Fire & Casualty Exam #3

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  • 1/150 Questions

    What does if mean if an agent's license is inactive?

    • The agent can transact insurance business if it is done with another agents approval
    • The agent can transact any insurance business for which the agent is licensed
    • The agent can still transact insurance business in CA, but not in any ohter state until it is reactivated
    • The agent cannot transact any insurance business for which a valid, active license is required
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About This Quiz

Fire & Casualty Exam #3
150 questions
3 hour time limit
70% to pass

Fire & Casualty Exam #3 - Quiz

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  • 2. 

    It is a violation of the CA Insurance Code to act as a producer for a non-admitted carrier unless:

    • The producer is an insurance solicitor

    • It is always a violation, no matter what type of producer

    • The producer is dually licensed in at least two states

    • The producer is a surplus lines broker

    Correct Answer
    A. The producer is a surplus lines broker
    Explanation
    The correct answer is that the producer is a surplus lines broker. This means that it is only permissible to act as a producer for a non-admitted carrier if the producer is specifically licensed as a surplus lines broker. This indicates that there are specific requirements and qualifications that need to be met in order to legally act as a producer for a non-admitted carrier.

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  • 3. 

    What would the commissioner likely do if an agent induces a client to co-sign a loan?

    • Suspend the agent's license

    • Force the agent to pay the loan back with interest

    • Impose a $1,000 fine

    • Force the agent to attend a state ethics course

    Correct Answer
    A. Suspend the agent's license
    Explanation
    If an agent induces a client to co-sign a loan, it is likely that the commissioner would suspend the agent's license. This action would be taken as a disciplinary measure to hold the agent accountable for their unethical behavior. Coercing a client into co-signing a loan can be considered a violation of professional ethics and a breach of trust. Suspending the agent's license would serve as a strong deterrent and ensure that they are unable to continue engaging in such practices.

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  • 4. 

    Which of the following types of coverage would be needed to cover a contractor's bulldozers which are used in the contractor's business but are not held for sale?

    • Older truck cargo floater

    • Contractor's equipment floater

    • Annual transit policy

    • Installment sales floater

    Correct Answer
    A. Contractor's equipment floater
    Explanation
    A contractor's equipment floater would be needed to cover a contractor's bulldozers which are used in the contractor's business but are not held for sale. This type of coverage is specifically designed to protect equipment that is used in a contractor's business operations. It provides coverage for damage or loss to the equipment, whether it is on the contractor's premises or being transported to and from job sites. It is a specialized form of insurance that is tailored to the unique risks and needs of contractors and their equipment.

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  • 5. 

    Which coverage is needed to protect physicians, surgeons and dentists for their professional activities?

    • Commercial general liability

    • Malpractice coverage

    • Employer's liability

    • Errors and Omissions coverage

    Correct Answer
    A. Malpractice coverage
    Explanation
    Malpractice coverage is needed to protect physicians, surgeons, and dentists for their professional activities. This type of coverage specifically addresses claims of negligence or errors made by healthcare professionals that result in harm to patients. It provides financial protection for legal expenses, settlements, and judgments that may arise from malpractice lawsuits. Commercial general liability coverage, employer's liability coverage, and errors and omissions coverage do not specifically address the unique risks and liabilities associated with medical professionals and their professional activities.

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  • 6. 

    Which of the following is most likely to be eligible for the CA Fair Plan?

    • An Insured with a very bad driving record

    • A poorly maintained dwelling with faulty wiring

    • An insured who has had a drivers license for less than two years

    • A well-maintained dwelling located in a hazardous brush area

    Correct Answer
    A. A well-maintained dwelling located in a hazardous brush area
    Explanation
    A well-maintained dwelling located in a hazardous brush area is most likely to be eligible for the CA Fair Plan. The CA Fair Plan is a program that provides insurance coverage for properties that are unable to obtain coverage through traditional insurance companies. Properties located in hazardous areas, such as brush areas, are often considered high-risk and may have difficulty obtaining insurance. However, if the dwelling is well-maintained, it may meet the eligibility criteria for the CA Fair Plan, which aims to provide coverage for properties in high-risk areas.

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  • 7. 

    Which of the following persons is not an insured under Section I of a homeowner's policy?

