Homeowners Insurance Quiz Questions And Answers

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Homeowners Insurance Quiz Questions And Answers - Quiz

Do you know what's covered in your home insurance policy? There are some of the commonly asked homeowners insurance policy quiz questions and answers about which every homeowner should be aware before buying any property. These policies cover losses and damages to an individual's house and assets for your home. Take the quiz below and check what you know about the general insurance policies of typical homeowners. Shall we begin the quiz now? Best of luck to you!


Questions and Answers
  • 1. 

    If John, while helping Robert move to his new home, accidentally drops Robert's entertainment system and it is damaged beyond repair. It will cost $950 to replace it. Will John's HO-2 policy provide coverage?

    • A.

      HO-2 does not provide coverage for property under his custody, control and care

    • B.

      Yes, it would be covered in full under section II (Damage to Property of Others)

    • C.

      Yes, it would be covered under Coverage D of his HO-2 policy

    • D.

      Yes it would be covered in full under section I (Damage to Property of Others)

    Correct Answer
    B. Yes, it would be covered in full under section II (Damage to Property of Others)
    Explanation
    The correct answer is "Yes, it would be covered in full under section II (Damage to Property of Others)". This is because section II of the HO-2 policy provides coverage for damage to property of others, which includes situations where the insured accidentally damages someone else's property while it is under their custody, control, and care. In this case, John accidentally dropped and damaged Robert's entertainment system while helping him move, so the policy would provide coverage for the cost of replacing it.

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  • 2. 

    If John has an HO-3 policy with $200,000 in Coverage A, and due to a loss he is unable to occupy his home, how much would coverage D provide?

    • A.

      $100,000

    • B.

      $50,000

    • C.

      $60,000

    • D.

      $20,000

    Correct Answer
    C. $60,000
    Explanation
    Coverage D in an HO-3 policy typically provides coverage for additional living expenses if the insured is unable to occupy their home due to a covered loss. In this case, since John is unable to occupy his home due to a loss, coverage D would provide $60,000 in additional living expenses.

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  • 3. 

    Of the options listed below, which one is not eligible for an HO-4 policy?

    • A.

      Renter of Single family home

    • B.

      Owner of a condo unit

    • C.

      Those who occupy a residence in an ineligible building

    • D.

      Those who live in an apartment of a commercial building they own

    Correct Answer
    B. Owner of a condo unit
    Explanation
    The owner of a condo unit is not eligible for an HO-4 policy because condo owners typically need an HO-6 policy, which is specifically designed for condominiums. An HO-4 policy, also known as renter's insurance, is meant for individuals who are renting a home or apartment, not for owners of property.

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  • 4. 

    Which of the following options provides open peril coverage for the building, other structures, and personal property, and is also the broadest coverage form of all the homeowners forms

    • A.

      HO-8

    • B.

      HO-5

    • C.

      HO-3

    • D.

      HO-2

    Correct Answer
    B. HO-5
    Explanation
    HO-5 provides open peril coverage for the building, other structures, and personal property, making it the broadest coverage form of all the homeowners forms. Open peril coverage means that the policy covers all perils except those specifically excluded. This type of coverage provides more comprehensive protection compared to named peril coverage, which only covers specific perils listed in the policy. HO-5 is typically recommended for homeowners who want the highest level of coverage for their property and belongings.

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  • 5. 

    Coverage B does not appear in which of the following Homeowner Forms? 

    • A.

      HO-5

    • B.

      HO-3

    • C.

      HO-6

    • D.

      HO-8

    Correct Answer
    C. HO-6
    Explanation
    HO-6 is a homeowner form specifically designed for condominium owners. It does not include Coverage B, which typically covers other structures on the property. The other homeowner forms (HO-5, HO-3, and HO-8) do include Coverage B, making HO-6 the correct answer.

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  • 6. 

    Coverage D limits can be increased in all of the Homeowners forms with the exception of which one?

    • A.

      HO-5

    • B.

      HO-3

    • C.

      HO-2

    • D.

