insurance exam Flashcards
Which of the following describes both the premium paid by the insured and the promise by the insurer to pay a covered loss and defend the insured in a lawsuit?
Consideration
Acceptance
Offer
Legal Purpose
- Consideration
Something of value is exchanged; the exchange of an act for a promise.
The consideration made by the applicant is the premium payment.
The consideration made by the insurer is its promise to pay for covered losses.
Under the Other Insurance condition, when two property policies cover the same property, how is a loss apportioned?
Each policy will pay an equal share of the loss
Neither policy will pay because of overinsurance
The first policy will pay up to its limits; then the second policy acts as excess coverage
Each policy will share proportionately according to the total insurance
Each policy will share proportionately according to the total insurance
For a property policy, the Other Insurance clause generally states that two policies covering the same loss will pay proportionally to their limits of insurance
Under aleatory contracts the exchange of values may be:
Waived
Rescinded
Equal
Unequal
Unequal
An aleatory contract is contingent on particular events, such a covered loss. Under an insurance policy, the insurer’s obligation to pay a loss depends on uncertain events, while the insured must pay a fixed premium during the policy period. Thus, the exchange of values is likely to be unequal between any given insurer and insured.
Other Than Collision coverage would cover losses to an insured vehicle caused by all of the following, except:
Fire
Driving into a tree
Larceny
Hail
Driving into a tree
Collision means the upset of the covered auto or its impact with another vehicle or object. Damage caused by the running into a tree would be covered under Collision coverage.
What coverage is not included under the Yacht policy?
Protection and Indemnity
Towing
Personal Injury Coverage
Personal Property coverage
Personal Injury Coverage
In addition to providing property and liability coverage, a yacht policy also offers protection and indemnity coverage for the insured’s legal liability for bodily injury and damage to property of others, personal property coverage for property on the yacht, and coverage for fuel spills, commercial towing, and dinghies. Personal injury is not covered
Which type of producer authority is not spelled out in the contract, but is necessary for carrying out the producer’s duties?
Admitted
Express
Assumed
Implied
Implied
Implied authority is not specifically listed in the contract, but is considered necessary for the producer to carry out their duties. Example: a producer has the express authority to transact insurance business–this implies the authority to provide quotes and collect premiums.
In Missouri, how many years must an insurer maintain policy records after a policy terminates?
5
3
2
7
2
All insurance policy records must be maintained for 2 years after the policy terminates. These records must remain available for examiners.
What is the correct term for a secondary loss that occurs as a result of a direct loss from a covered peril?
Secondary Loss
Consequential Loss
Provisional Loss
Delayed Loss
Consequential Loss
The direct loss to the property is the damage to the property caused by an insured peril. The indirect, or consequential, loss is further financial loss that results from the loss of use of the damaged property.
All of the following are true, except:
Coverage D of a Homeowners Policy covers additional living expenses
Coverage D of a Homeowners Policy includes loss of income from an incidental business
Home schooling is permitted under a Homeowners Policy
A Homeowners Policy will not cover theft of a boat away from premises
Coverage D of a Homeowners Policy includes loss of income from an incidental business
Coverage D does not cover loss of income from an incidental business.
Loss of income suffered by a storeowner after their store is destroyed in a fire is considered a(n):
Provisional loss
Secondary loss
Delayed loss
Indirect loss
Indirect loss
The direct loss to the property is the damage caused by an insured peril, the fire. The indirect, or consequential, loss is further financial loss that results from the loss of business income due to the loss of the damaged store.
Which of the following will be paid by Supplementary Payments under Part A of the Personal Auto Policy?
A $250 bail bond
$1,000 for loss of earnings when the insured is disabled
Medical expenses when the insured’s daughter is injured in an auto accident
A judgment against the insured up to 10% above liability limits
A $250 bail bond
Of these choices, only bail bonds is a Supplementary Payment. The policy limit is $250.