    • The named insured

    • The named insured's (resident) spouse

    • The named insured's (resident) 25 year old nephew

    • The named insured's (non-resident) spouse

    Correct Answer
    A. The named insured's (non-resident) spouse
    Explanation
    The named insured's (non-resident) spouse is not an insured under Section I of a homeowner's policy because Section I typically covers the named insured, their resident spouse, and resident relatives, but not non-resident spouses.

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  • 8. 

    What else must an applicant for a fire and casualty license, life agent license, or personal lines agent license complete in additional to pre-licensing classroom study?

    • A diversicty awareness course provided by the State of CA

    • A contract law course at any approved college location

    • A sales training course provided by the insurance department

    • A 12-hour course on ethics and the CA code

    Correct Answer
    A. A 12-hour course on ethics and the CA code
    Explanation
    In addition to pre-licensing classroom study, an applicant for a fire and casualty license, life agent license, or personal lines agent license must complete a 12-hour course on ethics and the CA code. This course is designed to ensure that applicants have a thorough understanding of ethical standards and the laws and regulations specific to the insurance industry in California. By completing this course, applicants demonstrate their commitment to conducting business in an ethical and lawful manner, which is essential for maintaining the trust and confidence of clients.

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  • 9. 

    If an armored car carrying an insured's bank deposit is robbed, what insurance would the insured need to be covered?

    • Money orders and counterfeit money

    • Funds transfer fraud

    • Outside the premises-theft of money and securities

    • Employee theft

    Correct Answer
    A. Outside the premises-theft of money and securities
    Explanation
    The insured would need the insurance coverage for "Outside the premises-theft of money and securities" in order to be covered in the event of a robbery of an armored car carrying their bank deposit. This coverage would protect the insured against theft that occurs outside of their premises, such as during transportation of the deposit. It would cover the loss of both money and securities, providing financial protection for the insured in case of such an incident.

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  • 10. 

    An open-peril policy protects against the loss from:

    • Perils found outside in the open

    • Only the perils openly named in the policy

    • Mainly, perils of the sea

    • Any peril, other than those specifically excluded

    Correct Answer
    A. Any peril, other than those specifically excluded
    Explanation
    An open-peril policy provides protection against any peril that is not specifically excluded. This means that the policy covers a wide range of risks and hazards, unless they are explicitly stated as exclusions. Unlike a named-peril policy, which only covers the perils that are specifically listed in the policy, an open-peril policy offers broader coverage and ensures that the policyholder is protected from a variety of potential risks.

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  • 11. 

    All Workers Compensation policies provide

    • Major medical coverage with 20% co-payment; co-payment has an annual stop-loss of $1,500

    • Compensation for worker related injuries without regard to fault

    • Adequate retirement benefits

    • 24-hour on and off the job coverage for workers

    Correct Answer
    A. Compensation for worker related injuries without regard to fault
    Explanation
    Workers Compensation policies provide compensation for worker related injuries without regard to fault. This means that regardless of who is at fault for the injury, the policy will provide coverage and compensation to the injured worker. This is an important feature of Workers Compensation policies as it ensures that workers are protected and supported in case of any work-related injuries or accidents.

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  • 12. 

    Which of the following perils is insured against in the Special form not in the Basic Form?

    • Fire

    • Lightning

    • Internal explosion

    • Collapse

    Correct Answer
    A. Collapse
    Explanation
    In the Special form, collapse is insured against, whereas in the Basic form it is not. Collapse refers to the sudden falling down or caving in of a building or structure. This coverage is important as it protects against the financial losses that can occur due to structural failures. Fire, lightning, and internal explosion are perils that are covered in both the Special and Basic forms of insurance.

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  • 13. 

    What is the minimum discount percentage for the "good driver" discount?

    • 5%

    • 10%

    • 20%

    • 25%

    Correct Answer
    A. 20%
    Explanation
    The minimum discount percentage for the "good driver" discount is 20%. This means that if someone qualifies for the "good driver" discount, they will receive at least a 20% discount on their insurance premium.

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  • 14. 

    The personal auto policy territory limits include:

    • Tokyo, Japan

    • London, England

    • Mexico City, Mexico

    • Montreal, Canada

    Correct Answer
    A. Montreal, Canada
    Explanation
    The personal auto policy territory limits specify the geographical areas where the policy coverage is valid. In this case, the territory limits include Tokyo, Japan; London, England; Mexico City, Mexico; and Montreal, Canada. This means that the policyholder's auto insurance coverage is applicable and valid in these locations.

