Term
Commercial Property Insurance usually imposes a penalty if, at the time of loss, the insured failed to maintain a minimum amount of coverage. This penalty may apply because of the:
Answer Choices:Select the Correct Answer
- Coinsurance clause.
- Valuation clause.
- Deductible provision.
- Value policy law.
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Definition
QUESTION:
Commercial Property Insurance usually imposes a penalty if, at the time of loss, the insured failed to maintain a minimum amount of coverage. This penalty may apply because of the:
Your answer: Coinsurance clause. is correct.
EXPLANATION:
Commercial property forms contain an 80% coinsurance clause. This means the insured must insure the property for 80% of its value or risk a penalty in case of a partial loss.
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Term
What is the purpose of the Nationwide Definition for inland marine exposures outlined in specific detail:
Answer Choices:Select the Correct Answer
- The coverage that marine insurers could write.
- The classes of property not eligible for inland marine coverage.
- What types of insurance companies could issue inland marine policies.
- The role of the National Association of Insurance Commissioners.
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Definition
The correct answer is: The coverage that marine insurers could write..
EXPLANATION:
This defines the types of coverage that inland marine insurers could provide.
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Term
QUESTION:
A release becomes “good” when:
Answer Choices:Select the Correct Answer
- It is notarized
- It is written
- It is signed
- The settlement check[image] is Cashed
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Definition
The correct[image] answer is: The settlement check[image] is cashed.
EXPLANATION:
A release becomes good when the settlement check is cashed.
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Term
Which of the following injuries would be paid under the Liability section of the Personal Auto Policy?
Answer Choices:Select the Correct Answer
- Injuries to the insured
- Injuries to the person the insured hit
- Injuries to a member of the insured’s family
- Damage to the personal property transported by the insured.
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Definition
Injuries to the person the insured hit
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Term
The type of Commercial General Liability policy that will cover an insured years after the policy expires is known as:
Answer Choices:Select the Correct Answer
- Occurrence Form.
- Claims Made Form
- Both the Occurrence and Claims Made Form
- Neither the Occurrence or Claims Made Form.
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Definition
The correct answer is: Occurrence Form..
EXPLANATION:
If a claim occurred during the policy period, that policy will provide coverage for years after it has expired.
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Term
The BAP uses Symbol 7 to cover “specifically described autos” identified in the declarations. An auto acquired during the policy period will only be covered:
Answer Choices:Select the Correct Answer
- If the insured insures all of their vehicles with the company or it replaces a covered auto.
- Only if it is a private passenger auto
- Only if it is other than a private passenger auto
- If reported to the company within 14 days of acquisition
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Definition
The correct answer is: If the insured insures all of their vehicles with the company or it replaces a covered auto..
EXPLANATION:
First the insured must insure all of their vehicles they own, or the auto replaces a covered auto. In either case the insured must notify the insurance company of the change.
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Term
QUESTION:
Which of the following is not a correct statement in determining "cost of a comparable automobile?"
Answer Choices:Select the Correct Answer
- The cost of a comparable automobile as determined by a computerized automobile valuation service that produces statistically valid fair market values within the United States market.
- When comparable automobiles are available or were available in the local market area in the last 90 days, the average cost of two or more comparable automobiles.
- When comparable automobiles are not available or were not available in the local market area in the last 90 days, the average of two or more quotations from two or more licensed dealers in the local market area.
- If not possible to determine the value using standard methods of value determination, the cost of a comparable automobile shall otherwise be supported by documentation and fully explained to the claimant.
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Definition
QUESTION:
Which of the following is not a correct statement in determining "cost of a comparable automobile?"
Your answer: If not possible to determine the value using standard methods of value determination, the cost of a comparable automobile shall otherwise be supported by documentation and fully explained to the claimant. is incorrect. The correct answer is: The cost of a comparable automobile as determined by a computerized automobile valuation service that produces statistically valid fair market values within the United States market. .
EXPLANATION:
The computerized method must use values that are fair market values in the local market areas and does not include markets in other parts of the United States.