      HO-8

    Correct Answer
    D. HO-8
    Explanation
    Coverage D refers to the coverage for additional living expenses in a homeowners insurance policy. This coverage helps pay for the cost of living elsewhere if the insured's home becomes uninhabitable due to a covered loss. The question is asking which homeowners form does not allow for an increase in the limits for Coverage D. The correct answer is HO-8. This means that in HO-8 homeowners insurance policies, the limits for Coverage D cannot be increased.

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  • 7. 

    The following statement below are true regarding a DP-1 policy with the exception of which one?

    • A.

      Building losses are covered on an all risk basis

    • B.

      Content losses are paid at an actual cash value basis

    • C.

      Building losses are paid at an actual cash value basis

    • D.

      Lightening is one of the covered causes of loss listed

    Correct Answer
    A. Building losses are covered on an all risk basis
    Explanation
    The given statement states that building losses are covered on an all-risk basis. This means that any damage or loss to the building is covered unless it is specifically excluded in the policy. However, the other statements mention that content losses are paid at an actual cash value basis, building losses are paid at an actual cash value basis, and lightning is one of the covered causes of loss listed. Therefore, the exception in this case is that building losses are not covered on an all-risk basis.

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  • 8. 

    If Coverage A is not included in a DP-2 policy, then Coverage C is limited to how much?

    • A.

      $5,000

    • B.

      $4,000

    • C.

      $2,500

    • D.

      $10,000

    Correct Answer
    B. $4,000
    Explanation
    If Coverage A is not included in a DP-2 policy, then Coverage C is limited to $4,000. This means that in the event of a covered loss, the maximum amount that will be paid out under Coverage C is $4,000. The absence of Coverage A affects the coverage limits for Coverage C, resulting in a lower maximum payout amount.

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  • 9. 

    Of the following options below, which one is found in a DP-3 policy but not in a DP-1 policy?

    • A.

      Personal Property

    • B.

      Additional Living Expense

    • C.

      Fair Rental Value

    • D.

      Other Structures

    Correct Answer
    B. Additional Living Expense
    Explanation
    The correct answer is Additional Living Expense. Additional Living Expense coverage is typically included in a DP-3 policy but not in a DP-1 policy. This coverage provides reimbursement for the additional costs incurred by the insured to maintain a normal standard of living if their property becomes uninhabitable due to a covered loss. It covers expenses such as temporary housing, meals, and transportation. DP-1 policies, on the other hand, usually only provide coverage for the dwelling and do not include additional living expense coverage.

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  • 10. 

    Commercial Package Policies can combine 2 or more of the following coverages with the exception of which one?

    • A.

      Boiler and Machinery

    • B.

      Pollution Liability

    • C.

      Ocean Marine

    • D.

      Liquor Liability

    Correct Answer
    C. Ocean Marine
    Explanation
    Commercial Package Policies can combine 2 or more of the following coverages, such as Boiler and Machinery, Pollution Liability, and Liquor Liability. However, Ocean Marine is the exception as it cannot be combined with the other coverages in a Commercial Package Policy.

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  • 11. 

    Business personal property coverage is on a replacement cost basis as long as the limits of insurance are equal to at least what percentage of the covered property replacement cost?

    • A.

      80%

    • B.

      50%

    • C.

      75%

    • D.

      90%

    Correct Answer
    A. 80%
    Explanation
    Business personal property coverage is provided on a replacement cost basis as long as the limits of insurance are equal to at least 80% of the covered property's replacement cost. This means that if the insured property is damaged or destroyed, the insurance company will pay the cost to replace the property with a new one of similar kind and quality, without considering depreciation. However, if the limits of insurance are less than 80% of the replacement cost, the coverage will be on an actual cash value basis, taking into account depreciation.

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  • 12. 

    The Cause of Loss - Basic Form provides coverage for all of the following perils with the exception of which one?

    • A.

      Riot

    • B.

      Sprinkler leakage

    • C.

      Lightening

    • D.

      Weight of ice, snow or sleet

    Correct Answer
    D. Weight of ice, snow or sleet
    Explanation
    The Cause of Loss - Basic Form provides coverage for perils such as riot, sprinkler leakage, and lightning. However, it does not provide coverage for the peril of weight of ice, snow, or sleet. This means that if there is damage or loss caused by the weight of ice, snow, or sleet, the policyholder would not be covered under the Cause of Loss - Basic Form.