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  • 15. 

    The limited Mexico endorsement applies to trips to Mexico with a duration of:

    • 7 days or less

    • 10 days or less

    • 2 days or less

    • 14 days or less

    Correct Answer
    A. 10 days or less
    Explanation
    The limited Mexico endorsement applies to trips to Mexico with a duration of 10 days or less. This means that if you have this endorsement, your insurance coverage will only be valid for trips to Mexico that are 10 days or shorter. If your trip exceeds 10 days, you may need to consider getting additional coverage or a different type of endorsement to ensure that you are adequately protected during your entire stay in Mexico.

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  • 16. 

    What must an insurer do who accepts an application from an agent who is not specifically appointed by that insurer, and then issues a policy from that application?

    • The agent must become an employee of the company within 30 days of receiving the application

    • Name the agent to the list of the company's approved agents

    • Send the agent an appointment approval notice within 30 days of policy issuance

    • Forward to the Commissioner a notice of appointment within 14 days of receipt of application

    Correct Answer
    A. Forward to the Commissioner a notice of appointment within 14 days of receipt of application
    Explanation
    When an insurer accepts an application from an agent who is not specifically appointed by that insurer and issues a policy from that application, they must forward a notice of appointment to the Commissioner within 14 days of receiving the application. This is important to ensure that the agent is officially recognized and approved by the regulatory authority. By notifying the Commissioner, the insurer is fulfilling their obligation to inform the relevant authority about the appointment of the agent.

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  • 17. 

    Carmen is driving her own car on behalf of her employer. Carmen's negligent operation of her car injures a member of the public. The employer may be held liable because of what is called:

    • Vicarious liability

    • Gross negligence

    • Absolute Liability

    • Contributory negligence

    Correct Answer
    A. Vicarious liability
    Explanation
    Vicarious liability is a legal principle that holds employers responsible for the actions of their employees while they are acting within the scope of their employment. In this scenario, Carmen was driving her own car on behalf of her employer, which implies that she was performing work-related duties. Therefore, if Carmen's negligent operation of her car caused harm to a member of the public, the employer may be held liable under the principle of vicarious liability. This is because the employer has a legal duty to ensure that their employees act responsibly and safely while carrying out their job responsibilities.

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  • 18. 

    Which property coverage form is best suited for a structure under construction?

    • Standard porperty policy

    • Reporting form

    • Building and personal property coverage form

    • Builders risk coverage form

    Correct Answer
    A. Builders risk coverage form
    Explanation
    The Builders risk coverage form is best suited for a structure under construction because it provides coverage for the structure, materials, and equipment during the construction process. This policy is specifically designed to protect against risks such as theft, vandalism, fire, and damage caused by natural disasters. It ensures that the owner or contractor is financially protected in case of any unforeseen events or accidents that may occur during the construction phase.

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  • 19. 

    Under the "examination of your book and records" condition of a commercial policy, when may an insurer examine an insured's books and records?

    • At any time during the policy period and up to 3 years afterwards

    • Only when authorized by the insured

    • At any time

    • Only upon receiving a court order allowing the inspection

    Correct Answer
    A. At any time during the policy period and up to 3 years afterwards
    Explanation
    Under the "examination of your book and records" condition of a commercial policy, the insurer has the right to examine an insured's books and records at any time during the policy period and up to 3 years afterwards. This allows the insurer to verify the accuracy of the insured's financial records and ensure that the coverage provided by the policy is appropriate. It also helps in detecting any potential fraud or misrepresentation by the insured. This provision gives the insurer the necessary flexibility to conduct thorough examinations and protect their interests.

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  • 20. 

    Which of the following is a true statement about CAARP?

    • Only agents with two or more years of experience are eligible to place business with CAARP

    • CAARP offers dwelling coverage, but not homeowners

    • Commercial risks are not eligible for CAARP

    • The minimum liability for CAARP policies are $15,000/$30,000/$5,000.

    Correct Answer
    A. The minimum liability for CAARP policies are $15,000/$30,000/$5,000.
  • 21. 