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Term
QUESTION:
All of the following types of signs can be covered by the Sign Coverage Form, except:
Answer Choices:Select the Correct Answer
- Neon
- Fluorescent
- Electrical, not attached to a building
- Signs carved in stone or brick
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Definition
All of the following types of signs can be covered by the Sign Coverage Form, except:
Your answer: Signs carved in stone or brick is correct.
EXPLANATION:
The sign carved into stone or brick would not qualify for the form.
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Term
An indemnity agreement is a contract that agrees to:
Answer Choices:Select the Correct Answer
- Restore the individual indemnified to his pre-loss condition
- Pay all charges incurred by the indemnified in a lawsuit
- To exercise good faith and fair dealing in claim resolution
- To exercise good claim practices
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Definition
An indemnity agreement is a contract that agrees to:
Your answer: Restore the individual indemnified to his pre-loss condition is correct.
EXPLANATION:
An indemnity agreement is a contract agreeing to restore an injured party to the same condition that party occupied prior to the occurrence of the injury or loss.
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Term
Symbol 42 is entered to identify covered autos for physical damage collision coverage under a trucker's policy. Which of the following autos would not be covered autos for collision coverage?
Answer Choices:Select the Correct Answer
- A truck owned by the named insured at the beginning of the policy period.
- A van owned by the named insured at the beginning of the policy period but not used in the named insured’s business.
- A station wagon purchased by the named insured during the policy period.
- A truck rented to the named insured during the policy period.
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Definition
The correct answer is: A truck rented to the named insured during the policy period..
EXPLANATION:
Symbol #42 is meant for vehicles either owned or acquired during the policy period. To provide coverage for this rented truck the insured would need to be showing the hired auto symbol for physical damage.
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Term
Other private structures on a farm policy are defined as:
Answer Choices:Select the Correct Answer
- Another private structure on the property separated from the dwelling by a clear space.
- Any other structure on the farm property.
- Barns, sheds, silos, etc.
- None of the responses listed are correct.
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Definition
The correct answer is: Another private structure on the property separated from the dwelling by a clear space..
EXPLANATION:
The key word is "private." Barns sheds, silos and such are covered under "other farm structures." A detached garage separated by a clear space from the dwelling and used as a "private" structure and not for business purposes would be covered by this section of the policy.
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Term
QUESTION:
When can two insurance companies arbitrate a subrogation question?
Answer Choices:Select the Correct Answer
- When approved by the court
- With the consent of both companies
- Only with the insured’s consent
- Only with the third party claimant’s consent
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Definition
When can two insurance companies arbitrate a subrogation question?
Your answer: Only with the insured’s consent is incorrect. The correct answer is: With the consent of both companies.
EXPLANATION:
Both companies must consent to the arbitration.
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Term
When is it appropriate for an adjuster to secure a non-waiver agreement with the insured?
Answer Choices:
Select the Correct Answer
- If the adjuster senses the claim may be fraudulent in nature
- If the adjuster is unsure of coverage
- If there is a question of coverage
When the adjuster has verified coverage
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Definition
The correct answer is: If there is a question of coverage .
EXPLANATION:
A properly executed non-waiver agreement allows the insurance company to complete a thorough investigation without implying that coverage is available for the loss.
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Term
QUESTION:
How long will the Businessowners Policy pay for “extra expense coverage” used to reduce the loss of income when the insured has suffered a loss from a covered peril?
Answer Choices:Select the Correct Answer
- Six consecutive months
- Twelve consecutive months
- Until the repairs are complete and the business re-opens, subject to a 12 consecutive month limitation.
- Only until the policy expiration date
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Definition
The correct answer is: Until the repairs are complete and the business re-opens, subject to a 12 consecutive month limitation..
EXPLANATION:
The coverage for extra expense is limited to twelve consecutive months after the date of direct physical loss or damage. Coverage also ceases when repairs are complete and the business re-opens.
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Term
The insured carries a Businessowners Policy (BOP). If the premises become 69% or more vacant, what can the insurer do?
Answer Choices:Select the Correct Answer
- The insurer can cancel the policy.