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  • 13. 

    A business income coverage extension provides what dollar amount in automatic coverage for 30 days at each newly acquired location?

    • A.

      $100,000

    • B.

      $200,000

    • C.

      $250,000

    • D.

      $150,000

    Correct Answer
    A. $100,000
    Explanation
    A business income coverage extension provides $100,000 in automatic coverage for 30 days at each newly acquired location. This means that if a business acquires a new location, they will have insurance coverage of up to $100,000 for any income loss that may occur within the first 30 days of operating at the new location.

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  • 14. 

    A doctor's patients need the doctor ,not the building the doctor is in. If the doctor needs to move to another location while the building is being repaired, what coverage would pay for the cost of temporarily setting up another location?

    • A.

      Extra Expense Coverage Form

    • B.

      Building Replacement Coverage

    • C.

      Relocation Endorsement on a Coverage Extension

    • D.

      Coverage Extension

    Correct Answer
    A. Extra Expense Coverage Form
    Explanation
    The Extra Expense Coverage Form would pay for the cost of temporarily setting up another location while the doctor's building is being repaired. This coverage is designed to cover the additional expenses incurred by the doctor in order to continue their practice in a temporary location. It would cover costs such as rent for the temporary location, moving expenses, and any necessary equipment or furnishings needed to set up the new location.

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  • 15. 

    In the Cause of Loss Basic Form ______________ is excluded, but resultant damage from a covered cause of loss is covered.

    • A.

      Vandalism

    • B.

      Sprinkler leakage

    • C.

      Civil commotion

    • D.

      Mechanical breakdown

    Correct Answer
    D. Mechanical breakdown
    Explanation
    In the Cause of Loss Basic Form, mechanical breakdown is excluded as a cause of loss. However, if there is resultant damage from a covered cause of loss, it will be covered. This means that if there is a covered event that leads to a mechanical breakdown and causes damage, the resulting damage will be covered by the insurance policy.

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  • 16. 

    While conceptually similar to the homeowners program, the business owners policy, provided an indivisible package of basically required coverages designed to meet the ordinary needs of certain classes of business which fall under 8 areas of eligibility. Which of the following is not one of those 8 areas?

    • A.

      Mercantile, wholesaler, service, or processing risk

    • B.

      Offices and office condo associations

    • C.

      Self-Storage facilities which provide outdoor storage of any type of motorized vehicles

    • D.

      Convenience food stores with or without gasoline sales

    Correct Answer
    C. Self-Storage facilities which provide outdoor storage of any type of motorized vehicles
    Explanation
    The correct answer is "Self-Storage facilities which provide outdoor storage of any type of motorized vehicles." This answer is not one of the 8 areas of eligibility for the business owners policy. The other options, including mercantile, wholesaler, service, or processing risk; offices and office condo associations; and convenience food stores with or without gasoline sales, are all included in the 8 areas of eligibility.

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  • 17. 

    In a Builders Risk Coverage Form the proper amount of insurance for coverage of losses without penalty is what percentage of the expected completed value?

    • A.

      75%

    • B.

      90%

    • C.

      100%

    • D.

      80%

    Correct Answer
    C. 100%
    Explanation
    In a Builders Risk Coverage Form, the proper amount of insurance for coverage of losses without penalty is 100% of the expected completed value. This means that the insurance coverage should be equal to the full value of the project once it is completed. This ensures that any losses or damages that occur during the construction process are fully covered without any penalties or reductions in the claim amount.

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  • 18. 

    John has a Personal Articles Floater for his camera, telescopic lenses, and his carrying case. His PAF has an itemized list with all of his equipment as required. John acquires a new camera but forgets to update his itemized list. Two weeks after purchase he suffers a loss with the new camera and wants his new camera covered. Would his PAF provide coverage for this newly acquired camera?

    • A.

      No, because this only provides coverage for one camera and supporting equipment

    • B.

      Yes, because it has not been more than 45 days since the newly acquired camera

    • C.

      No, because the new camera was not added to the itemized list

    • D.