    In California, excess and surplus lines coverage needs to be placed through:

    • An admitted insurer

    • An excess and surplus lines solicitor

    • Lloyds of London

    • A surplus lines broker

    Correct Answer
    A. A surplus lines broker
    Explanation
    In California, excess and surplus lines coverage needs to be placed through a surplus lines broker. A surplus lines broker is a licensed professional who specializes in placing insurance coverage with non-admitted insurers, which are not licensed in the state but can provide coverage for unique or high-risk situations. These brokers have the expertise and knowledge to navigate the surplus lines market and find the best coverage options for clients. Admitted insurers, excess and surplus lines solicitors, and Lloyds of London are not specifically required for placing excess and surplus lines coverage in California.

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  • 22. 

    Where would an insured who is in the business of importing exotic animals form Africa most likely go to obtain insurance coverage?

    • State Competitive Fund

    • Foreign Insurer

    • Alien Insurer

    • Excess and surplus lines insurer

    Correct Answer
    A. Excess and surplus lines insurer
    Explanation
    An insured who is in the business of importing exotic animals from Africa would most likely go to an excess and surplus lines insurer to obtain insurance coverage. This type of insurer specializes in providing coverage for unique or high-risk risks that are not typically covered by standard insurance companies. Importing exotic animals would be considered a high-risk activity, and therefore, an excess and surplus lines insurer would be the best option for the insured to obtain the necessary coverage.

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  • 23. 

    The equipment dealer's coverage form covers all of the following types of property, except:

    • Dealer's used stock

    • Motor vehicles designed for highway use

    • Customer's equipment in for service

    • Dealer's new stock

    Correct Answer
    A. Motor vehicles designed for highway use
    Explanation
    The equipment dealer's coverage form covers all types of property, except for motor vehicles designed for highway use. This means that the insurance policy will provide coverage for the dealer's used stock, customer's equipment in for service, and dealer's new stock. However, it specifically excludes motor vehicles designed for highway use from the coverage.

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  • 24. 

    Which type of exposure can be best defined as a condition or sitution where the exposure to financial loss is presented to an individual or family from causes such as injury, disability, death, sickness or unemployment?

    • Personnel loss exposure

    • Personal loss exposure

    • Personal property loss exposure

    • Liability loss exposure

    Correct Answer
    A. Personal loss exposure
    Explanation
    Personal loss exposure can be best defined as a condition or situation where the exposure to financial loss is presented to an individual or family from causes such as injury, disability, death, sickness, or unemployment. This type of exposure refers to the potential financial consequences that individuals or families may face due to personal circumstances or events that can result in financial loss. It encompasses various risks related to personal well-being and financial security, highlighting the importance of having appropriate insurance coverage or risk management strategies in place to mitigate these potential losses.

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  • 25. 

    All of the following are principal rating factors under Proposition 103 for personal auto policies, except:

    • Years of driving experience

    • Annual miles driven

    • Driver's safety record

    • Number of listed drivers

    Correct Answer
    A. Number of listed drivers
    Explanation
    The number of listed drivers is not a principal rating factor under Proposition 103 for personal auto policies. Proposition 103 in California requires insurance companies to base their rates on three main factors: years of driving experience, annual miles driven, and the driver's safety record. The number of listed drivers does not directly impact the insurance rates.

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  • 26. 

    Jack, a condo owner, wants a fire and allied lines coverage for personal property, liability coverage for himself and family members and protection for assessments or damage for the building structure and other common areas. Which homeowners form would you recommend?

    • HO-6

    • HO-3

    • HO-2

    • HO-4

    Correct Answer
    A. HO-6
    Explanation
    The correct answer is HO-6. HO-6 is a homeowners insurance policy specifically designed for condominium owners. It provides coverage for personal property, liability coverage for the owner and family members, and protection for assessments or damage to the building structure and common areas. This form is ideal for Jack as a condo owner because it offers comprehensive coverage tailored to his specific needs.

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  • 27. 

    All of the following contribute to the rising cost of Worker's Compensation Insurance, except:

    • The growing population

    • Employers who fail to secure the payment of workers compensation as required by law

    • Under-reported payroll of employers

    • Fraudulent claims

    Correct Answer
    A. The growing population
    Explanation
    The growing population does not contribute to the rising cost of Worker's Compensation Insurance. The cost of insurance is determined by factors such as the number of claims, the severity of the claims, and the cost of medical treatment. While a growing population may lead to an increase in the number of workers, it does not directly impact the cost of insurance. The other options listed - employers who fail to secure payment, under-reported payroll, and fraudulent claims - can all contribute to increased costs by reducing the funds available for compensation or by inflating the number of claims.