All of the following statements about binders are true, except:
A binder specifies the insurer providing the coverage
A binder specifies the perils covered
A binder specifies the premium amount
A binder specifies the effective date of coverage and amount of coverage
A binder specifies the premium amount
A binder does not specify the premium amount. The Declarations of an actual policy would include the premium.
After 60 days, a Homeowners policy can be cancelled for which of the following reasons?
Location of the property
The insured’s spouse is convicted of arson
Insurer’s sole discretion
The age of the insured
The insured’s spouse is convicted of arson
The insurer may cancel a Homeowners policy if any resident of the property is convicted of a crime that would increase the hazard insured against, such as arson.
If other insurance also applies to a loss covered by a policy, which of the following will establish the method for determining how the insurance companies will pay the loss?
Limit of Liability
Subrogation
Pro rata liability
Claim Settlement
Pro rata liability
This provision is found in the policy in the Other Insurance condition, and provides for claim settlement to be proportioned to the amount of other insurance.
All of the following statements regarding liability losses are correct, except:
Loss of consortium means the loss of companionship of a husband or wife
Bodily injury includes personal injury, physical injury, sickness, and disease
Property damage includes physical damage to tangible property, including loss of use of that property
Personal injury includes libel, slander, and false arrest
Bodily injury includes personal injury, physical injury, sickness, and disease
Bodily injury does not include personal injury.
Which coverage is written with a per occurrence limit?
Bodily injury and property damage
Personal injury
Advertising injury
Strict liability
Bodily injury and property damage
Bodily injury and property damage is written with a per occurrence limit.
A manufacturer is held liable if a product caused an injury whether the product was or was not defective. This describes what type of liability?
Contingent
Direct
Absolute
Strict
Strict
The doctrine of Strict Liability applies to products and their manufacturers. It holds that the manufacturer can be held responsible for an injury caused by a product, even if the product is not defective.
Which statement is not correct about the Right to Recover Payment under the PAP?
The Right to Recover is an insured’s right
The person who is paid a claim must give the insurance company the right to recover damages
The right to recover involves going after the negligent party to pay for the insured’s loss
The insured must reimburse the insurance company if the insured is paid by the other party
The Right to Recover is an insured’s right
The Right to Recover is a right given by the insured to the insurer after the insurer paid a claim.
How many days’ written notice must the insurer give the insured before cancelling a Homeowners policy for nonpayment of premium?
10
30
15
60
10
An insurer terminating a Homeowners policy must give the insured 10 days written notice before cancelling for nonpayment of premium.
An unintended and unforeseen event from which a loss results is called which of the following?
Risk
Proximate cause
Peril
Accident
Accident
An accident is the unforeseen and unplanned event from which a loss derives.
Which of the following is not an element of negligence?
Assumption of risk
Duty owed
Proximate cause
Forseeable consequence
Assumption of risk
The elements of negligence are: Duty of care, violation of the duty of care, proximate cause, and damages that are foreseeable. Assumption of risk is a defense against negligence, rather than an element of it.
When firefighters extinguish a house fire with water, the water damage is considered a(n):
Consequential Loss
Loss that will be subrogated to the fire department
Indirect loss
Direct loss
Direct loss
Water damage is a direct loss to the property.
Choose the false statement about the FAIR Plan policy.
The policy term is 12 months and renews automatically
An inspection of the property will be made
If the insured has 2 losses within a 12-month period, the policy will be nonrenewed
The policy provides coverage up to $200,000 for a dwelling
If the insured has 2 losses within a 12-month period, the policy will be nonrenewed
If there are 2 losses within a 12-month period, a higher deductible will be imposed, and if there are no losses for 5 consecutive years, the deductible may be reduced
Before cancelling a property insurance policy for nonpayment of premium, an insurer must give the insured how many days’ written notice?
10
45
30
60
10
An insurer terminating a property insurance policy for nonpayment of premium, or because the insured committed arson, must give the insured 10 days’ notice.
