Fire & Casualty Practice Exam #1

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  • 1/148 Questions

    In an insurance policy, which page contains the rights and duties of both parties involved in the contract?

    • Declarations
    • Conditions
    • Insuring Agreement
    • Exclusions
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About This Quiz

Fire & Casualty Practice Exam #1 assesses knowledge on insurance policy structure, market value, package policies, and specific clauses. It is essential for professionals in the insurance industry, enhancing understanding of key concepts and application in real-world scenarios.

Fire & Casualty Practice Exam #1 - Quiz

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  • 2. 

    Which of the following terms refers to how much the property (usually a home) would be bought for on the market?

    • Replacement cost

    • Actual Cash Value

    • Market Value

    • Agreed Value

    Correct Answer
    A. Market Value
    Explanation
    Market value refers to the amount for which a property, typically a home, would be bought or sold on the open market. It is the price that a willing buyer and a willing seller would agree upon in a competitive and fair transaction. Market value takes into consideration factors such as the property's location, condition, size, and current market conditions. It is an important concept in real estate as it helps determine the listing price, appraisal value, and potential returns on investment.

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  • 3. 

    The modular concept refers to:

    • Parts of a package policy

    • Endorsements within a package policy

    • The declarations and conditions section of a package policy

    • A monoline policy

    Correct Answer
    A. Parts of a package policy
    Explanation
    The modular concept refers to the different components or parts that make up a package policy. These parts can be customized and combined to create a policy that meets the specific needs of the insured. By breaking down the policy into modules, it allows for flexibility and ease of customization, as different modules can be added or removed as needed. This modular approach also simplifies the underwriting process and allows for more efficient policy administration.

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  • 4. 

    Which of the following is not associated with the word insurance?

    • Tansferring risk

    • Indemnify

    • Known event

    • Written contract

    Correct Answer
    A. Known event
    Explanation
    The term "known event" is not associated with insurance because insurance is typically designed to cover unforeseen or uncertain events. A known event refers to a situation or occurrence that is already known or expected to happen, which does not require the need for insurance coverage. Insurance is intended to provide protection against risks and uncertainties, such as accidents, natural disasters, or unforeseen circumstances, rather than events that are already known or anticipated.

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  • 5. 

    Which of the following is a basis provision of all property policies for property that can't be moved, such as ahouse and sends payment to the insured as well as the lien holder in the event of a loss?

    • Concurrent Policy Coverage

    • Standard Mortgage Clause

    • Special Lines Surplus Lines

    • Uniform Insurers Rehabiliation Act

    Correct Answer
    A. Standard Mortgage Clause
    Explanation
    The Standard Mortgage Clause is a provision in property insurance policies that protects both the insured and the lien holder in the event of a loss. It ensures that the payment for the loss is made to both the insured and the lien holder, typically the mortgage company. This clause is commonly included in property policies for properties that cannot be moved, such as houses, to provide financial protection to all parties involved.

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  • 6. 

    A policy of liability insurance issued to a local public entity or state agency as a named insured shall not be cancelled or have renewal declined for reasons other than nonpayment of premium unless notice is mailed to the named insured at least _____ days prior to the effective date or nonrenewal of at least _____ days prior to the effective date of cancellation.

    • 15/30

    • 30/45

    • 45/60

    • 60/90

    Correct Answer
    A. 45/60
    Explanation
    The correct answer is 45/60. This means that if a liability insurance policy is issued to a local public entity or state agency as a named insured, it cannot be cancelled or have its renewal declined for reasons other than nonpayment of premium unless the named insured is given notice at least 45 days prior to the effective date of cancellation or at least 60 days prior to the effective date of nonrenewal.

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  • 7. 

    The insurer may examine books and records of an insured:

    • Annually

    • Only after 30 days notice to the insured

    • Only with the consent of the insured

    • At any time and for up to three years after the policy expires

    Correct Answer
    A. At any time and for up to three years after the policy expires
    Explanation
    The correct answer is "At any time and for up to three years after the policy expires." This means that the insurer has the right to examine the books and records of an insured at any time during the policy period and for up to three years after the policy expires. This allows the insurer to verify the accuracy of the insured's records and ensure that the policy terms and conditions are being followed. It also gives the insurer the opportunity to investigate any potential fraudulent activities or misrepresentations by the insured.

