Chapter 22: Practice Exam 2

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Practice Exam Quizzes & Trivia

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


Questions and Answers
  • 1. 
    • 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. 
    • 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. 
    • 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. 
    • 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. 
    • 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. 

      $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. 
    • 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. 
    • 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

  • 26. 
    Which dwelling forms provide coverage for loss of fair rental value when a dwelling becomes uninhabitable?
    • A. 

      The special form only

    • B. 

      The basic and broad forms only

    • C. 

      The broad and special forms only

    • D. 

      The basic, broad, and special forms

  • 27. 
    On a commercial package policy, interline endorsements are which of the following?
    • A. 

      Attached to the common policy conditions

    • B. 

      Attached to the common policy declarations

    • C. 

      Only apply to commercial property coverages

    • D. 

      Could apply to more than one line of insurance

  • 28. 
    On homeowners policies, personal property used for business purposes is which of following?
    • A. 

      Cannot be covered

    • B. 

      Covered only if an additional premium is paid

    • C. 

      May be covered only while on the residence premises

    • D. 

      Covered up to $2,500 on the premises and up to $500 off the premises

  • 29. 
    • A. 

      The insurer will keep the earned premium plus an additional amount for policy writing expenses.

    • B. 

      There will be a pro rata adjustment of the premium so that the insured is not charged for the full policy term.

    • C. 

      The agent will return the commission paid on the policy to the insurer.

    • D. 

      The insurer will return the unearned premium plus interest on the amount that was not used.

  • 30. 
    • A. 

      Robbery

    • B. 

      Burglary

    • C. 

      Embezzlement

    • D. 

      Safe burglary

  • 31. 
    • A. 

      Retention

    • B. 

      Transfer

    • C. 

      Avoidance

    • D. 

      Reduction

  • 32. 
    Office buildings are eligible for coverage under a businessowners policy if they do not contain more than 100,000 square feet of space and do not exceed which of the following?
    • A. 

      4 stories in height

    • B. 

      6 stories in height

    • C. 

      8 stories in height

    • D. 

      10 stories in height

  • 33. 
    The commercial Common Policy declarations would include all of the following types of information except which one?
    • A. 

      The policy period

    • B. 

      The coverage parts purchased and their premiums

    • C. 

      The exclusions that apply to the coverages

    • D. 

      The identity and mailing address of the named insured

  • 34. 
    Under the loss sustained version of commercial crime coverage forms, the policy will cover losses sustained during the policy period and discovered either during the policy term or no later than which of the following?
    • A. 

      Three years after policy expiration

    • B. 

      Two years after policy expiration

    • C. 

      One year after policy expiration

    • D. 

      Six months after policy expiration

  • 35. 
    Under the NCCI workers compensation and employers liability policy form, the employers liability coverage excludes any claim for which of the following?
    • A. 

      Care and loss of service

    • B. 

      Liability assumed under contract

    • C. 

      Damages to a third party

    • D. 

      Consequential injury to a spouse or relative of an injured worker

  • 36. 
    Each of the following is true about farm coverages except which one?
    • A. 

      Livestock and equipment may be insured.

    • B. 

      Property and liability coverages may be included.

    • C. 

      The principal residence may be covered by farm or homeowners forms.

    • D. 

      Farm coverage may be written as a mono-line policy or part of a package.

  • 37. 
    • A. 

      Contracts of indemnity

    • B. 

      Unilateral contracts

    • C. 

      Contracts of adhesion

    • D. 

      Aleatory contracts

  • 38. 
    After a homeowners policy has been in effect for at least 60 days, when the insurer cancels for any reason other than nonpayment of premium, it must give the insured advance written notice of at least how many days?
    • A. 

      60 days

    • B. 

      30 days

    • C. 

      20 days

    • D. 

      10 days

  • 39. 
    • A. 

      Abandonment

    • B. 

      Pair or set clause

    • C. 

      Subrogation

    • D. 

      Arbitration

  • 40. 
    A businessowners policy may provide additional coverage for increased cost of construction when required to comply with an existing ordinance or law. However, this coverage is available only for buildings that are insured on a replacement cost basis and it is limited to which of the following amounts?
    • A. 

      $10,000

    • B. 

      $7,500

    • C. 

      $5,000

    • D. 

      $2,500

  • 41. 
    • A. 

      Personal property replacement cost

    • B. 

      Permitted incidental occupancies

    • C. 

      Increased limits for jewelry, watches, and furs

    • D. 

      Coverage for loss of use of the premises

  • 42. 
    Which of the following is true about commercial crime coverage written on a discovery policy form?
    • A. 

      In order to be covered, losses must be sustained and discovered during the policy period.

    • B. 

      Losses may be covered if they are discovered at any time up to 18 months after the policy expires.

    • C. 

      No exclusions apply to the types of losses that may be covered by this form.

    • D. 

      A loss discovered during the policy period will be covered even if it was sustained years earlier.

  • 43. 
    • A. 

      Misrepresentation

    • B. 

      Concealment

    • C. 

      Waiver and estoppel

    • D. 

      Fraud

  • 44. 
    When an insurer cancels a commercial package policy for reasons other than nonpayment of premium, it must give written notice to the first named insured at least how long?
    • A. 

      60 days in advance

    • B. 

      30 days in advance

    • C. 

      20 days in advance

    • D. 

      10 days in advance

  • 45. 
    • A. 

      Miscellaneous type vehicles

    • B. 

      Towing and labor costs

    • C. 

      Transportation expenses

    • D. 

      Named nonowner coverage

  • 46. 
    The commercial building and personal property coverage form provides a number of coverage extensions but only if which of the following is true?
    • A. 

      The coverage for buildings is written on a replacement basis.

    • B. 

      All coverages are written on a blanket basis.

    • C. 

      They are shown in the declarations and an additional premium is paid.

    • D. 

      An 80% or higher coinsurance percentage or a value reporting symbol is shown in the declarations.