Property And Casualty Practice Exam Free

D is correct. The Builders Risk coverage form covers the building under construction and its foundation. Fixtures, machinery, equipment used to service the building, and the insured's building materials and supplies can be covered if they will become a permanent part of the building and are located within 100 feet of the building.

A is correct. Theft means the unlawful taking of money, securities, or other property. This broad term includes burglary, safe burglary, and robbery.

Answer B is correct. A hazard is something that increases the chance of loss, such as a loose step or flammable materials. A peril is the cause of loss, such as a fire. Risk is any outcome that involves uncertainty. A catastrophe is an unexpected event, such as an earthquake or flood, which is not considered a hazard.

C is correct. Consideration is the thing of value exchanged under a contract. The insured's consideration is the premium; in return, the insurer promises to pay for certain losses if they occur.

C is correct. The named insured is the person, business, or other entity named in the declarations to whom the policy is issued. First State Bank has an insurable interest as the mortgagee, but is not a named insured.

D is correct. The umpire is selected jointly by the insured and the insurance company and settles the dispute if the appraisers selected by the insured and the insurance company do not agree on the value of the loss.

A is correct. To be eligible, a mobile home must be permanently located.

A is correct. This would be considered a collision loss under Part D of the Personal Auto policy because it involves the impact of an auto covered by the policy with another vehicle. Part ALiability coverage would not cover damage to the insured's own car. Part CUninsured Motorists coverage applies only to bodily injury in most states.

B and C are correct. Choice A is not correct because the auto is owned by a business. Choice D is not correct because a PAP can only insure four-wheel vehicles.

D is correct. The insurance company can examine an insured's books and records up to three years after the end of the policy period.

Answer B is correct. Claims paid under general liability coverage are charged against the applicable aggregate policy limits and reduce the amount of insurance remaining to pay future claims during the policy period, but they apply separately to each consecutive policy period and are reinstated on each policy anniversary date.

A is correct. Vicarious liability is liability that a person or business incurs because of the actions of others, such as family members or employees

A is correct. Assigned Risk Plans insure motorists with poor driving records who are unacceptable risks for most insurance companies.

Answer D is correct. The legal definition of "waiver" is the intentional relinquishment of a known right. Sometimes an insurer or its agent might overlook a provision that might have been grounds for denying coverage or increasing the premium. By doing so, the insurer might have relinquished its right to deny coverage or exercise options at a later date by creating a waiver. A representation is a statement believed, but not guaranteed, to be true, whereas a warranty is a statement guaranteed to be true. A unilateral contract is one in which only one party is obligated to perform its part of the agreementfor example, an insurance contract is unilateral because an insured might choose not to enter the agreement by paying the premium, but if the insured pays the premium, the insurance company is obligated to pay for covered losses.

Insurance is only used to manage pure risks that involve only the possibility of loss and no opportunity for gain.

D is correct. All of the described damages are for liability. General damages are a type of compensatory damages in which the injured party is compensated for his or her loss. Punitive damages are awarded over and above compensatory damages as a way of punishing the wrongdoer

A, B, and C are correct. Under Part A, the named insured, his or her spouse, or any family member is insured for the ownership, maintenance, or use of any auto or trailer. A family member is any person related to the named insured who is a resident of the insured's household. An individual who uses a vehicle without permission is not covered under Part A, unless that person is a family member using a covered auto owned by the insured.

C is correct. Competitive states give employers a choice between purchasing workers compensation insurance from a state fund or a private insurance company. The state fund competes with private insurance.

The retroactive date provides some protection against losses that occurred before the claims-made form was written.

Answer A is correct. Collision is defined as the impact of a covered auto with another object or vehicle. The policy specifically lists contact with a bird or animal as an "other than collision" loss.

The preservation of property additional coverage under a businessowners policy covers direct physical loss or damage from any cause if the property has been removed to another location in order to protect it from loss by a covered peril. Coverage applies while the property is being moved and while it is temporarily stored at another location, but only for 30 days after the property is first moved.

D is correct. The conditions describe the responsibilities and obligations of the insurer and the insured.

D is correct. The HO-5, the Comprehensive form, provides open peril coverage for dwellings, other structures, and personal property.

Answer A is correct. The special form is the only causes of loss form for commercial property coverage that provides theft coverage. However, for certain classes of property, various limitations apply, and coverage for theft of furs and fur garments is limited to $2,500.