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  • 28. 

    What items of personal property are included in Coverage A under a HO-3 policy?

    • Detached fences

    • Lawnmower used to maintain the exterior premises

    • Paint of the premises to be applied to the interior

    • Decorative fountains

    Correct Answer
    A. Paint of the premises to be applied to the interior
    Explanation
    Coverage A under a HO-3 policy includes personal property that is permanently attached to the dwelling, such as built-in appliances, carpeting, and fixtures. The paint of the premises to be applied to the interior is considered personal property that is permanently attached to the dwelling, as it is intended to be used to improve the interior of the home. Therefore, it would be included in Coverage A under a HO-3 policy.

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  • 29. 

    An umbrella policy

    • Provides coverage for outdoor fairs and exhibitions in case of bad weather

    • Provides excess physical damage coverage

    • Provides broad primary coverage for most personal or commercial loss exposure

    • Provides broad excess liability coverage over one or more primary policies

    Correct Answer
    A. Provides broad excess liability coverage over one or more primary policies
    Explanation
    An umbrella policy provides broad excess liability coverage over one or more primary policies. This means that it offers additional coverage beyond the limits of the primary policies, such as homeowners or auto insurance. It helps protect individuals or businesses from large liability claims or lawsuits that exceed the limits of their primary policies. The umbrella policy kicks in once the limits of the primary policies are exhausted, providing an extra layer of protection.

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  • 30. 

    The CA Insurance Code:

    • Prohibits agents from receiving compensation from premium financing

    • Sets the percentage of interest that may be charged in a premium finance contract

    • Requires agents to keep records of any compensation they may have received for their services involved with premium financing

    • Requires agents to provide premium financing services

    Correct Answer
    A. Requires agents to keep records of any compensation they may have received for their services involved with premium financing
    Explanation
    The CA Insurance Code requires agents to keep records of any compensation they may have received for their services involved with premium financing. This means that agents are required to maintain documentation of any payments or benefits they receive in connection with their involvement in premium financing transactions. This requirement ensures transparency and accountability in the agent's financial transactions and helps prevent any potential conflicts of interest or unethical practices. By keeping records of their compensation, agents can demonstrate compliance with the code and provide evidence of their adherence to ethical standards in their professional conduct.

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  • 31. 

    What would be the most likely action taken by the Insurance Commissioner if a licensee induces a client to co-sign a loan?

    • License suspension

    • $1,000 fine

    • Licensee to complete an approved ethics course

    • Licensee required to repay the loan with interest

    Correct Answer
    A. License suspension
    Explanation
    If a licensee induces a client to co-sign a loan, it is likely that the Insurance Commissioner would take the action of license suspension. This is because inducing a client to co-sign a loan is a violation of ethical conduct and can be seen as a breach of trust. License suspension is a severe consequence that serves as a deterrent and punishment for such misconduct.

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  • 32. 

    Which exclusion in the causes of loss - special form - excludes coverage for mudflow?

    • Ordinance or law

    • Utility service

    • Water (flood)

    • Governmental action

    Correct Answer
    A. Water (flood)
    Explanation
    The exclusion for water (flood) in the causes of loss - special form excludes coverage for mudflow. This means that if any damage or loss is caused by mudflow, it will not be covered under the policy. Mudflow is a type of water-related event where a mixture of water and soil flows down a slope, often caused by heavy rain or melting snow. Since it is specifically mentioned as excluded, any damage resulting from mudflow will not be covered by the insurance policy.

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  • 33. 

    The collision coverage of a personal auto policy covers:

    • A desert sand storm pitting the car windshield

    • Damage caused by the insured by driving into a tree that had fallen during a recent storm

    • A vandal making a deep scratch on the car with a screwdriver

    • Collision coverage does not cover any of these losses

    Correct Answer
    A. Damage caused by the insured by driving into a tree that had fallen during a recent storm
    Explanation
    The collision coverage of a personal auto policy covers damage caused by the insured by driving into a tree that had fallen during a recent storm. This means that if the insured accidentally drives into a fallen tree and causes damage to their car, the collision coverage will provide coverage for the repairs or replacement of the vehicle. However, it is important to note that collision coverage does not cover losses caused by a desert sand storm pitting the car windshield or a vandal making a deep scratch on the car with a screwdriver.