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  • 8. 

    Which is not a reason for a company to obtain reinsurance?

    • Protect companies form major losses

    • Share the risk with another company

    • Protect companies from catastrophic losses

    • Share in the loss ration with another company

    Correct Answer
    A. Share in the loss ration with another company
    Explanation
    The reason "Share in the loss ratio with another company" is not a valid reason for a company to obtain reinsurance is because the loss ratio is a measure of the company's profitability, not a reason for obtaining reinsurance. Reinsurance is typically obtained to protect companies from major losses, share the risk with another company, and protect against catastrophic losses.

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  • 9. 

    Under the standard fire policy, a fire that was intentionally started in an area such as a fireplace is known as:

    • Intentional fire

    • Unintentional fire

    • Hostile fire

    • Friendly fire

    Correct Answer
    A. Friendly fire
    Explanation
    The term "friendly fire" is commonly used in military contexts to refer to the accidental firing of weapons on one's own side. In the context of a standard fire policy, the term "friendly fire" is used metaphorically to describe a fire that was intentionally started in a controlled area such as a fireplace. This term emphasizes that the fire was intentionally started and poses no threat or harm to the surrounding property or individuals.

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  • 10. 

    Which of the following Homeowners policies covers a home that was built 75 years ago?

    • HO 1

    • HO 2

    • HO 4

    • HO 8

    Correct Answer
    A. HO 8
    Explanation
    HO 8 is the correct answer because it is a homeowners policy specifically designed for older homes. It provides coverage for the dwelling and personal property at replacement cost, regardless of the age of the home. HO 1, HO 2, and HO 4 are not suitable for a home that was built 75 years ago as they have limitations and restrictions based on the age and condition of the property.

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  • 11. 

    The declarations page of a commercial policy will state which of the following:

    • Premium amount and coverage limits

    • Named insureds

    • Covered property

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    The declarations page of a commercial policy will state the premium amount and coverage limits, named insureds, and covered property. This page provides a summary of the important details of the policy, including the cost of the premium, the maximum amount the policy will pay for covered claims, the individuals or entities insured under the policy, and the specific property that is covered. Therefore, the correct answer is "All of the above."

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  • 12. 

    Johnny told the insurace agent he thing he drives about 10,000 miles a year, but in fact it's more like 15,000 miles. What term would best describe this situation?

    • Fraud

    • Concealment

    • Misrepresentation

    • Misstated fact

    Correct Answer
    A. Misstated fact
    Explanation
    The term "misstated fact" best describes this situation because Johnny provided incorrect information about the number of miles he drives per year. He stated that he drives about 10,000 miles, but the actual number is 15,000 miles. This is a misrepresentation of the truth, as he knowingly provided false information to the insurance agent. However, it is important to note that this situation does not necessarily imply fraud or concealment, as those terms typically involve deliberate intent to deceive or hide information.

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  • 13. 

    What does an HO 6 cover?

    • The tenants personal property, loss of use and liability exposures in renter's insurance.

    • Covers perils to condominium units and the exposure of liability, as wee as loss assessment coverage.

    • An HO 6 is coverage by the broad form perils.

    • Covers all risks except those excluded

    Correct Answer
    A. Covers perils to condominium units and the exposure of liability, as wee as loss assessment coverage.
    Explanation
    An HO 6 policy provides coverage for condominium units and the liability exposures associated with them. It also includes loss assessment coverage, which protects the policyholder in case they are assessed a portion of a loss that occurred in a common area of the condominium complex. This type of insurance typically covers a wide range of perils, with the exception of those specifically excluded from the policy.

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  • 14. 

    Which of the following Homeowner's policies have both dwelling and person property on a broad peril form?