      Yes, because it has not been more than 30 days since the newly acquired camera

    Correct Answer
    D. Yes, because it has not been more than 30 days since the newly acquired camera
    Explanation
    The correct answer is Yes, because it has not been more than 30 days since the newly acquired camera. This means that John's Personal Articles Floater (PAF) would provide coverage for his newly acquired camera, even if he forgot to update the itemized list. The PAF allows coverage for newly acquired items within a certain time frame, in this case, 30 days. Since John suffered a loss with the new camera within two weeks of purchase, it falls within the coverage period and would be covered by the PAF.

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  • 19. 

    Which of the following is not considered a Commercial Property Floaters category?

    • A.

      Commercial Property Floaters Risk: Currency Risks

    • B.

      Commercial Property Floaters Risk: Business Floaters

    • C.

      Commercial Property Floaters Risk: Bailees

    • D.

      Commercial Property Floaters Risk: Dealers Policies

    Correct Answer
    A. Commercial Property Floaters Risk: Currency Risks
    Explanation
    The correct answer is "Commercial Property Floaters Risk: Currency Risks" because currency risks are not typically considered a category of commercial property floaters. Commercial property floaters typically refer to insurance policies that cover movable property used in a commercial setting, such as equipment, inventory, or goods in transit. Currency risks, on the other hand, refer to the potential financial losses or gains that can occur due to fluctuations in exchange rates.

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  • 20. 

    After a community study that results in a flood hazard boundary map being developed, and limited coverage amounts becoming available, the community is said to be in what NFIP program?

    • A.

      Emergency Program

    • B.

      Temporary Program

    • C.

      Regular Program 

    • D.

      Intermittent Program

    Correct Answer
    A. Emergency Program
    Explanation
    The community is said to be in the Emergency Program of the NFIP because it has conducted a study resulting in a flood hazard boundary map and has limited coverage amounts available. The Emergency Program provides limited coverage for communities that have not yet fully implemented floodplain management measures but have taken some steps towards reducing flood risk. It is a temporary program designed to provide immediate assistance to communities at risk of flooding.

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  • 21. 

    What is the total coverage amount (basic amount + additional amount) that a single family dwelling can receive under the NFIP?

    • A.

      $150,000

    • B.

      $250,000

    • C.

      $100,000

    • D.

      $500,000

    Correct Answer
    B. $250,000
    Explanation
    A single family dwelling can receive a total coverage amount of $250,000 under the NFIP. This includes both the basic amount and any additional amount.

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  • 22. 

    A Farm coverage insured may obtain earthquake coverage by purchasing what? 

    • A.

      Earthquake Rider

    • B.

      Earthquake Endorsement

    • C.

      Earthquake Clause

    • D.

      Earthquake Clause of Loss Form

    Correct Answer
    D. Earthquake Clause of Loss Form
    Explanation
    An insured individual who wants to obtain earthquake coverage for their farm can do so by purchasing an Earthquake Clause of Loss Form. This form is an addendum or provision that can be added to an existing insurance policy to provide coverage specifically for losses caused by earthquakes. It outlines the terms and conditions of the coverage and ensures that the insured is protected against damages resulting from earthquakes.

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  • 23. 

    The Florida Valued Policy Law applies to which of the following?

    • A.

      Mobile Homes

    • B.

      All coverages on the declarations page

    • C.

      Motor Homes

    • D.

      Total Losses to a building only if caused by fire

    Correct Answer
    A. Mobile Homes
    Explanation
    The Florida Valued Policy Law applies specifically to mobile homes. This law ensures that if a mobile home is completely destroyed by a covered peril, the insurance company must pay the full value of the policy without considering any depreciation. This law provides additional protection to mobile home owners in Florida.

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  • 24. 

    What can be added to the Homeowners contract which provides coverage for watercraft which is excluded under the HO policy itself.

    • A.

      Watercraft Policy

    • B.

      Watercraft Cause of Loss Form

    • C.

      Watercraft Endorsement

    • D.

      Watercraft Rider

    Correct Answer
    C. Watercraft Endorsement
    Explanation
    A watercraft endorsement can be added to the homeowner's contract to provide coverage for watercraft that is excluded under the HO policy itself. This endorsement is an additional provision that modifies the terms and conditions of the policy to include coverage for watercraft. By adding this endorsement, the homeowner can ensure that their watercraft is protected and any potential losses or damages related to the watercraft are covered by the insurance policy.