Answer C is correct. There are two primary CGL coverage forms: the occurrence form and the claims-made form. Although the two forms contain basically the same coverages, exclusions, and conditions, they only differ in how the coverage under the form is activated, or "triggered" for Coverages A and B.

C is correct. In a mutual company, insureds are also owners of the company. They can vote to elect the management of the company. Profits are returned to insureds in the form of dividends or reductions in future premiums.

Answer C is correct. As part of the additional liability coverages, a homeowners policy will reimburse an insured for reasonable expenses incurred at the company's request, including loss of earnings of up to $250 a day.

In property insurance, Actual Cash Value (ACV) is most commonly defined as the replacement cost of the item minus depreciation. This means the insurer will pay what it would cost to replace the damaged or lost item today, but then subtracts for age, wear, and tear. ACV reflects the current market value of the item, not what you originally paid for it.

B is correct. A warranty becomes part of the policy. If it is breached, the insurer can void the policy.

Contributory negligence occurs when the injured party’s own negligence contributes to their injury. In option A, Martin’s failure to follow safety instructions (ignoring exposure time) contributes to his injury, illustrating contributory negligence.

B is correct. Liability coverage does not pay for property or bodily injury to an insuredone's own property and medical insurance is needed for that

A is correct. Fire department service charges are paid in addition to the limit of insurance, with no deductible.

An endorsement in property and casualty insurance is an amendment or addition to an existing policy that changes the terms or scope of the original agreement. Endorsements can be used to add or exclude coverage, change deductibles, or alter who is insured under the policy, among other modifications. They are crucial for tailoring a policy to fit specific needs or circumstances that were not initially covered or adequately addressed in the original policy document.

B is correct. Choice A is not correct because mechanical breakdown is excluded by the policy. Choice C and Choice D are not correct because they are collision losses.

B is correct. The federal government created the NFIP to make Flood insurance available to eligible communities through federal subsidization. It is managed by the Federal Insurance Administration.

C is correct. Optional coverages are usually preprinted in the policy, but apply only if they are designated in the declarations. Losses involving an object during testing are specifically excluded.

Answer B is correct. If an insured already has physical damage coverage for at least one vehicle under a personal auto policy, a new vehicle will be automatically covered from the date it is acquired as long as the insured notifies the insurer and requests the coverage within 14 days. It doesn't matter if the new auto is a replacement or additional vehicle.

Answer D is correct. Although the PAP excludes liability arising out of operation of a public or livery conveyance, such as a taxi business, an exception is made for share-the-expense car pools that are covered. The other answer choices are specifically excluded.

A is correct. The specific provisions of the written agency contract constitute the authority expressly given to the agent by the insurer.

Under a Commercial Package Policy (CPP), if the insurance company is canceling the contract due to nonpayment of premium, they are typically required to provide at least 10 days' advance notice to the policyholder. This period allows the insured a final opportunity to pay the premium and avoid cancellation, but it is shorter than the notice period required for other reasons like policy changes or underwriting decisions.

C is correct. The Basic and Broad Causes of Loss forms are named peril forms.

Coverage A of the CGL (Commercial General Liability) policy typically provides coverage for bodily injury and property damage caused by the insured. However, intentional damage caused by the insured, pollution losses caused by the insured, and liquor liability for those in the business of serving liquor are specifically excluded under Coverage A. Therefore, the correct answer is "All of the above."

A is correct. One breakdown means that if an initial breakdown causes other breakdowns, all are considered a single breakdown. All breakdowns at any one premises that manifest themselves at the same time and are the direct result of the same cause are considered "one breakdown."

Answer B is correct. An aggregate limit is a maximum limit that applies to all losses during a policy period. Each individual loss is subtracted from the aggregate limit and reduces the remaining coverage. At each policy anniversary or renewal, the aggregate limit is reinstated in full.

B is correct. Because total coverage is $300,000 and policy C provides 50% of this amount ($150,000) it is obligated to pay 50% of the loss.

A is correct. The standard deductible is $500.

A, B, and C are correct. Workers compensation laws pay benefits in four categories: disability/loss of income benefits, medical benefits, survivor/death benefits, and rehabilitation benefits. They do not pay benefits for pain and suffering.

Answer C is correct. The conditions state the ground rules for the contract and spell out the responsibilities and obligations of both the insurance company and insured.