    • HO 2, HO 4, HO 5

    • HO 2, HO5, HO 8

    • HO 4, HO 5, HO 6

    • HO 2, HO 6

    Correct Answer
    A. HO 2, HO 6
    Explanation
    The correct answer is HO 2, HO 6. HO 2 is a broad form homeowner's policy that covers both the dwelling and personal property against a specific list of named perils. HO 6 is a condominium owner's policy that also provides coverage for both the dwelling and personal property on a broad peril form. Therefore, both HO 2 and HO 6 policies have coverage for both the dwelling and personal property on a broad peril form.

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  • 15. 

    On a Commerical package policy, "you" and "your" refer to:

    • Any person with financial interest in the property

    • The named insured and resident spouse

    • An individual, corporation or other entity

    • All of the above

    Correct Answer
    A. The named insured and resident spouse
    Explanation
    The correct answer is "The named insured and resident spouse." In a Commercial package policy, "you" and "your" refer to the named insured and their resident spouse. This means that both the named insured and their resident spouse are covered under the policy.

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  • 16. 

    All the following are part of the six specs of an insurance policy except:

    • The parties between whom the contract is made

    • Duties of an insured after a claim

    • Statement of the premium

    • The risks insured agains

    Correct Answer
    A. Duties of an insured after a claim
    Explanation
    The question is asking for an option that is not part of the six specs of an insurance policy. The six specs typically include the parties between whom the contract is made, duties of an insured after a claim, statement of the premium, and the risks insured against. However, duties of an insured after a claim is not typically considered one of the six specs of an insurance policy. Therefore, the correct answer is "Duties of an insured after a claim."

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  • 17. 

    When can insurers include an expense factor added to the premium charged for a class of policies?

    • When the insurer is running low of reserve funds

    • Anytime the insurer wants to

    • When there is insufficient premium to cover the cost of issuing insurance

    • When the claim is more than the premium within the first 6 months of issuing the policy

    Correct Answer
    A. When there is insufficient premium to cover the cost of issuing insurance
    Explanation
    Insurers can include an expense factor added to the premium charged for a class of policies when there is insufficient premium to cover the cost of issuing insurance. This means that if the premium collected from policyholders is not enough to cover the expenses incurred by the insurer in issuing the insurance policies, they can add an expense factor to make up for the shortfall. This helps ensure that the insurer can cover their costs and remain financially stable.

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  • 18. 

    At the time of all appointments being terminated (after all fees paid and education requirements have been fulfilled) the agent's license:

    • Terminates

    • Becomes inactive

    • Terminates after 10 days

    • Becomes inactive after 30 days

    Correct Answer
    A. Becomes inactive
    Explanation
    When all appointments are terminated, the agent's license becomes inactive. This means that while the license is still valid, the agent is not currently authorized to act as an agent or conduct any business. The license can be reactivated by fulfilling any necessary requirements or obtaining new appointments.

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  • 19. 

    Which of the following is not covered property under a Builders Risk form?

    • Scaffoldings

    • Lumber and other building supplies

    • Temporary structures on the premises

    • Trees, plants and shrubs

    Correct Answer
    A. Trees, plants and shrubs
    Explanation
    Trees, plants, and shrubs are not covered property under a Builders Risk form. A Builders Risk form typically provides coverage for property that is directly related to the construction project, such as scaffoldings, lumber, and other building supplies, as well as temporary structures on the premises. However, trees, plants, and shrubs are considered landscaping and are not typically included in the coverage provided by a Builders Risk form.

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  • 20. 

    Who has the ability to legally bind insurance for the insurer?

    • Insurance Broker

    • Insurance Agent

    • Insurance Solicitor

    • Insurance Administrator

    Correct Answer
    A. Insurance Agent
    Explanation
    An insurance agent has the ability to legally bind insurance for the insurer. They act as intermediaries between the insurance company and the client, selling insurance policies and assisting with the application process. Insurance agents have the authority to bind coverage on behalf of the insurer, meaning they can enter into contracts and make legally binding agreements with clients on behalf of the insurance company. This allows them to issue policies and provide coverage to clients based on the terms and conditions set by the insurer.

