Fire & Casualty Practice Exam 5

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Fire & Casualty Practice Exam 5 - Quiz

Fire & Casualty Practice Exam 5 - For personal use only


Questions and Answers
  • 1. 

    What gives an insured party the right to seek compensation if it is proven that another person with negligence contributed to the injury ?

    • A.

      Statutory code

    • B.

      Tort law

    • C.

      Criminal code

    • D.

      Case law

    Correct Answer
    B. Tort law
    Explanation
    Tort law gives an insured party the right to seek compensation if it is proven that another person with negligence contributed to the injury. Tort law is a branch of civil law that deals with personal injuries and provides a legal framework for individuals to seek compensation for harm caused by the negligence or wrongdoing of others. It allows the injured party to file a lawsuit against the responsible party and seek damages for their injuries or losses.

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  • 2. 

    Surplus lines brokers

    • A.

      Are always employees of insurance companies

    • B.

      Transact business only with admitted insurers

    • C.

      Specialize in marine insurance

    • D.

      Transact business only with non-admitted insurers

    Correct Answer
    D. Transact business only with non-admitted insurers
    Explanation
    Surplus lines brokers are insurance intermediaries who specialize in placing coverage with non-admitted insurers. Non-admitted insurers are not licensed or regulated by the state and typically provide coverage for high-risk or unique risks that admitted insurers are unwilling or unable to cover. Surplus lines brokers have the expertise and connections to access these non-admitted insurers and find coverage solutions for clients that may not be available through traditional insurance channels. Therefore, they exclusively transact business with non-admitted insurers.

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  • 3. 

    Which of the following is an insurer's option when making a loss settlement with the insured under a personal auto policy ?

    • A.

      Return stolen property to the address shown in the policy

    • B.

      Have the insured purchaser place the auto at an auto auction

    • C.

      Demand that the insured first attempt to settle with the responsible party

    • D.

      Instruct the insured to repair the vehicle at a designated shop

    Correct Answer
    A. Return stolen property to the address shown in the policy
    Explanation
    When making a loss settlement with the insured under a personal auto policy, an insurer's option can be to return stolen property to the address shown in the policy. This means that if the insured's vehicle is stolen and later recovered, the insurer may choose to return the stolen vehicle to the insured's address as stated in the policy. This option allows the insured to regain possession of their stolen property.

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  • 4. 

    What steps need to be taken to terminate a licensee's license that is in the possession of an employer

    • A.

      The employer must return the license to the licensee, who then must return the license to the insurance commissioner

    • B.

      The licensee must give written notice to the employer who then sends the license to the insurance commissioner

    • C.

      The license cannot be terminated prior to the expiration date; it becomes inactive

    • D.

      The licensee needs to give written notice of intent to the insurance commissioner

    Correct Answer
    D. The licensee needs to give written notice of intent to the insurance commissioner
    Explanation
    To terminate a licensee's license that is in the possession of an employer, the licensee needs to give written notice of intent to the insurance commissioner. This means that the licensee must inform the insurance commissioner about their intention to terminate the license. It is not the employer's responsibility to return the license or send it to the insurance commissioner. The license cannot be terminated prior to the expiration date; it becomes inactive is also incorrect as it implies that the license will automatically become inactive without any action from the licensee or the insurance commissioner.

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  • 5. 

    What will happen when an agent's appointment to an insurance company is terminated and the agent has no other appointments with any other insurance company ?

    • A.

      The agent's permanent license becomes inactive

    • B.

      The agent's permanent license remains fully active until expiration

    • C.

      The agent's permanent license remains in force for only 60 more days unless the agent becomes reappointed or receives a new appointment letter from another insurer

    • D.

      The agent's permanent license will be terminated simultaneously

    Correct Answer
    A. The agent's permanent license becomes inactive
    Explanation
    When an agent's appointment to an insurance company is terminated and the agent has no other appointments with any other insurance company, their permanent license becomes inactive. This means that they will no longer be authorized to sell insurance or perform any activities related to their license. The agent will need to either become reappointed or receive a new appointment letter from another insurer in order to activate their license again.

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  • 6. 

    Which of the following is covered by a building and personal property coverage form (BPP) ?

    • A.

      A patio

    • B.

      A bridge

    • C.

      A light pole

    • D.

      A dock

    Correct Answer
    C. A light pole
    Explanation
    A light pole is covered by a building and personal property coverage form (BPP) because it is considered a part of the building structure. BPP provides coverage for physical damage to the building and its contents, including fixtures such as light poles.

