5.) OTHER COVERAGES QUIZ QUESTIONS Flashcards
Which statement BEST describes a stand alone excess liability policy?
A. Excess liability insurance that often covers more risks than the base policy
B. Insurance coverage for damages caused by an excess of any one peril
C. Excess liability insurance that “follows” the base insurance policy to the letter
D. Excess liability insurance that “follows” the base policy, but includes its own set of limitations and exclusions
D. Excess liability insurance that “follows” the base policy, but includes its own set of limitations and exclusions
One day, a customer at Jim’s Tire Sales was severely injured when a rack of tires collapsed and fell on her. Later, the customer filed a lawsuit against Jim for $750,000. Jim has a commercial general liability policy, but the limit for this type of loss is only $500,000. Not wanting to use his entire limit on this one claim, Jim tries to use his excess liability policy first, which has a limit of $1,000,000, so he can retain most of the aggregate limit in his base policy. Unfortunately for Jim, this is not possible because:
A. all excess liability policies have a 10% per occurrence clause.
B. Jim’s excess liability policy is a Stand Alone policy.
C. excess liability policies cannot follow commercial general liability policies.
D. an excess liability policy pays only after the base policy’s limit has been exhausted.
D. an excess liability policy pays only after the base policy’s limit has been exhausted.
What does “implied warranties” mean in the context of Ocean Marine Insurance?
A. Mid-route deviation in voyage must be documented upon arrival.
B. Strict adherence to good maritime practices is required.
C. Coverage is implied for all cargo on an insured vessel, regardless of legality.
D. All cargo must be new and under warranty in order to be covered.
B. Strict adherence to good maritime practices is required.
Christine was looking quickly at her cell phone when she crashed into her garage, smashing the door. Since her auto liability won’t cover the damage because it doesn’t extend to property she owns, she hopes her excess liability policy will cover the damage to the garage door. Why is this NOT possible?
A. Excess liability policies cover only what is also covered by the base policy.
B. Excess liability policies only cover bodily injury.
C. Christine’s auto liability policy will cover the damages to her garage.
D. Excess liability policies only cover damages to the insured’s house, not attached structures.
A. Excess liability policies cover only what is also covered by the base policy.
Residual market insurance programs are primarily designed to meet the needs of which type of consumer?
A. Consumers needing multiple policies
B. Low-income consumers
C. High-risk consumers
D. Consumers with physical disabilities
C. High-risk consumers
Which of the following statements best explains why residual market insurance programs exist?
A. Most private insurance policies are too complex, and residual market insurance provides easy to understand, basic coverages for high-risk consumers.
B. High-risk consumers need more insurance coverage than private insurers can generally offer.
C. Some people cannot afford insurance, so residual market insurers provide cut-rate insurance policies for low-income consumers.
D. High-risk consumers need insurance, yet no private insurer wants to issue high-risk policies.
D. High-risk consumers need insurance, yet no private insurer wants to issue high-risk policies.
Residual market insurance programs exist to serve high-risk consumers. These people need insurance, but insurers, who do business to make a profit, don’t have any incentive to insure high-risk individuals.
This provision in Ocean Marine insurance obligates insurers of various interests to share the cost of losses associated with a captain’s decision to voluntarily sacrifice a part of the ship or its cargo.
A. Particular Average
B. Loss of Vessel
C. General Average
D. Sue and Labor
C. General Average
Jason crashes his single-engine plane while Jim and Barbara are on board. Jim has a broken leg and Barbara has a concussion. Jason has a broken wrist. Which coverage in Jason’s aviation insurance policy could cover Jim’s broken leg?
A. Bodily Injury Excluding Passengers
B. Medical Payments
C. All Risks - Ground and Flight
D. All Risks - Not in Motion
B. Medical Payments
The “Policy Take-Out Program”
A. encourages private insurers to transfer risks into the residual market.
B. encourages private insurers to take risks out of the residual market.
C. is a form of illegal kickback.
D. encourages policyholders to choose to leave the residual market and be insured in the voluntary market.
B. encourages private insurers to take risks out of the residual market.
Mark has an ocean marine insurance policy with cargo coverage. The type and value of his cargo varies from one shipment to the next, so rather than having a set value for this coverage, the amount of his settlement is only determined after a covered loss. Mark’s cargo coverage is written on a/an ________ basis.
A. actual cash value
B. replacement cost
C. valued
D. unvalued
D. unvalued
In January, a faulty pipe burst at Sunshine Farms, letting animal waste flow from some of their farms into the county’s water supply. In September of that year, the EPA inspects Sunshine Farms’ facility, discovers the animal waste pollution, and fines the company $500,000. In addition to the fine, Sunshine Farms will have to pay $300,000 in decontamination expenses and $150,000 to build an EPA-compliant waste management system for the farm. How much of this will be covered under Sunshine Farms’ Pollution Cleanup and Removal insurance?
A. $800,000
B. $300,000
C. $650,000
D. $0
D. $0
Which of the following businesses would NOT need bailee coverage?