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  • 34. 

    A personal auto policy (PAP) insured's car was a total loss when the car was stolen and wrecked. The insured has the following coverages: liability, medical payments and "other than collision." Her PAP:

    • "other than collison" will pay for the loss

    • Will not pay for this loss - no coverage

    • Medical payments will pay for the loss

    • Liability coverage will pay for the loss

    Correct Answer
    A. "other than collison" will pay for the loss
    Explanation
    The insured's car was stolen and wrecked, resulting in a total loss. The insured has coverage for liability, medical payments, and "other than collision." Since the car was not involved in a collision, but rather stolen and wrecked, the "other than collision" coverage will pay for the loss.

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  • 35. 

    What course of action does a party to a contract have if the other party is found to be in breach of that contract?

    • Nothing, unless the injured party can prove the damages are substantial.

    • Reasonable attorney fees and costs only

    • Damages for breach, reasonable attorney fees and costs

    • Damages caused by the breach only.

    Correct Answer
    A. Damages for breach, reasonable attorney fees and costs
    Explanation
    If one party to a contract is found to be in breach, the other party has the right to seek damages for the breach. This means that they can claim financial compensation for any losses or harm caused by the breach. Additionally, they may also be entitled to reasonable attorney fees and costs associated with taking legal action to enforce the contract.

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  • 36. 

    Extra expense insurance covers:

    • Increased expense of repairing property to appreciated assets

    • The extra expense that a business incurs to continue a business while damage to the premises is being restored

    • The loss of profit a business incurs while it is shut down after a loss by a covered peril

    • Payroll and other overhead incurred when a business is shut down after a loss

    Correct Answer
    A. The extra expense that a business incurs to continue a business while damage to the premises is being restored
    Explanation
    Extra expense insurance covers the additional costs that a business incurs to continue its operations while the premises are being restored after damage. This can include expenses such as renting temporary space, purchasing equipment, or hiring additional staff. It is designed to help businesses minimize the financial impact of a loss and maintain continuity during the restoration process.

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  • 37. 

    Mitchell's (unendorsed) personal auto policy liability coverage would pay for:

    • Mitchell's broken windshield caused by a rock thrown by the tire of a passing car

    • Mitchell's rental car expense, when his car is unusable due to a collision that was not his fault.

    • The cost of repairing the neighbor's fence that Mitchell damaged due to the negligent operation of his car

    • Damage or injury caused intentionally by Mitchell

    Correct Answer
    A. The cost of repairing the neighbor's fence that Mitchell damaged due to the negligent operation of his car
    Explanation
    Mitchell's personal auto policy liability coverage would pay for the cost of repairing the neighbor's fence that Mitchell damaged due to the negligent operation of his car. This is because liability coverage typically covers damages that the insured person is legally responsible for, including property damage caused by their negligence. In this case, Mitchell's negligence in operating his car led to the damage of his neighbor's fence, making him liable for the repair costs.

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  • 38. 

    A newly acquired motorcycle is not automatically covered under a personal auto policy because?

    • Motorcycles are insured under a homeowners policy

    • The unendorsed policy does not cover two-wheeled vehicles

    • Motorcycles are too dangerous to insure

    • Motorcycles caanot be insured under the PAP

    Correct Answer
    A. The unendorsed policy does not cover two-wheeled vehicles
    Explanation
    A personal auto policy typically covers four-wheeled vehicles, such as cars and trucks. Since a motorcycle is a two-wheeled vehicle, it is not automatically covered under a personal auto policy that does not include an endorsement specifically for motorcycles. Therefore, the unendorsed policy does not provide coverage for motorcycles.

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  • 39. 

    What additional coverage is provided in a DP3 that is not included in a DP1?

    • Collapse

    • World-wide coverage

    • Fire department service charge

    • Other structures

    Correct Answer
    A. Collapse
    Explanation
    A DP3 policy provides coverage for collapse, which is not included in a DP1 policy. Collapse refers to the sudden falling down or caving in of a building or a part of it due to various reasons, such as structural defects or natural disasters. This coverage ensures that the policyholder is protected financially in case their property experiences a collapse.