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  • 7. 

    A physician may have misdiagnosed a patient for terminal cancer.  what type of insurance would protect the physician for this type of mistake ?

    • A.

      Personal liability

    • B.

      Professional liability

    • C.

      Health insurance

    • D.

      Allied lines insurance

    Correct Answer
    B. Professional liability
    Explanation
    Professional liability insurance would protect the physician for misdiagnosing a patient for terminal cancer. This type of insurance is specifically designed to cover professionals, such as doctors, against claims of negligence or errors in their professional services. In this case, if the patient were to file a lawsuit claiming that the physician's misdiagnosis caused harm or financial loss, professional liability insurance would provide coverage for legal expenses, settlements, or judgments.

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  • 8. 

    What is one of the principle rating factors under Proposition 103 allowed for personal auto policies ?

    • A.

      Credit record

    • B.

      Year of the auto

    • C.

      Safety driving record

    • D.

      Make of the auto

    Correct Answer
    C. Safety driving record
    Explanation
    One of the principle rating factors under Proposition 103 allowed for personal auto policies is the safety driving record. This means that insurance companies consider an individual's history of safe driving, including factors such as accidents, traffic violations, and claims history, when determining the premium for their auto insurance policy. A good safety driving record indicates responsible and cautious driving behavior, which is seen as less risky by insurance companies and therefore may result in lower premiums.

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  • 9. 

    What coverage is available under the named non-owner coverage endorsement ?

    • A.

      Physical damage and uninsured motorist

    • B.

      Liability, medical payments, and uninsured motorist

    • C.

      Liability and physical damage

    • D.

      Liability only

    Correct Answer
    B. Liability, medical payments, and uninsured motorist
    Explanation
    The named non-owner coverage endorsement provides coverage for liability, medical payments, and uninsured motorist. This means that if the insured person is driving a vehicle that they do not own and is involved in an accident, this endorsement will cover their liability for any damages or injuries caused to others, provide medical payments coverage for their own injuries, and also provide coverage for any damages or injuries caused by an uninsured or underinsured motorist.

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  • 10. 

    Which of the following is considered special damages ?

    • A.

      Compensation for a person's emotional suffering

    • B.

      Compensation for time away from work

    • C.

      Compensation for loss of a foot

    • D.

      Compensation for a scar

    Correct Answer
    B. Compensation for time away from work
    Explanation
    Special damages refer to the specific financial losses or expenses incurred as a direct result of an injury or harm. Compensation for time away from work falls under special damages because it refers to the wages or income that an individual has lost due to their injury. This type of compensation is quantifiable and can be calculated based on the individual's salary or earnings. On the other hand, compensation for emotional suffering, loss of a foot, or a scar may fall under general damages, as they are more subjective and not easily quantifiable in monetary terms.

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  • 11. 

    All of the following are mandatory coverages of a business owner's policy, except:

    • A.

      Extra expense coverage

    • B.

      Professional liability coverage

    • C.

      Building coverage

    • D.

      Business income coverage

    Correct Answer
    B. Professional liability coverage
    Explanation
    A business owner's policy typically includes several mandatory coverages to protect the business from various risks. Extra expense coverage helps cover additional costs incurred due to a covered loss, such as renting a temporary space. Building coverage provides protection for the physical structure of the business premises. Business income coverage helps replace lost income if the business is unable to operate due to a covered loss. However, professional liability coverage, also known as errors and omissions insurance, is not typically included in a business owner's policy. It is a separate type of insurance that specifically covers claims arising from professional services or advice provided by the business.

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  • 12. 

    An agent who diverts premium dollars for the agent's own use is guilty of

    • A.

      Theft

    • B.

      Fraud

    • C.

      Forgery

    • D.

      Misrepresentation

    Correct Answer
    A. Theft
    Explanation
    An agent who diverts premium dollars for their own use is guilty of theft. This means that the agent is unlawfully taking the money intended for insurance premiums and using it for personal gain without the policyholder's knowledge or consent. This action is considered theft because it involves the unauthorized appropriation of someone else's property, in this case, the premium dollars.

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  • 13. 

    Every admitted insurer in the state of California is required to maintain a unit or disivion to investigate which of the following ?

    • A.

      Possible non-justifiable discrimination

    • B.

      Possible fraudulent claims made by insureds

    • C.

      Possible non-compliance with CA rate laws

    • D.