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  • 25. 

    John suffered a loss due to a covered peril on his farm and one of his silos was destroyed. Under John's Farm Property coverage, which coverage provides coverage for his loss?

    • A.

      Coverage A

    • B.

      Coverage G

    • C.

      Coverage D

    • D.

      Coverage C

    Correct Answer
    B. Coverage G
    Explanation
    Coverage G provides coverage for John's loss.

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  • 26. 

    Which of the coverages below, if rejected, requires a handwritten and signed note by the insured stating very specific verbiage where they acknowledge that their insurance company will not pay for that type of loss?

    • A.

      Windstorm coverage

    • B.

      Earthquake coverage

    • C.

      Sprinkler leakage

    • D.

      Catastrophic ground collapse

    Correct Answer
    A. Windstorm coverage
    Explanation
    If the insured rejects windstorm coverage, they must provide a handwritten and signed note acknowledging that their insurance company will not pay for any losses related to windstorms. This requirement is likely in place to ensure that the insured fully understands the implications of rejecting this coverage and takes personal responsibility for any windstorm-related damages or losses that may occur.

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  • 27. 

    What is known as any actual, lawful and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction or pecuniary damage or impairment.

    • A.

      Economic interest

    • B.

      Insurable interest

    • C.

      Insurable assets

    • D.

      Economic liability

    Correct Answer
    B. Insurable interest
    Explanation
    Insurable interest refers to any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance, free from loss, destruction, or pecuniary damage or impairment. This means that the person seeking insurance must have a financial stake in the property or person being insured, such as ownership or a legal relationship. Without insurable interest, the insurance contract would be considered invalid as it lacks the necessary economic connection between the insured and the subject of the insurance.

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  • 28. 

    John always seemed prone to accidents. What type of hazard does this present?

    • A.

      Physical

    • B.

      Precarious

    • C.

      Morale

    • D.

      Moral

    Correct Answer
    C. Morale
    Explanation
    John's tendency to have accidents does not present a physical hazard, as physical hazards are typically related to the environment or machinery. It also does not present a precarious hazard, as this term refers to something being unstable or risky. Instead, John's accidents may have a negative impact on the morale of those around him, causing a decrease in motivation, confidence, or overall mood. Therefore, the correct answer is morale.

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  • 29. 

    If John's business office burns down, and he suffers economic loss due to that loss, the economic loss is known as what type of loss?

    • A.

      Economic downturn

    • B.

      Consequential loss

    • C.

      Direct loss 

    • D.

      Indirect loss

    Correct Answer
    D. Indirect loss
    Explanation
    An indirect loss refers to the economic loss that occurs as a consequence of a direct loss. In this scenario, John's business office burning down is the direct loss, and the economic loss he suffers as a result of that is the indirect loss. This can include factors such as lost revenue, additional expenses, or a decrease in the value of assets.

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  • 30. 

    What type of valuation seems to violate the principle of indemnity, as the insured may effectively profit from the loss?

    • A.

      Actual cash value

    • B.

      Replacement cost

    • C.

      Inflated cost

    • D.

      Inflation guard cost

    Correct Answer
    B. Replacement cost
    Explanation
    Replacement cost valuation seems to violate the principle of indemnity, as the insured may effectively profit from the loss. This is because replacement cost valuation pays the insured the full cost of replacing the damaged or destroyed property, regardless of its actual cash value at the time of the loss. This means that the insured could potentially receive more than the actual value of the property, resulting in a profit from the loss.

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  • 31. 

    Damaged property that may be retrieved, reconditioned, and sold to reduce an insured loss is known as what?

    • A.

      Recoverable 

    • B.

      Retrievable

    • C.

      Salvage

    • D.

      Constructive total loss

    Correct Answer
    C. Salvage
    Explanation
    Salvage refers to damaged property that can be recovered, reconditioned, and sold to minimize the financial loss for an insurance company. It involves the process of retrieving and restoring items that have been damaged or deemed as a loss. The salvage value is the amount of money that can be obtained from selling the recovered property. This helps to offset the cost of the insured loss, making salvage an important aspect of insurance claims and risk management.

