operated on public roads.
- B.
  
  It is being carried or towed by a covered auto.
- C.
  
  It is being operated away from the insured's premises and work sites.
- D.
  
  It is being used for the purpose for which it was designed.
7.

Insurance is a mechanism used to manage which of the following types of risk?
- A.
  
  Pure risks
- B.
  
  Speculative risks
- C.
  
  Both pure and speculative risks
- D.
  
  Neither pure nor speculative risks
8.

Under the 1989 dwelling policy forms, if coverage for vandalism and malicious mischief is attached to a policy, it will be suspended whenever the building has been vacant for more than how many days?
- A.
  
  45 consecutive days
- B.
  
  30 consecutive days
- C.
  
  20 consecutive days
- D.
  
  10 consecutive days
9.

Commercial general liability coverage provides medical expense payments for accidental injuries if the expenses are incurred and reported to the insurer within what date?
- A.
  
  Six months after the accident date
- B.
  
  One year after the accident date
- C.
  
  Two years after the accident date
- D.
  
  Three years after the accident date
10.

An employer purchases a fidelity bond to protect against potential losses by employee dishonesty. In this situation, each of the employees covered by the bond is considered which of the following?
- A.
  
  A fiduciary
- B.
  
  A principal
- C.
  
  A guarantor
- D.
  
  An obligee
11.

When insurance is written on a dwelling form, each of the following types of property would be insured under Coverage A (dwelling coverage) except which one?
- A.
  
  A storage shed connected to the dwelling by a utility line
- B.
  
  A laundry room attached to the dwelling
- C.
  
  Building equipment and outdoor equipment
- D.
  
  Materials and supplies used for construction or repair of the dwelling
12.

On homeowners policies, "insured location" is a broad term describing where liability coverages apply. It includes each of the following except which one?
- A.
  
  Family cemetery plots
- B.
  
  Any newly acquired premises
- C.
  
  Structures on farm land owned by an insured
- D.
  
  A nonowned premises used as a temporary residence by an insured
13.

The most common definition of actual cash value (ACV) in the property insurance field is which of the following?
- A.
  
  Original cost, plus depreciation
- B.
  
  Original cost, less depreciation
- C.
  
  Replacement cost, plus depreciation
- D.
  
  Replacement cost, less depreciation
14.

Each of the following is true about the National Flood Insurance Program except which one?
- A.
  
  There are maximum limits on the amount of coverage available.
- B.
  
  Coverage may be written by private insurance carriers.
- C.
  
  Eligibility requirements are set by private insurance carriers.
- D.
  
  The federal government reimburses insurance companies for losses that exceed premiums collected.
15.

What is meant by the term "adverse selection"?
- A.
  
  Underwriting practices that discriminate against applicants in certain geographical areas
- B.
  
  Selling types of insurance to applicants who do not need that particular kind of coverage
- C.
  
  Agency marketing practices that promote only the policies that pay the highest commissions
- D.
  
  The tendency of people with greater than average exposure to loss to purchase insurance
16.

A commercial building valued at $300,000 is insured for $200,000. If the policy is written with an 80% coinsurance percentage and a standard deductible, how much would be paid for a $60,000 loss?
- A.
  
  $60,000
- B.
  
  $49,500
- C.
  
  $40,000
- D.
  
  $39,500
17.

Under homeowners coverage for medical payments to others, necessary medical expenses for treating an accidental injury will be covered if it incurred within how many days?
- A.
  
  90 days of the accident date
- B.
  
  1 year of the accident date
- C.
  
  3 years of the accident date
- D.
  
  5 years of the accident date
18.

Under a Personal Umbrella policy, a self-insured retention is an amount that
- A.
  
  Is in effect a deductible for insured losses.
- B.
  
  Reflects the maximum the insurer will pay for a particular loss.
- C.
  
  Applies between underlying coverage and the umbrella coverage.
- D.
  
  Reduces the amount of underlying coverage available to cover insured losses.
19.

Ocean marine protection and indemnity (P&I) coverage usually insures the ship owner against liability for all of the following except which one?
- A.
  
  Cargo lost or damaged through negligence
- B.
  
  Damage to other vessels when caused by collision
- C.
  
  Damage to or loss of the insured ship
- D.
  
  Job-related injuries to sailors
20.

National flood insurance is available for which of the following?
- A.
  
  Private residences only
- B.
  
  Private residences and residential contents only
- C.
  
  Residential and nonresidential buildings only
- D.
  
  Residential and nonresidential buildings and contents
21.

Which dwelling forms can provide replacement cost coverage for buildings?
- A.
  
  The basic and broad forms only
- B.
  
  The broad and special forms only
- C.
  
  The special form only
- D.
  
  The basic, broad, and special forms
22.

Under the commercial property conditions, the coverage territory includes all of the following except which one?
- A.
  
  United States
- B.
  
  Mexico
- C.
  
  Puerto Rico
- D.
  
  Canada
23.

Which of the following risks might qualify for coverage under a businessowners policy?
- A.
  
  A bank or saving and loan association
- B.
  
  A bar and grill
- C.
  
  An office building of any size
- D.
  
  An apartment building of any size
24.

Under business auto liability coverage, if an insured takes time off from work at the request of the insurer and suffers loss of earnings, as a supplementary payment, the insurer will pay up to how much?
- A.
  
  $150 a day for lost earnings
- B.
  
  $200 a day for lost earnings
- C.
  
  $250 a day for lost earnings
- D.
  
  $300 a day for lost earnings
25.

The primary purpose of insurance is to do which of the following?
- A.
  
  Avoid risk
- B.
  
  Eliminate risk
- C.
  
  Transfer risk
- D.
  
  Reduce risk