- The insurer can non-renew the policy.
- The insurer can restrict coverage.
- The insurer can reduce coverage.
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Definition
The insured carries a Businessowners Policy (BOP). If the premises become 69% or more vacant, what can the insurer do?
Your answer: The insurer can cancel the policy. is correct.
EXPLANATION:
The insurance company can cancel the policy if the risk is 69% or more vacant.
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Term
Commercial Glass Coverage is suspended if, at the time of loss, the building has been vacant for more than:
Answer Choices:Select the Correct Answer
- 60 consecutive days.
- 90 consecutive days.
- 30 consecutive days.
- 20 consecutive days.
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Definition
60 consecutive days. is correct.
EXPLANATION:
60 days is somewhat the standard for vacancy in commercial insurance.
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Term
Which of the following property is excluded under Homeowner’s Personal Property Coverage?
Answer Choices:Select the Correct Answer
- A valuable baseball card collection owned by the named insured’s son that is covered under a separate personal articles floater.
- A suitcase full of clothes while the named insured is vacationing in Russia.
- A suitcase full of clothes while the named insured is vacationing in Mexico.
- A valuable baseball card collection that the named insured’s young son owns, but the agent is unaware of.
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Definition
The correct answer is: A valuable baseball card collection owned by the named insured’s son that is covered under a separate personal articles floater. .
EXPLANATION:
Personal property more specifically insured elsewhere is specifically excluded in homeowner’s personal property coverage. Homeowner’s personal property coverage covers insured's personal property anywhere in the world.
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Term
After a claim has been paid under a policy, any recovery rights applying to the amount paid by the insurance company belong to:
Answer Choices:Select the Correct Answer
- The insured.
- The insurance company.
- Both the insured and the insurance company.
- Either the insured or the insurance company, depending upon which paid the greater share of the loss.
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Definition
The correct answer is: The insurance company..
EXPLANATION:
Recovery rights after a claim has been paid belong to the insurance company.
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Term
Identify the coverage NOT included for a $25,000 limit of insurance under the ISO Equipment Breakdown policy.
Answer Choices:Select the Correct Answer
- Ammonia Contamination
- Consequential Loss
- Data and Media
- Fire Damage
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Definition
The correct answer is: Fire Damage .
EXPLANATION:
Fire damage is not included. Commercial property forms include this coverage.
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Term
Which of the following would be covered by the advertising injury coverage under a Farmowner's Policy?
Answer Choices:Select the Correct Answer
- An insured farmer who unknowingly disparaged the crops grown by another farm.
- Advertising the wrong price of the goods
- Advertising the wrong description of the goods
- Intentionally making disparaging remarks about another’s farm products
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Definition
The correct answer is: An insured farmer who unknowingly disparaged the crops grown by another farm.
EXPLANATION:
The coverage would cover a farmer who unknowingly disparages the crops grown by another farm. Intentional acts, advertising incorrect prices or descriptions are not covered |
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Term
What is not covered by “extra expense” coverage in commercial property insurance?
Answer Choices:Select the Correct Answer
- Rent Payments at a Temporary Location
- Moving Expenses
- Overtime Pay Required to Make Repairs
- Loss of Income
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Definition
What is not covered by “extra expense” coverage in commercial property insurance?
Your answer: Overtime Pay Required to Make Repairs is incorrect. The correct answer is: Loss of Income.
EXPLANATION:
Extra Expense Coverage is a form of Business Interruption Coverage. It covers all reasonable extra expenses incurred by the insured in order to continue as nearly as practical the normal operation of a business that has been damaged by an insured peril. It does not cover the loss of income a business may suffer. Other forms like the “loss of income” forms would cover the loss of income.
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Term
Janet Feldman sells an apartment building to another party. A month later she is found negligent for the following incidents. Which claim(s) can be covered on Janet’s general liability policy?
Answer Choices:Select the Correct Answer
- Heavy rains damage a tenant’s furniture. The roof leaked because of a poor re-roofing job, which Janet supervised prior to the property sale.