A. A dry cleaner
B. A jewelry repair shop
C. A record store
D. A shoe repair shop
C. A record store
Which of the following would NOT be considered an Instrumentality of Transportation and Communication?
A. A truck
B. A bridge
C. A road
D. A dock
A. A truck
Which of the following statements about the Terrorism Insurance Program is TRUE?
A. All insurers must offer TRIA-covered property and casualty insurance to every policyholder.
B. For covered terrorism claims, insurers have to pay a deductible of 10% of the insurer’s direct earned premiums from the preceding calendar year.
C. The “industry-wide aggregate retention” is the total amount of copayments and deductibles that all insurers are responsible for paying in a calendar year for covered terrorism losses.
D. By definition, an “act of terrorism” is any violent act that is dangerous to human life, property, or infrastructure and results in damage anywhere in the world.
C. The “industry-wide aggregate retention” is the total amount of copayments and deductibles that all insurers are responsible for paying in a calendar year for covered terrorism losses.
What is a base flood?
A. A base flood is a flood that has a 1% chance of being equaled or exceeded in any given year.
B. A base flood is any flood caused by runoff waters.
C. A base flood is the average flood level expected in any given year.
D. A base flood is the highest flood level that has been reached in the previous 50 years.
A. A base flood is a flood that has a 1% chance of being equaled or exceeded in any given year.
The Valuable Papers and Records floater can cover losses to all of the following, EXCEPT:
A. books.
B. securities.
C. maps.
D. deeds.
B. securities.
In Ocean Marine insurance, this term of sale states that the seller of goods is responsible for damage to the cargo during shipment:
A. Cost, Insurance, and Freight (CIF)
B. Free on Board (FOB)
C. Cost and Freight (C&F)
D. General Average (GA)
A. Cost, Insurance, and Freight (CIF)
Which of the following would NOT be covered under a typical Ocean Marine policy?
A. The vessel is robbed of its cargo by pirates.
B. The owner sustains a financial loss when her vessel is confiscated by the government.
C. The vessel’s galley catches fire, and the fire spreads to the sleeping quarters.
D. A bolt of lightning strikes the vessel and fries its communication system.
B. The owner sustains a financial loss when her vessel is confiscated by the government.
A flood inundates Howard’s property, causing $100,000 of damage to the dwelling and $25,000 of damage to the detached garage. If Howard has a Dwelling Form flood policy with a $150,000 limit, how much will the policy pay for the damage to Howard’s home and detached garage combined? (Ignore deductible amounts.)
A. $100,000
B. $150,000
C. $90,000
D. $115,000
D. $115,000
XYZ Insurance is a private insurer that sells flood insurance policies. Which of the following statements is FALSE?
A. XYZ Insurance is responsible for adjusting all flood claims made by its policyholders.
B. XYZ Insurance is responsible for paying claims.
C. XYZ Insurance receives expense allowances from the federal government.
D. XYZ Insurance participates in the NFIP Direct Program.
D. XYZ Insurance participates in the NFIP Direct Program.
In an Aviation policy, which of the following is only covered through an endorsement?
A. Theft
B. Lightning
C. Hi-jacking
D. Explosion
C. Hi-jacking
Which statement BEST describes Umbrella coverage?
A. Excess liability insurance that “follows” the base policy, but includes its own set of limitations and exclusions
B. Insurance coverage for that doesn’t have deductibles
C. Excess liability insurance that “follows” the base insurance policy to the letter
D. Excess liability insurance that can also provide additional coverages not provided by the base policy
D. Excess liability insurance that can also provide additional coverages not provided by the base policy
Which of the following losses would qualify for federal assistance under the Terrorism Insurance Program?
A. A negligent employee causes an explosion in a Michigan nuclear plant that causes $250 million in damage.
B. A man opens fire in a California airport and causes $10 million in damage.
C. 11 people are killed in a terrorist attack in Paris, France that causes $300 million in damage.
D. A man drives a dump truck through a crowd in Washington, D.C., causing $200 million in damage.
D. A man drives a dump truck through a crowd in Washington, D.C., causing $200 million in damage.
A windstorm cuts the power supply of a wholesale butcher. To keep his inventory from spoiling, the butcher immediately runs to the store and rents generators to keep his freezers working. Which of the following statements is TRUE?
A. Business Interruption coverage will indemnify the butcher for the extra expense, even if renting the generators fails to keep the meat from spoiling.
B. Business Interruption coverage will indemnify the butcher for the cost of the rentals, but only if he succeeds in preserving his inventory.
C. Business Interruption coverage does not cover extra expenses, such as equipment rental.
D. Business Interruption coverage will indemnify the butcher for the cost of the rentals, but only if he had to close the store for more than 15 minutes while picking them up.
B. Business Interruption coverage will indemnify the butcher for the cost of the rentals, but only if he succeeds in preserving his inventory.That’s right! Business Interruption coverage will indemnify the insured for “Extra Expenses” if those extra expenses succeed in preventing further covered losses.
