Guarantee Exam Flashcards
The Extended Coverage Endorsement covers loss or damage caused by:
Wind
Which statement about the Personal Auto Policy is false?
It is written on an aggregate limits basis
Which peril is covered by an Open Peril Dwelling policy?
Damage by burglars
Which of the following is a duty of the insured defined under Homeowners Section II following an insurable occurrence:
Prepare an inventory of the damaged property
An insured purchases a Homeowners Policy with a $250 deductible and a Personal Articles Floater to provide coverage against loss or theft of a $2000 diamond ring. If the insured loses the stone from the ring that is valued at $1,800 while on a trip, she will receive which amount from the insurance company?
$1,550 because of the $250 deductible
Which of the following perils is one of the Perils Insured Against under the terms of an HO-2 Broad form policy?
Overflow of water
All of the following are excluded by the personal property portion of a Homeowners Policy, except:
The insured’s pet bird, fish, and dog
An insurance company takes possession of a damaged auto it has covered. When the company becomes the legal owner of the auto, it is exercising the right of:
Salvage
Which statement about Errors & Omissions insurance is not correct?
Policies can cover damages arising out of an agent offering improper coverage
In casualty insurance, an accident occurs when:
Someone slips and falls on a freshly waxed floor in a retail store
A fur coat insured on a Personal Articles Floater for $5,000 was stolen. The replacement cost is $6,000 but its actual cash value was $4,000. The policy will pay:
$5,000
Under Section II of the Homeowners Policy, which location is not an insured location
A farm
An unendorsed Homeowners Policy covers endangered property removed to protect it from damage for up to ___ days:
30
Which statement is false of Section I of the Homeowners Policy?
It will cover theft from a safe deposit box
Which of the following losses would be covered by a homeowner’s policy? The insured’s:
Dinghy rowboat is destroyed in a garage fire
Property ownership is evidence of:
Insurable interest
A strong wind blew open and then slammed an insured’s front door, causing a lamp to fall on and cut a child’s leg. The proximate cause was:
The wind blowing
An insured’s house is filling with smoke. To minimize smoke damage, he moves an oriental rug out to the porch but a sudden rainstorm ruins it. Under a DP-1 with no extended coverages purchased, the policy:
Will cover smoke damage to the dwelling
nder the HO-3 Policy, the limit of liability for Coverage C is what percentage of Coverage A?
50%
Various limits of liability specified in a liability policy include; split limits, per person limit, occurrence limit, and:
Aggregate limit
The federal law that prohibits a person who has been convicted of a felony involving dishonesty or breach of trust from engaging in the insurance business without a waiver from the Commissioner of Insurance is the:
Federal Violent Crime Control and Law Enforcement Act
A vandalism or malicious mischief loss to an insured auto is an illustration of a _____ loss.
Property damage
In which type of contract is only one party’s promises enforced?
Unilateral
Section II of the Homeowners Policy does NOT provide coverage for:
Defending against groundless or false claims
Under the National Flood Insurance Program, assuming the premium has been paid, coverage becomes effective
On the 30th calendar day after completion of the application
A deliberate act that harms another and permits an injured party to sue the wrongdoer is:
Gross negligence
A written amendment which broadens or restricts coverage, or further defines policy provisions is called:
An endorsement
Under Section II of the Homeowners Policy, which person is not an insured?
A resident employee’s brother who boards at the residence
Section I of the Homeowners Policy contains coverage for all of following, except:
Unscheduled personal property
All of the following may be considered to be an uninsured motorist, except a:
Family member of the insured
Concurrent Causation is:
A legal doctrine that states when a property loss is due to two causes, one of which is excluded and one of which is covered, the policy provides coverage
Which of the following terms is synonymous with inland marine:
Floater
Personal property covered under a Homeowners contract include a limitation on all of the following items, except:
Furniture and clothing
An insured’s obligation to notify the insurance company of a loss is stated in the policy:
Conditions
Insurers that deal directly with insureds without the use of agents are known as:
Direct writers
Which of the following would be considered an “offer”:
The insurer offers to pay the claim
When coverage in a Personal Umbrella Policy is broader than the underlying policy, the umbrella will cover the entire loss, less a:
Retention
When a homeowner put his lawn mower near his hot water heater he created a:
Physical hazard
The procedure for resolving a disagreement between the insured and insurer about a loss is outlined in the:
Conditions
If an insured and insurer are unable to agree on the amount of a claim to be paid, which of the following will be utilized:
Appraisal
Which of the following would be considered a policy condition in a dwelling policy?
Debris Removal
Which statement is true about a Collision Coverage deductible?