      Possible arson claims

    Correct Answer
    B. Possible fraudulent claims made by insureds
    Explanation
    Every admitted insurer in the state of California is required to maintain a unit or division to investigate possible fraudulent claims made by insureds. This is because fraudulent claims can result in financial losses for the insurer and can also lead to higher premiums for other policyholders. By investigating possible fraudulent claims, insurers can ensure that only legitimate claims are paid out and deter individuals from making false claims. This helps to maintain the integrity of the insurance system and protect the interests of both insurers and policyholders.

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  • 14. 

    Which of the following would be considered special damages ?

    • A.

      Scarring

    • B.

      Loss of an index finger

    • C.

      Lost wages

    • D.

      Pain and suffering

    Correct Answer
    C. Lost wages
    Explanation
    Special damages refer to the specific financial losses that a person incurs as a result of an injury or harm caused by someone else. Lost wages, mentioned in the answer, are a clear example of special damages. When a person is unable to work due to an injury, they may lose income and wages, which can be quantified and claimed as special damages in a legal case. Scarring and loss of an index finger can be considered as general damages, while pain and suffering are non-economic damages.

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  • 15. 

    Which of the following is a common policy condition for a commercial package policy ?

    • A.

      Causes of loss

    • B.

      Duty to defend

    • C.

      Pro-rata clause

    • D.

      Inspections and surveys

    Correct Answer
    D. Inspections and surveys
    Explanation
    Inspections and surveys are a common policy condition for a commercial package policy. This condition requires the insured to allow the insurance company to conduct inspections and surveys of the insured property. These inspections and surveys help the insurance company assess the risk associated with the property and determine the appropriate coverage and premiums. By conducting inspections and surveys, the insurance company can identify any potential hazards or risks that may affect the insured property and take necessary measures to mitigate them. This condition ensures that the insurance company has accurate information about the insured property and can provide adequate coverage.

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  • 16. 

    Insurance which covers ship owners against vicarious liability claims due to operating the insured vessel is:

    • A.

      A voyage policy

    • B.

      Hull insurance

    • C.

      The sue and labor laws

    • D.

      Protection and indemnity insurance

    Correct Answer
    D. Protection and indemnity insurance
    Explanation
    Protection and indemnity insurance is a type of insurance that provides coverage to ship owners against vicarious liability claims arising from the operation of the insured vessel. This insurance protects the ship owner from financial losses resulting from third-party claims, such as claims for bodily injury, property damage, or pollution caused by the vessel. It also covers legal expenses incurred in defending against such claims. Hull insurance, on the other hand, covers physical damage to the vessel itself. A voyage policy is a type of marine insurance that provides coverage for a specific voyage or journey. The sue and labor laws refer to the legal principle that requires ship owners to take necessary measures to minimize damage to the vessel and its cargo in the event of an accident or peril.

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  • 17. 

    Which advisory organization(s) develop forms for the standard market

    • A.

      National Association of Insurance Commissioners and the American Association of Insurance Services

    • B.

      Insurance Services Office

    • C.

      National Association of Insurance Commissioners and the Insurance Services Office

    • D.

      Insurance Services Office and the American Association of Managing General Agents

    Correct Answer
    B. Insurance Services Office
    Explanation
    The correct answer is Insurance Services Office. The Insurance Services Office (ISO) is responsible for developing forms for the standard market. The National Association of Insurance Commissioners (NAIC) is a regulatory organization that sets standards and provides guidance for insurance companies, but they do not develop forms for the standard market. The American Association of Insurance Services (AAIS) and the American Association of Managing General Agents (AAMGA) are not directly involved in developing forms for the standard market.

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  • 18. 

    What is one of the main factors that the insurance Commissioner uses while determining whether a rate is excessive or unfairly discriminatory

    • A.

      Whether the rate mathematically reflects the insurance company's investment income

    • B.

      How long the insurer has been admitted to do business in the state

    • C.

      Complaint history of the insurer by insureds

    • D.

      The degree of competition

    Correct Answer
    A. Whether the rate mathematically reflects the insurance company's investment income
    Explanation
    The insurance Commissioner uses whether the rate mathematically reflects the insurance company's investment income as one of the main factors to determine whether a rate is excessive or unfairly discriminatory. This means that the Commissioner assesses whether the rate takes into account the company's investment income and if it is reasonable in relation to the risks and costs associated with providing insurance coverage. By considering this factor, the Commissioner can ensure that insurance rates are fair and not excessively high or discriminatory.