Generally, four-wheel private passenger autos, pickups, and vans owned by an individual or married couple are eligible if used for pleasure or general transportation. Pickups and vans used in a business, other than farming or ranching, are not eligible.

A storage shed connected to the dwelling by a utility line would be considered an "other structure" available for insurance under Coverage B. All other answer choices are specifically described in the policy as being part of Coverage A, insurance for the dwelling.

B is correct. Absolute liability is imposed by law on those participating in certain activities that are considered to be especially hazardous. Individuals involved in such operations can be held liable for the damages of another even though the individual was not negligent.

A is correct. Credit cards, motor vehicles and their equipment, and property owned by boarders or roomers are all excluded under the Broad Theft Coverage endorsement. However, up to $2,000 of coverage is available to cover theft of firearms.

B is correct. Part ALiability coverage covers damages for bodily injury or property damage that an insured becomes legally responsible for because of an auto accident. Injuries to the named insured or his or her family members would be covered under Part BMedical Payments coverage. Loss of personal property of an insured is not a matter of legal liability, and is not covered.

A, B, and D are correct. The Common Policy Declarations contains information about who is insured, when he or she is insured, and for what lines he or she is insured. It includes the name and mailing address of the named insured, the policy period, and a summary of the premiums charged. Loss conditions are described in the policy form, not the declarations.

Answer A is correct. The value reporting form is an endorsement specifically designed for businesses with fluctuating inventory values because of seasonal variations in business or shifting inventory between different locations. When this coverage applies, the insured must report values periodically, such as monthly, and the actual amount of insurance in effect will be adjusted accordingly. The final premium will be adjusted at the end of the policy year based on average values.

Damage to a covered auto while being used as part of a car pool is not excluded. All of the other answer choices are specifically excluded.

B is correct. If no loss occurs, the insured will receive no benefits although he or she paid premiums, but if a large loss occurs, the insured might receive benefits that far exceed the premium payments.

B is correct. A detached garage that is used for commercial, manufacturing, or farming purposes is not covered under a Dwelling policy.

C is correct. Unless an exception applies, coverage does not take effect until after a waiting period of 30 days following the date of application. Binders may not be issued during the waiting period to provide Flood coverage.

B and C are correct. Under the Common Policy Conditions, certain responsibilities and obligations are assigned to the first named insured. One of these is cancellation of the policy. The insurance company may also cancel the policy under certain circumstances.

Standard homeowners insurance policies generally exclude coverage for earthquakes. Earthquake coverage is usually available as a separate endorsement or through a specialized earthquake insurance policy. This is because earthquakes are considered catastrophic events with the potential for widespread damage, making them a high-risk peril for insurers.

Answer C is correct. For certain hard-to-value items, the insurance company may issue a valued or agreed amount contract for a specified amount agreed to by both parties. If the item is lost or completely destroyed, the insurer will pay this amount as settlement.

Answer A is correct. Mobile homes may be covered only when the Mobile Home endorsement is attached. All of the other answer choices are included in every homeowners policy.

Answer A is correct. In addition to the major coverages written, if personal property coverage is included, a dwelling policy will provide up to 10% of the Coverage C limit for personal property located anywhere in the world. This would include such things as clothing, personal effects, cameras, and luggage taken on vacation.

D is correct. Office buildings that are no more than six stories high and contain no more than 100,000 square feet are eligible for the BOP.

Adverse selection means the tendency of people with a greater than average exposure to loss to purchase insurance coverage. For example, if insurers only sold earthquake coverage to applicants in earthquake-prone areas, or flood insurance only to those in flood-prone areas, the situation known as adverse selection would exist. Insurers and underwriters guard against adverse selection by trying to sell broad ranges of coverages to a large cross-section of the population in order to increase the premium base and spread the risk of loss.

C is correct. An agent or an insurance company can issue a binder. A binder does not guarantee that a policy will be issued; it only guarantees temporary coverage. If the company decides to not issue the policy, coverage under the binder may be cancelled by a formal cancellation notice; however, if no formal cancellation is made, coverage remains in effect until the binder expires. If a policy is issued, coverage under the binder ceases as of the effective date of the policy.

B is correct. Proximate cause is one of the elements required to establish a charge of negligence. It is an action that, in a natural and continuous sequence, produces a loss.

B is correct. Business Auto Physical Damage covers losses to the insured's own vehicles, not losses to other's vehicles the insured might become liable for.