- A tenant loses his footing and is injured when a balcony railing snaps. Janet installed the railing just prior to the sale of the building.
- Defective wiring catches the building on fire.
- None of the responses are covered claims.
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Definition
Janet Feldman sells an apartment building to another party. A month later she is found negligent for the following incidents. Which claim(s) can be covered on Janet’s general liability policy?
Your answer: None of the responses are covered claims. is incorrect. The correct answer is: A tenant loses his footing and is injured when a balcony railing snaps. Janet installed the railing just prior to the sale of the building..
EXPLANATION:
The policy excludes property damage coverage for claims that arise from premises sold if the property damage arises out of any part of those premises. This claim is for bodily injury and would be covered by the policy.
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Term
All of the following make a property insurance policy an indemnity contract, EXCEPT:
Answer Choices:Select the Correct Answer
- Liberalization.
- Insurable interest.
- Actual cash value.
- Subrogation.
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Definition
The correct answer is: Liberalization. .
EXPLANATION:
Liberalization is a clause that automatically upgrades an insured's policy when the company has made a change (without premium) that broadens coverage on the same type policies issued after the insured's policy was issued.
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Term
Bridges and tunnels may be insured under:
Answer Choices:Select the Correct Answer
- Inland Marine Forms
- Business floater forms.
- Transportation forms.
- Equipment dealer’s forms.
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Definition
The correct answer is: Inland Marine Forms.
EXPLANATION:
These are instrumentalities of transportation and can be covered under inland marine forms.
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Term
QUESTION:
Which of the following perils would provide coverage under the accounts receivable coverage floater?
Answer Choices:Select the Correct Answer
- A fire that caused a building to collapse.
- War.
- Bookkeeping errors.
- Voluntary parting of property to others.
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Definition
. The correct answer is: A fire that caused a building to collapse. .
EXPLANATION:
The fire that caused the building to collapse is covered. All of the other answers are exclusions in the policy.
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Term
All of the following insureds would have a personal injury liability exposure, EXCEPT:
Answer Choices:Select the Correct Answer
- The owner of a shop in the mall who sometimes follows customers around the store he suspects of shoplifting.
- A TV station whose reporters may do feature stories on high profile persons, including their personal lives.
- A landlord who evicts a tenant for nonpayment of rent and suspected improper use of the premises.
- The owner of a shop in the mall who sometimes detains customers he suspects of shoplifting in his office until the police arrive.
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Definition
The owner of a store who follows customers....CREEP
Explanation:
There is no Insurable claim that actually took place, however he might creep on customers there is no break in insureds risks.
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Term
Which of the following watercraft losses are excluded under a Homeowners policy?
I. Theft off the residence premises.
II. Windstorm damage while the insured's boat is docked at the marina.
III. Fading of the canvas tarp which covers a boat.
IV. Earthquake damage.
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Definition
The correct answer is: I, II, III, and IV.
EXPLANATION:
Homeowner's policies have specific limits and exclusions applying to watercraft. Whereas earthquake damage to and fading of ANY property would be excluded (because fading is inevitable and not accidental)theft of watercraft off-premises and windstorm damage to a boat that is not in an enclosed building are specifically excluded.
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Term
You're at a party and you run out of soft drinks. Your car is at the front of the driveway so you borrow a friend's car which is parked at the end of the driveway nearest the street. From a coverage perspective, this car is known as a:
Answer Choices:Select the Correct Answer
- Owned auto.
- Non-owned auto.
- Temporary substitute.
- All of the responses are correct.
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Definition
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Term
The retroactive date in a "claims made" general liability policy specifies:
Answer Choices:Select the Correct Answer
- The latest date in the policy to which coverage applies
- Those losses after that date will not be covered
- That losses occurring before the date will not be covered by the policy
- None of the responses are correct.
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Definition
The correct answer is: That losses occurring before the date will not be covered by the policy.
EXPLANATION:
The retroactive date is when claims made coverage begins. Claims that occur before that date will not be covered.
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Term
When a first party claim is made, what must be listed on the payment draft?