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  • 40. 

    All of the following are characteristics of an "ideally insurable loss exposure" except:

    • Losses that are accidental

    • Losses that are catastrophic

    • Losses that are definite and measurable

    • Large number of exposure units

    Correct Answer
    A. Losses that are catastrophic
    Explanation
    An ideally insurable loss exposure should have losses that are accidental, definite, and measurable, and a large number of exposure units. However, losses that are catastrophic are not considered ideal for insurance because they involve widespread and severe damage or loss, making it difficult for insurers to manage and spread the risk effectively. Catastrophic losses can result in significant financial strain for insurance companies and may even threaten their solvency. Therefore, the presence of catastrophic losses goes against the characteristics of an ideally insurable loss exposure.

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  • 41. 

    Which of the following losses is not covered by either the personal auto policy collision or other than collision coverage?

    • Sean's car is severely damaged by a storm when i sign is blown off the roof of a building and hits his car

    • Sean's car is washed away during a flood

    • Sean's car is stolen when he leaves the keys in the ignition, and the doors and windows are unlocked while he runs into the grocery store

    • Sean leaves his personal (non-business) laptop computer is his car overnight. His car is parked in the driveway in front of his house. The computer is stolen from his car.

    Correct Answer
    A. Sean leaves his personal (non-business) laptop computer is his car overnight. His car is parked in the driveway in front of his house. The computer is stolen from his car.
    Explanation
    The loss of Sean's personal laptop computer from his car is not covered by either the personal auto policy collision or other than collision coverage. This is because the personal auto policy typically covers physical damage to the vehicle itself, but does not cover personal belongings or items left inside the car. Therefore, the theft of Sean's laptop would not be covered under the auto policy.

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  • 42. 

    Which of the following types of insurance was designed to cover domestic shipments, means of transportation, personal property floater risks and commercial property floater risks?

    • Inland marine

    • Business personal property

    • Ocean marine

    • Auto liability

    Correct Answer
    A. Inland marine
    Explanation
    Inland marine insurance is designed to cover domestic shipments, means of transportation, personal property floater risks, and commercial property floater risks. This type of insurance provides coverage for property that is in transit or mobile in nature, such as goods being transported by truck, train, or plane. It also covers property that is not typically covered by standard property insurance policies, such as equipment, tools, and artwork. Inland marine insurance is commonly used by businesses that have valuable property that moves around frequently or is located off-site.

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  • 43. 

    The medical expense coverage in a Workers Compensation Policy

    • Does not have a time limit, but has a maximum dollar limit

    • Does not have a dollar limit nor a time limit

    • Does not have a dollar limit, but has a maximum time limit

    • Has both a maximum dollar and time limit

    Correct Answer
    A. Does not have a dollar limit nor a time limit
    Explanation
    The medical expense coverage in a Workers Compensation Policy does not have a dollar limit nor a time limit. This means that there is no maximum amount of money that can be spent on medical expenses, and there is also no specific time limit for when these expenses can be incurred. This provides the insured individual with the assurance that they will be covered for any necessary medical treatments or procedures without any restrictions on the cost or timeline.

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  • 44. 

    A possibility of financial loss resulting from the ownership of property is known as:

    • Insurable interest

    • Valuation

    • Indemnity

    • Legal Liability

    Correct Answer
    A. Insurable interest
    Explanation
    Insurable interest refers to the potential financial loss that an individual may incur due to the ownership of a property. This concept is important in insurance, as it determines whether an individual has a valid reason to insure a property. Having an insurable interest means that the individual would suffer a financial loss if the property was damaged or destroyed. It ensures that only those with a legitimate stake in the property are eligible for insurance coverage, preventing fraud and ensuring fair compensation in case of loss.

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  • 45. 

    You are to meet with a small furniture manufacturer and make property and liability insurance recommendations. You have insured many risks of this type in the past and have a good idea of what their needs may be. There are several popular ways of determining business loss exposures. Which of the following ways are the least professional and the least likely to correclty identify the loss exposure? You:

    • Take a walk through the business to observe operation and work flow, and ask their key people about the company and its operations.