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  • 21. 

    All of the following are examples of being a good agent for your client except:

    • Stay up to date with clients and contact them periodically

    • Go above and beyond with the service you provide for your client

    • Make important decisions about the policy for clients without consulting and bothering them

    • Know your job and strive to learn all there is about your job so you can be an effective agent

    Correct Answer
    A. Make important decisions about the policy for clients without consulting and bothering them
    Explanation
    The correct answer is "Make important decisions about the policy for clients without consulting and bothering them." This is because a good agent should always involve the client in decision-making and keep them informed throughout the process. Making important policy decisions without consulting the client goes against the principles of good client-agent communication and may not align with the client's needs and preferences. A good agent should prioritize client satisfaction and ensure that the client is involved in decision-making to provide the best possible service.

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  • 22. 

    An insurance company that has met all the qualifications designed by the Department of Insurance and has received a Certificate of Authority from the DOI to trasact insurance in this state is known as:

    • A domestic insurer

    • A foreign insurer

    • An admitted insurer

    • A non-admitted insurer

    Correct Answer
    A. An admitted insurer
    Explanation
    An insurance company that has met all the qualifications set by the Department of Insurance and has received a Certificate of Authority to transact insurance in a specific state is known as an admitted insurer. This means that the insurer is authorized and licensed to operate within that state and comply with its regulations and requirements. They are considered to be part of the state's insurance market and have the necessary approval to provide insurance coverage to customers within that jurisdiction.

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  • 23. 

    Coverage A of the Commercial Building and Personal Property coverage form covers which of the following:

    • Buildings and Separate Structures

    • Personal Property

    • A riding lawn mower

    • Both A & C are true

    Correct Answer
    A. Both A & C are true
    Explanation
    Coverage A of the Commercial Building and Personal Property coverage form covers both Buildings and Separate Structures and a riding lawn mower. This means that the insurance policy provides coverage for any damage or loss to the buildings and separate structures on the property, as well as coverage for a riding lawn mower.

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  • 24. 

    Which is not a power of a Managing General Agent?

    • Accept or decline risks

    • Collect premium moneys for producing brokers/agents

    • Underwrites gross direct written premium equal to or more than 10% of the policyholder surplus

    • Appoints local agents in that territory

    Correct Answer
    A. Underwrites gross direct written premium equal to or more than 10% of the policyholder surplus
    Explanation
    A Managing General Agent (MGA) is an intermediary who performs various functions on behalf of an insurance company. They typically accept or decline risks, collect premium payments, and appoint local agents in a specific territory. However, underwriting gross direct written premium equal to or more than 10% of the policyholder surplus is not a power of an MGA. Underwriting refers to the process of evaluating and determining the risk associated with insuring a particular individual or entity. This task is usually performed by the insurance company itself, not the MGA.

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  • 25. 

    Which of the following describes an Alien Insurer?

    • An insurance company that is incorporated outside the United States

    • An insurance company thas is incorporated in California

    • An insurance company that is incorporated in another state

    • An insurance company that is incorporated outside of the principal city

    Correct Answer
    A. An insurance company that is incorporated outside the United States
    Explanation
    An alien insurer refers to an insurance company that is incorporated outside the United States. This means that the company's headquarters and legal establishment are located in a foreign country rather than within the United States.

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  • 26. 

    A standard market insurer is an insurer who:

    • Offers rates for insurance to those who can no longer afford insurance through the standard market

    • Writes standard coverages in a state where the insurer is unlicensed

    • Regulates the standard premium used by the standard market

    • Will insure anyone for any reason

    Correct Answer
    A. Offers rates for insurance to those who can no longer afford insurance through the standard market
    Explanation
    A standard market insurer offers rates for insurance to those who can no longer afford insurance through the standard market. This means that they provide insurance options for individuals who may have been priced out or deemed ineligible for coverage by traditional insurance providers. This allows individuals with financial constraints to still have access to insurance coverage.