Answer Choices:Select the Correct Answer
- Type of coverage under which payment is made.
- Details of the Accident
- Application of the Deductible
- Drivers License Number
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Definition
When a first party claim is made, what must be listed on the payment draft?
Your answer: Details of the Accident is incorrect. The correct answer is: Type of coverage under which payment is made. .
EXPLANATION:
When a claim payment is made, an indication of the type of coverage under which the payment is made must be stated on the draft payment.
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Term
When is it appropriate for an adjuster to secure a non-waiver agreement with the insured?
Answer Choices:Select the Correct Answer
- If the adjuster senses the claim may be fraudulent in nature
- If the adjuster is unsure of coverage
- If there is a question of coverage
- When the adjuster has verified coverage
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Definition
The correct answer is: If there is a question of coverage .
EXPLANATION:
A properly executed non-waiver agreement allows the insurance company to complete a thorough investigation without implying that coverage is available for the loss.
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Term
What symbol is used for a non-owned auto in a commercial automobile policy?
Answer Choices:Select the Correct Answer
- Symbol 9.
- Symbol 1.
- Symbol 5.
- Symbol 8.
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Definition
The correct answer is: Symbol 9. .
EXPLANATION:
Symbol 9 is used to provide coverage for non-owned auto coverage in a commercial auto policy.
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Term
The earthquake endorsement will provide coverage to the dwelling and/or the contents with the deductible stated as:
Answer Choices:Select the Correct Answer
- $1000
- A % of the coverage A or coverage C policy limit
- $500
- $2500
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Definition
| A % of the coverage A or coverage C policy limit |
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Term
Which of the following would be covered under the "Other Than Collision" coverage of a personal auto policy?
Answer Choices:Select the Correct Answer
- Lightning
- Wear and tear
- Freezing
- Punctured tire
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Definition
The correct answer is: Lightning.
EXPLANATION:
Lightning is covered under the "Other Than Collision" coverage under the personal auto policy.
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Term
Under an Equipment Breakdown Protection policy with $500,000 in coverage, a covered "accident" resulted in the following:
I. $500,000 worth of damage to the property.
II. $10,000 damage to the property of another in the insured's care.
III. $5,000 in legal fees to defend the insured in this case.
The policy will pay a total of:
Answer Choices:Select the Correct Answer
- $505,000.
- $500,000.
- $510,000.
- $515,000.
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Definition
The correct answer is: $505,000..
EXPLANATION:
The maximum that can be paid is the limit of the policy. Legal expenses are in addition to the limit of coverage.
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Term
The custom farming endorsement is usually attached to a farmowners policy when receipts are at least:
Answer Choices:Select the Correct Answer
- $5,000
- $4,000
- $10,000
- $7,500
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Definition
The correct answer is: $5,000.
EXPLANATION:
The custom farming endorsement is used when a farmer is farming for others and the receipts exceed $5,000 per year. |
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Term
How many days does the liberalization clause provide for under the BOP prior to or during the policy?
Answer Choices:Select the Correct Answer
- 55 days
- 30 days
- 45 days
- 35 days
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Definition
The correct answer is: 45 days.
EXPLANATION:
The policy reads, “If we adopt any revision that would broaden the coverage under this policy without additional premium within forty-five days prior to or during the policy period, the broadened coverage will immediately apply to this policy.”
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Term
Which type of damages is not intended to indemnify the plaintiff?
Answer Choices:Select the Correct Answer
- Special damages
- Punitive damages
- General damages
- Compensatory damages
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Definition
The correct answer is: Punitive damages.
EXPLANATION:
Punitive damages are awarded in cases of gross negligence, for the purpose of punishing the defendant. Special and general damages are types of compensatory damages, which are intended to indemnify the plaintiff. |
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Term
An adjuster has a relationship with the legal profession. What can the adjuster not do with respects to this relationship in the adjusting of a claim?
Answer Choices:Select the Correct Answer
- Negotiate With the Attorney
- Write the draft for payment of the claim directly to the claimant.
- Contact the claimant without the consent of the attorney.