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  • 19. 

    Which of the following perils is covered by a causes of loss - basic form

    • A.

      Governmental action

    • B.

      War

    • C.

      Riot or civil commotion

    • D.

      Ordinance or law

    Correct Answer
    C. Riot or civil commotion
    Explanation
    The causes of loss - basic form provides coverage for riot or civil commotion. This means that if there is damage to the insured property as a result of a riot or civil commotion, the insurance policy will cover the cost of repairing or replacing the damaged property. This coverage is important as it protects the insured against any potential financial losses that may occur due to such perils.

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  • 20. 

    The commercial property policy part - " causes of loss - borad form " includes an exclusion for "concurrent causation". The effect of this exclusion is

    • A.

      If two or more perils happen at the same time to cause a loss, there is no coverage if any of the perils are excluded.

    • B.

      If two or more perils happen at the same time to cause a loss, there is coverage for all of the damage if any of the perils are not excluded.

    • C.

      If a loss occurs concurrently with the expiration date of the policy, it is not covered

    • D.

      If two or more perils happen at the same time to cause a loss, then only the damage caused by one of the perils is covered

    Correct Answer
    A. If two or more perils happen at the same time to cause a loss, there is no coverage if any of the perils are excluded.
    Explanation
    The commercial property policy's exclusion for "concurrent causation" means that if two or more perils occur simultaneously to cause a loss, there will be no coverage if any of those perils are excluded. In other words, if even one of the perils that contributed to the loss is excluded from coverage, the entire loss will not be covered by the policy.

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  • 21. 

    A health insurance deductible is

    • A.

      The cost of a covered expense minus a co-payment

    • B.

      The portion of the insurance premium paid for coverage by the insured

    • C.

      The insurance payment for health care that is not considered a covered expense

    • D.

      The amount of covered expense that the insured pays before the insurer pays

    Correct Answer
    D. The amount of covered expense that the insured pays before the insurer pays
    Explanation
    A health insurance deductible is the amount of covered expense that the insured pays before the insurer pays. This means that the insured must first pay a certain amount out of pocket for their medical expenses before the insurance company starts covering the costs. Once the deductible is met, the insurer will then begin to pay for the covered expenses according to the terms of the insurance policy.

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  • 22. 

    Which of the following is eligible for a business owner's policy

    • A.

      An auto repair shop

    • B.

      A credit union

    • C.

      A furniture store

    • D.

      A sports bar

    Correct Answer
    C. A furniture store
    Explanation
    A furniture store is eligible for a business owner's policy because it is a type of small business that typically requires coverage for property damage, liability, and business interruption. A business owner's policy combines these coverages into one package, making it convenient and cost-effective for small businesses to obtain comprehensive insurance protection.

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  • 23. 

    All of the following are listed on a commercial general liability declarations page, except

    • A.

      Medical expense limit

    • B.

      Rent it to you limit

    • C.

      Personal advertising injury limit

    • D.

      Pollution liability limit

    Correct Answer
    D. Pollution liability limit
    Explanation
    The commercial general liability declarations page lists various limits and coverages related to the liability insurance policy. It provides a summary of the policy's key details. The medical expense limit, rent it to you limit, and personal advertising injury limit are commonly included on this page. However, the pollution liability limit is not typically listed on a commercial general liability declarations page. This limit is specific to pollution-related claims and is often found in a separate pollution liability policy.

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  • 24. 

    The term "subrogation" refers to

    • A.

      The insured's right to receive broadened coverage at no extra charge

    • B.

      The insurance policy applies separately to each insured

    • C.

      The insurer's right to recover payment from a responsible 3rd party

    • D.

      The insurance firm insured's interest in a policy to another party

    Correct Answer
    C. The insurer's right to recover payment from a responsible 3rd party
    Explanation
    Subrogation refers to the insurer's right to recover payment from a responsible third party. This means that if the insurer has paid out a claim to the insured, they have the right to seek reimbursement from any party that may be responsible for the loss or damages. This allows the insurer to recoup their expenses and helps prevent the insured from benefiting from both the insurance payout and any potential compensation from the responsible party.

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  • 25. 

    All of the following statements concerning business owner's policies are true, except:

    • A.

      It allows insurers to individually underwrite the smaller, low-premium policies

    • B.

      It contains simpler reading which lower handling costs for insurers

    • C.

      Insureds have the benefit of additional coverages that might otherwise be overlooked

    • D.