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  • 27. 

    A Builder's Risk Policy:

    • Must reflect a Coverage A limit of 100% of the value of the property

    • Must reflect a Coverage A limit of 80% of the value of the property

    • May be insured for any limit

    • None of the above

    Correct Answer
    A. Must reflect a Coverage A limit of 100% of the value of the property
    Explanation
    A Builder's Risk Policy must reflect a Coverage A limit of 100% of the value of the property because this type of policy is designed to provide coverage for property that is under construction or renovation. The purpose of the policy is to protect the property owner against any potential loss or damage that may occur during the construction process. By requiring a Coverage A limit of 100% of the value of the property, the policy ensures that the owner is adequately protected and will be able to recover the full value of the property in the event of a covered loss.

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  • 28. 

    Which of the following is a Personal Lines Licensee not allowed to transact?

    • Stand alone Umbrella or excess liability insurance

    • Inland marine insurance covering personal property

    • Personal watercraft insurance

    • Stand alone earthquake and flood insurance

    Correct Answer
    A. Stand alone Umbrella or excess liability insurance
    Explanation
    A Personal Lines Licensee is not allowed to transact Stand alone Umbrella or excess liability insurance. This type of insurance provides additional liability coverage beyond what is typically covered by standard personal lines policies. Since a Personal Lines Licensee is limited to transacting insurance for personal lines, which includes coverage for personal property, watercraft, and certain types of natural disasters like earthquakes and floods, they are not authorized to sell Stand alone Umbrella or excess liability insurance.

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  • 29. 

    The claims department is responsible for:

    • Receiving applications for insurance and then deciding if the company should approve or reject the application.

    • Receiving claim requests, evaluating them and paying claims that are covered by the terms of the contract and rejecting those that are not.

    • Advertising, promoting and distributing an insurer's products to the public.

    • Using claims history, statistics and computer data to predict losses.

    Correct Answer
    A. Receiving claim requests, evaluating them and paying claims that are covered by the terms of the contract and rejecting those that are not.
    Explanation
    The claims department is responsible for receiving claim requests, evaluating them and paying claims that are covered by the terms of the contract and rejecting those that are not. This involves assessing the validity of each claim, determining if it falls within the coverage provided by the insurance contract, and processing the payment accordingly. By doing so, the claims department ensures that policyholders receive the appropriate compensation for their covered losses, while also preventing fraudulent or invalid claims from being paid out.

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  • 30. 

    The California Code simply states that to be an insurer:

    • The person needs to be on file with the Commissioner

    • The person needs to be licensed and approved by the DOI

    • Ther person needs to be capable of making a contract

    • The person has to be licensed and approved by the DOI and have 50 hours of insurance education

    Correct Answer
    A. Ther person needs to be capable of making a contract
    Explanation
    The California Code requires that for a person to be considered an insurer, they must have the capability of making a contract. This means that they have the legal capacity to enter into agreements and fulfill their obligations as outlined in the contract. This requirement ensures that insurers have the necessary competence and understanding to engage in contractual relationships with policyholders and fulfill their obligations under the terms of the insurance policies.

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  • 31. 

    Under the Building and Personal Property coverage form, vacancy means:

    • To be completely void of property

    • Insufficient business property present to conduct customary operations

    • 100% of the building is not rented or occupied

    • A property left unattended for more than 60 days.

    Correct Answer
    A. Insufficient business property present to conduct customary operations
    Explanation
    Vacancy, under the Building and Personal Property coverage form, refers to a situation where there is not enough business property present to carry out normal operations. This means that the property is lacking the necessary equipment, inventory, or other assets required for conducting regular business activities. It does not necessarily mean that the property is completely void of all belongings or that it is unattended for a specific duration of time.

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  • 32. 

    Which of the following are not actions of transacting insurance?