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  • 32. 

    A dollar amount the insured must pay on each loss before the insurance company pays rest of the loss is known as what?

    • A.

      Deductible

    • B.

      Franchise fee

    • C.

      Straight premium

    • D.

      Coinsurance

    Correct Answer
    A. Deductible
    Explanation
    A deductible is the amount of money that the insured person must pay out of pocket before their insurance company will cover the remaining cost of a loss. It acts as a form of self-insurance, encouraging policyholders to be responsible for a portion of the costs and reducing the number of small claims. The deductible amount can vary depending on the insurance policy and is typically agreed upon when the policy is purchased.

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  • 33. 

    What is the principle of insurance which provides that when a loss occurs, the insured should be restored to the approximate financial condition occupied before the loss occurred, no better, no worse.

    • A.

      Restitution

    • B.

      Reinstatement

    • C.

      Indemnity

    • D.

      Restoration

    Correct Answer
    C. Indemnity
    Explanation
    The principle of insurance that states that the insured should be restored to the approximate financial condition they were in before the loss occurred is called indemnity. This means that the insurance company will compensate the insured for their losses up to the amount specified in the insurance policy, ensuring that they are neither better off nor worse off financially after the loss. Indemnity is a fundamental principle in insurance contracts, providing a sense of financial security and protection for the insured.

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  • 34. 

    What is known as the maximum amount of insurance the insurance company will pay on your behalf for a particular loss, or for a loss during a period of time.

    • A.

      Limits of insurance

    • B.

      Liability cap

    • C.

      Limits of liability

    • D.

      Coverage cap

    Correct Answer
    C. Limits of liability
    Explanation
    The term "limits of liability" refers to the maximum amount of insurance that an insurance company will pay for a specific loss or during a specific period of time. This term is used to define the extent of coverage provided by the insurance policy and sets a cap on the amount the insurance company is obligated to pay in the event of a claim. It ensures that the policyholder is aware of the maximum financial protection they can receive from the insurance company.

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  • 35. 

    What method is used to provide equity in premiums by granting lower rates to those insureds who accept the responsibility of insuring for amounts which reflect a high percentage of the value of the subject property.

    • A.

      Deductible

    • B.

      Co-operation

    • C.

      Shared responsibility

    • D.

      Coinsurance

    Correct Answer
    D. Coinsurance
    Explanation
    Coinsurance is the method used to provide equity in premiums by granting lower rates to those insureds who accept the responsibility of insuring for amounts which reflect a high percentage of the value of the subject property. Coinsurance requires the insured to carry a certain percentage of the property's value as insurance coverage. If the insured carries less than the required percentage, they may be subject to a coinsurance penalty in the event of a claim. This encourages insureds to accurately insure their property and ensures that all policyholders are sharing the risk and cost of insurance fairly.

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  • 36. 

    In property insurance, specifically homeowners, the insurer must give the insured written notice of non-renewal at least how many days before the effective date of the non-renewal.

    • A.

      10

    • B.

      90

    • C.

      45

    • D.

      120

    Correct Answer
    D. 120
    Explanation
    In property insurance, specifically homeowners, the insurer must give the insured written notice of non-renewal at least 120 days before the effective date of the non-renewal. This allows the insured sufficient time to find alternative insurance coverage if needed. It also ensures that the insured has ample time to review the reasons for non-renewal and address any issues that may have led to the decision.

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  • 37. 

    What type of liability does not require proving negligence?

    • A.

      Medical liability

    • B.

      Proximate liability

    • C.

      Vicarious liability

    • D.

      Absolute liability

    Correct Answer
    D. Absolute liability
    Explanation
    Absolute liability refers to a legal concept where a person or entity can be held liable for damages or injuries caused, regardless of whether or not they were negligent. This means that the injured party does not need to prove negligence on the part of the person or entity responsible. In the context of the given options, absolute liability is the type of liability that does not require proving negligence.

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  • 38. 