      Insureds have the convenience of one policy that meets most of their needs at a reduced premium cost

    Correct Answer
    B. It contains simpler reading which lower handling costs for insurers
    Explanation
    Business owner's policies do not necessarily contain simpler reading that lowers handling costs for insurers. The other statements are true: business owner's policies allow insurers to individually underwrite smaller, low-premium policies, provide insureds with additional coverages that might be overlooked, and offer the convenience of one policy that meets most of their needs at a reduced premium cost.

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  • 26. 

    Under an unendorsed personal auto policy, what coverage is available for personal effects ?

    • A.

      None

    • B.

      Luggage and clothing up to $500

    • C.

      Luggage up to $200

    • D.

      All personal property in the auto up to $500

    Correct Answer
    A. None
    Explanation
    Under an unendorsed personal auto policy, there is no coverage available for personal effects. This means that if any personal belongings such as luggage or clothing are damaged or stolen while in the vehicle, the policy will not provide any compensation or reimbursement for those items. It is important for individuals to be aware of this limitation and consider obtaining additional coverage if they want their personal effects to be protected while in their vehicle.

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  • 27. 

    A home is damaged minutes after an earthquake, first by fire, then by fuel pipes bursting and causing an explosion.  Under an HO-3 form:

    • A.

      There is no coverage unless the homeowner has made an earthquake coverage endorsement a part of the policy

    • B.

      The policy covers all of the damage since explosion is an insured peril

    • C.

      There is coverage, but only for the damage caused by the fire and explosion

    • D.

      The policy does not cover the damage since the HO-3 provides only named peril coverage

    Correct Answer
    C. There is coverage, but only for the damage caused by the fire and explosion
    Explanation
    The correct answer is that there is coverage, but only for the damage caused by the fire and explosion. This is because the HO-3 form typically provides coverage for named perils, and in this case, the fire and explosion are considered insured perils. However, earthquake damage is not typically covered under the HO-3 form unless the homeowner has specifically added an earthquake coverage endorsement to their policy. Therefore, the damage caused by the earthquake itself would not be covered.

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  • 28. 

    The insurer's right to recover its claim payment to an insured from a negligent 3rd party is known as:

    • A.

      Arbitration

    • B.

      Liberalization

    • C.

      Subrogation

    • D.

      Assignment

    Correct Answer
    C. Subrogation
    Explanation
    Subrogation is the insurer's right to recover the claim payment made to an insured from a negligent third party. This means that the insurer can step into the insured's shoes and pursue legal action against the responsible party to recover the amount paid out for the claim. Subrogation allows the insurer to mitigate its losses and prevent the insured from benefiting from both the claim payment and any additional compensation received from the negligent party.

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  • 29. 

    All of the following are requirements for a notice by mail to an insured by an insurer, except

    • A.

      Notice must be mailed to the residence or principal place of business

    • B.

      Notice must be sent with return receipt required

    • C.

      Notice must be addressed to the person being notified

    • D.

      Postage must be prepaid

    Correct Answer
    B. Notice must be sent with return receipt required
    Explanation
    The requirement that notice must be sent with return receipt required means that the insured must sign and return a receipt acknowledging that they have received the notice. This ensures proof of delivery and helps to protect both the insurer and the insured. However, this is not a requirement for a notice by mail to an insured by an insurer. Therefore, the correct answer is that notice does not need to be sent with return receipt required.

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  • 30. 

    The term "assignment" refers to

    • A.

      The insurance policy applying to each insured

    • B.

      The insurer's right to collect damages from a 3rd party

    • C.

      The transfer of the insureds interest in a policy to another party

    • D.

      The insureds right to receive broad new coverage from the insurer at no charge

    Correct Answer
    C. The transfer of the insureds interest in a policy to another party
    Explanation
    In insurance, the term "assignment" refers to the transfer of the insured's interest in a policy to another party. This means that the insured can transfer their rights and benefits under the policy to someone else, such as a family member or a business partner. This transfer can occur through a legal document known as an assignment agreement. By doing so, the insured effectively transfers their rights to receive coverage and benefits from the insurer to the assigned party.

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  • 31. 

    Which of the following statements is true regarding insurers with admitted status in California ?

    • A.

      They may use race, color, religion or national origin as a condition to use higher rates

    • B.

      They may use any rating methods that are actuarially sound in rating the policy

    • C.

      They may not use race, color, religion or national origin as a condition to use high rates

    • D.