- Have an Attorney Prepare Releases
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Definition
The correct answer is: Contact the claimant without the consent of the attorney..
EXPLANATION:
Once the claimant has hired an attorney to represent the claimant in a claim, the adjuster may not contact the claimant directly without the consent of the attorney. |
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Term
The minimum liability amount per occurrence that is available on the BOP is:
Answer Choices:Select the Correct Answer
- $500,000
- $1,000,000
- $100,000
- $300,000
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Definition
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Term
The term “open-ended” release pertains to:
Answer Choices:Select the Correct Answer
- Any and all released
- A release involving an attorney
- A conditional or partial release
- All damages are paid
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Definition
A conditional or partial release
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Term
Under the comprehensive coverage of a Business Auto Policy, which of the following would not be a covered loss?
Answer Choices:Select the Correct Answer
- After sliding on icy pavement, a driver hits a guardrail.
- Electrical wiring in the vehicle catches fire when the ignition is turned on.
- All four tires are removed and a truck is put on blocks while it is parked over the weekend, even though there is no evidence of forcible entry into the company parking lot.
- A vehicle has its tires slashed by an undetermined person.
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Definition
The correct answer is: After sliding on icy pavement, a driver hits a guardrail. .
EXPLANATION:
Since the vehicle sustained damage by hitting the guardrail, it is considered a collision claim. This is because the definition of collision includes the upset of a vehicle, its impact with another vehicle or object; anything else would be other than collision and thus be covered by comprehensive coverage. |
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Term
What limit of liability would be needed for a risk that transports radio active materials as required by the Motor Carrier Act under the MCS-90 endorsement?
Answer Choices:Select the Correct Answer
- $500,000
- $750,000
- $1,000,000
- $5,000,000
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Definition
The correct answer is: $5,000,000.
EXPLANATION:
The MCS-90 endorsement requires the insured to carry a minimum of $5,000,000 in liability coverage. The endorsement provides for environmental restoration coverage as a result of pollution damages. The higher limit is required if transporting extra hazardous material.
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Term
Under the H0-3 form, an “insured location” includes all of following, EXCEPT:
Answer Choices:Select the Correct Answer
- A furnished garage used as a residence
- A hotel room where the insured is temporarily residing
- Family cemetery plots
- Property in an apartment rented to others away from the insured’s residence premises.
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Definition
The correct answer is: Property in an apartment rented to others away from the insured’s residence premises. .
EXPLANATION:
An insured location does not include property in an apartment rented to others that is away from the insured’s residence premises.
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Term
Under the BOP, how long is business income covered in case of an insured direct loss?
Answer Choices:Select the Correct Answer
- 12 months
- 6 months
- 15 months
- 9 months
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Definition
The correct answer is: 12 months.
EXPLANATION:
The BOP provides business income in the policy automatically. In case of a covered loss the policy would pay for loss of income for up to 12 months. |
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Term
hich of the following is a true statement regarding the “law of large numbers”?
Answer Choices:Select the Correct Answer
- It does not apply to insurance
- It proves that writing a large number of risks makes an insurance company profitable
- As the number of units increases, the ability to predict total and average losses increases
- All insurance rates are based on the law of large numbers
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Definition
The correct answer is: As the number of units increases, the ability to predict total and average losses increases.
EXPLANATION:
As the number of insured units increases, the ability to predict total and average losses increases. In order to be profitable, insurance companies must write a large number of risks and charge an adequate rate for the exposure being insured. |
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Term
An adjuster has a relationship with the legal profession. What can the adjuster not do with respects to this relationship in the adjusting of a claim?
Answer Choices:Select the Correct Answer
- Negotiate With the Attorney
- Write the draft for payment of the claim directly to the claimant.
- Contact the claimant without the consent of the attorney.
- Have an Attorney Prepare Releases
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Definition
The correct answer is: Contact the claimant without the consent of the attorney..
EXPLANATION:
Once the claimant has hired an attorney to represent the claimant in a claim, the adjuster may not contact the claimant directly without the consent of the attorney. |
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Term
Who pays for the services of the arbitrators under uninsured motorist coverage?
