Chapter 10 Flashcards
Which of the following is NOT one of the requirements for a building to be eligible for coverage under a flood insurance policy?
A) Building is owner-occupied.
B) Building has walls and a roof.
C) Building is principally above the ground.
D) Building is fixed to a permanent site.
Answer: A
Flood policy covers very specific buildings. The building must be walled and roofed, above ground, and affixed to a permanent site. There is no requirement that the building be owner-occupied.
In a flood policy issued by the NFIP, all of the following would be considered a flood EXCEPT:
A) sewer backup into a home.
B) overflow of inland waters.
C) mudslide.
D) collapse of land as a result of excessive erosion due to flood.
Answer: A
In the NFIP policy, flood generally refers to an overflow of inland or tidal waters; unusual and rapid accumulation or runoff of surface water from any source; mudslides; and collapse of land as a result of excessive erosion due to flood. Sewer backup into a dwelling is not covered.
What are the two flood insurance programs that are available?
A) Basic program and the Special program.
B) State program and the federal program.
C) Occurrence program and the claims-made program.
D) Emergency program and the regular program.
Answer: D
The emergency program goes into effect when the community applies to the National Flood Insurance Program and remains in effect until the government finalizes the flood insurance rates for that community. Then, the regular program provides coverage.
What is the most coverage available for a single-family dwelling covered under the regular flood program?
A) Building $250,000 and contents $150,000.
B) Building $300,000 and contents $100,000.
C) Building $250,000 and contents $100,000.
D) Building $35,000 and contents $10,000.
Answer: C
Under the National Flood Insurance Program (NFIP) there are two types of flood insurance programs available: the regular program and the emergency program. In regards to the maximum available coverage limits under these two programs, the maximum coverage available for a single-family dwelling under the regular flood program (which this question is on) is $250,000 for the building and $100,000 for the contents (personal property). Under the emergency flood program, the maximum coverage available is $35,000 for the building and $10,000 for the contents.
What is the minimum deductible for a single-family dwelling insured as a preferred risk in the regular flood program?
A) $1000 each for building and contents.
B) $750 each for building and contents.
C) $750 total for both building and contents.
D) $1000 total for both building and contents.
Answer: A
There are different standard deductibles. For the regular program, the minimum deductible is $1000 for building and $1000 for contents. The deductible for a standard policy under the emergency program is $2,000 for building and $2,000 for contents.
Which of the following property may be insured under a flood policy issued by the NFIP?
A) Fence surrounding insured’s property.
B) Trees.
C) Silo.
D) Automobile.
Answer: C
Vehicles, fences, and trees are not covered under the NFIP policy. Structures that are primarily containers are also excluded, but an exception is made for silos and grain storage buildings.
When does flood insurance take effect?
A) 30 days after the date of application and payment of premium.
B) As soon as the policy is issued.
C) As soon as the insured pays the first premium.
D) As soon as the agent binds coverage.
Answer: A
During the first 30 days after a community becomes eligible for flood insurance, an individual’s policy becomes effective at 12:01 a.m. of the day following the date he applied for the policy and paid the premium. After that first 30-day period, a policy becomes effective on the 30th calendar day after the applicant completes the application and pays the premium.
Premium credits for all of the following will lower the insurance premiums for the owner of a mobile home EXCEPT:
A) reducing Coverage C limit to 40% of Coverage A.
B) installing insurer-approved alarm system, fire system, or both.
C) installing an automatic sprinkler system.
D) tie-down credit.
Answer: A
Credits are given to owners of a mobile home for doing several things. One is to reduce the Coverage C limit for personal property to 30% of Coverage A. Other actions include tying down the mobile home to make it more secure and less susceptible to damage due to windstorm; installing an insurer-approved alarm, fire system, or both; and installing an automatic sprinkler system.
Premium credits for all of the following will lower the insurance premiums for the owner of a mobile home EXCEPT:
A) tie-down credit.
B) reducing Coverage C limit to 40% of Coverage A.
C) installing insurer-approved alarm system, fire system, or both.
D) installing an automatic sprinkler system.
Answer: B
Credits are given to owners of a mobile home for doing several things. One is to reduce the Coverage C limit for personal property to 30% of Coverage A. Other actions include tying down the mobile home to make it more secure and less susceptible to damage due to windstorm; installing an insurer-approved alarm, fire system, or both; and installing an automatic sprinkler system.
Sue has a personal articles floater with $20,000 worth of jewelry coverage. She purchases a ring worth $6,000. The ring is stolen from her the following week. How much can she collect from her insurance carrier?
A) $1,500.00
B) $6,000.00
C) She has no coverage because she has not told her insurance agent.
D) $5,000.00
Answer: D
This policy provides automatic coverage for newly acquired items of jewelry, furs, cameras, musical instruments, and fine arts, with a limit of 25% of the same type of property or $10,000 maximum. (The maximum does not apply to fine art.) The purchase must be reported within 30 days (90 days for fine art), and the premium is charged pro rata from the date of purchase.
The boat owners policy provides liability and physical damage coverage. What is the value and size of a boat eligible for the boat owners policy?
A) The value is more than $1,500 and/or the watercraft is more than 26 feet in length.
B) The value is more than $2,500 and/or the watercraft is more than 26 feet in length.
C) The value is more than $1,500 and/or the watercraft is more than 30 feet in length.
D) The value is more than $2,500 and/or the watercraft is more than 29 feet in length.
Answer: A
The homeowners policy will cover up to $1,500 for physical damage, excluding theft away from premises. Sailing vessels of 26 feet or more in length, with or without auxiliary power, are not covered for liability.
Yacht policies provide physical damages and liability coverage. What is the liability section called?
A) Protection and indemnity insurance.
B) Protection liability insurance.
C) Protection and medical payments insurance.
D) Owners protection and indemnity insurance.
Answer: A
The yacht policy has two sections. Section I covers hull insurance, providing open perils coverage on boats and equipment. Section II covers protection and indemnity providing marine liability coverage.
Which of the following statements about umbrella policies is NOT correct?
A) Losses that are excluded by the underlying policy but covered by the umbrella are subject to the umbrella’s retention limit.
B) If the insured fails to keep the underlying coverage in force, the umbrella policy will not cover the amount of loss that would have been paid by the underlying policy.
C) They are written only for commercial risks.
D) They provide coverage above the limits of underlying policies.
Answer: C
Umbrella liability policies may be written for both personal and commercial risks.
The insured has a homeowners policy (HO-3) with a $100,000 liability limit and a $1 million personal umbrella policy with a self-insured retention of $1,000. When a child is seriously injured on the insured’s property, a jury awards the plaintiff $2 million. Given only these facts, for what amount is the insured personally responsible?
A) $900,000.00
B) $1,000.00
C) $1 million.
D) $2 million.
Answer: A
The amounts for a loss recovery under both property and liability policies are restricted by policy limits. In this case, the underlying homeowners policy pays the first $100,000 and the umbrella would pay $1 million (which exhausts both policy limits). The insured pays the balance of the $900,000 settlement.
Which of the following statements about the FAIR Plan is NOT correct?
A) The FAIR Plan is underwritten by all companies writing property insurance in a given state.
B) States may have specific requirements for owners seeking coverage.
C) No property can be denied coverage by a FAIR Plan.
D) The FAIR Plan provides property coverage for risks that are uninsurable through the private insurance market.
Answer: C
FAIR Plans are designed to help people obtain property insurance. They provide property coverage for risks that are uninsurable through the private insurance market. Property can be denied coverage by a FAIR Plan; applicants must meet certain underwriting standards.