    John had surgery in a hospital. After a week or so he started feeling a sharp pain in his abdomen. Upon further x-rays it turn out some surgical clamps were left inside. John can sue the doctor for malpractice but he can also sue the hospital because the doctor was working as an employee of the hospital. The concept under which John can sue the hospital is known as what type of liability?

    • A.

      Vicarious liability

    • B.

      Medical liability

    • C.

      Proximate liability

    • D.

      Absolute liability

    Correct Answer
    A. Vicarious liability
    Explanation
    John can sue the hospital under the concept of vicarious liability because the doctor was working as an employee of the hospital. Vicarious liability holds an employer responsible for the actions of its employees, even if the employer was not directly involved in the wrongdoing. In this case, the hospital can be held liable for the doctor's negligence in leaving surgical clamps inside John's abdomen.

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  • 39. 

    What is an oral or written statement providing immediate insurance protection, valid for a specified period, designed to provide temporary coverage until a policy can be issued or denied.

    • A.

      Temporary liability coverage

    • B.

      Binder

    • C.

      Insurance contract

    • D.

      Provisional coverage

    Correct Answer
    B. Binder
    Explanation
    A binder is an oral or written statement that provides immediate insurance protection for a specified period. It is designed to offer temporary coverage until a policy can be issued or denied. A binder is a provisional agreement between the insured and the insurer, providing temporary liability coverage until a formal insurance contract is established.

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  • 40. 

    What is a document which is attached to the policy and modifies or changes the original policy in some way?

    • A.

      Rider

    • B.

      Policy change

    • C.

      Endorsement

    • D.

      Clause

    Correct Answer
    C. Endorsement
    Explanation
    An endorsement is a document that is attached to the policy and modifies or changes the original policy in some way. It can add or remove coverage, amend policy terms, or make any other necessary adjustments to the policy. Endorsements are typically used to tailor the policy to the specific needs of the insured, providing flexibility and customization options.

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  • 41. 

    What art of the insurance contract must show who is insured, what property or risk is covered, when and where coverage is effective and how much coverage applies?

    • A.

      Named perils

    • B.

      Declarations

    • C.

      Named insureds

    • D.

      Contract provisions

    Correct Answer
    B. Declarations
    Explanation
    The declarations section of an insurance contract provides important information such as who is insured, what property or risk is covered, when and where coverage is effective, and how much coverage applies. This section serves as a summary of the key details of the insurance policy and helps the insured understand the scope and limitations of their coverage.

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  • 42. 

    Which of the options below best describe provisions found in an insurance contract dealing with rights and responsibilities of insurer and insured, and various other matters? Examples of these provisions in a property insurance policy typically include prompt notice, the insured must cooperate with the insurer, and the insured must act in a way to preserve the insurer's rights.

    • A.

      Insurance contract shared responsibilities clause

    • B.

      Insurance policy adhesions

    • C.

      Insurance contract requirements

    • D.

      Insurance policy conditions

    Correct Answer
    D. Insurance policy conditions
    Explanation
    The correct answer is "insurance policy conditions". This option accurately describes the provisions found in an insurance contract that deal with the rights and responsibilities of the insurer and insured, as well as other matters such as prompt notice, cooperation, and preserving the insurer's rights. The term "insurance policy conditions" encompasses all these provisions and is the most appropriate choice.

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  • 43. 

    The person who must be at least 15 years old, and who the insurance company agrees to indemnify when they enter into an insurance contract is known as what?

    • A.

      Policy owner

    • B.

      Listed member

    • C.

      Insured

    • D.

      Indemnitee

    Correct Answer
    C. Insured
    Explanation
    The correct answer is "insured." The insured refers to the person who must be at least 15 years old and enters into an insurance contract with the insurance company. The insurance company agrees to indemnify or provide coverage to the insured in case of any covered losses or damages. The insured is the main beneficiary of the insurance policy and is protected by the terms and conditions outlined in the contract.

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  • 44. 

    Since most policies are said to be conditional contracts the  ______________ of the insurer to perform may be conditioned upon the insured satisfying certain conditions.

    • A.

      Action

    • B.

      Obligation

    • C.

      Decision

    • D.