Answer Choices:Select the Correct Answer
- The insurance company
- The insured
- The party that wins the most as a result of the arbitration
- They each pay for the one they selected and both split the expense of the other.
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Definition
The correct answer is: They each pay for the one they selected and both split the expense of the other..
EXPLANATION:
Uninsured motorist coverage contains an arbitration clause to settle disputes between the insured and the insurer. Each party selects one arbitrator and each pays for their arbitrator. The two arbitrators select a third arbitrator. Each party will split the expenses of the third arbitrator.
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Term
What does the term “bailment” mean?
Answer Choices:Select the Correct Answer
- Transfer of possession
- Transfer of possession and Temporary title
- Transfer of title
- Temporary release from jail
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Definition
The correct answer is: Transfer of possession.
EXPLANATION:
A bailment occurs when property is voluntarily delivered by the owner to another party, to be held by that other party (to repair, store, clean, etc) and returned to the owner in the same or better condition. Bailment is the act of placing property in the custody and control of another, usually by agreement in which the holder (bailee) is responsible for the safekeeping of the property. Possession changes temporarily from the owner to the bailee, but title do not change. |
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Term
Symbol 2 is entered for one of the physical damage coverages in the declarations of the BAP. The insured buys an additional auto after the policy begins. The newly acquired auto will become a covered auto:
Answer Choices:Select the Correct Answer
- Automatically.
- If all the other autos owned by the named insured are covered by the same insurer for the same coverage.
- If the insurance company is notified within 30 days that the named insured wants the same coverage for the new auto.
- All of the responses are true.
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Definition
The correct answer is: Automatically..
EXPLANATION:
Symbol 2 is used to cover owned autos only and would automatically cover a newly acquired auto for physical damage coverage. |
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Term
Which of the following is NOT true regarding the legal effect of a mistake in an insurance contract?
Answer Choices:Select the Correct Answer
- Coverage can be voided by the insurance company under any circumstances.
- Coverage is not voided by the mistake
- A mistake does not constitute a defense for the insurance company.
- The company can void coverage if the mistake was due to misrepresentation or concealment by the owner of the property.
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Definition
The correct answer is: Coverage can be voided by the insurance company under any circumstances. .
EXPLANATION:
The coverage is usually not voided by a mistake unless it was due to misrepresentation or concealment by the owner of the property.
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Term
All of the following are true regarding the "write your own" program under flood insurance, EXCEPT:
Answer Choices:Select the Correct Answer
- Insurers must participate in the program.
- Rates are determined by the NFIP.
- The WYO Program operates as part of the NFIP, and is subject to its rules and regulations.
- Participation in the program is voluntary.
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Definition
The correct answer is:Insurers must participate in the program..
EXPLANATION:
Insurers voluntarily participate in the program; they are not required to do so. |
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Term
Which of the following losses would not be covered under physical damage specified causes of loss coverage of the trucker's policy? Assume that each loss is to a covered auto.
Answer Choices:Select the Correct Answer
- Damage to the auto’s engine form overheating after vandals drained the coolant.
- Loss caused when a train carrying the auto collided with another train.
- Theft of the auto.
- Collision with a bird or animal.
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Definition
The correct answer is: Collision with a bird or animal..
EXPLANATION:
The specified cause of loss coverage is written in lieu of comprehensive coverage and provides limited peril coverage. Collision with a bird or animal is not a covered cause of loss peril.
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Term
Which of the following are excluded from the loan/lease endorsement:
Answer Choices:Select the Correct Answer
- Excessive use charges
- Cost of warranties
- Negative equity
- All of the responses apply
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Definition
All of the responses apply is correct.
EXPLANATION:
The loan/lease gap endorsement will not pay for any of these items as well as past due payments and late fees.
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Term
In which of the following situations has actual damage been sustained?
Answer Choices:Select the Correct Answer
- A national convention was delayed for one hour because Sidney, the main speaker, was late to arrive. The convention chairperson charged Sidney for damages.