    • The actual execution of a contract

    • Negotiations preliminary to the execution of a contract

    • Solicitation of insurance

    • Remitting or premium payments to the insurer

    Correct Answer
    A. Remitting or premium payments to the insurer
    Explanation
    Remitting or premium payments to the insurer is not considered an action of transacting insurance. Transacting insurance involves activities such as the actual execution of a contract, negotiations before the contract, and solicitation of insurance. However, remitting or premium payments to the insurer is a financial transaction that occurs after the insurance contract has been established and does not fall under the category of transacting insurance.

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  • 33. 

    Which of the following terms refers to a company that fails to meet is financial obligations when they are due?

    • Adverse selection

    • Loss control

    • Indemnity

    • Insolvency

    Correct Answer
    A. Insolvency
    Explanation
    Insolvency refers to a company's inability to meet its financial obligations when they are due. This means that the company does not have enough assets or cash flow to pay off its debts or fulfill its financial commitments. Insolvency is a serious financial condition that can lead to bankruptcy or liquidation of the company. It indicates a significant financial distress and inability to continue operating in a sustainable manner.

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  • 34. 

    Which of the following is not a type of insurer?

    • Lloyd's

    • Aleatory

    • Reciprocal

    • Mutual

    Correct Answer
    A. Aleatory
    Explanation
    Aleatory is not a type of insurer. Aleatory refers to a type of contract where the outcome is uncertain and depends on an uncertain event, such as an insurance policy where the insured may or may not suffer a loss. Lloyd's, Reciprocal, and Mutual are all types of insurers. Lloyd's is a marketplace where various individuals and syndicates provide insurance, Reciprocal insurers are owned by their policyholders who agree to share the risk, and Mutual insurers are owned by their policyholders who receive dividends based on the insurer's performance.

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  • 35. 

    Tenant Improvements and Betterment losses are valued at:

    • Actual Cash Value

    • Replacement Cost

    • Replacement Cost minus Depreciation

    • Tenant Improvements and Betterments is not covered.

    Correct Answer
    A. Actual Cash Value
    Explanation
    Tenant Improvements and Betterment losses are valued at Actual Cash Value. This means that the losses will be calculated based on the current market value of the improvements and betterments, taking into account any depreciation that may have occurred. This valuation method ensures that the insured party is compensated for the actual value of the improvements, rather than the cost of replacing them.

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  • 36. 

    Which of the following would not be considered a binder?

    • A temporary contract between the angent and the insured; usually 30 days.

    • A verbal contract given an insured automobile coverage for the weekend of their new car.

    • A temporary contract given an insured coverage for the additional truck they bought over the weekend.

    • A verbal contract given to an insured who purchased a car in a different city.

    Correct Answer
    A. A temporary contract between the angent and the insured; usually 30 days.
    Explanation
    A temporary contract between the agent and the insured; usually 30 days would not be considered a binder because a binder is a temporary contract that provides immediate coverage until a formal policy is issued. In this case, the contract between the agent and the insured is specifically mentioned as a temporary contract, which aligns with the definition of a binder. Therefore, it would be considered a binder and not excluded from the options provided.

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  • 37. 

    Which of the following is true when two or more policies are covering an auto?

    • The primary policy covers the loss

    • The loss is shared proportionately by all the policies

    • The policy with the most coverage covers the loss

    • The policy with the most coverage covers the loss and then the secondary policy covers any remaining amount

    Correct Answer
    A. The loss is shared proportionately by all the policies
    Explanation
    When two or more policies are covering an auto, the correct answer is that the loss is shared proportionately by all the policies. This means that each policy will contribute a certain percentage or proportion towards covering the loss. The amount contributed by each policy will depend on factors such as the coverage limits and terms of each policy.

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  • 38. 

    Which of the following does not define an uninsured motorist?

    • A hit and run vehile

    • Person without insurance

    • Person's insurer becomes insolvent

    • Person with insurance

    Correct Answer
    A. Person with insurance
    Explanation
    The correct answer is "Person with insurance." This option does not define an uninsured motorist because it states that the person has insurance. An uninsured motorist refers to someone who does not have insurance coverage for their vehicle.

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  • 39. 

