Chapters 1-4 Multiple Choice Flashcards
1
Q
- Which one of the following loss payment terms best describes replacing the old, damaged property for a newer version?
a. Fair Market Value
b. Actual Cash Value
c. Replacement Cost
d. Depreciated Cost
A
c. Replacement Cost
2
Q
- A position of trust that cares for or acts on behalf of another financially.
a. Lawyer
b. Consultant
c. Producer
d. Fiduciary
A
d. Fiduciary
3
Q
- Which one of the following is NOT an element of a contract?
a. Offer
b. Competent Parties
c. Legal Purpose
d. Conditions
A
d. Conditions
4
Q
- The loss valuation method used to cover unique items for their appraised value is known as
a. Agreed Value
b. Fair Market Value
c. Actual Cash Value
d. Salvage Value
A
a. Agreed Value
5
Q
- Which one of the following is NOT true about insurable interest?
a. Must have financial interest in the property at the time you purchased the policy
b. Must have insurance on the property that was in the loss
c. Must not gain financially from the loss to the property that is insured
d. Must have financial interest in the property at the time of the loss
A
a. Must have financial interest in the property at the time you purchased the policy
5
Q
- Where can you find the insurer’s promise to pay in the event of a covered claim?
a. Declaration Page
b. Insuring Agreement
c. Conditions
d. Exclusions
A
b. Insuring Agreement
6
Q
- Insurance is designed to only cover:
a. Speculative risk
b. Pure risk
c. Sure risk
d. No risk
A
b. Pure risk
7
Q
- A social device that protects people and businesses from certain types of losses by transferring the risk is:
a. Insurance
b. Retention
c. Reduction
d. Avoidance
A
a. Insurance
8
Q
- Which of the following would NOT be found on the Declarations Page?
a. Deductibles
b. The policyholders address
c. Limits of Coverage
d. Description of coverage
A
d. Description of coverage
8
Q
- Which term means that only one party is bound by a promise?
a. Doctrine of Reasonable Expectation
b. Unilateral Contract
c. Aleatory Contract
d. Conditional Contract
A
b. Unilateral Contract
8
Q
- Which one of the following is NOT an exclusion?
a. Flood
b. Fire
c. Intentional loss
d. Fungus
A
b. Fire
9
Q
- Which one of the following is TRUE regarding unearned premium?
a. It is returned pro-rata when the Named Insured cancels the policy
b. It is returned short rate when the insurance company cancels the policy
c. It is returned flat rate when the insurance company cancels after 4 months
d. It is returned short rate when the Named Insured cancels the policy
A
d. It is returned short rate when the Named Insured cancels the policy
10
Q
- A change of medication to the policy is called an
a. Amendment
b. Exclusion
c. Addition
d. Endorsement
A
d. Endorsement
11
Q
- Which one of the following will NOT be covered under property damage?
a. Damage to the neighbor’s fence when the insured backed into it
b. An insured’s fence when they backed into it
c. A telephone pole damaged when an insured lost control of their vehicle
d. The guardrail the insured hit when they slid on an icy road
A
b. An insured’s fence when they backed into it
11
Q
- Personal Injury pays for
a. Any 3rd party injury or doctor’s bill
b. Any 1st or 3rd party injury
c. Injuries suffered by the Named Insured or family members
d. The Named Insured’s offenses for slander, libel, invasion of privacy or false arrest committed against a 3rd party
A
d. The Named Insured’s offenses for slander, libel, invasion of privacy or false arrest committed against a 3rd party
11
Q
- Which one of the following defines an absolute truth?
a. Doctrine of Reasonable Expectation
b. Doctrine of Utmost Good Faith
c. Warranty
d. Representation
A
c. Warranty
12
Q
- What are the two types of compensatory damages?
a. Punitive and General
b. Punitive and Special
c. Punitive and Specific
d. General and Special
A
d. General and Special
12
Q
- Something that might increase the likelihood that a loss will occur is called:
a. Peril
b. Risk
c. Hazard
d. Catastrophe
A
c. Hazard
13
Q
- An insured sustained damage when the log rolled out of the fireplace igniting the carpet. In this situation, fire was considered the cause of the loss also known as a/an:
a. Exposure
b. Hazard
c. Peril
d. Risk
A
c. Peril
14
Q
- Which one of the following is an answer that an insured believes to be true to the best of their knowledge?
a. Misrepresentation
b. Representation
c. Warranty
d. Consideration
A
b. Representation
14
Q
- What is a written or verbal lie?