      They must file for an exemption with the insurance commisioner if they wish to use race, color, religion or national origin as a rating condition

    Correct Answer
    C. They may not use race, color, religion or national origin as a condition to use high rates
    Explanation
    Insurers with admitted status in California are not allowed to use race, color, religion, or national origin as a condition to use higher rates. This means that they cannot discriminate against individuals based on these factors when determining the rates for their policies. Admitted insurers must adhere to anti-discrimination laws and treat all policyholders fairly and equally.

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  • 32. 

    A person can base his/her claim for legal liability on the basis of all the following, except:

    • A.

      Absolute liability

    • B.

      Breach of contract

    • C.

      Intentional tort

    • D.

      Negligence

    Correct Answer
    B. Breach of contract
    Explanation
    A person can base their claim for legal liability on the basis of absolute liability, intentional tort, and negligence. However, breach of contract is not a basis for legal liability. Breach of contract refers to the failure to fulfill the terms of a contract, which typically results in a breach of contract claim rather than a claim for legal liability. Legal liability is usually based on actions or omissions that cause harm or injury to another person, such as in cases of absolute liability, intentional torts, or negligence.

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  • 33. 

    If the named insured is not the owner of the building, improvements and betterments are covered under the

    • A.

      Agreed value

    • B.

      Newly constructed property

    • C.

      Business personal property

    • D.

      Building

    Correct Answer
    C. Business personal property
    Explanation
    If the named insured is not the owner of the building, improvements and betterments are covered under the category of business personal property. Business personal property refers to movable items owned by the business, including furniture, equipment, inventory, and any improvements made to the property that are not permanent fixtures. Since the named insured is not the owner of the building, any improvements or betterments they make to the property would be considered part of their business personal property and would be covered under this category.

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  • 34. 

    Under the commercial building and personal property coverage extensions, property off-premises is covered while the property is located:

    • A.

      In a building the named insured has leased for five years

    • B.

      At a trade fair

    • C.

      In a delivery truck

    • D.

      At a salesperson's home

    Correct Answer
    A. In a building the named insured has leased for five years
    Explanation
    Under the commercial building and personal property coverage extensions, property off-premises is covered while the property is located in a building the named insured has leased for five years. This means that if the named insured has leased a building for a period of five years, any property that is located in that building will be covered under the insurance policy. This coverage extension ensures that the named insured's property is protected even when it is not on their own premises.

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  • 35. 

    If the vacancy permit endorsement is added to a building and personal property coverage form, the vacancy condition under the basic policy is:

    • A.

      Waived after the policy period

    • B.

      Waived only the designated perils during the policy period

    • C.

      Waived during the permit period

    • D.

      Waived only for designated perils during the permit period

    Correct Answer
    D. Waived only for designated perils during the permit period
    Explanation
    The correct answer is "Waived only for designated perils during the permit period." When the vacancy permit endorsement is added to a building and personal property coverage form, it means that the standard vacancy condition under the basic policy is waived, but only for specific perils that are designated during the permit period. This means that the coverage for these designated perils will still apply even if the property is vacant during the permit period, but coverage for other perils may still be subject to the vacancy condition.

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  • 36. 

    In order to receive the principal sum benefit for death from a disability income policy, death must occur

    • A.

      Within a specified number of days after injury

    • B.

      Any time during the total dismemberment period

    • C.

      Any time during a rehabilitation period

    • D.

      Within the policy period for any cause

    Correct Answer
    A. Within a specified number of days after injury
    Explanation
    In order to receive the principal sum benefit for death from a disability income policy, death must occur within a specified number of days after injury. This means that if a person sustains an injury and dies within the specified time period, their beneficiaries will be eligible to receive the principal sum benefit. It is important to note that this benefit is specifically tied to death resulting from the injury, and not any other cause or period of time.

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  • 37. 

    Which of the following describes the act of making a false entry in any book, statement or report of any insurer with the intent to deceive any agent, examiner lawfully appointed to examine the affairs of the insurer ?

    • A.

      An aleatory act

    • B.

      An error or omission

    • C.

      An exclusionary act

    • D.

      An unfair practice

    Correct Answer
    D. An unfair practice
    Explanation
    Making a false entry in any book, statement, or report of an insurer with the intent to deceive is considered an unfair practice. This act involves intentionally providing false information to agents or examiners who are lawfully appointed to examine the insurer's affairs. It is an unethical and deceptive behavior that goes against the principles of honesty and transparency in the insurance industry.