    Which Commercial Property Causes of Loss form has the broadest coverage?

    • Basic Causes of Loss

    • Specified Causes of Loss

    • Special Causes of Loss

    • None of the above are Commercial Causes of Loss Forms

    Correct Answer
    A. Special Causes of Loss
    Explanation
    The Special Causes of Loss form provides the broadest coverage among the Commercial Property Causes of Loss forms. This form covers all risks unless they are specifically excluded, offering comprehensive protection for commercial properties. The Basic Causes of Loss form provides coverage for a limited number of named perils, while the Specified Causes of Loss form covers only the perils listed in the policy. Therefore, the Special Causes of Loss form is the most inclusive and provides the widest range of coverage for commercial properties.

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  • 40. 

    The only exceptions to the free insurance prohibition are as follows, except:

    • Newspaper subscriptions

    • Services of a motor club

    • Life insurance to pay off a mortgage loan

    • Auto insurance included in a automobile sale

    Correct Answer
    A. Auto insurance included in a automobile sale
    Explanation
    Auto insurance included in an automobile sale is not an exception to the free insurance prohibition. This means that even though auto insurance is provided as part of the automobile sale, it is still not allowed under the prohibition. The other options, such as newspaper subscriptions, services of a motor club, and life insurance to pay off a mortgage loan, are exceptions to the prohibition and are therefore allowed.

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  • 41. 

    If the insurer has Physical Damage Settlement Option to repair, replace, or pay for damage, what will the company use in determining how much to pay out for a claim?

    • Use the amount specified in the policy

    • Use the Kelly Blue Book value

    • Use actual cash value

    • Use the Kelly Blue Book value and the fair market value

    Correct Answer
    A. Use the Kelly Blue Book value and the fair market value
    Explanation
    The insurer will use the Kelly Blue Book value and the fair market value to determine how much to pay out for a claim. These values are commonly used in the insurance industry to assess the worth of a vehicle and determine the appropriate payout amount. The Kelly Blue Book value provides a standard reference point for the value of a vehicle, while the fair market value takes into account the current market conditions and the specific circumstances of the claim. By considering both values, the insurer can ensure a fair and accurate payout for the damage.

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  • 42. 

    What is the purpose of Miscellaneous Type Vehicle Endorsement?

    • Is for people who don't own a vehicle but still drive (rented, public transportation, company vehicle, etc.)

    • Allows non-owned vehicles furnished for the insured's regular use (company car)

    • Allows the PAP to cover vehicles such as motorcycles, ATV's, dune buggies and motorhomes.

    • Covers expenses incurred in the event of a total theft

    Correct Answer
    A. Allows the PAP to cover vehicles such as motorcycles, ATV's, dune buggies and motorhomes.
    Explanation
    The purpose of the Miscellaneous Type Vehicle Endorsement is to allow the Personal Auto Policy (PAP) to provide coverage for vehicles such as motorcycles, ATV's, dune buggies, and motorhomes. This endorsement expands the coverage of the policy to include these specific types of vehicles, which may not be covered under the standard policy. By adding this endorsement, the insured can ensure that these vehicles are protected in the event of an accident or damage.

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  • 43. 

    Business Income and Extra Expense coverage would be necessary in which of the following cases?

    • A dry cleaner has a fire and must relocate to temporary location to avoid losing customers

    • A contractor has his tools stolen from a job site

    • A grocery store suffers damage to stock when an earthquake collapses a shelf

    • A restaurant owner forgets to order enough product as a result suffers a loss of business income.

    Correct Answer
    A. A dry cleaner has a fire and must relocate to temporary location to avoid losing customers
    Explanation
    Business Income and Extra Expense coverage would be necessary in the case of a dry cleaner having a fire and needing to relocate to a temporary location to avoid losing customers. This coverage would provide financial protection for the loss of income and the additional expenses incurred due to the temporary relocation.

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  • 44. 