    • Meet with key people and complete a loss exposure questionnaire developed for their general type of risk

    • Get a copy of all current policies and determine what coverage they have been carrying and how much they have been paying

    Correct Answer
    A. Get a copy of all current policies and determine what coverage they have been carrying and how much they have been paying
    Explanation
    Getting a copy of all current policies and determining what coverage they have been carrying and how much they have been paying is the least professional and least likely to correctly identify the loss exposure. This approach only focuses on the existing coverage and does not consider the specific needs and risks of the small furniture manufacturer. It does not provide a comprehensive understanding of the company's operations and potential vulnerabilities. The other options, such as taking a walk through the business to observe operation and work flow, and completing a loss exposure questionnaire, are more thorough and effective methods for identifying the company's loss exposures.

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  • 46. 

    If an insured rents an auto while on vacation, what coverage, if any, will be available for physical damage coverage under a personal auto policy?

    • The least coverage on any auto shown on the declarations

    • No coverage available

    • The coverage of the last auto shown in the declarations

    • The broadest coverage on any auto shown in the declarations

    Correct Answer
    A. The broadest coverage on any auto shown in the declarations
    Explanation
    The broadest coverage on any auto shown in the declarations would be available for physical damage coverage under a personal auto policy if an insured rents an auto while on vacation. This means that the insured would have the highest level of coverage for any physical damage that may occur to the rented vehicle.

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  • 47. 

    If an insured with a personal auto policy has an accident in a state with personal injury protection (PIP), how does the policy respond?

    • The insured may apply for the additional PIP coverage within 10 days of the accident

    • PIP coverage is provided only for medical providers in that state

    • Coverage automatically is broadened to provided PIP

    • Coverage remains as written

    Correct Answer
    A. Coverage automatically is broadened to provided PIP
    Explanation
    When an insured with a personal auto policy has an accident in a state with personal injury protection (PIP), the policy automatically broadens its coverage to provide PIP. This means that the insured will have access to PIP benefits, such as medical expenses and lost wages, as mandated by the state's PIP laws. The policy will respond by extending this coverage without the insured having to apply for additional PIP coverage or making any changes to the policy.

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  • 48. 

    Mary has an HO-3 policy with replacement cost coverage on the insured buildings. The cost of replacement on the dwelling is $100,000 and the other structure (a garage) is $20,000. To be certain of replacement cost coverage on a partial loss to either structure, she must carry a minimum of:

    • $80,000 on the dwelling; $16,000 on the garage

    • $80,000 on the dwelling; $8,000 on the garage

    • $100,000 on the dwelling; $20,000 on the garage

    • $100,000 on the dwelling; $10,000 on the garage

    Correct Answer
    A. $80,000 on the dwelling; $16,000 on the garage
    Explanation
    To be certain of replacement cost coverage on a partial loss to either structure, Mary must carry a minimum of $80,000 on the dwelling and $16,000 on the garage. This is because replacement cost coverage ensures that the insurance policy will pay for the full cost of rebuilding or repairing the damaged property without considering depreciation. In this case, the cost of replacement for the dwelling is $100,000, but Mary only needs to carry a minimum of $80,000 to be fully covered. Similarly, the cost of replacement for the garage is $20,000, but she only needs to carry a minimum of $16,000.

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  • 49. 

    If an insured borrows a neighbor's vehicle to run a personal errand, how do the policies respond in the event of an auto accident?

    • Both policies respond on a pro-rate basis

    • Only the neighbor's policy provides coverage: there is no coverage by the driver's policy

    • The driver's policy is primary and the neighbor's policy is excess

    • The neighbor's policy is primary and the driver's policy is excess

    Correct Answer
    A. The neighbor's policy is primary and the driver's policy is excess
    Explanation
    When an insured borrows a neighbor's vehicle to run a personal errand and gets into an auto accident, the neighbor's policy is considered primary and provides coverage for the accident. The driver's policy is considered excess, meaning it only provides coverage if the neighbor's policy limits are exhausted. This means that the neighbor's policy will be the first to respond and provide coverage, and if the coverage is not sufficient, the driver's policy will then kick in as excess coverage.

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Quiz Review Timeline (Updated): Jul 22, 2024 +

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  • Current Version
  • Jul 22, 2024
    Quiz Edited by
    ProProfs Editorial Team
  • Jun 01, 2010
    Quiz Created by
    Petsya

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