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  • 38. 

    Under the business income coverage form, extra expenses are

    • A.

      Covered without limit during the period of restoration

    • B.

      Excluded

    • C.

      Covered up to the amount they reduce the business income loss

    • D.

      Covered up to the monthly limit specified in the declarations

    Correct Answer
    B. Excluded
    Explanation
    Under the business income coverage form, extra expenses are excluded. This means that any additional expenses incurred during the period of restoration, such as the cost of temporary relocation or renting equipment, will not be covered by the insurance policy. The policyholder will have to bear these expenses themselves, without any reimbursement from the insurance company.

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  • 39. 

    If an insured purchases an all-terrain vehicle (ATV), what endorsement can be added to the personal auto policy to insure the vehicle ?

    • A.

      ATV endorsement

    • B.

      Recreational vehicle endorsement

    • C.

      There is no endorsement available for this exposure

    • D.

      Miscellaneous type vehicle endorsement

    Correct Answer
    D. Miscellaneous type vehicle endorsement
    Explanation
    A miscellaneous type vehicle endorsement can be added to the personal auto policy to insure the all-terrain vehicle (ATV). This endorsement provides coverage for vehicles that do not fit into the standard categories covered by the policy, such as motorcycles or motorhomes. By adding this endorsement, the insured can ensure that their ATV is protected in case of accidents, damage, or theft.

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  • 40. 

    All of the following are areas that market regulation covers, except:

    • A.

      Employee training

    • B.

      Underwriting

    • C.

      Sales

    • D.

      Rate-making

    Correct Answer
    A. Employee training
    Explanation
    Market regulation covers various aspects of the market to ensure fair and efficient practices. Employee training is not typically considered an area of market regulation as it pertains more to internal operations and human resources. Market regulation usually focuses on areas such as underwriting, sales, and rate-making, which directly impact the functioning and fairness of the market.

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  • 41. 

    All of the following are covered by protection and indemnity insurance, except:

    • A.

      Injury to persons on other ships

    • B.

      Injured passengers on the ship

    • C.

      The cost of reasonable measures that the insured must take to prevent damage at the time of loss

    • D.

      Damage to piers

    Correct Answer
    C. The cost of reasonable measures that the insured must take to prevent damage at the time of loss
    Explanation
    Protection and indemnity insurance covers various liabilities and expenses related to maritime activities. It typically includes coverage for injury to persons on other ships, injured passengers on the insured ship, and damage to piers. However, it does not cover the cost of reasonable measures that the insured must take to prevent damage at the time of loss. This means that the insurance policy does not provide coverage for proactive measures taken by the insured to prevent potential damage.

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  • 42. 

    Under an unendorsed personal auto policy, transportation expense coverage applies to

    • A.

      Theft only losses

    • B.

      Collision and other-than-collision losses

    • C.

      Other-than-collision losses only

    • D.

      None. There is no coverage

    Correct Answer
    B. Collision and other-than-collision losses
    Explanation
    Under an unendorsed personal auto policy, transportation expense coverage applies to collision and other-than-collision losses. This means that if the insured vehicle is involved in a collision or any other type of non-collision incident, such as fire, vandalism, or theft, the policy will provide coverage for the cost of alternative transportation while the insured vehicle is being repaired or replaced. This coverage does not apply to theft-only losses or other types of losses not related to collisions or non-collision incidents.

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  • 43. 

    Which of the following is an example of loss prevention?

    • A.

      A homeowner decides not to install a pool in the backyard

    • B.

      A homeowner decides not to restore water damage to basement

    • C.

      A homeowner installs a home sprinkler system

    • D.

      A homeowner installs a home security system

    Correct Answer
    A. A homeowner decides not to install a pool in the backyard
    Explanation
    Installing a pool in the backyard can increase the risk of accidents and potential liabilities for the homeowner. Therefore, by deciding not to install a pool, the homeowner is taking a preventive measure to avoid potential losses associated with accidents, injuries, and legal issues that could arise from having a pool on their property.

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  • 44. 

    All of the following are typical exclusions in an inland marine policy, except:

    • A.

      Insects or vermin

    • B.

      Earth movement

    • C.

      Wear and tear

    • D.

      Electrical breakdown

    Correct Answer
    B. Earth movement
    Explanation
    Earth movement is not typically excluded in an inland marine policy. Inland marine policies usually cover property that is in transit or temporarily located away from the insured's premises. Exclusions such as insects or vermin, wear and tear, and electrical breakdown are commonly included in these policies to limit coverage for specific risks. However, earth movement, which refers to events like earthquakes or landslides, is not typically excluded and may be covered under an inland marine policy.