It applies per loss
The requirement that legally binds an insurance company to an agent’s action is commonly referred to as:
The law of agency
The declaration page includes all of the following, except:
Coverage territory
Under Section I of the Homeowners policy, coverage for an indirect loss is provided by:
Coverage D – Loss of use
An oral or written temporary contract for insurance is referred to as a:
Binder
Other than Collision (Comprehensive) Coverage provides protection in cases when:
A car is damaged by a flood
A restaurant has clogged heating and cooling ducts. This is an example of a:
Hazard
An insured has purchased a grave marker and cemetery plot at the local cemetery. Vandals enter the cemetery and destroy the grave marker valued at $3,500. How much will the insured’s Homeowners Policy pay for the damage under Coverage C?
$3,500, less any deductible
An unintentional tort is:
Negligence
Contribution by Equal Shares is defined as:
Each insurer contributes equally until the loss is settled or the insurer’s limits are exhausted
Which vehicle is considered a temporary substitute vehicle?
A dealer’s loaner car used while the insured vehicle is being repaired
When an insured has two auto policies with the same insurer, the insurer’s liability would not exceed:
The combined limit of the two policies
An individual that suffers physical harm as the result of an insured’s negligent action will be paid under which policy coverage?
Bodily Injury
Which floater is not a Personal Articles Floater?
Exhibition Floater
If an insured causes an accident, which of the following policy coverages will pay for any passengers’ reasonable and necessary medical expenses?
Medical Payments
A Liability policy structure includes: Insuring Agreement, Conditions, Exclusions, and:
Declarations
Assume lightning strikes a home and starts a fire that destroys the structure and its contents. By definition, the fire is the:
Peril
The necessary potential for an insured to suffer financial hardship in the event of a loss is called:
Insurable interest
yhe purpose of the definition of the “insured” in a policy is:
To list the named insured
When applying for homeowners insurance, the insured tells the agent that the home is used strictly as a residence. The insured actually manufactures fireworks in the basement. What will happen if the insurance company discovers this information after the policy is issued?
It will void the policy because the insured misrepresented a material fact
Which of the following would be an insurable, pure risk?
An investor’s risk of market loss
All of the following are methods of rating, except:
File and Use rating
Persuading a prospect to purchase a policy by promising to return a portion of the commission is considered:
Rebating
All of the following statements about supplementary payments from a personal auto policy are true, except:
Payments will be deducted from the limit of liability
The Underwriter’s primary function is:
Determining which risks are acceptable
When an insured cancels a policy, what is the method used to determine the premium refund that is due?
Pro Rata
If a person owns a 60 ft sailboat, which policy would provide the best coverage?
A Boatowners Policy
What is not a supplementary payment under Section II of the Homeowners Policy?
Claim settlement payments
When an agent exceeds the authority expressed in a contract and the insurance company does not counteract, _____ authority is created.
Apparent
An auto policy’s Medical Payments Coverage provides benefits for which individual?
The insured, family members, and anyone else while occupying the insured auto
Open Peril coverage means that:
All perils are covered except those specifically excluded
he insurance company’s promise of protection is in found in the:
Insuring Agreement
A civil wrong can best be described as:
Tort
A continued exposure to a harmful situation could be referred to as:
Occurrence
Under Section II of the Homeowners Policy, which statement is true?
Coverage E is Personal Liability
Which of the following statements about the standard mortgage clause is correct?
B
The mortgagee has no rights under the policy
Subrogation grants the:
Insurance company the insured’s rights of action against a third party
By purchasing a $500,000 insurance policy on her home, an insured:
Transferred her risk of loss
What is NOT true of Absolute Liability?
Owners of wild animals kept in captivity are not liable for injuries caused by their animals
An insured has an HO-3 with a $250 deductible. Coverage A is $50,000. A tree is struck by lightning and falls on the insured’s garage. The garage is valued at $4,000 and the tree $750. How much will the insured collect?
4,250
“Actual Cash Value” means:
The property’s current replacement cost, minus depreciation
Mr. Jackson bought a home that was totally destroyed by fire before he moved in. He decides not to rebuild and does not submit a proof of loss to the insurer. What is the best way for his mortgage company to collect the insurance proceeds?
Submit a Proof of Loss
A rental home becomes uninhabitable and the loss of income to the landlord is:
An indirect loss
The insured’s property insurance policy has a deductible clause. This means that:
The insured must pay a certain amount for each loss incurred under the policy
Should the insured or insurer recover any property for which a claim has already been paid, the procedures to be followed are found in the policy:
Conditions
A storm damaged an insured’s roof. The extent of damage was not realized until it rained one week later and water entered through the roof, damaging the living room ceiling and walls. The insured reported the damage and filed a claim 3 days later. The insurer may refuse coverage for the rain damage because:
The insured failed to take proper action after the initial roof damage to protect against further damage
Which statement is true about Strict Liability?