- Mary was a passenger in a bus when the driver swerved the bus off the road and into a field to avoid a collision with a deer that had darted across the road. Although Mary sustained no bodily injury, she made a claim against the bus company for inconvenience as a result of the incident.
- Gertrude lost her husband through the negligence of a worker on her husband’s construction crew. Although Gertrude is employed and her income exceeds that of her deceased husband, she sued for damages.
- Mary and Gertrude both have suffered actual damage.
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Definition
The correct answer is: Gertrude lost her husband through the negligence of a worker on her husband’s construction crew. Although Gertrude is employed and her income exceeds that of her deceased husband, she sued for damages..
EXPLANATION:
In this case Gertrude is the only one that has actually sustained damages.
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Term
Which of the following would be covered under the products and completed operations portion of a commercial general liability policy?
Answer Choices:Select the Correct Answer
- Product falls off a shelf and injures a customer
- Employee demonstrating a product injures customer
- Customer injures their hand on a rented vending machine
- A child is injured when a wheel falls off a bicycle that was assembled at the store
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Definition
A child is injured when a wheel falls off a bicycle that was assembled at the store |
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Term
How do eligibility requirements of homeowner and dwelling policies differ?
Answer Choices:Select the Correct Answer
- Homeowner's policies require that the named insured reside at the described premises while dwelling policies do not.
- Homeowner policies are only for actual home owners while dwelling policies can be written only for tenants.
- Homeowner's and dwelling policies have the same eligibility requirements.
- Dwelling policies can be written on duplexes while homeowner's policies are only for single-family dwellings.
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Definition
The correct answer is: Homeowner's policies require that the named insured reside at the described premises while dwelling policies do not. .
EXPLANATION:
The named insured must be a resident of the policy's insured premises under the HO program. |
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Term
Which of the following is NOT considered a "breakdown" under Equipment Breakdown coverage?
Answer Choices:Select the Correct Answer
- Mechanical failure
- Rupture or bursting caused by centrifugal force
- Electrical failure
- Lack of power, light, heat, steam or refrigeration
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Definition
The correct answer is: Lack of power, light, heat, steam or refrigeration.
EXPLANATION:
Breakdown is direct physical loss that causes damage to covered equipment requiring it to be repaired or replaced. It must be caused by a failure of pressure or vacuum equipment, a mechanical failure, including rupture or bursting caused by centrifugal force, or an electrical failure, including arcing, provided the loss or damage is not excluded elsewhere in the coverage form. The lack of power, light, heat, steam or refrigeration is specifically excluded. |
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Term
The statement by an applicant on a personal automobile application that she has had no accidents within 3 years, but which she later corrects to include one claim 2 1/2 years ago is an example of:
Answer Choices:Select the Correct Answer
- A representation.
- A warranty.
- A concealment.
- A misrepresentation.
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Definition
The correct answer is: A representation. .
EXPLANATION:
A representation is a statement that is believed to be true when made, which might prove to be false. A warranty is a statement that is guaranteed to be correct. In this case, the applicant made no apparent attempt to conceal or misrepresent a time distortion. |
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Term
If a loss is valued using functional replacement cost, which of the following would apply?
Answer Choices:Select the Correct Answer
- Market value of the loss is paid
- Deductibles are suspended
- The coinsurance clause is not applicable
- Replacement cost up to an agreed amount is payable
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Definition
The correct answer is: The coinsurance clause is not applicable.
EXPLANATION:
The coinsurance clause is not applicable because the coverage limit is based on the market value of the property which is probably below the 80% cost to replace it. This has been agreed to in the contract when functional replacement cost is the basis for loss settlement. Used particularly in losses involving antique, ornate or custom construction with less expensive, but functionally equivalent materials.
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Term
Which of the following would not be covered under the personal effects form?
Answer Choices:Select the Correct Answer
- Tickets
- Money
- Passports
- All of the responses listed are correct.
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Definition
The correct answer is: All of the responses listed are correct..
EXPLANATION:
All of these would be excluded under the personal effects form as well as contact lenses, dentures, hearing aids and artificial limbs.
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