a. Misrepresentation
b. Representation
c. Warranty
d. Consideration
A
a. Misrepresentation
15
Q
- Which one of the following is NOT listed on a binder?
a. Insurer’s name
b. Limits of coverage
c. Effective dates
d. Premium
A
d. Premium
16
Q
- Which one of the following is a duty of the insured following a loss?
a. Always call the police
b. Take pictures of the break in and hire a private deceive to find the thieves
c. Call the insurance company within 2 hours of the incident
d. Submit a proof of loss statement
A
d. Submit a proof of loss statement
16
Q
- What is a lie that will void the policy, impact the rate or cause an insurer to reject the risk?
a. Misrepresentation
b. Representation
c. Condition
d. Material Misrepresentation
A
d. Material Misrepresentation
17
Q
- Where in the policy would the insured be able to read more about the Liberalization Clause?
a. Declarations Page
b. Insuring Agreement
c. Conditions
d. Exclusions
A
c. Conditions
17
Q
- Mark is injured in an auto accident when Julie runs a red light and hit his truck. The courts aware Mark $85,000 to cover his medical bills, lost wages and the damages to his truck. The aware is referred to as:
a. Compensatory damages
b. Punitive damages
c. Personal damages
d. General damages
A
a. Compensatory damages
18
Q
- Which one of the following is a defense against negligence where the victim is responsible for their own damages because they did something they should not have done?
a. Statue of limitations
b. Contributory
c. Assumption of risk
d. Intervening cause
A
b. Contributory
18
Q
- Which one of the following is NOT required to establish negligence?
a. The negligent act and the damage must be tied together
b. There is a situation that required an action
c. It results in injury/damage to a 3rd party
d. It is an action that is intentional
A
d. It is an action that is intentional
19
Q
- John is at a baseball game when he is injured by a fly ball that hits him in the head. Which one of the following defenses against negligence would the baseball team use?
a. Assumption of risk
b. Comparative negligence
c. Contributory negligence
d. Statute of limitations
A
a. Assumption of risk
19
Q
- Which one of the following would NOT be considered a negligent act?
a. Accidental
b. Careless
c. Thoughtless
d. Intentional
A
d. Intentional
19
Q
- If Jolie has liability limits of 100/300/50, how much coverage does she have for property damage per occurrence?
a. $50,000
b. $100,000
c. $300,000
d. $350,000
A
a. $50,000
20
Q
- Replacement Cost minus depreciation is the formula for which basis of recovery?
a. Replacement cost
b. Agreed value
c. Actual cash value
d. Functional replacement cost
A
c. Actual cash value
21
Q
- What is the most critical piece of underwriting needed to determine the correct rate for the risk?
a. Motor Vehicle Report
b. Application
c. Tax records
d. Credit report
A
b. Application
21
Q
- A riot in the town square broke the insured’s windows and set their house on fire. The proximate cause of the loss is
a. Civil authority
b. Fire
c. Glass breakage
d. Riot
A
d. Riot
22
Q
- A blanket limit
a. Insures a single item for a single limit
b. Insures a single item for multiple limits
c. Insures multiple items for multiple limits
d. Insures multiple items for a single limit
A
d. Insures multiple items for a single limit
22
Q
- Which insurer status identifies operating in a different country?
a. Domestic
b. Foreign
c. Alien
d. Admitted
A
c. Alien
23
Q
- Who has the primary responsibility of determining an acceptable risk?
a. The insurer
b. The agent
c. The broker
d. The underwriter
A
d. The underwriter
24
Q
- When two policies cover the same loss, and one policy does not pay until the other policy’s limit is exhausted is known as:
a. Non-concurrency
b. Pro-rata liability
c. Extensive liability
d. Primary excess liability
A
d. Primary excess liability
24
Q
- The term that describes an agent exclusively representing only one insurer is called:
a. Captive
b. Independent
c. Appointed
d. Admitted
A
a. Captive
25
Q
- The type of insurance that allows a primary insurer to transfer their losses to another is called:
a. Non admitted insurance
b. Reinsurance
c. Surplus lines insurance
d. Admitted insurance
A
b. Reinsurance
25
Q
- The customer has 2 policies covering the loss of $50,000. They will each pay a portion of the loss based on their limits. Company A has a limit of $300,000 and Company B has a limit of $100,000. How much will Company A pay for the loss?
a. $35,700
b. $40,000
c. $37,500
d. $50,000
A
c. $37,500