Manufacturers are held liable regardless of fault
A homeowner policy’s liability coverage pays up to ____ for an insured’s share of loss assessment charged by a property or homeowners association.
$1,000
The coverage territory of the Personal Auto Policy includes all of the following, except:
The Hawaiian Islands
A damage award that is reduced in proportion to the amount of negligence, is called:
Comparative Negligence
An example of an indirect loss is:
A broken window caused by an overthrown baseball
What provides “Open Peril” coverage
A Personal Articles Floater
_________ is having more than one property on a single policy with each property covered for a specific amount.
Scheduled Coverage
Which vehicle is not eligible for coverage under a Personal Auto Policy?
A truck with a 10,500-pound gross vehicle weight
Which ONE of the following Homeowners forms provides broad form coverage for both dwelling and personal property?
HO-2
A relationship between two parties where one may act on behalf of another is called the:
Law of Agency
_______ is not one of the essential elements of an insurance contract.
Consideration
Which of the following occurrences is covered under the additional coverage part of Section II of a Homeowners Policy?
Bodily injury at a vacation site
An insurer that is organized under non-U.S. Laws is called a:
Alien Insurer
Which of the following statements regarding the Fine Arts Floater is correct?
Coverage is provided on an open peril basis
The maximum amount an insurer will pay in case of a loss is known as:
Limit of liability
Under a DP-3, improvements, alterations and additions made by a tenant may be covered for which amount?
10% of coverage C
The insurance coverage that reimburses first in the event of a loss, is known as:
Primary
Who are the owners of a mutual insurance company?
Policyowners
What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?
Open peril policy
Which of the following would be eligible under a dwelling policy:
A Motor home
Which type of insurance companies may pay dividends only to its policyholders?
Mutual
What is an example of negligence?
A waitress spills some soup and burns a customer
The policy provision that allows the insured to immediately benefit from any changes to coverage made during the policy period that would broaden coverage is the:
Liberalization clause
Which loss is considered a collision loss under the Personal Auto Policy?
Fender Damage caused by a hit and run driver
If a claim is valid, the insurer may:
ay the claim to the extent of the limits of liability
An accident occurred in which A was 70% at fault and B 30% at fault. A’s damages were $3,000 and B’s were $2,000. If the accident occurred in a state that allowed contributory negligence as a defense, what amount would be paid to each party?
A would collect $900 from B’s carrier and B would collect $1,400 from A’s carrier
Mr. Jones bought a rental house on May 1 and insured it under a DP-2 policy. The house was vandalized on July 15 before it was occupied. Mr. Jones finally rented out the home on August 1 and submitted a claim on September 1. His policy will pay:
Nothing because the house was vacant for more than 60 days
Mr. Jones bought a rental house on May 1 and insured it under a DP-2 policy. The house was vandalized on July 15 before it was occupied. Mr. Jones finally rented out the home on August 1 and submitted a claim on September 1. His policy will pay:
Nothing because the house was vacant for more than 60 days
Which of the following is not a moral hazard?
Which of the following is not a moral hazard?
Being able to get paid more in claims than was actually lost
To provide the best, most specific coverage on an heirloom diamond brooch and gold watch, use a:
Personal Jewelry floater
When a risk is covered in equal shares by more than one insurer, each company is:
Contributing
Under Section II of the Homeowners Policy, which outboard motorboat owned by the insured is excluded?
26 horsepower or more
An insured with a Personal Auto Policy with limits of $50,000/$100,000/$25,000 is at fault in an auto accident that causes the following damages to others. Medical: Other driver-$32,000; Passenger 1-$17,000; Passenger 2-$5,000. Damage to other car-$2,000; Rental car for other driver-$500. What is the maximum the insured’s insurance company will pay?
$50,000
Which of the following could be covered by both the National Flood Insurance Program and the Earthquake endorsement?
Collapse due to shore erosion
Amy is a passenger in Joe’s car when it hits a tree. Amy suffers $18,000 in medical expenses and $2,600 in lost wages. If Joe has limits of $15,000/$30,000/$5,000, which statement is true?
The policy’s Liability Coverage is the only one to apply
ue to exterior freezing, water seeped down the interior walls of Mary’s house, causing enough damage to require their replacement. Her HO-2 policy will cover debris removal:
Only if Mary purchased a Debris Removal Endorsement
Ms. Peters insures her 14 ft boat and 50 hp outboard motor under a Boatowners Policy. Which loss, if any, would be covered by this policy?
Personal injury losses occurring while onboard
If an insurance company cancels a Homeowners Policy after it has been in effect for 11 months because the company is no longer writing this type of insurance, the insurer would offer?
Pro rata cancellation
In property insurance, how is cancellation best defined?
An insurance company’s termination of coverage in the middle of the policy term