      Conditional response

    Correct Answer
    B. Obligation
    Explanation
    Most policies are considered conditional contracts, meaning that the insurer's obligation to perform is dependent on the insured meeting certain conditions. In other words, the insurer is only obligated to fulfill their part of the contract if the insured satisfies the specified conditions. Therefore, "obligation" is the most appropriate term to complete the given sentence.

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  • 45. 

    What document, often in affidavit form, states details and amounts claimed?

    • A.

      Proof of loss

    • B.

      Loss scheduling

    • C.

      Claim statement

    • D.

      Loss settlement

    Correct Answer
    A. Proof of loss
    Explanation
    A proof of loss document, often in affidavit form, is used to state the details and amounts claimed in an insurance claim. It is a formal statement provided by the policyholder to the insurance company, outlining the extent of the loss or damage, along with supporting evidence and documentation. This document helps the insurance company assess the validity of the claim and determine the appropriate settlement amount.

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  • 46. 

    An insurer has a responsibility to respond promptly after having received what?

    • A.

      Notice of claim

    • B.

      Request to rate

    • C.

      Injury notice

    • D.

      Request to settle a claim

    Correct Answer
    A. Notice of claim
    Explanation
    An insurer has a responsibility to respond promptly after having received a notice of claim. This is because a notice of claim is a formal communication from the insured party to the insurance company, informing them about a potential claim or loss. It is crucial for the insurer to promptly acknowledge and investigate the claim to fulfill their responsibility towards the insured party and provide timely assistance or settlement.

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  • 47. 

    John's car has been damaged by Jane with approximately $2,000 in damage. John receives $1,500 from his own insurance company ($2,000 damages - $500 deductible = $1,500). By receiving that payment from his insurance company John has now transferred his right against he other party to his insurance company. The transfer of John's rights to his insurance company, a policy condition commonly found in property and liability policies, is known as what?

    • A.

      Indemnity

    • B.

      Subrogation

    • C.

      Appraisal

    • D.

      Liberalization

    Correct Answer
    B. Subrogation
    Explanation
    Subrogation is the correct answer because it refers to the transfer of rights from an insured party to their insurance company after they have been compensated for a loss. In this scenario, John received $1,500 from his insurance company, which means he transferred his right to seek compensation from the other party to the insurance company. Subrogation is a common policy condition in property and liability insurance policies.

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  • 48. 

    Which of the following is not a fundamental contract element of virtually all property and liability insurance contracts?

    • A.

      Named insureds

    • B.

      Exclusions

    • C.

      Insuring agreements

    • D.

      Conditions

    Correct Answer
    A. Named insureds
    Explanation
    The question asks for the element that is not a fundamental contract element in property and liability insurance contracts. Named insureds are indeed a fundamental contract element in insurance contracts as they refer to the individuals or entities who are specifically named as insured parties. Exclusions, insuring agreements, and conditions are all other fundamental contract elements commonly found in insurance contracts. Therefore, the correct answer is named insureds.

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  • 49. 

    In the crime application John states that no prior crime losses had been experienced, when in fact there had been prior crime losses. The insurance company can now avoid the contract if it found that the statement made was incorrect, material and intentionally made with the intent to deceive. In this case, what word best describes what John did? 

    • A.

      Fraud

    • B.

      Misrepresentation

    • C.

      Concealment

    • D.

      Falsification

    Correct Answer
    B. Misrepresentation
    Explanation
    John's action can be described as misrepresentation. Misrepresentation refers to providing false or misleading information with the intent to deceive. In this case, John stated that there had been no prior crime losses, which was incorrect and intentionally made to deceive the insurance company. This misrepresentation can allow the insurance company to avoid the contract.

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  • 50. 

    The ability for a mortgage company to make claims under a property contract issued to a mortgagor, by virtue of the mortgagee's financial interest in the property is known as what?

    • A.

      Mortgage rights

    • B.

      Mortgage claim deference

    • C.

      Mortgage defense

    • D.

      Mortgage clause

    Correct Answer
    A. Mortgage rights
    Explanation
    Mortgage rights refer to the ability of a mortgage company to make claims under a property contract issued to a mortgagor. These rights are based on the mortgagee's financial interest in the property.

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