    You must notify the Commissioner in writing immediately if the following occur except:

    • Residence address change

    • Principal business address change

    • Drivers license change

    • Mailing address change

    Correct Answer
    A. Principal business address change
    Explanation
    The question is asking for an exception to the situations in which the Commissioner must be notified in writing. The correct answer is "Principal business address change." This means that if there is a change in the principal business address, the Commissioner does not need to be notified. However, all other changes including residence address, driver's license, and mailing address must be reported to the Commissioner.

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  • 45. 

    Which type of coverage is needed to cover how much you owe on a vehicle and how much the actual cash value is worth?

    • Gap coverage

    • New Auto Coverage

    • P & I (protection and indemnity)

    • Liability coverage

    Correct Answer
    A. Gap coverage
    Explanation
    Gap coverage is needed to cover how much you owe on a vehicle and how much the actual cash value is worth. Gap coverage is an optional insurance coverage that helps pay off the difference between the amount you owe on your car loan or lease and the car's actual cash value in the event of a total loss. This coverage is particularly important for individuals who have a loan or lease on their vehicle, as it protects them from having to pay out of pocket for the remaining balance on the loan if the car is totaled.

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  • 46. 

    A policy that typically insures drivers who have less than favorable driving record or less driving experience than is desired is known as which of the following coverages?

    • GAP coverage

    • Named Non-owner coverage

    • Other than collision coverage

    • Non-Standard Physical Damage coverage

    Correct Answer
    A. Non-Standard Physical Damage coverage
    Explanation
    Non-Standard Physical Damage coverage is a type of insurance policy that is specifically designed for drivers who have a less than favorable driving record or less driving experience than is desired. This coverage provides insurance protection for damages to the insured driver's vehicle in the event of an accident, regardless of fault. It is called "Non-Standard" because it deviates from the standard insurance policies that are offered to drivers with a clean driving record. This coverage is typically more expensive than standard policies due to the higher risk associated with insuring drivers with a poor driving history.

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  • 47. 

    Aggregate limit refers to:

    • The limit of insurance per loss

    • The most an insurer will pay in any one policy period

    • A per article limit

    • Agricultural loss limit

    Correct Answer
    A. The most an insurer will pay in any one policy period
    Explanation
    Aggregate limit refers to the maximum amount that an insurer will pay in any one policy period. This means that regardless of the number of claims or losses that occur during the policy period, the insurer will not pay more than the aggregate limit. This limit is set to protect the insurer from excessive losses and to ensure that they can manage their risk effectively. It is an important consideration for policyholders as they need to ensure that the aggregate limit is sufficient to cover their potential losses.

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  • 48. 

    An Application may be denied a license without the right to a hearing if any of the following conditions apply except:

    • Applicant was convicted of a felony

    • Applicant was convicted of a DUI misdemeanor

    • Applicant's previous insurance license was revoked within the past 5 years

    • Applicant was denied an insurance license last year

    Correct Answer
    A. Applicant was convicted of a DUI misdemeanor
    Explanation
    An application may be denied a license without the right to a hearing if the applicant was convicted of a felony, if the applicant's previous insurance license was revoked within the past 5 years, or if the applicant was denied an insurance license last year. However, being convicted of a DUI misdemeanor does not automatically result in denial of a license without the right to a hearing.

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  • 49. 

    What type of endorsement waives the standard requirement of a "4-wheel vehicle and/or a vehicle weight of less than 10,000 pounds" limitation?

    • Extended non-owned liability

    • Named non-owner

    • Excess automobile liability exposure

    • Miscellaneous Type Vehicle.

    Correct Answer
    A. Miscellaneous Type Vehicle.
    Explanation
    The correct answer is Miscellaneous Type Vehicle. A Miscellaneous Type Vehicle endorsement waives the standard requirement of a "4-wheel vehicle and/or a vehicle weight of less than 10,000 pounds" limitation. This means that with this endorsement, vehicles that do not meet these requirements can still be covered under the policy.

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Quiz Review Timeline (Updated): Mar 22, 2023 +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Feb 19, 2010
    Quiz Created by
    Petsya

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