All of the following are true of subrogation, except:
It allows the insurer to attempt collection from a third party to reimburse a loss
It allows the insurer to file suit against the insured
It helps the insurer control expenses and premiums
It prevents the insured from collecting twice for the same loss
It allows the insurer to file suit against the insured
The principle of subrogation requires the insured to transfer its right of recovery against any party causing a loss to the insurer, after it accepts payment from the insurer for a loss. Subrogation allows the insurer to recover from the third party that caused a loss any amounts paid to an insured. It also prevents the insured from collecting twice for the same loss. It does not allow the insurer to sue the insured.
Which of the following is not true about the Missouri FAIR Plan?
Perils covered under the FAIR Plan are normally limited to fire and extended coverage
All admitted property insurers in Missouri must participate in the FAIR plan
Licensed producers may bind coverage and accept premium payments
Property to be insured must meet reasonable underwriting standards
Licensed producers may bind coverage and accept premium payments
Producers are not contracted by the FAIR Plan and do not have the authority to bind coverage of accept premium payments on behalf of the FAIR Plan.
Which of the following best describes a direct loss?
Transportation expenses after a personal auto loss
Increased living expenses following a fire loss
Loss of rents from a dwelling following a fire loss
Water damage resulting from a burst pipe
Water damage resulting from a burst pipe
A direct loss is a physical loss proximately caused by a covered peril.
A second negligent act that interferes with the chain of events leading to a loss is known as a(n):
Loss of consortium
Tort
Foreseeable consequence
Intervening cause
Intervening cause
An intervening cause prevents or limits recovery from the wrongdoer when a second, distinctly separate negligent act occurs after the original negligent act, but before damage occurs, and interferes with the chain of events that brings about the loss. The intervening cause must be unexpected and unforeseen.
Which of the following is not required in the estimating process of handling a claim?
If the insured chooses the insurer’s repair shop, no additional cost will be charged to the insured
The estimate must be based on aftermarket parts
An estimate prepared by the insurer must have the insured’s permission
The person preparing the estimate must have a contractual relationship with the insurer
The person preparing the estimate must have a contractual relationship with the insurer
The estimate must be prepared by a person or entity having no contractual relationship with the insurer.
Each insurer must maintain a register of all producers it has appointed and notify the Director within how many days of appointment?
90 days
30 days
15 days
Never
30
Each insurer must maintain a register of all producers it appoints to sell, solicit, or negotiate insurance on its behalf. New appointees must be added to the register within 30 days of appointment. Terminated appointments must also be removed from the register within 30 days and the reason(s) for termination must be provided to the Director.
A producer’s license will not be revoked for which of the following?
Convicted of a crime of moral turpitude
Knowingly violated a state insurance law
Unknowingly accepted business from an unlicensed individual
Licenses suspended in another state
Unknowingly accepted business from an unlicensed individual
In order to have a license suspended, the producer must knowingly accept business from an unlicensed individual.
A producer is guilty of ___________ when he makes a derogatory statement about a competing insurer’s financial statement.
Twisting
Defamation
Coercion
Intimidation
Defamation
is making a false or maliciously critical statement regarding the financial condition of any person, with the intent to injure such person.
Which of the following is not a duty of the Director of Insurance?
Regulate the Department of Insurance affairs
Prescribe forms and procedures
Conduct hearings
Create Missouri insurance laws
Create Missouri insurance laws
The Director of Insurance does not create law. The Director has the authority to make any rules necessary to enforce the insurance laws passed by the state legislature.
Which of the following defines a surplus lines broker?
A broker who places risks with authorized but nonadmitted carriers
Any producer who wants to transact insurance in any state
Any producer who wants to transact insurance in Missouri
A broker who places risks with authorized and admitted carriers
A broker who places risks with authorized but nonadmitted carriers
A surplus lines broker is a broker who places risks with authorized but nonadmitted carriers.