Answer B is correct. A tort is a civil wrong that violates the rights of another. Unlike the commission of a crime, in which the government may prosecute the wrongdoer, torts are a part of civil law that is concerned with private relationships between people.

Answer C is correct. The basic and broad dwelling forms provide coverage on a named peril basis. The special form provides open peril coverage.

Answer A is correct. Some policies cover an insured's exposure for "personal injury," which means liability for such things as slander, libel, false arrest, and invasion of privacy. In the insurance business "bodily injury" and "personal injury" have different meanings and are not used interchangeably. The term "bodily injury" is limited to physical injury.

Almost any building that is walled and roofed, is principally above ground, and is fixed to a permanent site is eligible to be covered by a flood policy. A policy may cover a building, its contents, or both.

B is correct. Experience rating, retrospective rating, and schedule rating are all types of merit rating.

B is correct. The Business and Personal Property coverage form will only pay up to $2,500 in any one policy year for losses to electronic data.

The nonrenewal condition states that if the insurer decides to not renew the CGL policy, it must mail or deliver written notice of nonrenewal to the first named insured at least 30 days before the expiration date of the policy.

A, C, and D are correct. The Garage coverage form is designed to cover automobile-type businesses, such as car dealerships, gas stations, and parking garages. These types of businesses cannot be covered under the Business Auto coverage form.

The term "time element coverage" is used for many indirect losses, such as a business income loss, because the amount of loss might not be directly related to the amount of property damage that occurred, yet it is related to the time it takes to repair, rebuild, or restore the damaged property. Many factors can influence the ultimate loss, including the availability of supplies and replacement parts.

A is correct. A solicitor, who often works with or for an agent, has more limited authority than the agent. A solicitor sells insurance and might even be authorized to collect premiums. However, a solicitor cannot issue or countersign policies.

B is correct. Coverage for collapse is provided by the Broad and Special forms, but not by the Basic form.

A is correct. The policy will pay up to $10,000 for pollutant cleanup and removal if the pollution was caused by a covered peril.

Causes of Loss forms are not used with the CGL coverage part.

D is correct. Losses from wear and tear are excluded. The other two losses are considered collision losses.

C is correct. The insurer can immediately suspend coverage whenever covered equipment is found to be in or exposed to a dangerous condition. Suspension applies only to that particular object and takes effect as soon as written notice is delivered to the insured.

Answer C is correct. States where coverage applies must be listed on the information page. Coverage for other states is not automatically provided. In order to have coverage in other states, the states need to be listed on the policy and the insured must notify the insurer as soon as operations begin.

B is correct. The Liability section of the Garage coverage form excludes liability for damage to customers' autos in the insured's custody. Coverage for this exposure is provided under the Garagekeepers section of the Garage form.

C and D are correct. Although burglary is not specifically defined in the Crime forms, it still has a specific meaning in the insurance industry. Burglary is the taking of property from inside the premises by a person unlawfully entering or leaving the premises. There must be evidence of forcible entry or exit, such as marks made by tools, explosives, chemicals, or electricity. There is no requirement that the property be taken from a custodian or watchperson.

A is correct. Deductibles apply separately for each applicable coverage unless the deductibles are shown as "combined" for any two or more coverages. Depending on the coverage, the deductible might be expressed as a dollar amount, a time limit, a percentage of loss, or a multiple of daily value.

This form covers medical and dental instruments on and off the premises, furniture and fixtures at the office, and the insured's interest in improvements and betterments. Radium is not covered.

B is correct. Every state has some exempt classifications, but the majority of the nation's employees are covered under workers compensation laws.

Answer B is correct. Under homeowners coverage for medical payments to others, injuries to the named insured, family members, and any other regular residents are specifically excluded. However, although residents are not usually covered, an exception is made for "resident employees" and they are covered.

Answer B is correct. Under a dwelling policy, if the endorsement is included, the basic limit of coverage is $1,000 per person for medical payments to others. However, this is a minimum limit, and higher limits can be purchased.

Answer B is correct. In the exclusive of captive agency system, the insurance company contracts with agencies, which are independent businesses, to represent and sell insurance only for that insurance company.

C is correct. The insuring agreements state what types of losses the insured will be indemnified for. This section also describes the type of property covered and the perils against which it is insured.

C is correct. Property insurance policies typically exclude nonaccidental losses, losses controllable by the insured, extra-hazardous perils, catastrophic losses, and property covered in other policies.