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  • 45. 

    An organization will cease to exist as an entity eligible to hold a license for all of the following reasons, except:

    • A.

      Termination of key employee

    • B.

      Dissolution of a co-partnership

    • C.

      Dissolution of a corporation

    • D.

      Termination of an association

    Correct Answer
    A. Termination of key employee
    Explanation
    An organization will cease to exist as an entity eligible to hold a license for all of the given reasons except the termination of a key employee. While the termination of a key employee may have an impact on the organization's operations and success, it does not directly result in the organization losing its eligibility to hold a license. On the other hand, the dissolution of a co-partnership, dissolution of a corporation, or termination of an association can lead to the organization ceasing to exist as a legal entity and therefore losing its eligibility for a license.

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  • 46. 

    An insurer's loss reserve for a claim is

    • A.

      The exact amount the insurer will have to pay to close the claim

    • B.

      An estimate of the amount the insurer will pay

    • C.

      The maximum amount the insurer will have to pay to close the claim

    • D.

      Equal to claims paid divided by earned premium reserve, not including loss of adjustment expense

    Correct Answer
    B. An estimate of the amount the insurer will pay
    Explanation
    The correct answer is "An estimate of the amount the insurer will pay." This is because a loss reserve is a provision made by the insurer to cover the estimated cost of settling a claim. It represents the amount of money that the insurer expects to pay out in order to close the claim. It is not necessarily the exact amount that will be paid, as the final amount may vary based on factors such as negotiations, legal proceedings, or additional information that may arise during the claims process.

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  • 47. 

    What coverage is available under the miscellaneous type vehicle endorsement

    • A.

      Physical damage only

    • B.

      All coverage under the personal auto policy

    • C.

      Liability and physical damage only

    • D.

      Liability only

    Correct Answer
    B. All coverage under the personal auto policy
    Explanation
    The correct answer is "All coverage under the personal auto policy." This means that the miscellaneous type vehicle endorsement provides the same coverage as the personal auto policy, which typically includes liability coverage, physical damage coverage, and other types of coverage such as medical payments, uninsured/underinsured motorist coverage, and comprehensive coverage.

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  • 48. 

    If an individual does not own an auto nor have a regular use of an auto, what endorsement to a personal auto policy could be used to properly protect that individual ?

    • A.

      Named non-owned coverage endorsement

    • B.

      No coverage available

    • C.

      Extended non-owned liability coverage endorsement

    • D.

      Miscellaneous type vehicle endorsement

    Correct Answer
    A. Named non-owned coverage endorsement
    Explanation
    The named non-owned coverage endorsement is the correct answer because it provides coverage for individuals who do not own a car or have regular use of a car. This endorsement extends liability coverage to the individual when they are driving a non-owned vehicle, such as a rental car or a friend's car. It is a way to ensure that the individual is properly protected in case of an accident or damage while driving a vehicle that they do not own.

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  • 49. 

    An insured has a personal auto policy but does not pay the initial insurance premium when it is due.  The insurer cancels the policy for non-payment.  How many days notice must the insurer give ?

    • A.

      5

    • B.

      10

    • C.

      15

    • D.

      20

    Correct Answer
    B. 10
    Explanation
    The insurer must give 10 days notice before canceling the policy for non-payment. This allows the insured enough time to pay the outstanding premium and prevent the cancellation of their policy.

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  • 50. 

    The watercraft endorsement on a homeowner's extends coverage for

    • A.

      Liability coverage for all owned watercraft

    • B.

      Physical damage and liability coverage for all owned watercraft

    • C.

      Liability coverage for watercraft listed on the schedule

    • D.

      Physical damage and liability coverage for watercraft listed on the schedule

    Correct Answer
    C. Liability coverage for watercraft listed on the schedule
    Explanation
    The watercraft endorsement on a homeowner's insurance extends coverage for liability for watercraft listed on the schedule. This means that the policy will provide coverage for any legal liabilities that arise from owning and operating the specific watercraft that is listed on the policy schedule. It does not provide coverage for liability or physical damage for all owned watercraft or any watercraft that is not specifically listed on the schedule.

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Quiz Review Timeline +

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

  • Current Version
  • Oct 19, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Dec 28, 2009
    Quiz Created by
    Pchinna
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